This week, my COT system has generated a “SELL” signal.

Large specs decreased their long exposure in the S&P futures by a substantial amount. Small investors…the so called dumb money….also decreased their long exposure, but not to the extent of the large specs.

As an aside, the action in the 3-Month Euro contract and the Dollar Index contract confirm the signal if you are a believer in “Dollar Up – Stock Market Down. I say as an aside because this is not part of my COT system. However, it never hurts to look for a little confirmation outside of the system. Large specs significantly increased their long exposure to the Dollar Index (Dollar Up-Market Down) and significantly decreased their long exposure on the 3-Month Euro contract (Euro Down-Dollar Up). So the action in the currencies provides a little confirmation for the “SELL” signal generated by the COT system….that is of course….if the inverse relationship between the Dollar and the Stock Market continues to hold.

Remember….this system has not been fully refined and is only based on about 3 years of data.

Shorted one ES contract at 1102.5 after the stock market closed (and losing on that already :).

Disclaimer: What the hell do I know?

- Vics

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