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Following the lead of “Commercial Hedgers” doesn’t provide the Holy Grail of investment signals, yet doing so over the past 3 years would have been a profitable idea. Since 2008, following the lead of this group has been of benefit per playing the Euro and the S&P 500 as well.
Currently the Hedger’s are making one of the largest bets since the 2008 Financial crisis low, that the Euro is about to rally! Frequently they have been right in the past 36 months, often early though.
Will see if they are correct this time around!
What I like about the Euro here, along with the COT report, is that everyone and their grandmother is just certain the Euro is going to 1.15 in a matter of days. The mainstream news is reporting on the imminent demise of the Euro. I’m starting a modest long position here.
I enjoy your blog Chris!
Aaron…Thanks for the kind words.
See the quiz today? Shoot me an email when you can, due to if the quiz is correct, it would go against one of your positions.
Chris
Hi Chris,
Thanks for answering my post. I follow your suggestions almost religiously and it has paid off handsomely. I am long XLF, KRE,and IYM since those were plays you had recommended. I am long TLT as of Monday @ 116. I also bought credit spreads in RUT (780/790 Calls) and SPX(1310/1315 Calls)since resistance was at hand.
I spent some time two nights ago putting together a list of bull case vs bear case scenarios and frankly, I could not put serious money on either side right now. Patterns suggest a decline is coming (major resistance in 500 index, VIX was on support, etc..), but news out of Europe could catch me on the wrong side.
Thanks for being frank and to the point with me. I am sure most readers will agree when I say that you are supplying a great service to all of us.
Aaron
HD…
The chart/data can be found at this link.
Thanks for your viewership and question,
Chris
Aaron…
With resistance at hand and you want to go long the 500 index, I would wait for a breakout.
At this time premium members have a market neutral spread trade in place, being long the banks and short the 500 at the same time. We are not betting on markets direction, we are placing a relative strength idea in place. This idea stems from a huge relative underperformance of the banks compared to the 500 index. Thes ratio between the banks and the 500 is reflecting readings only hit 3 times since 2008.
I remain open/lean towards liking the “Inverse H&S” in IYM. We picked it up over a week ago and remain owning it. FCX has broken a key falling resistance line and IYM is attempting to get above it.
Hope this helps some,
Chris
give me a break. The monthly chart is rolling over on the eur/usd. See ya at 115-118.
Rooster…I very much appreciate you comment and no problem with any arguement with this situation or any of my noise.
What I like is that the Euro hit a low last summer when the spread between the hedgers and large traders was very much like it is right now. That set up/spread between (which represents a big difference of opinion) was a signal for a good move to take place. The go no-where markets will end sometime and I am attempting to find some crowded trades that might reflect that the boring/choppy markets could be ending.
Thanks for your viewership and great comment,
Chris
Food for thought.
Before SIlver exploded towards $48 in April (seems so long ago….) if memory serves me right, commercial had the biggest short positions. Closing them (coupled with several margin hikes) fueled the final move from $36ish to $49
I generally agree that commercial positioning is a good indicator (not necessarily timing wise) but just like any good pattern or analysis, they are falible from time to time.
That said, I am expecting a retracement of the Euro to perhaps 1.38. Wish I knew if we had one more down move first though!!
Thanks for the inputs you provide,
Leonardo
Looks like a 17 month old Head & Shoulders Neckline to me…break or reverse, a hinge pin event
Interpretation of COT data would be in my third draw of tools
A COT Squeeze at a Neckline break would be interesting
tic toc tic toc
Hi, Mr.Kimble.
Where did you get the Data of: Commercial Trader, Large Trader, and Small Traders? Can You tell me.
Thanks B4
Hi Chris,
A simple question for you. If you had 10K to invest right now, would you go ahead put long positions on tomorrow or would you wait for confirmation of a breakout.
You have provided a lot of compelling reasons to go long. However, the market does not seem to be able to get above the 200 DMA. Your flag pattern resistance trendline seems to be affecting the market as well.
The news out of Europe at the end of this week will be bias toward the positive side, so what is one to do?
Go long or wait for breakout.
On another note, the VIX bounced off its 200 DMA and is sitting right above its lower Bollinger band. Lately, this has meant a rapid move to the upper Bollinger Band (~36) and a quick decline in the S & P (5-10%).
Makes me think twice about putting new money to work here
Any suggestions?
Thanks,
Aaron
I usually wouldn’t want to argue with the masters read of a chart, but my read of it is the commercial hedgers have had a dreadful time of it whilst the large traders have been very profitable! The commercial traders have been way early and then squared up in the earliest part of the next move. Small amounts of call options being purchased but also no puts being purchased, i.e no market participants. The rydex ratio has turned quite bullish in sentiment?
Gary…No outcomes for key flag/pennant patterns being suggest. These are patterns that confine and piss off bulls and bears. Yes most often if the Euro does break higher, 500 index and many commodities will follow. Should that happen it would reinforce the inverse H&S pattern in Basic materials.
The flag/pennant in the Einstein update reflects the ever narrowing pattern, which will have to come to an end. The Euro chart reflects that the Hedgers beleive the flag will breakout.
Chris
Ty…The Euro does have the opposite Cup and Handle to the Dollar chart for sure, which is normal.
Fib resistance for the Dollar, which is the top of the cup, is the opposite on the Euro. Stating the obvious, Currencies and the 500 index have been in choppy ranges for a period of time. Other than day trading or holding a position for a few days, the markets are trendless for the most part.
Crowded trades can often break markets from the boring go nowhere situation they are in right now. A few sentiment extremes are starting to crop us…such as the fewest number of small traders since the 2008/09 lows are buying call options right now. In the past when the small traders were loading up on call options, going to get rich on a rally, what usually happens? Now the fewest number of call options are getting purchased.
Whether you are a bull or a bear, it is these type of readings, huger number of hedgers betting on the Euro or the small number of call buyers, these situations can finally help break key support/resistance lines.
Chris
http://www.forexpros.com/analysis/analysis-inverted-%22cup—handle%22-in-the-weekly-of-eur-usd-106916
Of the last few posts; gold and silver against resistance, again, SP500 in flag pennant, TLT and S&P reversing support and resistance again, aren’t they all in danger of failing expected outcomes if the EURO bolts higher???
Ty…Hedgers are usually ahead of the bigger moves over the past three years, so when they have taken the position it was “contrary” at that time. Cup & handle is a pattern Dollar bulls need to come true. That pattern doesn’t have the best track record per predicting, yet remains a possible outcome. If the hedgers are correct, the handle will break down.
Hi Chris,
Could this be a contrarian indicator this time? Also, what about the “cup-and-handle” formation I have been reading about?