Understanding COT Data........
- Thread starter J-Law
- Start date
cot data is useless, but my politics are great......
PS, the fella says the cot is a working theory......I am impressed..
I repeat the COT is a couple weeks old when released, it used to be a month old as i remember. If there is anything i ever saw after the cot come out it was simply: if the numbers showed one group leaning a particular way then a short-term squeeze could be pulled to nail the weak hands by the bigs.
Aside from that, for the normal sized trader (read small), the COT is useless. ..........
Speaking of politics, the Bush plan is to claim Victory (again) and say the Iraq police, military are a trained lean, mean fighting machine and the troops can come home. but you can bet your sweet butt we will keep troops there to defend the oil fields we stole from that naughty Saddam.....
PS, the fella says the cot is a working theory......I am impressed..
I repeat the COT is a couple weeks old when released, it used to be a month old as i remember. If there is anything i ever saw after the cot come out it was simply: if the numbers showed one group leaning a particular way then a short-term squeeze could be pulled to nail the weak hands by the bigs.
Aside from that, for the normal sized trader (read small), the COT is useless. ..........
Speaking of politics, the Bush plan is to claim Victory (again) and say the Iraq police, military are a trained lean, mean fighting machine and the troops can come home. but you can bet your sweet butt we will keep troops there to defend the oil fields we stole from that naughty Saddam.....
Actually I've wrote an entire book on using the COT as part of an overall trading strategy. In fact, the COT is becoming more and more important useful as the pension funds scramble into commodities (entering long only non-traditional commercial positions). This has already caused some spectacular moves and may lead to a shortage of sellers in some markets. Remember the big run up in soybean prices in late Feb 2005? Much of that was the result of pension fund hedging. The pension funds are not able to speculate in futures the way a hedge can, obviously that's simply to risky, but they can hedge against rising inflation/rising commodity prices using a traditional index such as the Goldman Sachs. As you know I am sure, stocks have performed poorly over the last 5 years. There are many reasons for this, but part of the reason is the largest bubble in modern history. No, I am not talking about any housing bubble. I am talking about a population bubble I call the "baby boom bubble". This skew in the population is having a great influence in the market and the economy overall. Think about, in 1995, at the onset of the big bull move in equities the first of the baby boomers (those born in 1946) were just 49 years old. If you look at the data, you'll find 49 years old is a very important age. This is the time when individuals really began to think and prepare for retirement. There is still time to sock money into more risky growth stocks at this age (as there is time to recover from short-term dips or a short-term 3 - 5 year recession). However, its now 2005 (not 1995), and the same baby boomers (born in 1946) are now 59 years old not 49. At 59, one thinks a little differently regarding risk and exposure to risk. One tends to scale back exposure and that will have a pronounced affect as this continues as again this is only beginning since I am referring to the first of the baby boomers only. This trend will continue as the baby boomers (born between 1946 - 1964) all move into retirement over the next 15 or so years. Now in 2008 the first of the baby boomers (those born in 1946) will reach 62 years of age. This is also an important milestone. This is the age that individuals can begin pulling money from social security. Thus, as the market moves towards 2008 and beyond we have big issues to deal with. Money is going to be leaving equities (first of all). Pension funds, whom own a huge chunk of the equity markets, must begin paying out promised benefits to the largest population group in modern history. The pension funds have suffered poor performance and some are losing money. Regardless however, they still have to pay out promised benefits (unlike a traditional 401(k), which only pays out what its worth). This is a big issue. What does it have to do with commodities and the COT? Between now and 2008 and beyond I believe we will see more pension fund money going into commodities as a hedge against rising commodity prices, rising inflation and falling equity prices. We can see this happening already in the COT numbers (the signatures are changing). The key however is that you can't look at the COT data the same way we have in the past. To see what is really happening we have to dig deeper into the COT and look at individual participants (individual groups and so forth, including the non-traditional commercial funds and the traditional funds). I talk about this in my book in detail and provide several new approaches (21st century approaches) to using this very valuable information.
Be sure and stop by my site for a free review of some of my work and software - Some of my indicators are available for view, and some sample charts and graphs are available as well. I also have developed a pattern recognition system which I combine with the COT data. You must combine traditional forms of technical analysis (derived from price structure) with the COT, as a timing tool otherwise you'll never enter at the right (if simply looking at the COT only). I have developed specific methods for stops and managing both profits and losses (both are a reality with any trading system and all traders have to deal with both). There are no pie in the sky promises on my sites or in my book, but with hard work you can make good use from the COT. This is a great resource which our government provides.
Good trading to you.
Very respectfully,
floyd Upperman
www.upperman.com
Be sure and stop by my site for a free review of some of my work and software - Some of my indicators are available for view, and some sample charts and graphs are available as well. I also have developed a pattern recognition system which I combine with the COT data. You must combine traditional forms of technical analysis (derived from price structure) with the COT, as a timing tool otherwise you'll never enter at the right (if simply looking at the COT only). I have developed specific methods for stops and managing both profits and losses (both are a reality with any trading system and all traders have to deal with both). There are no pie in the sky promises on my sites or in my book, but with hard work you can make good use from the COT. This is a great resource which our government provides.
Good trading to you.
Very respectfully,
floyd Upperman
www.upperman.com
The COT data is very valuable for longer term traders ... if you take the time to study and understand it. Each market behaves slightly differently, as do the behaviour of the 3 players reported in the COT data.
It is not valid to make sweeping statements like the commercials are always the side of the market albeit a little early. Some futures markets are actually used for hedging by the commercials and they consistently take a beating, eg: Nat Gas.
Somebody mentioned Nat Gas earlier so here's my analysis for this market....
Small Spec
These guys are always net long. Since 1991 they have been net short only 1 week (Dec 2001). Their positions are very stable which suggests there is very little speculative retail money in this markets - ie: dentists do not have the scrotal fortitude to play this market. In the last 5 years their short holdings have remained constant but they have gradually added to their long positions. Possible impact of the emergence of long only commodity funds. Because of their long bias they make money during rallies and give it back during selloffs and sideways markets. Overall they don't do much better than break-even.
Large Spec (Trading/Hedge Funds)
These guys generally make money in this market. They take money off the small specs and commercials. They had a long bias up to 2001, but since then have definitely favoured the short side. They were net short during the recent explosive rally - got killed obviously. Their positions are alot more volatile than the small specs and commercials, in accordance with the market action.
Commercial Hedgers
These guys have a definite short bias. In fact whenever they get net long it is time to buy Nat Gas. Over time they lose money - they are hedging their forward requirements. Their positions have remained vitually unchanged for 3 years.
Bottom line: Nat gas is a traders market. The regular explosive moves are not the result of a sudden increase in buying/selling interest - it is probably driven by interests in the pit.
Heres my recent charts on Nat Gas and COT data.
Combine COT data with seaonal analysis and market action and you will get 2 to 3 low risk high reward trades in most markets every year. Enough to make any patient, pragmatic tradre rich beyond belief.
It is not valid to make sweeping statements like the commercials are always the side of the market albeit a little early. Some futures markets are actually used for hedging by the commercials and they consistently take a beating, eg: Nat Gas.
Somebody mentioned Nat Gas earlier so here's my analysis for this market....
Small Spec
These guys are always net long. Since 1991 they have been net short only 1 week (Dec 2001). Their positions are very stable which suggests there is very little speculative retail money in this markets - ie: dentists do not have the scrotal fortitude to play this market. In the last 5 years their short holdings have remained constant but they have gradually added to their long positions. Possible impact of the emergence of long only commodity funds. Because of their long bias they make money during rallies and give it back during selloffs and sideways markets. Overall they don't do much better than break-even.
Large Spec (Trading/Hedge Funds)
These guys generally make money in this market. They take money off the small specs and commercials. They had a long bias up to 2001, but since then have definitely favoured the short side. They were net short during the recent explosive rally - got killed obviously. Their positions are alot more volatile than the small specs and commercials, in accordance with the market action.
Commercial Hedgers
These guys have a definite short bias. In fact whenever they get net long it is time to buy Nat Gas. Over time they lose money - they are hedging their forward requirements. Their positions have remained vitually unchanged for 3 years.
Bottom line: Nat gas is a traders market. The regular explosive moves are not the result of a sudden increase in buying/selling interest - it is probably driven by interests in the pit.
Heres my recent charts on Nat Gas and COT data.
Combine COT data with seaonal analysis and market action and you will get 2 to 3 low risk high reward trades in most markets every year. Enough to make any patient, pragmatic tradre rich beyond belief.
If you want CTI data visit www.chart-ex.com The data is FREE. On any CBOT detailed charts, hold the shift key down and click through the CTI data for the day, week or month. You can see the cumulative net long or short position for each CTI.