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Tuesday, December 25, 2007

Going Nowhere



If you look at the bigger picture here in the S&P 500, we are essentially just trading sideways in a trading range. You can see the commercials have shifted to the short side of the market on a relative basis. However, if you look at the green line drawn across horizontally, they are still at a high level compared to where they have been over the last several years. Short term, they are at lower levels compared to 6 months ago.



I have researched the number of times that the WillVal indicator with these parameters has gone into an oversold condition as it was recently, with the market moving sideways in an uptrend, and there is not one single instance of a large decline that followed.



I also researched how often the market declined when the commercials were in this type of position in December, and there were no instances of a decline in the last week of the year when this happened. What this means is simply that the seasonal year end bias has been stronger than many of the other fundamentals at this time of the year.



As a result, I am holding my longs into the first week of January, where I will lighten up or completely exit. I do think we will have a January short term top, possibly the first week. I am looking for a March re-entry, for a big rally up from there. Oh wait, I read on another blog the other day that we all should "be very scared." I love that type of thing because that is just another person for us to take money from, the more the merrier especially during the holiday season!

4 comments:

grozzy said...

Chris,
I see in the COT data both the commercials and non-commercials are net short on the big sp500 contracts. What are you thinking?
tnx

Chris Johnston said...

I actually exited all my longs on the next to last trading day of last year at the close. I do have some stock exposure still but they are stocks that are outperforming the market as a whole by quite a bit. I have written in my newsletter that I expected a first quarter decline, but did not know how severe it would be, and that March should be the next buying spot.

Due to lack of comments here, I just don't make the effort to post that much anymore. Too many people read and then send me emails instead of posting, so it defeats the purpose of it in some ways.

Also, for reasons of protecting my clients, I deliberately post some things after the fact so they get the advice on the front side, I think that is only fair.

There is no question with the comms heavily short right now, there is no reason to be long that I can see.

Chris Johnston said...

Correction, I exited all of my futures, funds and index longs on that day, I still have some stock long positions that are still very profitable and are long term holds. Look for a March buy back spot, hopefully we really drop big into that date, but I doubt it, I think a slow drop or sideways move into that time frame is what will occur.

Marek said...

hello , i have a question about willval indicator. does anybody know how is calculated? or which commodity is used to get the value of measured commodity?