Here we are in the critical zone of price I pointed out on the weekly chart, and look what we have here on the daily chart. The Synthetic COT indicator on the daily chart, has now dropped into the sell zone again. You can see the last 2 times we were here what happened. As it is with other COT stuff, zones of price where reactions have occurred in the past need to be looked at versus the indicator. What amount of commercial buying or selling was required to stop or start a move. In this case it has been clear that this amount of commercial selling has been what has stopped recent rallies, so that has to be the first read right now until we blow through here and it fails. Net net, this is a sell signal right here. How anyone may or may not decide to get into a trade is an individual judgement call, but I think this is a sell zone on a short term basis right here.
Here is an interesting looking chart, Silver.
Once again we have moved into the sell zone in this market as well, sells can be done right here. We also have the seasonal pointing downward, so this is lined up pretty well. We also know the back has been broken in this market and the probabilities are it has topped for many years to come. Overall this means we need to be looking for sell signals. The larger scale cycles do still point up until years end, so we don't have everything perfect here, but we rarely do. I know I have readers here who do not agree with my big picture view on this market and you may well be right. However, this is a short term signal so the larger picture does not matter for this setup. Besides I am the one who is dumb enough to go out publicly with my views every day and eat crow when I am wrong, so what you get here is my views not someone else's.
Here is the Wheat market which had a Mr Bills wild ride the last 2 days. You may recall me posting a chart the other day with an error I made in this market that wound up making me a small amount of money. It was just my gut that the market needed to base a bit more, before a big rally could happen if it was going to. You can see we had a monster up day, followed immediately by a monster down day. This is the type of price action I was talking about where the market congests some, and forms a base. With equities on the verge of cracking here, this may well just head back down again, but in any event I am glad not to be long and getting whipped around here.
The next chart is an ugly price pattern, the Yen.
Boy is this a mess, the Yen. I have looked at this chart each day because I have been looking for a sell in this market, but good lord what to do with this? It is my view that when you get something this choppy you need to look somewhere else. What often happens in situations like this is exactly what happened here. You get a monster bar breakout, that clears out everyone, and lures a few suckers in, then retraces the very next day right into the middle of the price zone again. For my purposes, I need to see some bars clear of this mess before I will do anything. Since this is a flight to quality vehicle, it has held strong during the stock market turmoil, so it it likely this won't tumble until stocks begin the year end rally.
This market might be telling us with the last 2 days of action, that stocks are not quite ready to make their cyclical and seasonal up move just quite yet.
There was a question in a prior thread about my comments pertaining to the COT data and the stock market. What appears to have happened here is that there is so much cross indexing and arbitrage type of stuff going on, that the numbers get out of whack for these markets. For many years the COT data was just great for stocks, but once the onset of the emini's began, the effecacy started to diminish.
The above is my guess as to why this is taking place, but it does not really matter. Traditional COT buy and sell signals in the stock indexes just don't work any more. There are a few top analysts of this report, and some of them publish newsletters. They have been wrong time and time again with the directional calls they have made the last few years. If these folks that know this report better than I ever will can't get it right, how can we hope to make anything out of it.
This is the main reason I have been dinking around with my synthetic COT indicator that I display so often. I have been trying to find the best true measure of what the insiders are really doing and the COT report for stocks does not do that anymore. At times I think I have the grail with this tool, but other times it is dead wrong, so I am not sure at this point what the true value of my creation is.