THE NEW COT REPORT
I have been talking in here about the PPT and it's manipulation for quite some time and now many other sites that are more popular than mine have picked up on the theme and have been running with it. There is even a specific traders name at the Fed I am finding mentioned in a couple of places.
Today was a case in point of how things have changed with the COT data and the stock indexes. The Commercial position in the large pit contract used to be a very good tool to use to position yourself for large stock market moves, NO MAS. Since the FED officially took over control of the stock indexes either by trading them directly or indirectly through Proxies in 2009, the COT Data has been terrible as a tool for analyzing the stock indexes. What we all have to learn and re-learn over and over is that things change and we have to adapt to those changes whether we like them or not. One such change is that the dominant player is the FED and they are the new commercials for the stock indexes. When they release meeting minutes or other statements, I am looking at that as the equivalent of the COT data release. When they make a statement like they did today where they hint that there is an end to what they are doing, that is the equivalent of them lessening the long position they have as if they were commercials.
There is one difference between looking at the FED as a commercial and the commercials themselves in the COT report. The commercials are hedgers in the COT data so timing moves based on their positioning is a bit tricky as I have discussed for a long time in here. The FED is not a hedger they are a one way trader. When they are changing their positioning it should cause essentially an immediate reaction. They are not forward selling crops or hedging them. They are solely trying to drive prices only one way and in an immediate fashion. If we know when they are buying it is a no brainer to be with them. We will still take an occasional loss doing this, but not too often.
On a bar pattern basis I have no idea whether or not today's decline means a thing. It is another example of consecutive outside bars a pattern that has occurred often recently across all the markets, which tells me indecision more than definitely bet the farm. However, you just never know. This market although clearly in a strong trend is very very extended in both price and time, so a correction or more can occur at any time. Today's action by itself does not mean anything to me stand alone. I still would prefer a break and re-test for any short position I might take for a hold. My mechanical system was short going into today in the ES so that trade is going to work out it appears.
I am going to work on this new COT idea and see what I can come up with for a tool. For now it is somewhat of a subjective idea, but clearly has a basis in fact which is always a good starting point for something.
Gold is rapidly approaching the moment of truth, if it breaks through the numbers I gave recently the Emperor having no clothes will finally become clear. I maintain as I have for the last couple of years that the whole skit with Gold is one of the biggest shams ever put over on the public right up there with real estate and Internet stocks. I don't know if this is finally the breaking point or if it will come later, but eventually it is going back down under $500 right where it started from. The head lines and stories will be very interesting when that happens. For now it is still holding the critical levels but they are not far below. It is time to really start paying attention if you have been holding this for a long time waiting for $10,000 to be hit. If you don't have an exit strategy you better get one in case this fraud finally gets exposed.
Must see TV right here.