Wednesday, January 18, 2012

Recoil…the trap is being set

Since the open of 2012 the S&P Futures have travelled 20 points…it feels like its been a lot more because of all the volatility and the choppiness of the move. And its done a good job. Apparently, even though I do not watch CNBC, its gotten Jim Cramer bullish. Perfect! In any case, people are now bantering about the COT commercial open interest. As usual the popular banter is completely wrong. Take a look at the dollar COT numbers for the Dollar. Speculators and Large Investors are clearly the ones to watch. When their positions break to new highs…that is the beginning of a move NOT the end of one. The dollar has broken to new highs in open interest. That takes considerable effort and will not be easily undone. Moreover, when you watch for the subsequent action from a break to new open interest highs (long or short), you will see that the Dollar wants to move in that direction for at least the next 4 to 5 months and many times years…hedgers (which means commercials) do not have the same objectives are NOT an indication of trend reversals. Perhaps for some short periods they can be…but not for more.
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