NET
COMMERCIALS AND THE U.S. DOLLAR RALLY
by James
West
buythebottom.com
forever a student of the markets
October 10, 2006
Broad Markets
Russell
2000 [ http://www.buythebottom.com/rut.html ]
Net-commercial position decreased by 819 contracts, but remains
bullish � in view � with a total of 11 413 contracts net long.
S&P
500 [ http://www.buythebottom.com/spx.html
]
Net-commercial position decreased by 3 065 contracts. As this market
rallies, commercials are selling into strength. Conversely net-large
trader position increased by roughly 1 400 contracts, and currently
stands at a total of 34 751 contracts net long. This is their highest
net-long position ever and is starting to make me wonder how much more
fuel is left in this rally�s tank.
NASDAQ
100 [ http://www.buythebottom.com/ndx.html
]
Net-commercial position increased by 712 contracts. My stance here
is neutral to slightly bullish. The market may drag itself higher, but
the upside seems limited.
Dow
Jones [ http://www.buythebottom.com/indu.html
]
Net-commercial position decreased by 432 contracts. Is this the time to
buy the Dow Jones at new record highs? Hmm� Nah, I'll pass.
Last week I wrote: The Russell 2000 is the most bullish looking index, and continues to be my general market barometer. And until we see significant commercial selling on the RUT, I do not expect the other indexes to top and/or do any significant damage on the downside. I maintain this view, but stress that this rally is getting long in the tooth. I consider the markets to currently be in cyclical bull market within a large secular bear market. So, bet small, and be nimble.
Commodities
Crude
Oil [ http://www.buythebottom.com/wtic.html
]
This marks the 7th
consecutive weeks of commercial buying. Over the span of
the last 7 weeks, net-commercial position increased by 88 328
contracts. Support at $60 was broken, and the new reaction low is at
approximately the $58 price level. Now, one must realize that COT data
is not exactly a day trading tool. It is a weekly report, and is good
for analyzing intermediate term trends. The trend in crude is bottoming
/ bottomed; now I don't know where the exact bottom will be and on
what day, also I don't have exact price targets / time frames for
where a potential rally may take us. But
what I do know for certain is that the time to buy is much closer to
now, than when crude was trading above $76. In fact the time to sell was
exactly when crude was near $80, NOT now, when it is trading in the low
60s and while commercials are
steadily accumulating.
Gold
[ http://www.buythebottom.com/gold.html
]
Net-commercial position increased by 3 371 contracts, marking the fourth
straight week of commercial buying. Similar story as with crude, this
market is setup for a rally. Support at 575 was broken, and the new
reaction low is at around the $560 price level. We either saw the bottom
last week, or else, the bottom is very close. Also, sentiment readings
concerning anything commodities related, is bearish, at least from where
I am standing. This is telling me that the fuel is on the sidelines and
is ready to support the fire, once it gets started�
Currencies
US
Dollar [ http://www.buythebottom.com/usd.html
]
Net-commercial position decreased by 6 313 contracts. It seems like
every time the US dollar index rallies, commercials are very eager
sellers. I can’treally say that this market is setup for a decline,
but at the same time the rally of the past 4 � 5 months is better
classified as a trading range. Right now a smart idea is to probably
wait out a setup to the downside, it is not here yet, but it is
coming�
Regards,
James
© 2006
James West
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Contact Information
James West
www.buythebottom.com
Toronto, Ontario, Canada
Email: westjam @ gmail.com (Remove the space before and after @ when
sending your email)
