COMMERCIAL
SELLING CONTINUES
by James
West
buythebottom.com
forever a student of the markets
February 14, 2007
Volatility
Index
VIX [ http://www.buythebottom.com/vix.html
]
Commercials were sellers of the VIX last week, meaning that
volatility was probably not quite ready to make a dramatic re-entry into
the marketplace. Subsequently, and to no great surprise, the VIX
declined (today) to near record lows. However,
there is continued evidence of commercial distribution in the stock
market; so as soon as the VIX is setup to rally - will probably
be a very good indication that a top in the markets is imminent.
Broad Markets
Russell
2000 [ http://www.buythebottom.com/rut.html
]
As the RUT broke out to new highs, commercials were selling
into strength. This is a classical bearish COT setup in the making. A
few more weeks of this sort of selling would setup this index to the
downside, which would translate into the much awaited intermediate-term
top for the stock-market.
S&P
500 [ http://www.buythebottom.com/spx.html
]
Commercial selling reemerged in this market as well, which is just
another confirmation that commercials are sellers at these price-levels.
Total net-commercial position fell to -52 667 contracts, a level not
seen since July of 06.
NASDAQ
100 [ http://www.buythebottom.com/ndx.html
]
From the commercial perspective this market looks very bearish. But
it is important to note that from the price-chart we are starting to
receive a bearish tone as well. The NDX failed to move to new highs over
the last week, lagging other major indexes. This is just one more sign
of commercial distribution and the formation of an intermediate-term top
in the markets.
Dow
Jones [ http://www.buythebottom.com/indu.html
]
And finally, the Dow is setup for a decline as net-commercial position
is hitting record lows (aka. selling)
while net-large-trader position is hitting record highs (aka. buying).
Once more, a classical bearish setup from the COT charts.
The message from COT data in regards to the stock-market is unanimous; commercials are selling into strength as the market is making new highs. Anybody chasing these highs on the long side is only asking for trouble.
Commodities
Crude
Oil [ http://www.buythebottom.com/wtic.html
]
The COT setup in crude is finally resolving. We saw commercials buy oil,
as this market rallied from $52 to $60 per barrel. This sort of behavior
is unusual for commercials and is considered very bullish. (Commercials
tend to buy weakness and sell strength) Net-commercial position is
right around 40,000 contracts, a level not seen since December 2005.
Crude started off 2007 with a very volatile trading pattern, which was
largely not forecasted by COT data. But then again, markets are markets,
and this sort action is just a part of the game.
In conclusion, this market is setup to continue to rally, I see any weakness as a buying opportunity.
Gold
[ http://www.buythebottom.com/gold.html
]
As gold moves to higher ground, commercials continue to sell. With this
in mind, I would expect gold to stall; until we see a correction and/or
consolidation during which time commercial buying reemerges.
Currencies
US
Dollar [ http://www.buythebottom.com/usd.html
]
The dollar has been trading sideways for the last several weeks, and
remains setup to the downside as evidenced by the COT chart. A breakdown
from the current consolidation level is likely.
Regards,
James
© 2007
James West
Editorial
Archive
Contact Information
James West
www.buythebottom.com
Toronto, Ontario, Canada
Email: westjam @ gmail.com (Remove the space before and after @ when
sending your email)
