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NET
COMMERCIALS SUPPORT
by James
West
buythebottom.com
forever a student of the markets
September 4, 2006
Market
Rally
The
market rallied nicely off of the 50% retracement level for the Russell
2000, and is now taking a breather. So where do we go from here? For
the next little while (1 – 3 months) I believe that stock prices are
headed higher, and I will maintain that view until commercial data tells
me otherwise. However, in the short-term, we could see the markets
pullback before they go higher. The levels to watch on the Russell 2000
are 725.1 and 718.7.
On Friday all the major averages made higher highs relative to
Thursday’s close, except the Russell 2000. If we go above 725.1 and
stay there then that would mean – to me at least – that last
week’s rally is not yet over. On the other hand if we go below
718.7 and stay there, then that would most probably mean that a
short-term correction is underway. I would then look for support in the
area of 705 to 713 and a bottom to be put in place near the middle to
end of this coming week.
Broad
Markets
Russell
2000 [ http://www.buythebottom.com/rut.html ]
Net-commercial position decreased marginally by 113 contracts, and
now stands at 10 888. Again, as long as their net-position is over 10
000 contracts it remains a bullish scenario for the markets.
S&P
500 [ http://www.buythebottom.com/spx.html
]
Net-commercial position increased by 4 718 contracts and now stands
at -14 689. Even though commercials are net-short the S&P 500, they
are much less net-short than they were in May when their position
hit a low of -79 209 contracts. In fact the last time commercials were
this bullish on the market was not since late 2005. So, from a relative
perspective COT data in this market also supports higher prices. I would
also add that a lot of the commercial buying has come in the past month
or so, when the markets were rallying. It is unusual for commercials to
buy strength, and is considered bullish.
NASDAQ
100 [ http://www.buythebottom.com/ndx.html
]
Net-commercial position increased slightly by 506 contracts, and
currently stands at 10 634; anything above 5 000 looks solid to me.
Dow
Jones [ http://www.buythebottom.com/indu.html
]
Net-commercial position was little changed from last week, and currently
stands at -27 741 contracts. This market continues to perplex me, and so
I will continue to watch it closely for any new developments. I know
that the net-commercial position for the Dow Jones “MINI” is
net-positive and is balancing it out, but I am not sure if this is a
legitimate explanation…I will try to find out.
Crude
Oil [ http://www.buythebottom.com/wtic.html
]
Net-commercial position is moving up, signifying commercial buying
in this market. However, we are not quite ready just yet, but a bottom
is in sight. The 200-day moving average acted as support in the past and
will probably do so in the future, it is now at 67.68.
Commercials are buying weakness in this market, right now, and they are
not doing it because they think oil is going back to forty dollars.
Gold
[ http://www.buythebottom.com/gold.html
]
Another commodity, and more commercial buying. Gold is a little bit
trickier to analyze, but this market is nearing a setup to the upside.
In fact, if this market is not already setup, then it probably will be
in 1 – 2 months. When / if this rally gets underway, look for gold to
retest the high set in May at 725.
US
Dollar [ http://www.buythebottom.com/usd.html
]
The US Dollar continues to trade sideways, as commercial supporting
is holding steady…a surprise rally in the making? History says, yes.
My best,
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)
The
opinions of FSU contributors do not necessarily reflect those of
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