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NET
COMMERCIALS, GOLD & OIL SETUPS
by James
West
buythebottom.com
forever a student of the markets
October 2, 2006
Broad
Markets
Russell
2000 [ http://www.buythebottom.com/rut.html ]
Net-commercial position was virtually unchanged, increasing by only
19 contracts, now totaling 12 232. The
way this market is setup I think there is a pretty good chance that in
the intermediate term we will test the record high for the RUT in the
780 area.
S&P
500 [ http://www.buythebottom.com/spx.html
]
Net-commercial position decreased by 3 032 contracts.
The SPX rallied to new 2006 highs, but it seems like the rally is
running out of steam as commercials are starting to sell at these
levels. I am reluctant to
use the word ‘top’ largely because of the bullish setup in the
Russell 2000 and partially because of the lack of a really bearish setup
in the S&P 500 itself.
NASDAQ
100 [ http://www.buythebottom.com/ndx.html
]
Net-commercial position increased by 1863 contracts.
This market is turning somewhat bearish, after last week’s
net-commercial decline of over 8 800 contracts.
Not yet a top but also not the best place to buy in terms of
risk/reward.
Dow
Jones [ http://www.buythebottom.com/indu.html
]
No major developments here, as net-commercial position decreased by 364
contracts.
The
deal with the broad markets is as follows: the time to consider buying
was three months ago, right now we are somewhere in the middle so it is
hard to forecast future price movement with any kind of certainty.
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.
Commodities
Crude
Oil [ http://www.buythebottom.com/wtic.html
]
This marks the 6th consecutive weeks of commercial buying. Over
the span of the last 6 weeks, net-commercial position
increased by 77 597 contracts. Once again, this market is setup
for a rally. September's reaction low marks support at 60 dollars, if we break
this level there is strong support in the 57.5 dollar area.
Gold
[ http://www.buythebottom.com/gold.html
]
Net-commercial position increased by 6 560 contracts, marking the third
straight week of commercial buying. This market is setup for a
rally. September's
reaction low marks support at 575, if we break this level there is
strong support in the 550 dollar area.
Currencies
US
Dollar [ http://www.buythebottom.com/usd.html
]
Net-commercial position increased by 1326 contracts.
This market has been setup for a rally for around five months, so
far – the rally is nowhere to be seen.
This is a good lesson in how to look at COT data: for example, a
market setup for a rally does not guarantee that you will see higher
prices; in fact it does not even guarantee that you won’t see lower
prices. This is precisely
why watching trend reversals and having good money management is
so crucial. The long-setup
in the dollar is still there, however, I will be surprised to see this
market making new highs above 91 – 92 price level.
Regards,
James
©
2006 James West
Editorial
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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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