|
NET
COMMERCIALS AND ADAPTING TO CHANGE
by James
West
buythebottom.com
forever a student of the markets
March 26, 2007
Volatility
Index
VIX [ http://www.buythebottom.com/vix.html
]
Commercials were sellers of the VIX index when it broke out,
since, then the VIX has declined to retest old-resistance, which is now
support at around 12 dollars. In
the short-term, it looks like the VIX is overextended to the downside,
so we will probably see a re-test of the 10-day moving average.
From a longer-term perspective and the commercial setup, it looks
like we are going to break below 12 and return to a period of low
volatility.
Broad
Markets
Russell
2000 [ http://www.buythebottom.com/rut.html
]
Commercials were big buyers last week of this index, as well
as all the other indexes. Not
too long ago, commercials were sellers at these price levels, and now
they have turned around 180 degrees and are buying at these levels.
I was anticipating the market to decline further before
commercials would get interested in the stock market, but they proved me
wrong. It looks like the
double bottom at 760
is for real, and that we are headed towards higher prices in the
intermediate-future.
S&P
500 [ http://www.buythebottom.com/spx.html
]
Total net-commercial position currently stands at -4,783.
The last time net-commercial position was this high was back in
late-2005. This is very
bullish as far as COT setups are concerned.
The double bottom near 1378 should hold, as this setup is forecasting higher
prices in the intermediate-term.
NASDAQ
100 [ http://www.buythebottom.com/ndx.html
]
Net-commercial position increased by roughly 20,000 contracts,
confirming the other bullish COT setups on the rest of the indexes.
Once again, the double bottom at 1,720
should hold, and higher prices are the forecast for the
intermediate-term.
Dow
Jones [ http://www.buythebottom.com/indu.html
]
Net-commercial position increased by over 25,000 contracts.
This probably means that the double bottom at 12,050
should hold, as this COT setup forecasts higher prices in the
intermediate-term.
After
just one week, most of the index COT charts transformed from bearish
setups to bullish setups. This
just goes to show how dramatically the markets can change, and also that
we – as investors – must be able to ADAPT to these sorts of
changes. The key here is to
stay open minded. A
week ago the melt-down that started in late February looked like the
beginning of something big; instead, it now looks like a critical bottom
has been put in place. Also,
notice the RUT broke right back above 800.
Commodities
Crude
Oil [ http://www.buythebottom.com/wtic.html
]
Oil broke below $60, but found support near $57 and then rallied back
above $60. Commercials
continue to sell this market, so it looks like a bearish setup is in the
works. There is very
significant resistance above $64 for crude.
For now, oil remains in a trading range (57 – 64); and even
though commercials are sellers over the last little while, it is
important to follow the trend which continues to point up…as long as
oil remains above $60.
Gold
[ http://www.buythebottom.com/gold.html
]
The picture with gold is not entirely clear.
While commercials were buyers over the last little while, is this
enough fuel for gold to go up and challenge its 2006-high near 730?
This COT setup would have been much more bullish if
net-commercial position moved to new highs on the 1-year-COT-chart, to
roughly -75,000. For now, it
looks like this market is poised to challenge its resistance at 690.
Other than that, bullion continues to stay range-bound from a
big-picture perspective, in between roughly 550 and 730.
Currencies
US
Dollar [ http://www.buythebottom.com/usd.html
]
The US dollars is setup for a rally, and is literally
touching strong support at $82.5. If
the USD holds above $82.5, then it looks like we will see a leg-up
develop from these levels to perhaps challenge resistance at $85.5 –
87.5.
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)
The
opinions of FSU contributors do not necessarily reflect those of
Financial Sense
|
