Special COT Report

[richmtn]

Long time Stoolies know I have followed the COT reports very closely over the last year and a half. During the first half of 2002 I got some good signals by watching the commercial players. While this is a very blunt instrument it helped me a number of times.

I have always found the DOW to be the most useful of the reports. The signals it gave were valid for all three majors. When I began following the COT I was getting about a 6 week lead time. That narrowed down to about 2 weeks. During the second half of 2002 I stopped getting good signals. Then the minis began to be a factor seemingly masking their intentions. But I digress.

 

FWIW:

The current report, as of last Tuesday, showed a big jump in the long position for DOW commercials. The DOW minis don't balance out this position. They sold off 1/3 of their short position during the last one week period.

What are we to make of this? Did the commercials get dumb over the last year, NOT.

I went back and reevaluated the data. I found a strong negative correlation! Do I think that this is their situation, NOT. My guess is that they have found a way to mask their true intentions.

Until proven otherwise I am assuming a negative correlation. That would make the current signal extremely bearish. Remember the report is as of last Tuesday. That's right before the big sell-off day. Anyway it's something to think about. I wouldn't bet the farm on it.

 

I have included a weekly COT DOW chart. The arrows are mine. The chart is from softwarenorth.

[The End]

Rich,

 

You have done some good work there. I still would have you look at the spx large contract however.

[richmtn]

Rich,

 

You have done some good work there. I still would have you look at the spx large contract however.

Here you go The End. What do you think?

[richmtn]

Here's the mini S&P do they make sense together?

[TGakaTheBigHurt]

I've looked at all of the available index futures back to 1986 when they first became available.

 

The only one I've found to give reliable signals over time is the large S&P 500 contract.

 

The key point is that historically, the large SPX contract dwarfs all other index futures in terms of the dollar value of the respective open interest.

 

The dollar size of these contracts are relative to each index. The large SPX contract goes for $250 x the SPX index, the Dow contract is $10 x the Dow, and the Naz 100 contract is $100 x the NDX. So to take a position in the SPX large contract would cost you $245,000 right now compared to $91,000 for the Dow and $124,000 for the Naz.

 

Taking this into account, the approximate $ value of the open interest on the large SPX contract is $150 bill. compared to only $10 bill. for the large Naz 100 contract and $3 bill. for the Dow contract. So what you likely have is a much better sample of smart money vs. dumb money on the SPX contract.

 

Since I am currently short I was worried when I saw that the commercials had taken a historically high net long position in the Dow futures contract. But at the same time, they have taken a historically high net short position in the Naz 100 futures contract.

 

If you compare the approximate $ values of the commercials net positions, they are long the Dow at $1.25 bill., short the NDX at $2.54 bill., and short the SPX at $9.55 bill.

 

I would not combine mini contracts with full contracts. The mini contracts are only 1/5th the value of the large contracts for the SPX and NDX and the classifications for commercials on the large contracts differ from that of the mini.

[richmtn]

I've looked at all of the available index futures back to 1986 when they first became available.

 

The only one I've found to give reliable signals over time is the large S&P 500 contract.

 

The key point is that historically, the large SPX contract dwarfs all other index futures in terms of the dollar value of the respective open interest.

 

The dollar size of these contracts are relative to each index. The large SPX contract goes for $250 x the SPX index, the Dow contract is $10 x the Dow, and the Naz 100 contract is $100 x the NDX. So to take a position in the SPX large contract would cost you $245,000 right now compared to $91,000 for the Dow and $124,000 for the Naz.

 

Taking this into account, the approximate $ value of the open interest on the large SPX contract is $150 bill. compared to only $10 bill. for the large Naz 100 contract and $3 bill. for the Dow contract. So what you likely have is a much better sample of smart money vs. dumb money on the SPX contract.

 

Since I am currently short I was worried when I saw that the commercials had taken a historically high net long position in the Dow futures contract. But at the same time, they have taken a historically high net short position in the Naz 100 futures contract.

 

If you compare the approximate $ values of the commercials net positions, they are long the Dow at $1.25 bill., short the NDX at $2.54 bill., and short the SPX at $9.55 bill.

 

I would not combine mini contracts with full contracts. The mini contracts are only 1/5th the value of the large contracts for the SPX and NDX and the classifications for commercials on the large contracts differ from that of the mini.

Thanks for the very fine education. I'll be including your info into my thinking.