I did some more work on the COT stuff and made charts showing the Long versus short results both from the beginning of the SPX and then zoomed in from 96 to present which is around when they started tracking the DOW and NDX futures also. These two charts show the S&P, DOW and NDX futures as well. Looks like they are hedging the long DOW with short NDX at the current time but net short via the SPX as of last Tuesday.
marketswing.com
marketswing.com
Running through the charts, I can't come up with a solid opinion long or short so I am no help what so ever. FA and some TA says we could drop hard right here and now however there are equally bullish TA signs that show we could head up a bit longer before starting our decline.
On the bullish arguement, all my targets pretty much line up with AllanAlias' targets with the NASDAQ likely topping out in the 2450 to 2600 region before heading south. Our indicator also doesn't show a sell trigger. RYDEX numbers and various other sentiment indicators are troublesome in that so many have discounted the bear and gone full bore long but they aren't that great for timing, just the longer term direction when used in a contrarian sort of way. The low VIX and VXN is bothersome but I did some shuffling on some forks and show the VIX could get as low as 22 before it would likely bounce up and signal a sell off.
I have seen very very few of the old favorite stocks in tech make any kind of a bullish break out above key resistance. Only SEBL, QLGC and few others have really done that well thus far with most others being repelled at mild resistance levels, 38% retrace levels etc. Most of the weaker stuff like CMGI, GSPN, etc never even came close to anything important and show that they were just dead cat bounces. NDX weekly ADX is only around 40 so there is no sign that we are necessarily going to reverse down yet thus my reluctance to go short despite all the bad news.
I tend to agree with Don and XXXXX that "IF" this rally tries to continue, it will do so only a few more weeks at most, then the June period will tend to be very very weak.
================================
Someone else just asked about if the larger size of traders might be skewing this outlook somewhat I just made the following answer...
I thought that also so see the charts in my post that I just made. I attempted to filter out that noise by just taking the Commercial longs minus the shorts ( in terms of number of contracts) and displayed those results for the S&P, DOW and NDX futures.
Regarding the commercials. Who knows for sure but the idea is that this is the "Big Money" or the real pros. This isn't the every day trader regardless of the amount of cash he has, this is the large hedge funds etc that play billions. Don and I discussed this yesterday as to it's validity and he too is skeptical pointing out that LTCM blew up. My view however along with many others is, these guys play huge amounts and HAVE to be right more than wrong or they would disappear very quickly. The large size of their positions is why they aren't very good at timing since it takes a long time ot leg in and out of these positions without tipping their hands too much. I will grant though that they also use complex hedging strategies, offsetting shorts with like longs in other instruments etc. However I think the chart clearly shows that they never have been this biased to one side before except the long side when the bull was first starting around 95 and we know how that turned out. We are now seeing them going hard the other way and knowing it takes time for them to get out of these, they don't appear to be in any hurry. AS I said in my earlier post, it appears they went long the DOW and added to shorts on the NDX so there was some obvious hedging there but the overall bearishness of the SPX positions is scary.
My interpretation is they are looking for a multi year bear and don't believe CNBC when they say we will be better off in the 4th quarter. -ggggg-
Good Luck,
Lee |
