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Strategies & Market Trends : Ride the Tiger with CD -- Ignore unavailable to you. Want to Upgrade?

To: The Vet who wrote (20106)	11/15/2004 9:57:59 PM
From: Condor	Respond to of 314064

Thx Vet, It isn't what I thought. Glad I asked. C

To: The Vet who wrote (20106)	11/15/2004 10:59:21 PM
From: rubbersoul	Respond to of 314064

"Some Comments on the Latest COT Release of 11-15-2004" A few comments about today's COT release Bill. It is actually somewhat interesting to me. Here's the particular feature that caught my eye this time around. The total open interest continues to rise far exceeding levels seen earlier this year back in both January and April when gold peaked both times near the $430 level. You and I both have said constantly that those who were calling for tops based solely on open interest totals were missing the picture as there is no reason to suggest that open interest could not exceed those levels and exceed it in quite handily as it has indeed done. Any guy worth his salt as a trader knows that is a given. Anyone who says anything different has never traded for a living and is best ignored. Again, some get paid to talk and write; traders get paid to trade. At the conference we both heard talk about "extreme levels of bullishness among the specs", "huge level of shorts among the commercials", etc., etc. as signs of an impending top. As we both know from trading, a market can do anything, anytime it darn well pleases to do so. However, based on this week's release of the Commitments, I find nothing particularly "excessive" about the commercial category position. Here's the deal - while the commercial short category has indeed been piling on a substantial number of shorts to contain the price as expected, their TOTAL SHORT POSITION is still some 12,000 contracts shy of levels they were carrying back in April of this year when gold peaked at $430. This week's commitments data is good thru Tuesday, Nov. 9 of last week when front month gold closed at $436.20. So here we are sitting ABOVE a critical double top resistance zone near $430 and the total commercial short position is SMALLER than it was back with gold sitting at $430 or below. We've got more room to run based on that number alone and thus the commercial short position does not disturb me in the least. Secondly, while funds have indeed been building a substantial long spec position that is some 11,000 contracts larger than the previous peak back in April of this year as well, something important is taking place. The little spec long position IS STILL SMALLER THAN PREVIOUS PRICE PEAKS made both in January and April of this year. Depending on which month one chooses, it is either some 8,000 or 9,000 positions less. Translation - the little specs are still NOT EXCESSIVELY BULLISH. I simply do not care what anyone said at that conference - the Commitment of Traders data is the measurement used to determine trader sentiment and based on this one indicator, it CANNOT be stated that the small specs are wildly or excessively bullish, more so than at any other time this year. As a matter of fact, they are LESS BULLISH now than they were back in January and April and here gold is sitting above $435. That is indisputable and anyone arguing different simply does not know what he or she is talking about. Thirdly - someone else is buying besides both the specs - that leaves only one category and that is the commercial interests as well. People tend to forget that the gold cartel is not the only "commercial" interest in this market. There are other "commercial" interests besides them and some in that category have been BUYING. As a matter of fact, they did a fair amount of buying this past week picking up a bit over 6,300 contracts. The end result of their buying is to bring the NET COMMERCIAL SHORT category (the difference between the commercial long positions and commercial short positions) to -162,688. As a bit of perspective, the NET COMMERCIAL SHORT position back in April of this year, again when gold peaked near $430, was a whopping -196,304. Translation - even though the usual commercial price capping has been taking place by our "friends" at Goldman, Morgan, et al, bona fide hedgers, while not matching the cartel's selling contract for contract, have been doing a pretty good job of offsetting some of that selling. Much of this group can be considered to be end users of gold who will need to purchase gold at some date in the future and are using a futures position to hedge their exposure to a rising gold price. It is obvious that many in this group are anticipating higher gold prices down the road and need to "lock in" a purchase price so as to preserve their profit margins. The point in all this is quite simple - even though open interest levels are indeed rising and at new high levels in this market, the actual market composition of the traders is still not wildly bullish by any means. There is bullishness, that is for sure, but I see nothing here that when compared to earlier levels we have seen in this market causes me any particular uneasiness. Funds can surprise you - just about the time you think they are tapped out and have no more money to throw into the pit, out of nowhere a tidal wave of additional buying simply overwhelms a market. It is a dangerous thing attempting to second guess when the funds are maxed-out, a lesson this trader has learned all too well much to the detriment of his own personal trading account.