Received a few emails about the latest Commitment of Traders article. This question from Richard was typical:
"Can you recall a time when the SP (large contract) Professionals were ‘wrong’ in their positions when the COT had reached extreme (or record) levels?"
I’ve mentioned before that I pay more attention to the change in the Professionals position than their absolute long / short reading. So the Commitment of Traders Oscillator is more important in my analysis.
However, the absolute long / short reading must have some predictive value, right? Well, the hypothesis I’m working under is that the current Commitment of Traders position is most similar to March 2002.
Commitment of Traders March 2002 (Emini weekly)
In March 2002, the Professionals were Short 17.7% of total open interest. The Professionals are currently Short 18.5% of total open interest. Back in March 2002 the SP contract Professionals were also much more bearish than the ES Professionals – again, same as today.
So, I believe we’re still in a long term bear market but rallying and about to form a Pull Back turning point, after which we’ll re-test the March lows. If I stick my neck out, I’d say that this turning point is due in the next week or two.
My Better TRIN system reversed Long on Friday and the Better TRIN Oscillator is yet to turn down. A signal Short on the system or break of the previous week’s Low might signal the start of this down leg.
Good luck with your Emini trading.
