Much of successful trading, like economics, comes from making small changes that over time, affect the big picture. Today, we’ll discuss a marginal improvement to our Commitments of Traders swing trading calculations that improved performance across all of the markets we trade and that leads to big changes in the bottom line over time.
We’ve been writing about the metal markets quite a bit, having recently published articles at Futures Magazine, Equities.com and TraderPlanet. We’ve seen major churning by the commercial traders which is indicative of a broader change in sentiment. Obviously, when it comes to the metals markets like gold, silver, platinum and copper, the major questions on everyone’s mind is, “Have we bottomed?” We’ll review the current setups in these markets and attempt to answer just that question.
The most heavily anticipated Federal Reserve meeting in the last seven years turned out to be a non-event. No change. The ticker flashed across the bottom of the screen, “The Federal Reserve Board has left interest rates at 0. No change.” There are lots of variables factored into their decision but the end result is that they simply didn’t feel our economy was ready strong enough to withstand even the slightest of interest rate increases. Assuming they’re right, what do we make of copper’s recent rally? Clearly an expanding economy will need more copper. Apparently, the commercial traders weren’t too keen on this idea as they’ve been net sellers in each of the last four weeks. Furthermore, the Commitment of Traders report reveals a unique imbalance that bodes poorly for copper’s future prices.
Another week of good calls with two out of three trades well in the money and the third is still hanging on.
We began the week by sending our COTSignals discretionary customers a sell signal in the Australian Dollar on Sunday evening. The market opened Sunday night at $.8026 to the U.S. Dollar and hasn’t looked back. It’s currently pushing $.7800, accumulating more than $2,000 per contract thus far. We detailed this trade for TraderPlanet on Monday in, “Aussie Dollar: A Commercial Trader’s Perspective.”
Commercial traders in the copper market have been extremely active through the first half of 2015. It was obvious by the record net long position they set in January that they had big expectations for global growth and the corresponding demand for copper to continue into the summer. However, a growing stream of soft economic data which led to dovish comments by the Federal Reserve Board which led to a dramatic shift in commercial trader sentiment just as the market was approaching solid resistance is now quickly sending this market downward towards its seasonal lows.
This morning’s unrevised Q4 GDP number at 2.2% on declining corporate profits provides just the right ambiance for a what has been a gloomy week. While we had a completely separate trade looking at multi-year lows in , “Time to Sweeten on Sugar,” most of our focus was on the financial markets.
We’ve been discussing the turmoil in the financial markets for the last three weeks both literally and figuratively. We’ve discussed the massive flow of money headed into the short-term rates in, “Expected Turbulence in the Financial Markets.” We noted the rotation from industrial to precious metals in, “Re-shuffling the Metals Markets.” We’ve caught both sides of the equity market volatility between, “Equity Rally Waves a Caution Flag” and “Hidden Strength in the S&P 500.” The final piece of the confusion was addressed timely enough in, “Bottoming Action in the Euro Currency” which we wrote the night before the Dollar turned. The point of all this review is that today’s action in the copper market further reinforces the increasingly negative attitude that the commercial traders are taking towards global output. Taken in total, the signs are negative. Taken individually, they are good trading opportunities.
This was a busy week. We began on Monday with an exclusive follow up on last week’s “Equity Rally Waves a Caution Flag”, for TraderPlanet in, “Commercial Traders Turn Negative Towards Equity Rally” which focused specifically on the Dow.
Meanwhile, our main piece for the week focused on, “Copper Traders Bailing Out of Record Position.” Specifically, what was going on with the record commercial net long position in the face of a market that appears to be rolling over.
Finally, the equity curve for our commercial live cattle trading program has been updated to show its recent success.
The copper market is frequently referred to as the, “economist of the metals markets” because the supply and demand issues associated with this market lead directly to construction and manufacturing. Therefore, commercial long hedgers actively locking in prices for their future usage is seen as a bullish sign for the economy because construction and manufacturing managers are trying to lock in their production supplies for an expected growth in demand. Obviously, commercial long hedgers setting a record net long position would be indicative of Continue reading Copper Traders Bailing Out of Record Position