Jul

13

This article at Trader Planet says commercials are record net long and in the past such has resulted into large up moves.

Without invoking the testing or testability of such a thought process yet, I seek the Senator and other CoT experts on the site to help define in the least ambiguous way how to filter out the True Commercials, The True Speculators and the True Small Traders.

Is the COT data so straightforward to leave a free lunch on the table for the whole world?

I also wish to twist this one thread in evaluating why would this tool of thought also not suffer from the ever changing cycles?

Also indulging in the more routine task and the more mundane task of imagining the future: once the pent up emotions of a Greece that was greasy for last five years having been released, with equities everywhere in the world been ho-hum for a good time, with an iPhone in the pocket of every college kid in India, is the world complacent enough here for a regime change? Oh, yes with peak oil ideas being forgotten completely, the world has also been quite happy in imagining 45 for the Nymex Light crude is also not going to hold, oil will be free some day very soon.

Anatoly Veltman writes: 

The article is (surprisingly) erudite: commercials are mean-reversion, while small specs are trend followers. This always explains increased commercial Long after decline, and diminished small spec Long. Not really predictive, except if you believe in mean reversion anyway…

The only COT-specific signals are in fact trend-following, and occur rarely: divergence. Divergence is one situation only: when commercials have NOT countered the move. Recent move was down, and if commercials have NOT increased Long, then it would be a rare signal "to sell!". But, of course, no signal right now. If Gold embarks on long rally, and commercials will NOT sell into it - there will be "buy!" signal.

All other COT interpretations are coincidental or superficial. Commercials should not be followed because "they know better"; but following them is safer because "they don't care", i.e. will not be force-liquidated! (It did happen to them twice in 35 years: during Hunt silver corner in 1980, and during Ashanti failed financing in 1999).


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