COT data is signaling a great buy opportunity in
ES1!
despite all the talks of this "bear rally" peaking and a coming recession
The COT data has had us in this trade for the last couple months - just 1 SPY Call profited over $2,000. Personally, I took profits last week in accordance to my trading system. However, with the COT data still pointing heavily long, I'm looking for the daily chart to signal a long entry this week
Notes on My Trading Methodology and What I'm Even Talking About
COT Definitions:
- COT: Commitments of Traders Reports - A weekly report published by the government (CFTC) that shows long and short positions of the below 3 groups (As well as much more data I don't look at). We look at the NET positions of these 3 groups and compare them to historical levels to signal trade opportunities
1- Commercials: Hedgers - We want to trade with them when they're at extreme levels (Think Tyson for meats, Cargill and General Mills for grains, etc)
2- Large Speculators: Hedge funds and large institutions - We want to fade them (trade against) when they are at max positions (Think suits in NYC and commodity funds)
3- Small Speculators: People/institutions trading small lot sizes not big enough to report to CFTC - We want to fade their max positions as well since they represent the public (Think dude in his PJs trading and small trading firms)
Indicators on Chart:
- The first indicator shows the net positions of the 3 groups above plotted over time
- The second indicator is an index of the relative buying/selling of commercials over a certain lookback period. Anything above 95 is looking for buy (Green shading), look to sell when it hits 0 (red shading)
- I use both a short-term and long-term lookback
- When the small speculators are at max positions as well, it's further proof to get in the trade (shading gets darker)
- Note: Just because the Commercial's net position is negative doesn't mean it can't be relatively net long and signal a buy (same in the opposite scenario). This is very common with Gold for example
Trade Setup - Both Must Happen:
- When commercials are at max levels we are alerted to buy or sell (Depending on the criteria above)
- On a daily chart, use technical indicators, candlestick patterns, news, etc to enter the trade (I have a proprietary reversal signal I use)
- Added bonus when the trend is your friend (I use a Multiple Moving Averages indicator to visualize)
- If the trend is against you on both a Weekly and Daily chart, the short and long term Index must both be signaling to trade. If the trade fails, look to reverse the position and go with the trend
ES1!
despite all the talks of this "bear rally" peaking and a coming recession The COT data has had us in this trade for the last couple months - just 1 SPY Call profited over $2,000. Personally, I took profits last week in accordance to my trading system. However, with the COT data still pointing heavily long, I'm looking for the daily chart to signal a long entry this week
Notes on My Trading Methodology and What I'm Even Talking About
COT Definitions:
- COT: Commitments of Traders Reports - A weekly report published by the government (CFTC) that shows long and short positions of the below 3 groups (As well as much more data I don't look at). We look at the NET positions of these 3 groups and compare them to historical levels to signal trade opportunities
1- Commercials: Hedgers - We want to trade with them when they're at extreme levels (Think Tyson for meats, Cargill and General Mills for grains, etc)
2- Large Speculators: Hedge funds and large institutions - We want to fade them (trade against) when they are at max positions (Think suits in NYC and commodity funds)
3- Small Speculators: People/institutions trading small lot sizes not big enough to report to CFTC - We want to fade their max positions as well since they represent the public (Think dude in his PJs trading and small trading firms)
Indicators on Chart:
- The first indicator shows the net positions of the 3 groups above plotted over time
- The second indicator is an index of the relative buying/selling of commercials over a certain lookback period. Anything above 95 is looking for buy (Green shading), look to sell when it hits 0 (red shading)
- I use both a short-term and long-term lookback
- When the small speculators are at max positions as well, it's further proof to get in the trade (shading gets darker)
- Note: Just because the Commercial's net position is negative doesn't mean it can't be relatively net long and signal a buy (same in the opposite scenario). This is very common with Gold for example
Trade Setup - Both Must Happen:
- When commercials are at max levels we are alerted to buy or sell (Depending on the criteria above)
- On a daily chart, use technical indicators, candlestick patterns, news, etc to enter the trade (I have a proprietary reversal signal I use)
- Added bonus when the trend is your friend (I use a Multiple Moving Averages indicator to visualize)
- If the trend is against you on both a Weekly and Daily chart, the short and long term Index must both be signaling to trade. If the trade fails, look to reverse the position and go with the trend
