About the FT article: Commitment to accuracy of CFTC data in doubt

A few weeks ago, the Financial Times of London announced an expansion in coverage of the commodity sector. This week they published an article cleverly titled “Commitment to accuracy of CFTC data in doubt,” discussing the impact of inaccurate large trader reporting by Newedge from March through May 2011 (for which the CFTC fined the broker $700,000). Continue reading

Insider Money Annual Outlook Issue

Insider Money is a general investment letter covering longterm outlooks for the economy, stocks, bonds, gold, and oil. I am amused when I see articles on “those got it right,” having foreseen this or that aspect of the financial crisis. Insider Money subscribers have experienced few surprises over the past eight years, having been forewarned (repeatedly, and well ahead) of virtually every facet of the economic crisis. Not just years in advance, but with specific timely advice. It takes a lot longer, for instance to liquidate real estate holdings or a bond portfolio than to sell a stock portfolio. Timing is everything. Insider Money serves two priorities, but in a specific order. My first concern is return of your capital. My second priority is return on your capital.

Insider Money has carried both advance warning of major financial upheavals plus timely actionable investment recommendations.
These are early warnings issued in IM:
2003 Mortgage backed securities huge risk
2003 Derivatives threaten financial system
2003 Debt bubble hangs over economy
2004 Glass-Steagall repeal–history lesson
2004  Fannie Mae & Freddie Mac gone wild
2004 Unprecedented Housing bubble
2004 Musical chairs in Credit default swaps
2007 Triple-digit annual bank failures due
2007 World-wide financial system at risk
Here are the timing calls in IM & BR:
Dec 1998 Generational commodity bull move
Mar 2000 NASDAQ market top
July 2005 Housing bubble top won’t be long
Oct 2007 Major stock market top
Nov 2007 Recession already here
Jun 2008 Commodity prices to plunge 50%
Jul 2008 Oil prices to collapse to $30
Jul 2011 Stocks, special situation selling recommendation
You can buy this 17-page special report here: http://www.insidercapital.com/imorder.htm

Comments:

Please congratulate Steve on his powerful, comprehensive Insider Money Issue #50. He is extraordinary. JP
I would like to thank you for the excellent Insider Money report, which I purchased yesterday. ND
Current Insider Money is some of your best work during the course of time
that I have been a subscriber. [since June 1989] Jim Dillavou
Steve, I just purchased your Insider Money letter. I am so impressed! Congratulations on your work. RB

Gold may take a breather

Quoted By GENE EPSTEIN in Barron’s

September 2, 2011
One such bear is Steve Briese, publisher of the Bullish Review of Commodity Insiders newsletter and Website. Having strongly recommended long positions in the metal early this year, Briese (pronounced “breezy”), recently put out a virtual S.O.S. to his subscribers. In the Aug. 15 issue of the newsletter, he called the daily gold price chart “as close to straight up as you can get without going vertical,” and then warned, in uncharacteristically emphatic language: “These charts always, always, always end with prices going down, down, down for a long, long, long time. Always.”
BASED ON EXTENSIVE research he did for Barron’s about the performance of similar roaring bull markets, which rose and then collapsed, Briese believes a 33% correction from recent highs, to about $1,250, is quite plausible.
Bolstering his conviction that the gold chart illustrates a classic speculative bubble, Briese further points out that the long side of the vast futures and options market has been in “weak hands.” Based on the Commodity Futures Trading Commission’s weekly “Commitments of Traders” report, he notes that the net short position of traders whose business involves dealing in actual gold has been at near-record levels over the past few weeks. In other words, the smart money, while not always right, has been voting with its dollars that gold will fall. It has mainly been the speculators who have been voting for a continued price rise.
But not wishing to overly bug the gold bugs, he recommends only that they consider taking profits and then wait to buy back eventually at what he believes will be much lower prices. This is a similar prediction to the one Briese made for commodity indexes in the March 31, 2008,Barron’s cover story. In that case, he was proved right by year end.

Making Sense of Futures vs. Futures + Options Report

I use the Futures + Options report in lieu of the Futures only Commitments of Traders Report. The Futures + Options report is, obviously more comprehensive, and it is also the basis for the COT-Supplemental breakdown of Index Traders. Although the net position patterns may look almost identical for many markets, the actual position totals vary. This brings up an interesting point. In some markets, in some weeks, the totals for the Non-Commercial category may be larger on the Futures Only than on the Futures + Options report:

Continue reading

CFTC April 22 Forum by web or phone

CFTC Announces Details of April 22 Agricultural Forum

Washington, DC – The Commodity Futures Trading Commission (CFTC) announced today further details about the upcoming roundtable discussion on the agricultural markets. The roundtable is designed to gather information about whether the futures markets are properly performing their risk management and price discovery roles.

Agenda

Participants

The roundtable will consist of officials from the CFTC, U.S. Department of Agriculture, Farm Credit Administration, Federal Reserve System, and a broad spectrum of agricultural market participants, including producer groups, commodity merchandisers, commodity consumer and producer groups, financial firms, and futures exchanges. A complete participant list will be available before the forum.

Attendance and Comment

The roundtable will begin at 9:00 a.m. on Tuesday, April 22, 2008, in the Commission’s hearing room located on the ground floor of its headquarters – Three Lafayette Centre, 1155 21st Street, NW, Washington, DC 20581. The hearing room doors will open at 8:30 a.m.

Due to significant space limitations, interested members of the public are strongly encouraged to use the following alternative options to access the hearing:

1. Watch live broadcast of the roundtable via Webcast on www.cftc.gov

2. Call in to a toll-free telephone line to connect to a live audio feed

Call-in participants should be prepared to provide their first name, last name, and affiliation. Conference call information is listed below.

Domestic Toll Free: 866-759-0291

International Toll: 763-416-8828

The conference ID: 43214239

Call leader name: “CFTC”

Because opportunities for questions and comments the day of the roundtable may be significantly limited, participants and members of the public may submit written statements for the official record up to two weeks following the roundtable.

EURO: Anatomy of bull market

euro chart

Let’s review the long-term performance of the COT Index in the euro. This is the youngest of the currencies we follow, replacing the Deutchemark on the IMM futures board in January 1999. In most ways, the euro has followed the well-established Deutchemark patterns in terms of COT net positions (along with cycles and other technical studies). We could not assume this at the time, however, and it took a couple of years to build enough data history to have confidence in COT signals. Until 2001, we successfully relied on signals in the Swiss franc, which traded pretty much in lockstep with the euro.

Our first reliable signal in the euro was published on July 16, 2001 (A). The minor buy signal in the euro was accompanied by a major buy signal in the Swissie. The fact that these signals occurred at a prior support level did not escape our attention:

This is the first time during this bear market that Commercial buying has appeared at the

same price level as at the prior occurrence (last fall). This hints that fundamentals have quit slip

ping in the franc. Traders should watch for confirmation of a potential major bottom”.

This was published just 6 days following the low of the failure swing bottom that triggered the ongoing 6.5 year bull market. In December 2001 we primed subscribers for what we expected to be a long-term trade:

In a bull market, the longer you hang on, the higher the profits. We got you in very early in the trend and now encourage you to try to stay aboard for the long term. If you get knocked out by a protective stop, we will be watching for re-entry signals.”(B)

We were fortunate to find optimum rebuying points at key retracement lows in August 2003 (C) and April 2004 (D).

But what about the major buy signal in December 2004 (E)? Commercials were buying on a scale up, not at a corrective low. I dare guess that your casual Commitments analyst did not get this one right. Although the signal was unusual it did indicate a sudden change in large trader sentiment, leading us to expect a trend change. The Dec. 13, 2004 Bullish Review carried this advice:

“CURRENCIES NEW SPECIAL SITUATION: …There are an unprecedented number of December contracts to close out or roll over by the last trading day on Friday Dec. 17. We expect major retracements of the 3.5-year trends will develop off this rollover, and would trade a breakout of last week’s high in the dollar index or low in the euro (or other IMM foreign currency we cover).”

That retracement lasted exactly 12 months during which a single short IMM euro contract gained $25,000 (on a correction!). After an initial bout of selling, commercial buying appeared near the bottom of the correction. On Nov. 25, 2005, we noted trader extremes across the currency spectrum (F):

With Commitments at such historic extremes, we suspect that this dollar bull move [euro pull back] has reached its probable limit. Since the next trend possibilities include a resumption in the dollar bear market, it seems reasonable to lock in long dollar profits. Yen net positions are at a 6.5-year extreme. Franc net positions are at a record extreme. Pound net positions are at 6-year extreme. Commercials are near net long record level in euro.

This was just five days ahead of the resumption of the bull trend that lasted two years and accumulated a $40,000 increase in each long euro contract. The COT Index took on a textbook bull market pattern during this uptrend, with nearly continuous bearish readings reflecting commercial scale up selling. Commercials did buy on corrections, however, providing us exceptionally timely buy signals at October 2006 (G) and August 2007 (H).

The euro appeared to run out of steam in November 2007, consolidating in a 3-month trading range. Was this THE top, or just a resting place in the euro bull market? Commercial buying and a major COT buy signal on February 11 (I) tipped us off to the next bull leg, which has so far accumulated per contract profits totaling $17,000:

The proximity to the lower trading range boundary makes a low-risk long entry available, in anticipation of an imminent breakout above the upper boundary.” –2/1/2008 Bullish Review

What have we learned from this exercise?

A. COT signals are highly effective in the euro.

B. Play for the big move and try to stay aboard.

C. But major corrections cannot be ignored.

D. Bullish Review is an awesome newsletter.

E. All of the above.

Get the bible on the COT report…

book cover

The Commitments of Traders Bible” is the first comprehensive guide to the COT report. If you don’t want to know everything there is to know about the Commitments of Traders, then don’t buy this book.  Click here for full details: The Commitments Of Traders Bible by Stephen Briese

If you are not a subscriber to Steve Briese’s Bullish Review, the weekly market letter devoted solely to the COT report for the last 20 years, you might want to get a year’s subscription at 1/2 price (and some other bonuses) here: http://www.BullishReview.com (This introductory offer is only for new subscribers to Bullish Review.)

Two lobbyists appointed CFTC Commissioners

Bart Chilton is the former chief lobbyist for National Farmers Union. Jill Sommers comes to the post from the International Swaps and Derivatives Association (ISDA), where she was the chief lobbyist. Swap dealers aren’t regulated by the CFTC. Why would the President appoint someone from the ISDA? Oh, ya, somebody needs to protect the status quo. The CFTC’s announcement is here. See my article on the influence of swap dealers in futures markets here.

COT data files posted

I finished my book and sent it off to Wiley, which has given me a little more time for other projects (including this blog). I have completed posting the complimentary historical COT data files as well as the weekly printed reports under the “COT Data” tab at the top of the page. This data is provided for personal non-commercial use only, and may not be retransmitted, or reproduced, in any form including charts.

These are not some lame partial history files requiring you to pay for current updates. These are the complete histories and are updated weekly. You will also find a file key. Since I have maintained the data bases personally for the last 20 years, I believe them to be the cleanest data available. It is certainly cleaner than the data available from the CFTC, and used by all other data vendors (except CSI who licenses my data). The CFTC’s data carries the following warning:

“Please be advised that prior to September 30, 1992 only mid-month and month-end data are available. Since the mid-month data were not published on a current basis, they may contain identifiable data errors. A substantial period of time elapsed between the report date for these data and their eventual compilation. As a result it is not possible to correct the errors.”