Commodities

OK… Bank That, Too…

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Remember back on July 12th I called for a BUY on EURUSD at 1.2172?  Bet y’all thought I was out of my god-damned mind.

Well, with EURUSD at about 1.2430 now, it’s time to bank that shit.

In the same post, I mentioned buying Gold at $1563; take half of that off too, now that it’s $50 higher.

Buy EURAUD at 1.1747

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As with EURUSD’s ludicrously oversold “Dumb Money At Work” event last week, so too the fifth-decimal-place chasers have decided that AUD can only go up (relative to EUR, at least).

 

Every dickhead with access to an online Forex account thinks he’s a genius jumping on the same direction as a trend that is the most oversold (basis EURAUD) that it’s been in years.

 

As with the EURUSD call, look to double your dough.

Buy EURUSD at 1.2172

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Every retarded 5th-decimal-place chaser in the world has decided to slam short on EURUSD (of course ,they decide this after the Euro is 25 handles off its high, and 120 pips of its recent swing high… at which point you could not find a pullback for money nor jam).

EURUSD will gut them just as it gutted the same sort of fucktard who was slamming into the offer up above 1.25…

 

Likewise, Gold. Seriously? Gold’s weak? Oh, well I guess that means that the political shitbags have got a solution for the fuckups that keep emerging: from PFG, MFG, Madoff, RepCo, Enron, LIBOR, WorldCom, Greece, Spain, France… and QEn, n=1,…,∞ : of course! Makes sense. They’ve got it sorted, so there won’t be ‘beggar thy neighbour’ printing, and so there’s less risk of future inflation today, than there was yesterday or the day before.

 

Seriously? Someone’s going to try to run that shit up the flagpole? Sorry, no sale.

So get on the ‘wrong’ side of the GOld market too – be a buyer at 1563 (basis XAUUSD) and ride that sucker up a couple hundred bucks.

DAX Short Panning Out Niiiice

DAX short entry is panning out, irrespective of whether it was entered based on "Freebie" from Dec 30th (DAX at about 5970) or from this twitter twatt ("DAX might open with a pop… if can get short above 6000 that would be one of the best things evah." – Dec 30th at 8:40 P.M. [DAX was closed… opened and popped above 6000 on Jan 4th]).

As of Friday that short was up over 100 points irrespective of which entry was used: that's €2500 per €17.3k margin … of course no exit target was given to free-users (only USSpyers got the targets: they were out at the 100-point target).

This trade will probably last half the year and quintuple the margin required to enter it. If you didn't action it at the time, it makes no sense to enter it now. There will be a bounce at some stage, so wait for a re-entry.

Contango Charts

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A commodity is said to be in Contango if 'forward' contracts are priced higher than the 'front month'. The front month is the contract that is nearest to expiration; 'foward' contracts are futures with expiration dates after the expiration date of the front month. If forward contracts ar price lower than the front month, the commodity is said to be in backwardation.

Other things being equal, the existence of a contango indicates that futures participants expect the price of the commodity to rise (since they are prepared to pay more to obtain delivery of the commodity in question, the further into the future). If a commodity is in backwardation it indicates that the market expects the price to fall.

If the slope of the contango or backwardation becomes very strong, it indicates that participants expect the market to rise (or fall) forcefully: taken in conjunction with Commitment of Traders analysis, this may indicate a situation of a 'sentiment extreme' and the optimal trade is to take the opposite side of the trade.

Futures Movers

MarketMentat Commodity Charts

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MarketMentat CoT Charts

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The Dumb Bull Ratio is the proportion of 'Non-Reportable' open interest (positions held by small speculators) which is held 'long'. Small speculators tend to be latecomers to any significant move, and once the preponderance of small traders are positioned on one side of the market, a reversal is likely.

When a commodity has an unusual concentration of long positions amongst small speculators this represents a sentiment extreme: it is useful when used in conjunction with other sentiment-based analysis such as the Contango cgharts and price-based oscillators such as the commodity Channel index and Williams %R.

The Dumb Bull Ratio II is the proportion of all open interest which is held as long positions by 'Non-Reportable' traders.

When long positions amongst small speculators rise as a proportion of all open interest, this represents another indication of a sentiment extreme, and reinforces the Dumb Bull Ratio above. Note that it is possible for the DBR and the DBRII to indicate different things: small traders may be overwhelmingly bullish among themselves, but small-spec long positions may be shrinking as a result of increased bullishness amongst large-traders (it is reasonably rare for both large and small traders to become bullish at the same time – usually small speculators are attracted into already-bullish markets).

The final pane in our Commitment of Traders Analysis is the proportion of small speculative positions (both long and short) in total open interest.

When the market concentration of small speculators rises, it indicates that larger traders – hedgers and large speculators – are becoming 'less keen', both on the long and short side, than the small specs. In other words, smart money has decided to reduce its exposure to this market. The ideal contrarian setup within the CoT charts is for the DBR and DBRII to be at an extreme and for Small spec concentration to be rising.

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