COT DATA ANALYSIS
Here is a market that is set up for a decline Lean Hogs. This is not a traditional COT setup but it is a way this can be used to help find trading opportunities. We are basically at a triple top in price or the top of a trading range, while at the same time the commercials as well as all the proxies for them are showing heavy short positions. If that was not enough we are also at a time when the seasonal favors a down move and my sentiment index is also bullish. This is a full house basically. We are against the trend defined by my bands so I guess this does not have everything if you are nit picking this.
We have the big boys defending a price level in this example so this market bears watching for entries on the short side. The seasonal patterns have very short cycles much more so than in other markets so I do not put as much weight into that aspect of this setup as I do in other markets. However, this is a pretty good setup for a short. There is not much more to say than this a picture speaks a thousand words.
We did get some weakness that crept in today in the stock market as I stated I thought we might see today. If you look at the chart we have outside bars all over the place. This is disturbing.
I have labeled the outside bars which are highlighted in green on the chart. There are 14 of these in just this short amount of time. This is an early warning that something is going on with this market. It is very odd to see this and it tells me that for whatever reason there are a lot of stops sitting above and below prior days highs and lows. As a result you should take that into account when determining where to place your stops. Whether this is funds and their cute little algorithms or something else I cannot say for sure. What we can say for sure is that is a change in market behavior and you need to always been watching for things like this.
We taught a technique for trading outside bars in the Newsletter recently and for those who read that you know that 11 of the prior 13 of these before today were profitable by what we taught. As it turned out with the open tonight now 12 of 14 of them were. This type of approach needs to be used with judgement and in conjunction with other things. Even just stand alone it is hard to beat 12 out of 14 wins with something we just taught.
I know a lot of people are enamored with trading the ES but in my view it is the hardest single market to trade just look at this crap above with the outside bars.... Aye Carumba. However, this market does drive the world right now so you need to be aware of what it is doing.
Speaking of that we have reached the infamous 11/30 date with the Eurodollar chart so we need to be looking for a decline now. Here is an interesting post at Zero Hedge on the Fed and the stock market