Might Think
By James Brown
One might think that by looking at the "bearish" rollover in the VIX and VXN today coupled with the intraday bounces by the Dow Jones Industrial average and the NASDAQ that we still have some more upside left in this market. The bulls on Wall Street have to be feeling pretty good about the markets thus far this summer. The traditional post-July earnings season sell off has refused to show up. We continue to get bits and pieces of the economic picture that strengthens everyone's expectation that "yes, the economy is improving." If we keep this up then maybe September, historically the worst month of the year, won't be so bad. (Psst.. just don't look at the bullish percent charts for the major indices. They're all still near record highs and that should give bulls vertigo.)
Keep an eye on the S&P 500 as buyers need to be able to push through several levels of resistance at 1000, 1010 and 1015. Should this occur then Wall Street might see a bear stampede instead of a bullish one. Also keep in mind that many veterans discount this entire period of the market with most of the professional traders gone on vacation and the retail investor more focused on getting the kids back to school than where the markets are headed. The low volume is testament to the lack of participation.
The VIX rolled over under the 22 level while the VXN produced a nice doji candlestick after touching its 50-dma. While investors don't trade these like stocks they still tend to forecast direction and both of them look ready for more weakness. That means less "fear" in the markets and potentially more short-term upside before the inevitable top.
CBOE Market Volatility Index (VIX) = 20.33 +0.01
Nasdaq Volatility Index (VXN) = 29.75 +0.41
Commitments Of Traders Report: 08/19/03
Weekly COT report discloses positions held by small specs
and commercial traders of index futures contracts at the
Chicago Mercantile Exchange and Chicago Board of Trade. COT data
can be found at www.cftc.gov.
Small specs are the general trading public with commercials being
financial institutions. Commercials are historically on the
correct side of future trend changes while small specs tend
to be wrong.
S&P 500
There is nothing eye opening to report in the large S&P futures
contracts today. Commercials remain slight more short than long
and small traders are significantly long the market.
,pre>
Commercials Long Short Net % Of OI
07/29/03 405,429 445,114 (39,685) (4.7%)
08/05/03 395,633 450,988 (55,353) (6.5%)
08/12/03 399,414 456,767 (57,353) (6.7%)
08/19/03 404,665 455,381 (50,716) (5.9%)
Most bearish reading of the year: (111,956) - 3/06/02
Most bullish reading of the year: 18,486 - 6/17/03
Small Traders Long Short Net % of OI
07/29/03 155,216 73,030 82,186 36.0%
08/05/03 159,971 72,951 87,020 37.4%
08/12/03 158,821 71,040 87,781 38.2%
08/19/03 162,034 87,064 74,970 30.1%
Most bearish reading of the year: (1,657)- 5/27/03
Most bullish reading of the year: 114,510 - 3/26/02
E-MINI S&P 500
Meanwhile for the e-mini contracts commercial traders are
still net long. Small traders are still net short but we
saw a big increase in long positions.
Commercials Long Short Net % Of OI
Commercials Long Short Net % Of OI
07/29/03 272,659 216,166 56,493 11.6%
08/05/03 310,662 249,004 61,658 11.0%
08/12/03 306,014 217,233 88,781 17.0%
08/19/03 296,971 235,779 61,192 11.5%
Most bearish reading of the year: (354,835) - 06/17/03
Most bullish reading of the year: 88,781 - 08/12/03
Small Traders Long Short Net % of OI
07/29/03 44,437 93,144 (48,707) (35.4%)
08/05/03 56,663 95,919 (39,256) (25.7%)
08/12/03 62,534 106,403 (43,869) (26.0%)
08/19/03 90,428 125,980 (35,552) (16.4%)
Most bearish reading of the year: (48,707) - 07/29/03
Most bullish reading of the year: 449,310 - 06/10/03
NASDAQ-100
Hmm... interesting development here. Commercial traders
are still net short the NDX so that's not a surprise but
the extreme just brushed a new "high" so to speak. Retail
traders are still net long but there was a big bump in
short positions.
Commercials Long Short Net % of OI
07/29/03 31,456 50,294 (18,838) (23.0%)
08/05/03 32,813 52,383 (19,570) (23.0%)
08/12/03 34,374 53,015 (18,641) (21.3%)
08/19/03 32,107 53,665 (21,558) (25.1%)
Most bearish reading of the year: (21,558) - 08/19/03
Most bullish reading of the year: 9,068 - 06/11/02
Small Traders Long Short Net % of OI
07/29/03 25,691 7,810 17,881 53.4%
08/05/03 22,188 7,783 14,405 48.1%
08/12/03 23,957 7,871 16,086 50.5%
08/19/03 25,607 10,134 15,473 43.3%
Most bearish reading of the year: (10,769) - 06/11/02
Most bullish reading of the year: 19,088 - 01/21/02
DOW JONES INDUSTRIAL
Wow! We see a big change in sentiment by the commercial
traders in the DJ futures. Short positions doubled indicating
a growing expectation that the market could rollover.
Right on cue the retail trader is picking the wrong direction
and more than doubled their long positions while slashing
their shorts. This sort of extreme flip-flop would indicate
a market reversal in the making.
Commercials Long Short Net % of OI
07/29/03 23,696 9,572 14,124 42.5%
08/05/03 23,981 9,264 14,717 44.3%
08/12/03 24,942 9,878 15,064 43.3%
08/19/03 21,088 18,984 2,104 5.3%
Most bearish reading of the year: (8,322) - 1/16/01
Most bullish reading of the year: 15,135 - 10/16/01
Small Traders Long Short Net % of OI
07/29/03 5,744 11,601 (5,857) (33.8%)
08/05/03 5,716 10,422 (4,706) (29.2%)
08/12/03 6,933 13,248 (6,315) (31.3%)
08/19/03 15,717 9,143 6,574 26.4%
Most bearish reading of the year: (8,777) - 10/12/01
Most bullish reading of the year: 6,574 - 8/19/03
http://www.asianinvestoronline.com/marketsentiment/082403_1.asp
A lot of mixed data leading to a market ready to still go higher this morning but also one that ultimately will form a top.
Thanks for the short interest update!
RtS
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