This week COT data was quite illustrative of what the big boys are doing. Infact it was deja vu for me as it gave me taste of what the big boys aim to do when they need to get off their positions. I was part of all this as we used to unload huge and massive speculative postions and leaving the small guys holding the batter.
For the first time in the last 6 months, we have the small traders (even retail) becoming hopeful of the rally to go on. And guess what? The big boys including the commercials and large funds and traders have gone short. This is bearish. Very!
S&P is just shy of kissing the upper boundary of bollinger band but seems to be now topping out into another vertical fall. The Committment of Trader reports indicate that both Large and Commercial guys have loaded out of the S&P. Take a guess is on the counter party to their shorts? Correct. Retail guys. It is unbelievable how these guys egts drawn in time and again and again. How dumb can you be?
Even a simple math of P/E should tell you that S&P is right now trading at forward 16x onÃ‚Â Goldman’sÃ‚Â prediction for S&P EPS. That is near to pre crash levels when unemployment were closer 6%. And yet the retail guys found a reason to buy this crap out of the big boys.
We have suggested to our clients to books profits and stay in cash. Once S&P crashes below 1160 go short to a target of 1120/30.
Unlike the S&P , dollar index looks well set to rally. Any fall will be picked up by the large traders who increased their bet that dollar will rally. Dollar index has been rising kissing the upper band and sometimes even going over it, showing the strength left in the bear rally of dollar. My own target for this is 83 which could happen as early as Friday when the Jobs report will be released.
It is no coincidence that we have a 30 Year auction this week and there is no way the FED will allow the dollar to weaken given that 30 year auctions have beenÃ‚Â disappointmentÃ‚Â all through 2010.
And that brings to my favorit currency: Euro. Well the outlook is bleak for short term traders.
Large traders increased their bet to the largest every >80k short contracts.