Big Money Movement in the Dow — Watching it could have helped you catch the ride down

COT Data

On the weekly chart, we see that on the Friday July 29 COT report, commercials were -32,296 contracts net short and by Friday Aug. 19 they were -2,108 net short. On the other side of this large specs were net long 25,979 contracts for the July 29 report. On Aug. 19 they were net long 5,113. Solid liquidation, solid drop in open interest, solid drop in the market. For the best picture of how this movement affects the market see the weekly chart below and for the best analysis of this report on all of the markets go to Trends in Futures. If you need help understanding the COT report e-mail me at Gary@TrendsinFutures.com and put COT e-book in the subject line.

Commercial Net Tracker instructions: This form tracks the Commitment of Traders (COT) data for the commodity futures market. This form "looks" at the most recent five weeks of COT data and provides visual indications of the data. A) If the current value is at a 12-month low, the cell will display a red/burgundy background. B) If the current value is at a 12-month high, the cell will display a green background. C) If the current value went from net negative to net positive, the cell will display a blue background (indicating a bullish condition). D) If the current value is both a 12-month high and also went from a net negative to a net positive, the background will be green. You should view the data with green backgrounds to determine if they also went from net negative to net positive.

If you need help understanding how to understand how to use the COT report to your benefit, please email me at Gary@crbtrader.com and put COT report in the subject line. Please include your name and telephone number in the email.

Proceed to Page 3 for this week's detailed fundementals charts...

Fundamentals

After a 42% upside correction, the S&P 500 index on Thursday fell sharply and may be headed for a test of its recent 11-month low.

Bearish factors for stocks include:

1. recent economic data showing the global economy is slowing as Q2 German GDP rose less than expected and Japan’s Q2 GDP contracted for the third straight quarter;
2. continued concern about the European sovereign debt crisis and its potential to cause an all-out crisis for the European banking system;
3. the plunge in the August U.S. University of Michigan consumer confidence to a 31-year low and
4. comments from Dallas Fed President Fisher that Washington's "fiscal misfeasance" restrains the U.S. economy and that the Fed shouldn't ease monetary policy whenever there is a big drop in U.S. stock prices.

Bullish factors include:

1. the larger-than-expected increase in Jul leading indicators;
2. increased M&A activity with $22 billion in takeovers over the past week and
3. reduced interest rate concerns as the 10-year Treasury note yield fell to a record low.

Fundamental Outlook — Medium-Term Bearish — Stock prices attempted a half-hearted recovery but fell back due to a weakening U.S. economy, a plunge in consumer confidence, the ongoing European debt crisis that now threatens the European banking system and the Fed’s reluctance to engage in QE3. Supportive factors include hopes that the U.S. economy may improve in the second half (if the European debt crisis can be kept in check) and very reasonable valuation levels with the low forward P/E of 11.6 (vs. the five-year average of 14.9 and 10-year average of 16.7).

Proceed to Page 4 for the latest daily and weekly DJIA charts...

Have a prosperous trading week.

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