Commitment of Traders: Sell signal in my new COT indicator

Last year I already wrote about the Commitment of Traders (COT) reports and how they can be applied to improve trading results. I showed that for the S&P500 the Large traders are the ones to watch – because in this market they have the tendency to jump on the train right at the very end of a trend.

Now, I put my knowledge about COT in one indicator that gives a clear objective indication what the COT data means. With the build-in COT data delivered by Tradestion this is a very convenient way of making sense of the data. The results so far is shown in the following chart. The most interesting indication is shown in the bottom window. The windows above just show intermediate values and tell where the final result comes from.

The indicator takes the net value of the COT postions of small and large contracts for the S&P500, analyzes the relative positions of large and commercial traders, as well as the momentum of the positions- and reports in form of a simple signal ranging from -4 (strong sell) to +4 (strong buy).

Yesterday’s COT update brought the first signal this year. Large traders entered the market this week heavily, resulting in a -2 reading in the indicator. This is the strongest sell signal since September last year.

Combining it with planetary (retrograde! Mercury and conj. Venus in trine/square to Jupiter/Saturn) and cycle information (weak the next four weeks) this is a signal one maybe should not ignore. However, dynamic in the stock markets is good, volume does not show weakness, I do not see weakness or divergencies anywhere, and there is future expiration in few days – makes it a bold move to short now.