I’m going to save most of what I have to say for this week’s SMR. And I just got back from being gone all day so I haven’t had a chance to thoroughly analyze this week’s COT report. But from what I can see I don’t know how this thing could have been more bearish. Here is what I see on the surface…
1. The smart money not only flipped, they dramatically flipped. They went from being net long 18, 446 contracts to net short 42,144 contracts in a week. I haven’t checked yet, but that very well be a record switch for one week.
2. They went from being net long by 51% to net short by 48% in just one week. I don’t think that’s a record, but it’s highly unusual.
3. Open interest dropped a whopping 182,236 contracts in one week. That has to be easily a record.
4. The small trader went from being 52% long to 65% long in one week In other words, all of a sudden the little guy got quite bullish.
5. And as I’ve been harping about, the lack of bearish sentiment has been the most extreme since 1987.
I’m sure that there are other things that I’ll uncover this weekend, but if you combine all of the above with what I think are bearish fundamentals, it’s a pretty bleak picture. The last thing that you should do is what I do, but I managed to liquidate all longs before the close. So going into this weekend, all I have is my precious metal positions, some option positions that have nothing to do with the COT report, and the rest is in cash.
I’ll be busy next week entering short positions. I would like to do it on strength but if I have to sell into weakness, I’ll at least establish a partial short position and look for places to enter more shorts depending on how things develop.
The S&P closed at 976.22. When the smart money flipped to being net long on March 28, it was at 863.50. So that’s a 13.1% profit in three months. You may have done better or worse than that depending on a lot of factors. As you know, I never was comfortable with being long this market in the first place. So I view the fact that we were able to make a very nice profit on the long side as a tremendous gift. I’ll have much more to say in the Smart Money Report.
Larry
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