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The following is an excerpt from an email from Crash Proof Advisors.
Does anyone follow the S&P Commitment of Traders data?
If so, any comments on his opinion below?
Norman E.
Good Evening, Sunday October 29, 2000
It's been quite a while since I've sent out an update to
all of my past subscribers. We are at, what I feel will
prove to be the most important market juncture, for many
years to come. As October comes to a close we once again
are hearing that November will bring back the Bull. My feeling is
that nothing could be further from the truth. I feel that we have
entered a multi year bear market that could be the most sever
since the 1929 bear. I could point to a multitude of reasons but
thought it best to focus on one that I feel is the most graphic reason,
as well as one of the most important.
I follow a statistic called the S&P Commitment of Traders data. Basically
this is a report that shows the number of S&P futures contracts that are held,
long or short, by Commercial Hedgers (smart money) and small speculators (the
public). This has never been a short term indicator but more a long term indicator.
Currently the Commercial hedgers are short a record 66,352 contracts while the
speculators are long a record 55,273. Both groups have been increasing their
respective positions as the market has declined. This is important because
the commercials normally short into strength and buy into weakness. Just the
opposite has been happening. By contrast, in 1994 with the S&P around 400
the commercials were net long over 100,000 contracts while the speculators were
net short about 50,000 contracts. At the bottom in October 98 the commercials
were net long 20,000 contracts while the speculators were short. The most interesting
thing about the data is that the commercials and the public were both net
long
through out the 1100 point rise in the S&P's. The massive divergence that we currently
have is the first major divergence since the 1994 bottom. The point is that this
data should not be taken lightly.
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