by Alex Roslin
Monday, December 10, 2007
Bullion has settled into a narrow trading range as markets debate the future of the U.S. dollar. Meanwhile, the greenback has mounted a sweet little rally over the past two weeks. Has the buck finally bottomed after its crash to all-time lows this fall, or is this merely a soon-to-be-doomed counter-trend rally?
The data doesn’t look for the buck, which means an upside breakout for previous metals could be in the cards. The latest Commitments of Traders report issued by the U.S. Commodity Futures Trading Commission shows that the “smart money” commercial traders have again reduced their net position in U.S. dollar futures.
The commercials are now gloomier on the dollar than they’ve been since Oct. 2006 relative to their historic positioning. I’ve developed a trading system that follows the commercials when they hit specific extremes of bullishness and bearishness in their net positioning as a percentage of the total open interest.
My system first flipped to bearish on the U.S. dollar back in Oct. 2006. The latest COTs report gives me a renewed bearish signal for my dollar trading setup. (See the table posted with my original story at Kitco for more details.)
The latest COTs report also shows the “dumb money” large speculators continuing to increase their net short position in copper futures and options. This setup has been on a bearish signal since April, but the large specs have been steadily getting more pessimistic on copper since prices crashed in October. They’re still not quite at the extreme of bearishness to flip my setup to bullish, but they seem to be getting closer each week.
All my other signals remain unchanged from last week’s COTs report: bullish for silver, Canadian Gold iUnits and platinum; bearish for gold, the HUI Gold Bugs Index and USERX U.S. Gold Fund.
For more info on how my trading system works, visit my free blog COTsTimer.Blogspot.com. Good luck this week.