S&P 500 Futures - Small Traders Extremely Short   Wednesday, October 18, 2006
By Gibbons Burke
 Traders in the S&P 500 index futures market with positions too small to report to the CFTC for that agency's week Commitments of Traders report are net short of contracts in the market - and the net position of this category is as short as we've seen in the last year. What's the significance?
First, a bit of background on the market. The SP futures were making new 52-week highs last week and as recently as Monday, and the December contract closed on Tuesday at 1371.70, which is above its 200, 100, 50, 20 and 10 day moving averages, so has been in full-spectrum bull mode recently.
Yet, the small traders seem to be suspicious of the gains. Do the small fry have a good record when they reach such levels of bearishness? We asked the MIM... Q: How have the SP futures performed in the past during the fourth quarter of the year when the Small Traders, according to the CFTC report, which was released after market close on Friday, are net short of contracts, and that net short position is within 10% of the bottom range of net positions this category has held over the last 52 weeks? A: Omitting any repeat occurrences within 40 trading days, there are 13 previous occurrences of this event. EventEdge indicates that CME.SP has shown a strong bullish edge that peaks 44 trading days after the event. CME.SP rallies in 92% of the cases (12 of 13) by an average of 6.8% relative to the close on the event date. The average of the 1 decline is -0.1%. The overall return of the 13 cases is 6.3%. Listed below are some previous trading ideas which used the COT data to make the call. Gibbons Burke is editor of MarketHistory.com.
Related Ideas:
 |
| | Let variable values:
@ = SP
theEvent = IF
(100 * ((The weekly CoTSTL of @ 1 week ago - The weekly CoTSTS of @ 1
week ago ) - lowest ( The weekly CoTSTL of @ 1 week ago - The
weekly CoTSTS of @ 1 week ago, 52 weeks )
) /
(highest ( The weekly CoTSTL of @ 1 week ago - The weekly CoTSTS of @ 1
week ago, 52 weeks ) - lowest ( The weekly CoTSTL of @ 1 week ago - The
weekly CoTSTS of @ 1 week ago, 52 weeks )
)
) is at most 10
AND
Date is fourth quarter
AND
@ is DEFINED
THEN 1
ENDIF
Date Day t+19 t+30 t+36 t+44 t+51
10/20/1986 Mon 4.2 8.1 6.6 6.1 5.2
12/15/1986 Mon 5.5 12.0 13.9 15.7 14.4
11/07/1988 Mon 0.4 1.2 1.5 2.3 3.9
11/06/1989 Mon 5.6 2.8 5.1 4.0 1.3
11/23/1992 Mon 3.7 1.1 2.5 2.9 5.6
10/24/1994 Mon 0.2 -1.8 -1.6 0.1 -0.5
12/27/1994 Tue 0.5 3.5 4.4 4.3 5.4
10/01/1998 Thu 7.7 13.0 17.4 15.9 14.2
10/18/1999 Mon 10.7 9.9 11.0 11.8 15.4
10/01/2002 Tue 4.4 3.6 7.6 8.2 5.6
10/01/2004 Fri -0.5 4.4 3.9 4.9 6.3
11/26/2004 Fri 2.4 0.7 0.0 -0.1 0.8
10/31/2005 Mon 4.2 4.9 4.3 5.2 6.2
10/16/2006 Mon NaN NaN NaN NaN NaN
Avg 3.8 4.9 5.9 6.3 6.4
AvgPos 4.1 5.4 6.5 6.8 7.0
AvgNeg -0.5 -1.8 -1.6 -0.1 -0.5
PctPos 92.3 92.3 92.3 92.3 92.3
PctNeg 7.7 7.7 7.7 7.7 7.7
Maximum 10.7 13.0 17.4 15.9 15.4
Minimum -0.5 -1.8 -1.6 -0.1 -0.5
StdDev 3.2 4.6 5.4 5.3 5.2
ZStat 1.2 1.1 1.1 1.2 1.2
Variance 10.4 20.8 29.7 27.7 26.8
14 Occurrences | |
|
Wednesday, October 18, 2006 at 8:37 am
A reader responds to this trading idea with an email: "Question about small traders who do not report to CTFC. If they don't report, how do you get this data to analyze?"
Here is my reply: "The CFTC deduces the small trader positions from the positions of the two reporting categories (hedgers and large speculators). They know the total open interest - once they have accounted for the reported positions they know what the small traders are doing from what's left over."