COT REPORTS for GOLD and STOCKS

While I’ve done my best to try and dissuade people from selling short, there are always going to be plenty of traders that insist on doing things the hard way. If you are determined to make it as hard as possible to turn a profit then at least have the patience to wait until you have the odds as far in your favor as possible. I would argue that the COT reports are your single best tool to time short entries.

During gold’s baby bull rally I saw trader after trade try to be a hero and pick a top. Invariably every one of them ended up like a bug on a windshield. Why? Because they tried to sell short too soon. Over and over I cautioned that almost no intermediate cycle in gold ever tops until the total commercial short position rises above 300,000 contracts. If traders had paid attention to that one simple rule they could have saved themselves a lot of pain.

Just as I warned, gold kept ramping higher and it wasn’t until three weeks ago that the COT reports for commercial short position reached the 300,000 contract level.

COT Reports - Gold

I still maintain that selling short is a very difficult way to make money. But if you just can’t resist flying into the fire at least wait till the COT reports reach levels in your favor. Now that the commercial short position has moved to 327,000 contracts it is safer to short gold. Personally I just use the COT reports to tell me when to take profits, I have no interest in trying to short. Even if gold is ready to drop into an intermediate cycle low I suspect the nature of the market has now changed and it’s going to be a very erratic move that will likely chew up bulls and bears alike. By that I mean it could take 5-7 weeks to complete the ICL and gold may only drop 50-70 points during that period.

Why fight with a market for such small percentage gains?

Now I’m seeing the same impatience when it comes to shorting the stock market. And you can use the same tool here to give you an edge and prevent losses by being too early to the party.

At intermediate tops the combined COT index futures almost always reach single digits, or even slightly negative levels. Until they do the odds are that early shorts will lose money just like the early shorts in gold who failed to heed my warning. Pay careful attention to what these COT reports are telling us.

As you can see in this week’s stock market COT report below, the commercials still have a long way to go before the odds swing in favor of shorting.

COT Reports - Stocks

Folks it’s not usually a good idea to stand in front of this train. Yes you may be able to day trade the short side and make some money, but if you are trying to pick an intermediate top it’s almost certainly too soon.

I can’t stop the moths from flying to the flame, but if you will heed this one simple warning the odds of you getting burnt will decrease significantly.

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55 thoughts on “COT REPORTS for GOLD and STOCKS”

  2. Gary Post author

    An even more precise way to time tops is to monitor the NDX contracts. When the NDX net short position rises above -7 billion it’s time to start looking for a top. The current NDX level is less than 1 billion net short.

    1. Gary Post author

      No it is not accurate because it doesn’t include the emini data. Most of the volume nowadays is in the eminis. You have to combine the large and small contracts to get the full picture of what is going on.

  5. Randall

    Great information, Gary. Where do you find the COT data for the stock futures in the format you show?

    1. Bill

      The format is an Excel spread sheet … Looks to me Gary may do his own math , I could’ve wrong of course, none the less good post Gary

    2. Gary Post author

      I copy and paste it to my spreadsheet that has the formula to automatically calculate the Blees rating for all contracts.

      just another perk you get with a subscription 🙂

      1. David

        Gary do you normally post the cot and blees ratings weekly in your premium site? Also does the COT report not work for oil? I remember you said the bottom was in on oil and told everyone to buy on Korelin site just before it ripped to new lows. thanks keep up the good work.

        1. Gary Post author

          I do update the COT’s every week and yes I was one intermediate cycle too early on oil as well as gold.

          The last ICL occurred in the middle of the normal timing band for the CRB’s 3 YCL so I took a stab at that being the bottom. The latest ICL is occurring at the very tail end of the normal 3 YC timing band so the odds are much better that the bottom in February was the final 3 YCL in the CRB and the final 7 YCL in stocks as they should both occur together.

          This came right at the time when economic data was very weak which is as it should be during a 7 YCL. The problem most people like the perma bears over at Kereport have is that they give in to recency bias and are unable to project an economic upswing. All they know is what has come before so they assume it will continue. Unfortunately both Rick and Chris are the worst offenders.

          The thing is that if the 7 YCL is complete then the economic data isn’t going to get worse, it’s going to get better. And the glut in oil is going to be quickly used up as the global economy starts to heat up again. That’s what all of the bears are missing. They are stuck in the past unable to see the change that is already in progress.

  7. Gary Post author

    Gold also has completed a monthly swing and for the first time since the bear began the character of the rally has changed from a bear market rally to a new cyclical bull.

  9. Gary Post author

    The 7 YCL, while I think it was cut a little bit short by a large intervention in Feb. clearly delivered the minimum decline necessary to qualify for a multi-year correction. It reached oversold levels on the monthly chart, completed a quarterly swing high, and is now clearly emerging from the final bottom to start a new 7 year cycle.

    Even if this 7 year cycle is destined to be left translated (and I expect it is) there is virtually no chance of it topping in less than 3 years.

  10. David

    Gary , aren’t Cot updated at the end of the week normally? Also yours was dated for the 22 which was the day before the $30 dollar fall in gold. Basically the CoT probably has changed and commercial shorts could have decreased . Why don’t you do your COT analysis of report at the end of the week when Cot reports are updated? Just wondering if it would be more reflective of current gold price and sentiment. thanks sorry for being such a pain .

    1. Gary Post author

      The data is complied on Tuesday after the market closes but isn’t available until Friday at 3:30. So yes the data is delayed but since it is more of a multi week to multi month type of signal a few days isn’t really significant.

      1. David

        Yes I went and saw that on Cftc site. Thanks keep up the great work… And Al took my jab at Avi off. So you think biotechs will rally fir a few weeks ? Thanks again For your explanation on oil. I am going to sign up on premium site .

        1. Gary Post author

          I think bio tech will rally for a few years. I can’t predict what its going to do tomorrow though.

  11. jacob 2

    Kudos on the COT and sentiment. The new boys in town. Perhaps the better new tools to pay attention to versus classic TA. When too many programs trade off the the same thing as is the case with many of the tools used in TA …. it gets discounted.

    2. Marco

      Clive Maund was NOT bearish for the long term in PM,he thought we are in a new bull market,has he changed idea lately?

      1. Dave

        No He is correct in saying that the bugs are way to bullish and need a taming. Big correction coming, this might not be the set up all the bugs were hoping for.

        1. Marco

          So this have nothing to do with the mantra “there is no baby bull yet” .
          Maund thinks we are experienced a correction in an ongoing new (baby) bull market.
          So why all these hysterical rant ?

          1. stewie

            Marco. This correction will determine if we are in bull market or still in bear market. We never made higher high (1308 on gold) on gold and silver chart is a joke. Look at them both. Silver is telling you PM sector is still in bear market. You have to look at hole PM sector not just Gold and say woo hoo let’s go.

            http://goldtadise.com/wp-content/uploads/2016/03/goldwema.png

            Gary as always is always jumping a gun. Clive is not taking any stance besides longs now will get annihilated. Based on this correction we will know more soon.

            It would be out of cartel character to not annihilate all long to oblivion so don’t expect technical levels to hold but that’s my opinion.

            Gary’s problem is and always has been bullish biased as he never takes short positions in miners or gold and is always bullish.

            Long DUST

    3. Gary Post author

      Stewie,
      LOL way too late, We already booked profits and are waiting on the sidelines.

      1. stewie

        Good. Annihilation of 258k large specs and 30k small specs is coming. We will be making new lower low. Back into trend channel for gold. (see below chart) Silver will get wiped off the map. (see below chart). It has highest short position in last 2 years too. The fact silver never made higher high says PM sector is NOT IN BULL TREND and this was viscous bear market rally but downside move will be equal or bigger then current move. Gold never made higher high either as it need to break 1308 for that to happen.

        http://snalaska.com/cot/current/charts/GC.png

        http://i66.tinypic.com/drf486.jpg

        http://www.tfmetalsreport.com/sites/default/files/users/u2/326goldw.png

    2. JaninWales

      stewie, any idea what Clive Maund’s latest article is about? It is titled ‘COMMODITY & STOCKMARKET COT ASSESSMENT – dramatic developments…’.

      Is it possible that he has looked at the COTS and come around to Gary’s line of thinking re the conventional markets?

      1. Stewie

        Janin i have no sub to his site so not sure. I think the line is more in line with commodity COT. Read the 30,000 coffins article he has released.

        Bill i clicked submit twice when it was thinking so it double submit it.

        1. JaninWales

          Ah, you are just talking about gold. What about the conventionals?

          Gary has used the COTS to show just how bullish the commercials are on conventional stocks – Perhaps Maund has just realised the same and that is what his latest article might be about? It will be interesting to find out.

          Gary has already stood aside from gold for now.

    1. Bill

      Relax Francis, dialect over anger shows intelligence, but in your case you sounds more like a 12 pack day trader.pleade your case with some facts not a single line chart …

  20. Marco

    Gary,
    they are saying your gold baby bull is already dead!
    And this just after a slight retracement in PM….just imagine what will happen when gold will broke 1200!!!!

    1. Gary Post author

      LOL all markets need corrective moves .Nothing unusual happening other than the midnight attacks have stopped.

    1. JaninWales

      ‘3 weeks later, I see that i’ll-know-more-in-2-weeks over at the exclusive site for retards, is finally seeing the same target.’

      Which, um, site are you referring to Irwin? You could be referring to any one of countless finanical sites on the web. Your insult needs to be specific otherwise we don’t know what you are talking about.

      Just asking.

  22. Joseph

    Some advise from a humble guy. I visit this site as I see value. It’s certainly not a day trading site, if your not experienced….. you will get whip sawed and loose your $$$ tick by tick…… YOU need a good Trading syatem….. Hence Gary site is for longer term trades !!!
    And I will be joining his subscription for his insight

    My advise, DONT PUT ALL YOUR $$$$ IN THE STOCK MARKET. YOU WILL LOOSE !!! TAKE SOME DOLLARS and 50% of profits,, GO TO THE BANK, ,BUY A HOUSE at Historic low rates, Bungalo, 3-Plex and rent the place out, great income, great tax write offs, real asset, All supplies you buy shop around, run it like a business, ….. In 5-7 Years, , take a LOC, buy another one or Get a 10/20-plex….. I’ve done this and now have 2 APT Bldgs, total 200 Tenant units…… All from working, saving, trading and diversifying into Real-Estate, A REAL Asset I own, Put the asset in a Irrevocable TRUST so if you get sued, you are Fully Protected……

    Dont invest all $$$ in Stock Market, that inclds Gokd,, Diamonds, E-Mini etc…etc…

    To all Christians and all on site, GOD Bless and have a memorable Easter

  23. Bill

    Gary not to many people say it enough but I want to personally thank you for your continued exhausting efforts to keep this blog alive for one and educational for many and interesting it’s a complete package. Not to many understand how taxing it is to do a news letter daily, so thank you and a very happy Easter to you and yours.

  24. marina

    Hi Gary:

    I am new to COT report. There is ” dealer’s position” ” asset mgr position” and ” lev money position”, how do you get the #long contract for smart money? Thanks a lot.

  27. Ralph Wiederzane

    Happy Easter Christians!

    There are so many doubters of the gold baby bull that I won’t be surprised if it kicks into high gear again as we get through the end of March and first week of April. Bears should shorts this week or it could get real ugly for them over the next few months.

    Say the word G-money, I’m ready to buy XBI or add to my miners any day now.

      1. Ralph Wiederzane

        Lol, I thought he said next best opportunity to add should come by first week in April if we didn’t already buy first round. I’m still pretty heavy ol’ MuffinTop, with my 75% invested in miners (rippers too, not the clunky big names like ABX). 🙂

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