CoT: Looking Into The Future Thru Futures, Hedge Fund Buying

After surging 4.7 percent last week, the large cap index (3934.83) added another 1.2 percent this week, to a new high. Under the surface, however, action was tentative. Tuesday produced a doji, Wednesday a spinning top and Thursday a long-legged doji. At least a few other times in recent months, similar lethargy was seen, but when it was all said and done it turned out to be nothing more than a pause, before the upward trend reasserted itself.

For bears to get any traction here, they need to reclaim 3870s. Speaking of which, non-commercials raised their net shorts in e-mini S&P 500 futures to a 24-week high. This could turn out to be a good strategy medium term, provided they do not get squeezed near term.

Euro: Currently net long 140.2k, up 3.2k.

Euro bulls have a task at hand. Last Thursday, they put their foot down by saving $1.18-$1.19. Earlier on January 6, the euro ($1.2119) peaked at $1.2345.

After last Thursday’s intraday low of $1.1957, the currency rallied 0.6 percent this week. Thursday’s intraday high of $1.2150 tested dual resistance – the 50-day moving average ($1.2156) and straight-line resistance at $1.20-$1.21, which goes back more than 17 years and which the bulls reclaimed in early December. This also approximates the underside of a broken trend line from last May. Bulls have their work cut out.

Gold: Currently net long 251.4k, down 5.7k.

Last Thursday when gold ($1,823.20/ounce) dropped to $1,784.60 intraday, it just about tested crucial support at $1,760s-$1,770s. The metal reached its all-time high of $2,089.20 on August 7, and currently finds itself within a potentially bearish descending triangle, the lower support of which lies at $1,760s-$1,770s.

Four trading sessions after last Thursday’s low – that is Wednesday this week – the metal was rejected at horizontal resistance at $1,850s, which is about where both the 50- and 200-day ($1,858.52 and $1,857.03 respectively) reside; the daily RSI turned back down from the median in that session.

Inability to rally strongly off support continues to put gold bugs on the defensive. From their perspective, this raises the risk that $1,760s-$1,770s eventually gives way, which will complete the descending triangle pattern.

Nasdaq 100 index (mini): Currently net long 25.7k, down 3.4k.

After January’s monthly long-legged doji, the Nasdaq 100 is up 6.8 percent so far this month. Bears once again were unable to make the most of opportunities that came their way. After peaking on January 25 at 13563.70, the index (13807.70) came under pressure, but the weakness only lasted four sessions.

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