Trade Stocks and Commodities with the Insiders: Secrets of the COT Report

CHAPTER 13

The One-Minute Commodity Trader

Instant gratification takes way too long.

It may seem like a bit of a stretch to say that you can spend one minute and know what to do in the markets. However, it’s not too much of a stretch. What I want to share next is one of my favorite ways of using the commercial indicators. It begins with an idea, a concept that is important to understand. The concept is that we want to combine the trend of prices with the commercials’ buying and selling.

If you have looked carefully at any of the charts presented so far you should have noticed that at times the commercials buy or sell too early, sometimes way too early. Yet the more you look the more you see that they often have an uncanny ability to buy and sell just before the start of major moves. Is there a way we can hone in on these exceptionally accurate junctures of buying and selling by our favorite players? I sure think there is, and to establish this point I want to take you step by step through this next lesson, first presenting a chart of what appears to be a somewhat erratic market vis-à-vis the commercials: bonds.

Figure 13.1 is the weekly chart, with the weekly percent of the six-month COT index. I have marked off each time the index dropped below 20 percent, suggesting a market top should be close at hand.

While some of these are very good, for example the one in late 1999 and the one in mid-2003, some of the other indications were too early. Some were good, some not so good, ...