Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

MInyan Mailbag: RUT/NDX versus S&P/Dow


So...who you gonna dance with?


Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next column with that very intent.

"The Commercials have had a net long position in the NDX and RUT futures for a couple weeks now while they maintain a net short position in the SP and DOW futures. The speculators have had a net short position in all of these contracts (DOW, SP, RUT and NDX). Does this mean that the NAZ and RUT are at a turning point?. Considering the fact that classiifications have changed, is this significant or am I just seeing things?" Minyan RK


The COT data has had a decent (not great) track record in most of the equity indexes, so I'm not sure I would extrapolate these positions alone into a long Naz/Rut, short SP/Dow pairs trade or anything.

The commercials in the NDX last went net long against speculators last September, which worked out well, and they had been short since late December, also a good move. Now commercials are net long again in NDX futures (though they have also rapidly decreased their shorts in the Dow as well).

Looking at several other sector-specific sentiment measures for those groups, it does look like there is a better opportunity in the Naz and small-cap shares than there is in, say, the Dow.

One example is Rydex sector assets. As of Friday, there was $64 million invested in their small-cap fund, which is almost exactly equal to the amount on August 13th of last year, even though small caps are considerably higher. That seems like excessive pessimism to me.

Looking at the Dow, however, even though it has dropped about 1,000 points in the past month, assets in the long Dow fund at Rydex have stayed steady. That seems like "irrational" optimism.

Right now, I do actually prefer looking at small cap and technology shares for whatever bounce back we might get. The COT data is one small input to that idea, but there are others that back it up.

< Previous
  • 1
Next >
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos