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2008 Book By
Steve Briese |
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(Click
book cover to order from Amazon)
From the back
cover:
"I have followed Steve Briese's analysis for two
decades in trading the commodities markets. His methods and
conclusions from COT data are fact based and often properly
contrarian. In today's world, where commodity hedge funds have
become even larger players, Steve Briese's work assumes an
even higher importance level for commodity market
participants, individual and professional
alike."
—Brent R. Harris, Head
of PIMCO Real Return and Commodities Desk; Chairman, PIMCO
Funds
Steve Briese,
Editor
Bullish
Review
As a US Army helicopter pilot
during two tours in Vietnam, Steve was awarded the Bronze
Star, three Air Medals for Valor, the Soldier's Medal, and the
Distinguished Flying Cross .
Steve began is trading career in
1973, buying silver futures at 3.97. In 1974 at the bottom of
the stock bear market, he watched is grandfather select stocks
using 3 simple rules:
-
Solid dividend paying
record.
-
Currently yield of 8%
minimum.
-
Price having doubled during the
last bull market.
In 1988, Steve retired from the
construction business and began writing Bullish Review of
Commodity Insiders based on the Commitments of
Traders report he discovered
in 1974. He hired couriers to pick up the printed reports in
New York and Chicago and rush them to his doorstep. Later,
Steve led a letter writing campaign to get the CFTC to release
reports more frequently than once a month and electronically.
You can now get these reports weekly at the CFTC's website.
(But, you're better off getting them from Steve (for
free).
In 1997, when the CFTC announced
proposed registration requirements for broadcasting market
opinions on the Internet, Steve joined a group of five
newsletter writers and sued the CFTC in federal court. His
landmark First Amendment victory assures your unfettered
access to the kind of material you find on Steve's website
(and thousands of others).
In 2001, when Florida's First
District US Congressman quit in the middle of his term, Steve
ran to replace him in a special election. Steve's strength was
his wife Jeannette, 5 college-age kids and a 5-year-old
granddaughter working on the campaign. Alas, owing to not
enough votes, Steve lost for lack of votes and returned
to researching and writing about markets.
Market Technicians Association 1997 Best of
the Best Awards
From Steve's
Peers:
-
"It is rare that
I endorse other people in the trading business. Yet, I have
known Steve Briese and the Insider Capital folks for many
years, dating back to the early 1980s when we both lived in
the land of the lakes and mosquitoes, Minnesota. During that
time I have come to view Steve as the authoritative word on
understanding the CFTC Commitments of Traders data. What I
love about Steve is that he does the work I would do, the
way I would do it, if I had to analyze the data. Steve looks
for major signals and is not twisted here and there by minor
week-to-week changes. I believe that COT data brings another
piece to the mosaic I try to assemble to make big bets. I
highly recommend the COT service from Insider
Capital.
-Peter L. Brandt,
F actor
LLC
"No one else that I know
of has been so right on so many markets so consistently. The
'reading between the lines' and recognition of special
situations is particularly impressive."
--Peter
Rehmer,Elliott
Wave International
--David S.
Fuller,Fuller Money Letter
--Bill
Fleckenstein,Fleckenstein Capital
Management
--Jake Bernstein,MBH Commodity Letter
--Thom Hartle,Stocks & Commodities
Magazine
--Dr.
Alexander Elder Financial Trading
Seminars
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"You write an insightful
newsletter. It is one of the few in the industry I truly
respect."
-
--Glen
Ring,Trends In
Futures
From
Subscribers:
-
"There cannot be anyone
in the advisory business that writes and produces anything
as well as you. Every issue is a pleasure to
read."
-
"Thanks for so candidly
sharing the knowledge you’ve gained with blood, sweat and
tears."
-
"You are an excellent technician. I
learn a lot from you."
-
"Newsletters are
invaluable--usually early--but sometimes very timely--seldom
wrong."
-
"I have paid thousands of dollars for
advice and help in trading. None of them have been as
helpful or as profitable as your advice. Thank you! Thank
you!"
-
"I appreciate your
accurate, profitable analysis as well as your approachable
manner. Please keep going for 20 years!"
-
"Your sincerity and
dedication to helping traders along this difficult road is
very apparent and much appreciated. Thank you. "
-
"You are impressive in
what you know and what you show."
-
"Your doing a great
job
-
"Even though I
immediately recognized the value of your cycles work and
Bullish Review, it has taken me 2-3 years to be able to
actually use this information in my trading. I read two or
three other letters, but now I rely predominantly on your
information when trading!"
-
"Your service is excellent, and I value it
highly. It is the most intelligent and insightful analyis I
have found on the commodities markets."
-
"I run a small trading company
on the floor of the CBOT...Your grain commentary is
unbeatable on a longer-term basis."
-
"I enjoy and make excellent use
of the newsletter. The circumspect point of view and
unpretentious tone make the reading and analysis so much
easier than many letters which are grounded in a fixed
position on a market."
-
-
"Very good and keenly
insightful. Bullish Review provides a good analysis versus
just the raw data which I could and have
misinterpreted."
-
"Bullish Review is the
backbone of my trading. The rest must work with BR or I get
rid of 'em. BR gives me an edge. I don't tell anybody about
it. Trading friends of mine tell me they receive the COT
numbers when released. I ask them what they mean. They don't
know! Nothing is indispensable; however, BR is one of my
most useful tools. A lot of hard work and intellect are
reflected in each issue."
-
"I highly appreciate the valuable information
of your Bullish Review, as well as the conceptual idea of
your letter...I personally would like to thank you for
giving such insight!
-
"Excellent
commentary--the reader can tell that the writer trades and
cares about the market."
-
"Steve's comment come from years of market
analysis , often making astute technical comments and
observations many professionals would miss. His work is
educational and functional."
5 DAYS AHEAD
OF THE JULY 2011 STOCK MARKET TOP, THE FOLLOWING ARTICLE
APPEARED IN STEVE'S NEWSLETTER:
BULLISH REVIEW, June
30, 2008
STOCK INDEXES SPECIAL
SITUATION: The rebound toward the May price high has attracted
renewed commercial selling--aggressive selling--triggering
minor and major COT sell signals in our composite stock index
(which is a combination of S&P 500, NASDAQ, and Dow
futures and options). The net position pattern is similar to
that at the May price peak, showing consistent commercial
resistance over the past two months, a tendency I discussed in
the July 4 Bullish Review: “The commercial tendency to defend
the same price level over an extended period of time is well
established. The COT buy signals of the past two weeks
confirmed that they were sticking with this pattern, and our
strategy was based on their success at holding this support in
March. While last week's rebound may, indeed, be the beginning
of a new upleg in stock indexes, those who went long on our
advice of two weeks ago might consider how often you have
neglected to take a gift--in the form of an unexpectedly quick
profit--and later regretted it. Based on the known commercial
selling resistance (COT sell signal) at the May market top, it
seems prudent to at least lock in a portion of last week's
profits. We will be watching to see if commercial selling
erupts if resistance at the May peak is threatened. The latest
COT sell signal comes at the right shoulder of potential head
and shoulders top on the weekly bar chart. This will not
escape the attention of even the
least-interested-in-technicals trader, putting intense focus
on the Juneanalysissut what is a COT analyst to believe?
Commercials seem to want it both ways, triggering buy signals
at recent market lows as well as sell signals Jot both the
“head” and “right shoulder” of the potential chart pattern
top. This is not as unusual as it may appear.
Fundamentals--which commercials tend to trade on--do not
change as rapidly as the “news” would suggest. Commercials
seem to feel that the fair price for stock indexes lies in the
band between the May high and the June low. Obviously one of
these will eventually give way, but which? While commercials
typically make market turns, speculative fever fuels trends. A
rally failure here will undoubtedly result in a reduction in
bullish speculators, turning the odds in favor of market
bears. While the more-speculative NASDAQ reached new highs on
the bull run, neither the S&P 500 nor Dow Futures have
ruled out the possibility that the rally off the March 2009
low is any more than an extended correction of the 2007 to
2009 bear trend. The Dow is just now testing the largest
accepted Fibonacci “correction” level of 0.786, and S&P
futures remain below this key level. Here is what I had to say
in March 2009: “This week's Commitments report showed that new
commercial buying was the impetus to the weekly upside
reversal bars on all three stock index futures contracts. That
this was not enough to trigger a COT buy signal is beside the
point; we would not pay much heed to a buy signal in a bear
market anyway. But corrections in both the current downtrend
and the 2000 to 2002 bear trend were caused by commercial
buying. If we knew for how long and how much commercials were
going to buy, we could pretty closely guesstimate the likely
extent and duration of this rebound. What we can say is that
commercials are holding a huge net short position at a good
profit, providing the potential for an extended recovery IF
they continue profit-taking. The major trend remains down,
however, and there is nothing in the Commitments data that
suggests that we have reached any kind of permanent bottom.”
The fact that the bear market that began with the 2007 top may
not yet be complete is one factor in my labeling this COT sell
signal as a “special situation.” The second factor is the
proximity of a potential stop-loss levels. The third factor is
the exceptional commercial track record in calling major tops
in the stock indexes, including 1987, 2000, and 2007.
Aggressive bears may want to use the current signal to
establish anticipatory short positions using stops above the
May price peak. A break of the June low would be the
unambiguous signal for bulls to abandon long positions, moving
short or flat.
2 DAYS AHEAD OF THE TOP
OF THE LARGEST COMMODITY PRICE BUBBLE ON RECORD, THE FOLLOWING
ARTICLE APPEARED IN STEVE'S NEWSLETTER:
BULLISH REVIEW, June 30, 2008
"The Commodity Boom: On Friday,
June 27, the US House of Representatives passed H.R. 6377: To
direct the Commodity Futures Trading Commission to utilize all
its authority, including its emergency powers, to curb
immediately the role of excessive speculation in any contract
market within the jurisdiction and control of the Commodity
Futures Trading Commission, on or through which energy futures
or swaps are traded, and to eliminate excessive speculation,
price distortion, sudden or unreasonable fluctuations or
unwarranted changes in prices, or other unlawful activity that
is causing major market disturbances that prevent the market
from accurately reflecting the forces of supply and demand for
energy commodities. Well, hell, it isn't as if the CFTC didn't
already have the power, in fact, directive from Congress (in
its current form since 1968) under USC Title 7, Chapter 1,
Sec. 6a. Excessive Speculation: Excessive speculation in any
commodity under contracts of sale of such commodity for future
delivery made on or subject to the rules of contract markets
or derivatives transaction execution facilities causing sudden
or unreasonable fluctuations or unwarranted changes in the
price of such commodity, is an undue and unnecessary burden on
interstate commerce in such commodity. For the purpose of
diminishing, eliminating, or preventing such burden, the
Commission shall, from time to time, after due notice and
opportunity for hearing, by rule, regulation, or order,
proclaim and fix such limits on the amounts of trading which
may be done or positions which may be held by any person under
contracts of sale of such commodity for future delivery on or
subject to the rules of any contract market or derivatives
transaction execution facility as the Commission finds are
necessary to diminish, eliminate, or prevent such burden. What
makes Congress believe that the CFTC will not continue to
abrogated its duties. It has already ignored federal law by
eliminating trading limits in all but a handful of
agricultural markets. The CFTC made a big deal recently of
reaching an agreement to hold London oil traders to the same
speculative trading limits as NYMEX traders. What they
neglected to mention is that there are no federal limits
imposed on NYMEX traders. (The NYMEX imposes a limit, but only
during the last three days before contract expiration). Other
than this, there is a 20,000 contract “advisory level,” at
which point the exchange may make certain enquiries of the
trader. There is no public record of whether or how often even
this feeble provision might be invoked. Thup legre at least a
half-dozen proposals in Congress addressing sky-high commodity
prices. Most miss the point, which is that Congress already
anticipated the current situation and has laws on the books
that should have prevented this commodity bubble. One proposal
is to ban commodity index traders from “investing” in
commodities. Once again Congress has already decreed that
everyone is subject to speculative trading limits except “bona
fide hedgers...producers, purchasers, sellers, middlemen, and
users of a commodity or a product derived therefrom to hedge
their legitimate anticipated business needs for that period of
time into the future for which an appropriate futures contract
is open and available on an exchange.” How does the CFTC
possibly interpret this to include swap dealers such as JP
Morgan Chase, Citigroup, Bank of America, Wachovia, or HSBC
North America? Absurd. Why am I taking so much space on this?
Because the possibility that Congress might try to fix this
mess multiplies the risk to commodity traders—particularly
longs. The table below shows the scale of the problem. Actual
CIT positions reported by the CFTC in the COT-Supplemental
report are shown at upper left. Below left are my extrapolated
positions based on the S&P GSCI Index weightings (right
hand column). British markets are shaded. While some may
quibble about which benchmarks to use or in what proportion,
the GSCI is the most popular, and differences between indexes
are minimized by separating US markets. We are certainly in
the ballpark. All figures have been standardized to current
dollar value. The US commodity market total is currently $225
billion. The pie chart on the next page illustrates that
commodity indexers are the largest long player in reported
markets, currently holding an astounding 42% of long open
interest. Open [Interest in 12 Reported Markets] The chart
below shows the large trader net positions reported in the 12
markets included in the COT-Supplemental report. Traditional
commodity funds are net long by $20 billion, while commercial
hedgers are net short $74 billion (difference in totals is due
to excluding small traders on this chart). While indexer
apologists claim that these positions are static and are just
rolled forward, suggesting that any position growth is due to
rising prices, the black line shows the CIT positions in
contracts; clearly a good deal of the growth is due to
indexers adding new long contracts to their positions. There
is an obvious positive correlation between CIT positions
(black line) and price movement of the GSCI Commodity Index
until mid-March. It appears that commercial shortcovering may
be responsible for much of the rally over the last three
months. If this trend continues, the lack of new buying by
commodity indexers is likely to result in declining commodity
prices. Once prices start to subside, there is a huge
speculative (traditional commodity funds and index funds)
position to liquidate. In the course of time, this bull market
is likely to retrace, as every one before it has. But if
Congress forces the CFTC to take steps to reduce speculation,
the retreat could quickly escalate to a rout. The last chart
shows net trader positions for the 17 markets underlying the
Continuous Commodity Index. At the September 2007 price peak,
the commercial net short position was near its historical
extremes (dotted line) indicating that they were fully hedged.
Commodities were fully priced in September, and the 35% to 60%
commodity price hikes since are purely speculative affairs.
When all the buyers are in, which they may already be, prices
will fall of their own weight. While they are likely to
overshoot on the way down, by how much and how suddenly
depends on how many longs try to get out at the same time.
Given the real potential for a change in the rules, the risk
on the long side of the commodity game now exceeds potedown
trendns. Getting short may not be easy, but it could offer
unusual profit potential. We recommend liquidating longs now
(ahead of the crowd) and looking for short entry opportunities
on signs of a breakdown.
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The Commitments of Traders report
is used to find special situations in futures markets--commodities,
currencies, financials, and stock indexes. Steve Briese is the
acknowledged expert when it comes to interpreting this weekly
report. He has been doing this successfully for 38 years and has
published his advice Bullish Review since 1988. Let's see how
he has done on recent record moves.
Or continue reading...
As this is written gold is enjoying its largest
bull market in history, and Bullish Review subscribers are
participating.
Bullish Review June 12,
2010
"GOLD: Commercials were
quick to jump on a relatively small price correction, with enough
buying to trigger a major COT buy signal. This is the first buy
signal in gold since the October 2008 market bottom. In terms of
their actual net position, it still looks quite bearish compared to
the historical levels. However, our formula accounts for
changes in open interest, which at times can present an entirely
different picture than net contracts alone. This buy signal should
mark a nearby end to this pullback and quickly move prices to new
highs. "
Bullish Review January
24, 2011
"GOLD: The current net
position pattern is nearly identical to the July bottom, and the COT
Index is once again at 100%, the first COT buy signal since July.
The commercial net position is slightly higher than July 2010, which
indicates that commercials are more bullish at $1,350 than they were
when gold was nearly $200 cheaper. So far the pattern looks like a
typical bull market correction, with little sign of trouble. If so,
this buy signal should rebound prices, as they have consistently
over the last seven years. It would take a break of the June
reaction low to create an official buy signal failure. However, as
the chart below illustrates, any extended decline from here--in
either price or time--would not be consistent with the gold bull
market norm. Major buy signals have not been every-year events
during the gold bull market. There have been just nine signals since
April 2001. Results show odds heavily in favor of bulls at this
juncture.
UPDATE: On Sept 19, 2011, three days ahead of the gold
market plunge, Bullish Review carried this
warning:
"[The] commercial net position remains very near its
bearish record. On the other side of the coin (no pun intended)
large speculators (CTAs) set a net long record in early August, and
are still very near that total. A break of 1700 will undoubtedly
trigger CTA liquidation, and never before have CTAs had so many
speculative positions in jeopardy. The continuing forced long
liquidation plus selling pressure from new shorting could easily
take gold below 1000."
Cotton just made an historic
round trip, first rising 188%, then declining 58%, all within the
course of 12 months. Bullish Review subscribers were not left
out.
Bullish Review June 14, 2010 COTTON:
"Prices rebounded
last week were due to commercial buying, which triggered both a
COT-Fisher and minor COT buy signal. A similar dual buy signal
marked the March 2009 failure swing (double) bottom. And a
COT-Fisher buy signal marked the January 2010 reaction low. The
current buy signals come at an ideal cycle point. Both the major and
intermediate cycles are in up modes, with the short-term trading
cycle in a down mode. This pattern identifies a bull market
correction."
Bullish Review March
14, 2011 COTTON:
"The lack of
follow-through on the early March breakout has created a potential
failure-swing top. (Attendees of my 2002 Master Chart Trader seminar
are aware that a failure swing top is not necessarily invalidated by
a short spike to new highs. In this case the “breakout” only lasted
two days, and this was in only the front months; the December
delivery did not make a new high. This sets up the intervening low
of February 25 at 175.13 [basis nearest futures] as key support.
(You should check the low for the contract month you are trading.
May, July, and December are all viable deliveries.) If still long, I
will suggest once more that you consider banking profits. In any
case, please do not get caught up in the bullish news. News is
always bullish when prices are rising to record levels. If the
February 25 low is taken out it is a sure sign that the market is no
longer bullish."
Stock Indexes have had two bull runs separated
by a nasty bear market. Steve was one of the first to see the
2003-2007 bull market beginning...
Bullish Review March 28, 2003:
"The Commitments figures for March 25 show commercials net long in
both S&P 500 and Nasdaq futures. This is the first commercial
foray since last June into net long territory in the NASDAQ, and the
first time since the last bull market peaked in the S&P! We
don't think traders dare ignore the current commercial buying
interest because it could signal a significant
recovery."
This started a four year bull
move, with the public and advisors becoming more and more bullish.
But by October 2007 commercials were
not buying it, they were selling, triggering a major sell
signal. To overcome the nearly universal bullishness, Steve
printed bearish advice for 52 straight weeks following the sell
signal. The markets eventually lost more than half their
value
Then on March 16, 2009, Steve
noted significant new commercial buying in Bullish Review: " If we
knew for how long and how much commercials were going to buy, we
could pretty closely guesstimate the likely extent and duration of
this rebound. What we can say is that commercials are holding a huge
net short position at a good profit, providing the potential for an
extended recovery"
That recovery lasted three years and three months
until August 2011.
On July 18, 2011, Steve issued a "STOCK
INDEXES SPECIAL SITUATION" that took up two pages of the newsletter,
and ended with this timely advice:
"Aggressive bears may want to use the
current signal to establish anticipatory short positions using stops
above the May price peak. A break of the June low would be the
unambiguous signal for bulls to abandon long positions, moving short
or flat."
If you wish you had received this kind of
timely advice in your trading career, and do not want to miss the
next major move, now is the time to join the smart money, whose
latest moves are highlighted in each Monday's Bullish Review.
This was not the first time
the market insiders pointed the way in stock indexes.
It all began in 1987.
Black Monday 1987
may not look like much on a long-term S&P 500 chart today, but
if you were there, you will never forget the surreal hour after hour
unprecedented volatility, panic and decimation. Seemingly no one was
prepared for this market crash.
But this is not entirely true.
The smart money -- commercial hedgers -- actually prepared for a
downturn two months ahead of the the crash, triggering a sell signal
in Commodity Insiders market letter in mid-September 1987. At that
time, the Commitments of Traders was a monthly report, issued
on the 11th or 12th of the next month. Among subscribers to
Commodity Insiders was Steve Briese, and it was this signal that
convinced him to buy the newsletter, COT Indexes, and research from
Curtis Arnold, the pioneer in Commitments analysis. Steve began
publishing Bullish Review in March 1988, and the COT continued its
magic in predicting major market turns.
In 1991, following a three month
correction, commercial insiders began heavy long accumulation,
triggering a major buy signal, which was followed by a 43% rally
into year-end...where commercial selling triggered a major sell
signal that augured in a 10-month, 10% correction.
It was 1995 that the stock
index charts began taking on a whole new scale -- the one we are
familiar with today. Commercials were there to signal the start, just
ahead of a price breakout from a year-long sideways consolidation.
Talk about timing.
1997 and1998 each saw significant
corrections. But commercials did not just call the market tops, they
also triggered COT buy signals at each market bottom.
There were dire predictions ahead
of the millenium New Year. Despite the fact that the calendar
switched with nary a hiccup, commercial insiders were major sellers
in December 1999, triggering a major sell signal, that led to a
three year bear market.
Commercials signaled not one, but all
3 major tops in late 1999 and early 2000.
Legal Insider
Information
The
Commodity Futures Trading Commission's comprehensive breakdown of
who owns what in the futures markets is legal inside information,
which makes the U.S. Futures the most transparent markets in the
world. If you trade, you need to know what the COT report
reveals.
You can monitor this report yourself
at www.CommitmentsOfTraders.ORG,
where Steve provides free COT charts and free COT data—and not just
partial teaser files, the whole shebang from 1983 to the most
current report is provided free. Why would Steve provide data and
charts free when every other source charges for this? Principle. He
believes in a level playing field and the COT report provides it.
(When you get his book you will understand why you should not get
your data anywhere else—let alone pay for it.)
The key to
using the COT report to uncover markets with mega-move potential can
be described in once sentence: Follow the lead of the large commercial
hedger. You may read other
advice, such as “follow the large speculator” in older trading
books. Certainly the trend-following funds move markets. However,
they are almost always fully invested in the wrong direction at
important market turns.
Commodity
markets were invented by commercials in order to transfer their
inventory risk to speculators. We have been at the mercy of these
market insiders ever since. But by knowing what commercials are up
to—by following their actual market manipulations through the COT
report—you can pinpoint major trend changeshort coveringer analysis
method will detect.
Strong
claim?
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Why
would some of the biggest traders and money managers in the
world subscribe to Bullish
Review?
|
|
UBS
Securities PIMCO Capital
Group Cedar
Partners Cooperfund Solaris Capital
Advisors Wexford
Capital H G Wellington Fly Trading MBF Clearing Tudor Investment Corp. TradeLink
Llc Hellman
Jordan Beanpot
Financial DCM Funds Haroon
Group Northwestern Mutual
Life FTC
Capital Philip
Securities Harris Bosch Capital
Management Paschal Capital
Advisors Fortress
Investment Group Friedberg
Mercantile Group Red Rock
Capital Management Charles
Schwab Credit Andorra
Penn Mutual Company Templeton Financial Group
Jory Capital
Management Toby
Crabel Deutsche
Bank Thorium Asset
Management Union Bancaire
Privee Met Life Morgan Stanley
Capital Group Research Robert Jenkins Trading Tano
Capital The Leuthold
Group |
It's really quite
simple. Bullish Review provides original research and insights
not available anywhere else. Every expert has a niche. Steve's
thirty-three year experience in analyzing the COT report allows him
to uncover trading opportunities long before conventional
fundamental and technical analysts become aware of
them.
After reading Steve's book—or
even his Subscribers Guide—anyone can tell when large commercial
hedgers are bullish or bearish. This is the conventional analysis.
And it might be enough of an edge to make you profitable, because
these market insiders catch market extremes about two-thirds of the
time.
Steve's subscribers, of course, demand more. And he
delivers, or he would not have readers who have subscribed
continuously for 23 years! They expect to be advised when
commercials are likely to be wrong. Some of the biggest and fastest
moves are tipped off by cng. This is where Steve's analysis may make
a big difference in your trading results. Let me give you an
example.
In
the Fall of 1998, Steve invited futures traders to a series of
seminars in six U S cities . He called this the
"Turning
Point Tour" and hundreds of traders heard him
predict a:
"major bottom
in the oil complex due in December 1998 to be followed by a
generational-type bull market.”
It
may be difficult now to understand how incredulous this forecast
sounded in 1998, when oil prices had fallen 74% over the previous
eight years to nearly $10 per barrel, and in the process brought
gloom and doom to the oil industry. Prices bottomed exactly as Steve
predicted, on Dec. 11, 1998.
But
very soon after the apparent bottom, heating oil moved to a new
price low. This was followed by a minor rally into March 1999. At
this point, large oil companies (commercial hedgers) started
selling. Many analysts assumed this was a bearish sign. They were
wrong, of course, but Steve got it right:
“We have
posted minor CoT sell signals across [oil] the complex in this
issue. This reflects normal Commercial selling into the rally. As
you know, we generally respect these signals in a bear market. If
these signals do not trigger a resumption in the bear trend, we will
have our first confirmation of a major trend change. A failure swing
bottom has been confirmed by consecutive higher closes in Unleaded.
We believe the picture for the entire complex is turning quite
bullish and that long-term traders should be approaching these
markets from the long side. Based on the patterns to-date, we can
anticipate that any additional price weakness threatening market
lows will be met by overwhelming Commercial buying
interest.”--March 15,
1999 Bullish
Review.
A single crude oil contract gained
$23,000 over the next year
alone.
There were not a handful of
bullish analysts who, like Steve, called the beginning of
the greatest commodity bull market of all time in 1998. And 20
years later it was the same story. There was nary a bearish
advisor in sight, when this Gene Epstein cover story featuring
Steve's research appeared in Barron's March 31, 2008:
"Briese’s analysis of commercial hedger
positions leads him to believe that commodities in general were
fully valued in terms of the fundamentals as of early September
2007. Based on the 24-commodity S&P Goldman Sachs Commodity
Index, that would mean about a 30% collapse from present levels.
But, he adds, 'Given the tendency for prices to
overshoot, commodity values could be cut in half before they
stabilize.' Maybe it’s time to start
listening to the smart money.” -Steve Briese Mar 31,
2008
The GSCI Commodity Index
dived 65% by year end.
Barron's declined to print Steve's
prediction of $30 crude oil (then trading above $100), calling
it "implausible." Implausible, maybe. Impossible?
Oil prices hit $34.10
on Jan. 16, 2009.
Bullish Review subscribers
received their own private warning of the commodity market top. The
entire June 30, 2008 issue was devoted to the imminent end to
the commodity boom. The last paragraph read:
"the risk on the long
side of the commodity game now exceeds potential gains. Getting
short may not be easy, but it could offer unusual profit potential.
We recommend liquidating longs now (ahead of the crowd) and looking
for short entry opportunities on signs of a breakdown." -- Steve
Briese, Bullish Review, June 30, 2008.
Commodity markets topped
just two days following this advice.
UPDATE:
Steve just saved his subscribers from another commodity market
plunge. The Sept 19, 2011, Bullish Review was devoted, once again to
a commodity top, and carried this warning:
"We finally
have the COT sell signal we have been awaiting, in this case the
COT-Fisher variety in the Continuous Commodity Index. Because the
CCI is not actively traded, I combine net positions for the 17
underlying markets to arrive at a COT Index. The COT-Fisher sell
signal is based on these composite net positions... As we saw in
2008, when we made the call two days ahead of the market top,
commodity prices slide (fall) faster than they glide (rise)."
Commodity
markets plunged just three days following this
advice.
Bullish
Review is the only market letter exclusively
devoted to analysis of the Commitments of
Traders report for 23 straight years. Steve
spends about 12 hours reviewing each weekly release. This would be a
huge time investment for most futures traders. If professional money
managers use Steve's expertise instead of relying on in-house
research, shouldn't you take the same
advantage?
Bullish
Review provides professional-level research
in the two areas of market analysis conventional techniques often
miss:
-
Fundamental
Analysis:
Who knows the fundamentals better than the trade? Much of what
passes as fundamental information actually originates from the
large commercial houses. Even assuming that the information is
factual, do you know how to interpret it? Do you think commercials
release actionable research before they take action on it? What we
want to know is whether commercials think fundamentals are bullish
or bearish and—this is the most important detail—at what price
levels they are
acting.
-
Sentiment:
There are all kinds of sentiment measures available. Most are
based on surveys; what traders say they are going to do. Why count
on surveys when you can get a true reading of the market sentiment
of large speculators (commodity and hedge funds) and small traders
from their actual market positions, revealed by the COT report?
This is gospel, not hearsay.
Natural gas is a good example of using
the COT data to gauge market fundamentals AND sentiment to your
advantage. Many people assume that natural gas prices are no more
predictable than the weather. To make matters worse, we now know
that Enron and others manipulated natural gas prices in 2000-2001.
Although at least 25 companies and individuals ended up paying $250
million in fines to the CFTC, this was little solace to California
or the hundreds of natural gas traders torn up by commercial price
manipulation. The next chart shows direct quotes from
Bullish
Review. The
market manipulators could not hide from the COT report or Briese's
analysis.
I mentioned before Steve Briese's
seminar series in the fall of 1998. Why did he call it the “Turning
Point Tour?” Today everybody is only too well aware of the greatest
commodity bull market in history. But almost no one foresaw this
possibility as the previous bear market was ending. Briese's
seminar, filled with charts and facts and figures, was organized to
focus his subscribers on the commodity market bottom that Steve's
work convinced him was imminent. The actual price low in the CRB
index occurred on February 26, 1999. This is what Steve wrote in
Bullish
Review on March 1, 1999:
"CRB INDEX: This has been a long bear
market in physical commodities. We have seen articles explaining why
commodity prices may never recover. This is typical psychology at a
long-term bottom. It is important that we don't get caught up in the
bearish sentiment. Commercial buying has moved them to a record net
long total in the 17 CRB component markets. This is a strong
indication that bear markets have extended too far -- driving
prices below fundamental value levels. While this does not guarantee
prices will not be forced still lower, it tells us that the CRB is
ripe for a reversal at any time.
"Large Speculators (commodity funds)
are holding a record net short total. They have been the real power
behind this drive. Keep in mind, they are typically most heavily
invested (in the wrong direction) at important market turns. Even
Small Traders, who have maintained a net long balance during the
last two years, have finally joined Large Specs in the net short
category. This may be an indication of final capitulation to the
bear trend. "
How many advisors called the beginning AND the
end of the greatest commodity bull market of all time?
Attentive readers may be aware that
the Continuous Commodity Index is not included in the
Commitments of
Traders report. Whether you refer to this
index by CRB, Reuters, Jefferies, or Bridge, it is the oldest
tradable commodity index, but there are too few large traders
holding positions for the CFTC to include it in the COT. No matter.
Bullish
Review has carried a COT rating for the CRB
commodity index for more than 15 years. How? Steve found that by
combining the reported large trader positions for the underlying
futures markets in the index (currently 17), he could derive the
same degree of fundamental and investor sentiment insight that was
available for other futures markets. This is just one of the unique
“sector” indicators Briese pioneered, and it was invaluable in
identifying the beginning and the end of the biggest commodity bull
market in
history.
I
don't want to give you the idea that the COT
is only useful at major market turns.
It is typically most effective at spotting repeated opportunities
during long-term trends.
Heating oil's initial rally out of the
1999 bottom provides a textbook example of the COT isolating
real-time opportunities throughout a long-term move. These are
direct quotes from Bullish
Review
issues.
Keep
in mind that this is an exemplary move. Don't expect the COT or any
other tool to provide so many accurate signals at every turn during
a single trending move. Nevertheless, if you had bought 1 contract
at each buy signal in heating oil in 1999 and 2000, you could have
closed them out for a gain of $103,000 at the COT sell signal on
Sept. 11, 2000.
Want more info? Click below for sample
newsletters:
Bullish Review
(published Mondays--normally 4-page, but this is the 2011 wrap-up
issue)
First Look (published
Saturdays)
HYPOTHETICAL PERFORMANCE RESULTS
HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY
TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE
ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE
RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY
PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL
PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE
BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT
INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN
COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL
TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE
TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE
MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING
RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN
GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM
WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF
HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY
AFFECT ACTUAL TRADING RESULTS. SEE ALSO: CFTC'S FRAUD
ADVISORY
link: http://www.cftc.gov/customerprotection/fraudawarenessandprevention |
