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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.
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Currently yield of 8% minimum.
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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:
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"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."
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"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!"
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"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, 2007 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 bull 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?
|
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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
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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.
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 |
