Interesting COT report by TimingCharts

I am a fan of COT reports. COT reports make sense to me and they provide me with another view of markets. As the author of this newsletter I share the opinion that you should base your strategy on more then one view and opinion. Always question your view and try to disapprove it for yourself. Once you find out that there is more “+ points” for your decision then “- points” you should go with your decission and always remember why you have decided that way. You will need it in a times when your decission will be questioned.

Here is a report from TimingCharts.com I find interesting. Very similar to my reports I do every week:

This the season to be Jolly

This week we are going to talk about how seasonal tendencies can really move the markets.  Webster s dictionary defines seasonal as affected or caused by seasonal need or availability. 

When most traders think about seasonals, they think of commodity products such as corn, wheat, oil, gold, silver, etc.  Could seasonal tendencies have an effect on the currencies such as the U.S. dollar, the Swiss franc, and the Euro?  The answer is most definitely yes. 

An investor could go through endless amounts of economic data trying to figure out how the dollar will fair against other currencies but a much easier approach is to study seasonal tendencies.   

The U.S. Dollar index chart below indicates a weekly bar chart of the past 5 years.  The seasonal tendency is overlaid to reflect how prices moved over the past five years.  I have marked in red when there has been a very strong tendency for the US dollar to decline. 

Note that each time it was at the end of February and the beginning of March the market had very strong downtrends.  Currently, we are at the end of February so we should see prices start falling.    

The euro chart is constructed the exact same way as the dollar chart.  The euro had some excellent rallies after the month of February.  So we should see the euro turn the other way toward the upside.

The Swiss Franc is almost exactly like the Euro.  I hate to sound like a broken record but at the end of February and the beginning of March, the Swiss franc had some excellent rallies.

At this point we have a seasonal tendency for the dollar to go down, but I don t like just trading on that theory alone.  I like to look at other indicators to support the trade. This week I’m looking at momentum. 

The chart below indicates the daily trading bars over the past year.  At present, the market is in a short term uptrend.  The 50 day moving average gives a good general direction of trend.  If the 50 day moving average is moving up, then we have an uptrend.   If the 50 day moving average is moving down then we are in a downtrend. 

Momentum is a good indicator to identify trend change that is coming.  When price is moving up but momentum is moving down we have a divergence in the market place.  When this happens, prices tend to move in the direction of momentum.  

The euro and Swiss franc are showing the exact same thing as the dollar except toward the upside.  Momentum is moving up and prices are moving down, we should expect a change in trend toward the upside.

What about the news or economic data?  Well it s just that, news.  Why try pouring through a countless amount of information trying to figure out where the market is headed.  I am a picture person.  When I see two or three indicators, such as momentum or seasonals, that is REAL news.  Seasonals are just another example of a powerful tool that we can use to identify where a particular market is headed.“ 

source: http://www.timingcharts.com/email/10-02-28.html