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 SYSTEM PERFORMANCE AS OF 8/30/2002: NET EQUITY AS OF LAST CLOSED POSITION $2,875,684 (starting with $10,000 in 1986) We have been following the COT, (Commitments of Traders), reports published by the CFTC, (Commodities Futures Trading Commission) for the last 15 years, first as a paid subscriber, and then for free after 1996 when they started publishing them on the Internet. This strategy DOES NOT have anything to do with commodities or S&P futures or options. It simply looks at that data for clues to future market direction. As a watchdog agency for the Futures markets, CFTC makes normal practice of informing the public on the positions of futures traders and how their contract holders have changed large scale long or short positions which might affect the other traders in Futures or options. Most people think of Commodities as being Pork Bellies, Lumber, Corn, Orange Juice, Heating Oil etc, but they also include financial instruments such as Swiss Francs, US Treasury Bonds and Stock Indices, (which is where we become interested). In the reports, each Commodity is broken down into different types of traders reporting ownership. These traders are broken down into 3 groups:
As any Futures trader knows, the Commercials get it right most of the time, whereas the Large Traders and Non-Commercials are most always wrong. The Commercials use the liquidity of the Futures and Options markets to control risk on the underlying securities and commodities they already own. They are required, by regulation to reveal these figures. By not having to liquidate the underlying instrument, (in our case the SP500 group of stocks), they can mitigate a bad market by simply buying Short Futures and Options contracts. If they had to move whole baskets of these stocks all at once, they would be essentially playing against themselves, driving prices for the underlying higher or lower as the case may be. For all these years Speculators, primarily, have used the number of long or short contracts to attempt to gauge the "future" intentions of the "Smart Money" which always seems to know, in a timely manner, which way the markets are going to move in the longer time frame. (Actually they tend to lead the markets by about 3 weeks, thus capturing the middle chunk of the moves); These Speculators, for the most part, look for a divergence between Large Traders and Commercials as a market vane. If the Large Traders have a high number of long positions and the Commercials have a large number of short positions and the market is down, this is the ideal set up for a "buying opportunity", which is just looking for a catalyst to make the turn. Traders like to look at 5 year historical levels of contracts, and if the Short Futures contracts are within 5% of their record high, they would begin buying the Futures and Options contracts.. If the Long Futures contracts are within 5% of their record high, and the market is up, they would begin selling Futures and Options contracts. (not a bad concept, and with a few more embellishments is the basis for many "Guru" recommendations on Futures and Options). Few have gone beyond this step and applied the key elements of these reports to an analysis and method of trading the general markets. Futures Contracts are traded by the wealthy or risk adventurous, (It costs upwards of $30,000 margin for EACH SP500 Futures contract you want to play, and all bills are due and payable at the end of each market day). For many it is the home away from home for Vegas high-rollers. What if there was a way to use these reports in a non-traditional way to play non-traditional, market related "Proxies". These proxies are actually stocks equivalents, like the Dow Diamonds, SPYDRs and even "bull" and "bear: Funds that capitalize on market direction. These are extremely liquid instruments, (the SPY trades 10's of millions of shares a day), can be bought through a discount broker, on margin, with narrow spreads. The bull and bear proxies have the added benefit that four of them currently are designed to give a 2 times market move percentage trade, the equivalent of trading on margin, without the necessity to do so. Additionally, whereas you are prohibited from trading margin and selling short within a tax deferred retirement account, these funds can be bought and sold like regular stocks, giving you the benefits of a margin equivalent play which is fully tax sheltered. We believe we have found just such a way to generate these signals, with a method that is simple and verifiable from the free data provided by the CFTC each Friday. By simply subtracting two numbers buried within the free weekly reports you can generate the same signals we get. You can get all of the back data and follow these signals yourself and determine if this is a long term investment strategy that works for you. We will publish the trade signals and data changes on our own website weekly for all of our other service subscribers for FREE, but you do not have to subscribe to any service once you have learned the technique. If you are a subscriber to one of our other mechanical shorter term trading systems, you don't even have to go to the Government site. Just log onto the Pitbull Investor once a week and you will see find a link to our tracking tables: (REMEMBER, YOU DON'T HAVE TO SUBSCRIBE TO ANY OF OUR SERVICES TO USE THIS STRATEGY...THE GOVERNMENT PROVIDES THE DATA FREE). (Yes this can be used on other Indices successfully, and we track them each week as well).
There are of course, many questions such as "What will happen if everyone starts following this system, (won't it be ruined etc)?", which are all answered in detail in a fully documented 50 page booklet we are making available for a one time charge of $49.50 +$5.50 shipping and handling. While there isn't any way, of course, that we can, (or would), promise future continued success of the strategy, there are salient reasons for believing it will continue, (also covered in the Manual). Frankly we wouldn't sell this booklet if we thought it would taint future results, and we WILL be using this strategy ourselves. If it is so good, then why are we selling it?....Frankly, it can't hurt our investing and we want you as a new or continued subscriber to some of our other Pitbull Investor services and systems, which are shorter term trading strategies. If you like this long term capital growth idea, then maybe you will like the rest of our offerings, BUT THERE IS NO REQUIREMENT TO PURCHASE ANYTHING ELSE TO LEARN AND USE THIS STRATEGY!. All the information you need to backtest and work the strategy is derived from the FREE data provided by the government each week. Is the system "curve fit", as most strategies, or optimized to produce winning historical trades, (so therefore doomed to ultimate failure)?...Absolutely not. There are no moving averages, volume accumulation formulas, standard deviation exercises. The entire strategy is determined by your ability to subtract one number from another, both contained in the COT data, and base your WEEKLY decision on the outcome of that process. Yes, I said WEEKLY. This strategy requires 5 minutes a week to decide if you are a buyer or a seller. Enough, already.....let's get down to the nitty gritty. Below you will find the results of using 15 years of data straight from the CFTC and simply trading the SP500 index long or short depending upon this "five minute" signal each week. (You can't actually trade the SP500 Index, but can trade the SPY, (since 1996), as a proxy, using margin...(other bull/bear funds we will tell you about require NO margin). Starting capital was $10,000. LOOK AT THESE RESULTS! .
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