Cell – Data International

Ideas for 2013

Technical Analysis & Forecast Room – Cell Data International January 14th 2013

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C.O.T. Report: a good instruments

to forecast Three month analysis on €/$

by Giacomo Tulino

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Before July 2012 the €/$ cross has been characterizing by the deep weakness that now seems to have vanished,

favoring a new positive climate that may continue in the coming months.

This study will seek to identify, in a simplified way, the behavior and expectations of the various actors in a medium-

term (3 months) in the cross €/$, through the COT (Commitment of Traders Report), a weekly report published by

the U.S. government (Commodity Futures Trading Commission), where gives the long and short positions left open

(open interest) of different financial instruments.

The report divides the open interest data in the three main categories of financial operators:

COMMERCIAL or LARGE HEDGERS: This group consists of market participants who use the futures contracts

for hedging purposes, and these commercial participants are generally exporters and importers who are

hedging against currency fluctuations.

NON COMMERCIAL (or Large Speculator): This group consists of large speculators such as hedge funds,

banks and so on who use currency futures just for speculation

NON REPORTABLE POSITIONS (Small Traders): This group consists of small speculators like retail traders.

In a simplified view, we will show (graphically the 2012 weekly data extracted from the report on the official website

http://www.cftc.gov) only the NON COMMERCIAL operator for the U.S. DOLLAR INDEX and the EUR FX:

On the U.S. DOLLAR INDEX (Chart 1) the short positions (red line) increased steadily throughout 2012 while the long

positions fell (green line down).

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The EUR FX () shows an opposite view, as long positions (green line) rose significantly, especially in the last period

(circle) while many short positions (red line) decline.

The NON COMMERCIAL net positions (difference between the long and short) kept open on the EUR FX weekly

chart, increasing long positions in a medium term that, especially in the end of the year (2012), the line crossed

upward zero while COMMERCIAL (who go against trend for hedging) reduced exposure in long positions. (Chart 3).

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The U.S. DOLLAR INDEX (Chart 4) view is diametrically opposite. The NON COMMERCIAL operator closed many long

position (green line descending) while the COMMERCIAL operator increased long position. Accordingly, in a medium

term (3 months), the above data suggest a strengthening of the Eur Fx compared to the Us dollar.

To optimize this study also refers to an another "instrument" really useful, the COT INDEX. This is an indicator based

on data from the COT, which relates the latest data released, compared to the average of the 26 previous data.

The COT INDEX identifies the extremes in buy or sell, moving on a scale of values ranging from 0 (weak) to 100

(strength).

Lastly, we report the C.O.T. INDEX of EURO FX and U.S. DOLLAR INDEX:

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Long - term trend and 2013

forecast Dow Jones Industrial vs. CRB Commodity Index

Price forecast S&P 500 index

by Angelo Prataviera

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STOCK EXCHANGE INDEX AND COMMODITY (DJ IND. & CRB INDEX): A VIEW INTO THE FUTURE.

DOW JONES INDUSTRIAL - CRB COMMODITY INDEX (LONG TERM ANALYSYS) (FIG.1)

There is a widespread opinion in according to which commodities and stock market have similar and converging

prices trend. In other words, a rise in the stock market would have a positive match with commodities and vice

versa. This is true in the short and medium term, but false in the long term as shown by several studies published in

the literature. For example, the chart above shows the performance of the CRB Commodity Index compared to that

of the Dow Jones Industrials since 1950: it Is clear that commodities and stocks are very often negatively correlated.

The commodity and stock’s market cycles change on average about every 15 - 20 years. Of course variants at this

frequency are always possible, as can be seen for example by the collapse of 2008 - 2009 which has probably

established the minimum price of the stocks referred in $, but still does not conclusively show that their "bear"

phase has ceased. Similarly it’s not possible to conclude that the positive phase of the commodity cycle has already

completed on the 2008 maximum. Most of them in fact (Copper, Tin, for example) have also set new highs after the

increases begun from the 2009 minimum. Surely the time for the end of these cycles are winding down, but is

possible to watch a new bullish momentum for them before the start of their Bear phase and then, by analogy, an

important signal will come with the start of the Bull phase on stock markets in analogy to what happened in the

past.

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So it’s important to establish whether the recent increases observed in the major world stock markets (particularly

those in $) have already led in a bullish long-term phase, or if we‘ll need new corrections in the coming months after

the exhaustion of the last rise leg began in mid-November 2012.

If so, we will have some more time (1 year or more) before it can start the reversal of the so-called "super cycle" of

equity and commodity just mentioned. Otherwise the market is already entered in a new multi-year bull market for

stock exchanges and in a wide downward laterally swing phase for commodity.

DOW JONES INDUSTRIAL AND VOLUME (FIG. 2)

With reference at the Dow Jones Industrial in Fig. 2, it is clear that the rise since 2009 has decreasing volumes, that is

exactly the opposite feature that we normally found at the resumption of a positive trend marked that springs from

the bottom of a "super cycle" when it start again; for it in fact prices and volumes must be in phase. So even in the

presence of new absolute price highs in the coming weeks (event considered likely in various equity indices), if

volume trends remain similar to what we have seen so far, it is difficult to assist at the beginning of a new

"megacycle Bull" in the stock exchanges. For its inception will be appropriate to wait for a correction in the next 6

months at least, before a definitive consecration bullish. Similarly the possible rise of the CRB Commodity in 2013

will likely be the last push upward before a long Bear phase period.

2013 SHORT & MEDIUM TERM SCENARIO.

Figure 3 below is the prediction made on the future performance of the S&P500 written in the report: "The

challenges of 2012," published Feb. 3, 2012.

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S&P500 INDEX WEEKLY (FIG. 3 & 4)

Basically, the forecast was for an important minimum from June to July of 2012 and a restart bullish until November

2013.

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It’easy to recognized as the minimum expected has actually occurred and with it the subsequent rise. The last year

price projections could not anticipate the correction from October to November 2012 that however did not change

the bullish trend expected. All this was written 11 months ago and has maintained the essence of the movement

with target at 1450, in line with current prices. This was obtained only with Technical Analysis concepts and studies,

even more incredible if you think how the 2012 has been a full enormous financial turmoil year, with massive

intervention by major central banks of the world, all factors that can be significantly disruptive for forecast technique

that use prices projections in the future.

Now it is possible that in January 2013 we can see a healthy correction in prices which, if it will train, should not

encroach the value of the November least 1343. At the end of this correction, market should be able to push

towards the target at 1570 calculated by assuming identical extensions of wave 3 and 5 (counting in blue), and by

assuming wave 1 wave = wave 5 (last count in red) and also the proximity to the historic high of 2007. Also it’s

possible to see an extensions beyond that level towards the upper wall of the uptrend, but however in any case the

preferred hypothesis wants that, after them, there will be no upward accelerations but instead prices corrections

until the central part of 2013 to close of the six-month cycle began in mid-November 2012.

The massive liquidity injected by central banks leads us to be cautious in proposing, as did last year, a price

projection for throughout 2013. For this we need to waiting for the confirmation of top formation expected in

spring. Only after this we can suggest a route for the rest of the year.

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Ratio between non-ferrous metals

and gold Price Change and changes in value

by David F. Mele

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Raw material prices may be subject to change for various reasons, the most important and historically present are:

a) variation between demand and supply; b) geopolitical developments; c) entire world’s economic cycles;

d) inflation.

In the last decade we can add two additional reasons: e) strong grow of emerging countries; f) unconventional

monetary policy adopted by several central banks (i.e. Federal reserve, Bank of Japan, Bank of England) creating and

injecting money into the economy.

The commodity market have been so upset by a new high volatility.

PERFORMANCE OF GOLD AND COPPER IN THE FIRST CHART, NICKEL AND ALUMINIUM IN THE SECOND.

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Are price changes that have occurred (and shown above) true? And with reference at the account listed above: are

their values really increased?

The only way to get an answer to these questions is to compare the non-ferrous metals with something that is

universally recognized to have value. Recognition by the multiplicity of economic operators, something traded by

countless time: this parameter is gold.

By dividing non-ferrous metal prices for gold price we will have a lot of interesting charts:

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The result is a depletion of the real value of the non-ferrous metals over the years.

Copper price has a strong acceleration between 2006 and 2007 against gold price, but with the succession of

systematic economic and financial crisis, the ratio gradually loses its strength, until it reaches a minimum at

the beginning of 2009 and it still remains at those levels.

Nickel price divided gold price has a vertical climb, followed by a vertical fall at the turn of 2006 and 2007,

then the ratio will continue to go down to the minimum in early 2009, the same value also came recently.

The ratio between Primary aluminum and gold shows greater strength between 1999 and 2001, then in the

following years enters in a horizontal channel that starts in 2002 and ends in 2007. In 2007 begins the

descent, initially strong and then slower until the 2012 minimum.

CONCLUSION: The rise in prices of non-ferrous metals during the second half of 2000s was just a nominal rise; in real

terms (when compared to gold, the only commodity considered to be holder of intrinsic value) the metals have

experienced a slow and steady drop.