• Trends turn higher
• Commercials add to long position
• Focus now on 1st quarter earnings

We can add Trend to the Bull side of our ledger this week as prices of all indexes continue to move higher.

The commercials continued buying into last week’s up movement in price and are now long the same degree that they where prior to the 2,000 point rally from July 2006 through February 2007. It’s a bit unusual to see them add to longs on a move up; they normally are scale down buyers and then sell into rallies. Their aggressive action gives me confidence that the nascent up trend will continue. Last week’s commitment of traders report also showed that the small speculator has moved to a neutral position from being net long for many months. What a perfect time for the market to go up after the little guy gives up and gets out. Taking the opposite side of the large commercial was the large speculator a.k.a. hedge fund. They are getting heavily short which is what could add fuel to this rally. As prices move to new highs they will cover their positions, which means they have to BUY back their shorts.

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Posted by Michael Chapman at 8:42 AM PDT