GOLD Threatens Additional Downside Pressure, page-236

Ned Davis Research team present impeccable data

#cot

in an earlier post an idea that sentiment may set up divergence as an anecdotal conclusion and may also run parallel to price, in other words, as the data shows, there are different ways to skin the data cat to create a bias

in this first chart you can see a major swing that sets up the final upleg in pog, was also accompanied with a major increase and strong high in sentiment,
what is not talked about is  both the immediate swing south in sentiment on very small price movement* after pog comes out of the consolidation low and that price then ascended impulsively despite the extreme optimism coming out of the consolidation, so, clearly, it is easy to create a story in hindsight but to do it with context is what is required and we need to give the current pricing context too
*where sentiment immediately dips south after pog clears the basic high (orthodox printed horizontal line) price looks like it'll head south again.....it is this "look" and the surrounding gossip that causes the sentiment to give up and head south, so, while the sentiment reflects fear the reality is that price continues to climb shortly afterward despite the extreme in commercials STO's ...more on this below the 3rd chard




in one weeks reporting during the march to november pullback in 2008 the sentiment for all three groups was manic to say the least with one week seeing Commercials reaching 225k STO's  which does not fit with the NDR data "Smart Money Bearish" extreme but it does if you add BOTH Commercials and Managers as the managers are trend followers and clearly, for them at least, the downtrend is still in operation (as we know from comments by outfits such as Goldman Sachs commending a STO position)

the tricky part about the cot report is it only reports the numbers as-is, not as transcribed, so if we took the march - nov 2008 as an example of what was considered a major top in gold and remember this was in the middle of a major liquidity contraction (where re-balancing saw margin gold positions closed) then that manic period of extremes in position sizing clearly shows that the sentiment (dumb and smart) did not dictate the outcome after the liquidity contraction (in the middle of the equity bear 2007-09)

that means, sure, it's easy in a smooth market to apply smoothness to price with position sizing but that's referencing the left hand side of the chart for analysis and that, as they say, is where the trouble begins!
look at the third and fourth charts below for the march-oct 2008 period and you'll see a time stamped STO pos's for Commercials


unless the data is imcomplete the positions were fairly manic

in this fourth chart the Commercials were at 242k STO's  while retail (you) were half BTO positions compared to this weeks latest COT report - thus - context context context and relative size......