Commitment of Traders Update - Stocks and Crude Oil

I have been following the CoT data on a number of markets closely for several years.  I spend most of my analysis effort on US stocks in general, and that is no different for CoT data.

Recently as the US stocks have traded in very tight range for months, there have not been major extremes in positioning long or short.  Currently as prices have recently made new all time highs, there has not been any major sell signal or accumulation of shorts by the "smart money". 

Generally the pattern is that smart money will sell heavily at the highs, sometimes with some divergence as is typical in markets, and sometimes after forced short covering.  But at our recent highs, the situation is either that they are NOT ready to sell en masse yet, OR there is a massive divergence period which would imply that the bull market is ending.  As always price action is the final answer.

I did want to alert readers here to what could be a very telling pattern and trade set-up in crude oil.  Coming off the March low in crude there has been a massive short-covering rally in crude oil.  The underlying position data is interesting and probably should be alarming for the bulls.  There has been NO increase in long speculative positions in the entire 49% rally off the lows.  In aggregate ALL the buying has been short covering.  This is occurring in a downtrend.  Short-covering in a downtrend with no new interest on the long side is NOT a healthy bull pattern.  And yet it gets WORSE for the bulls........

 At the March low the large speculators - which normally are most long at TOPS and which normally buy increasingly as price rises in an uptrend - had actually bought on the way down from November to March, to the point that their long position was basically equal to their all time high in net long at the June 2014 top before the massive decline.

And as already stated, they have not increased their long positions at all during the rally since March.  So here is the question........Is this because the CAN'T increase their long position?  There is a limit to the amount of funds they have, and certainly historical numbers can give floors and ceilings to the probable max capacity of $ deployment available. 

If the answer is that they can't buy more, then once this rally fizzles out, crude will certainly plummet again before the bear market ends.  The seasonal trends in crude are positive into the end of summer.  So it may be that oil holds up or sideways for a while before that happens.

The alternate possibility is that the funds have a "stash" of cash that they have yet to commit to the long side of the market, but given the way these things work, that seems like a very unlikely possibility.

So my suggestion here is to take all crude oil sell signals that develop according to your system or technique moving forward from this point.  I don't know how easy it will be to catch a top of this rally or if it already occurred.  But it may take a few attempts to get a position that sticks for a major decline.  I plan to speculate with put options at key points or signals moving forward.

Pete