NEWS is always most bullish at the top. There are no worse market forecasters than financial news outlets, except maybe economists. While their piss-poor track records by themselves may not make me or the few other contrarian market analysts correct, you do need to guard against bullish crowd my-opia.

In this regard, there is no better reference than the position of market insiders, commercial hedgers who have access to informational resources and in-sights well beyond the best news sources available to market outsiders (us).

With deep financial resources to match, plus off-setting cash market positions, hedgers can with-stand adverse moves that would bankrupt the rest of us. Monitoring the Commitments of Traders provides a unique portal into the market view of commercial hedgers.

When we see a consensus among these market insiders, we can prepare for a trend reversal. That is the set-up, but you still need to identify the trigger point. I often point out critical price support or res-istance levels, which are being monitored by tech-nical traders and are, therefore, potential trigger points. But there are myriad technical approaches to market entry and stops, and I leave this to you.

We use the COT to locate significant market turns. The key to remaining solvent is to wait for the moment that price action bends to the com-mercial consensus. There is no need to catch the top tick. As legendary trader Jesse Livermore related in the thinly fictionalized classic, Reminiscences of a Stock Operator:

One of the most helpful things that anybody can learn is to give up trying to catch the last eight--or the first. These two are the most expensive eights in the world.

STOCK INDEXES: Two weeks ago we posted a minor sell signal in Dow futures and last week's issue carried a COT-Fisher sell signal warning for our composite stock index, a combination of S&P, NASDAQ, and Dow futures.

Despite the fact that commercials were minor buyers this week, the COT-Fisher warning ad-vanced and the warning remains in effect. These warnings progress all the way to actual sell signals in 95% of cases.

Our assumption is that major trend turned down following timely major and minor COT sell signals in our composite index of July 18, 2011. It will take new highs above that peak to cause us to reevaluate the trend. Short of that, we cannot count on COT sell signals at every rebound high. The current warning is enough to prepare for a re-sumption in the major downtrend, which has the potential to break the March 2009 low.

Composite Stock Indexes Weekly

Issue No. 878 Insider Capital Group January 23, 2012

All information has been obtained from sources believed to be reliable, but accuracy and completeness are not guaranteed. Statements and recommendations are subject to the limitations inherent in market analysis and may be changed without notice. No claim is made that future recommendations will be as profitable as past performance or that they will not result in losses. All trade references should be considered hypothetical.

THERE IS RISK OF LOSS IN FUTURES TRADING. Those using this information are responsible for their own actions. © 2012 by Insider Capital Group • 362 Gulf Breeze Pkwy • Gulf Breeze, FL 32561 • www.InsiderCapital.com

Tel 1-888-423-4950 1-850-677-1966 • Fax: 1-850-677-3521 • Re transmittal or duplication in any form is illegal and strictly prohibited.

362 Gulf Breeze Pkwy • Gulf Breeze, FL 32561 • www.InsiderCapital.com Tel 1-888-423-4950 1-850-677-1966 • Fax: 1-850-677-3521 • Publisher: Jeannette Briese

OIL COMPLEX SPECIAL SITUATION: There is no market sector with more bullish news than crude oil. It does not matter what the news is, even a rise in inventories provokes a bullish re-sponse. This is a financial writer's dream.

Market insiders are telling us in no uncertain terms that bulls are, indeed, dreaming. Commercial (the smart money) selling has taken their net short total to its highest (most bearish) level since the May 2011 market peak. Small traders (the late money) are holding their largest net long total since that top, as are large speculators (the hot money). Trend-following large speculators are typ-ically fully invested in the wrong direction at im-portant market turns.

Commercial selling triggered a COT-Fisher sell signal in our composite oil sector index this week, while moving the COT Index to a maximum bearish reading. Last week's special situation recommenda-tion remains in effect, awaiting only a trigger:

A double-top formation will be completed on a breakdown through the December low on the crude continuation chart. (Consult daily chart of contract traded.) We view this set-up as a spe-cial situation with substantial short profit poten-tial.

Composite Crude Oil Index Weekly

LONG-TERM TREASURYS: There was a dra-matic increase in the spread between opposed large trader positions this week, as commercial bears moved to a four-year high net short position while CTAs increased their net long total to a simil-ar bullish extreme. I have marked the November 2007 net positions (which were records for our composite long-term treasury index) on the follow-ing chart, along with June 2011.

You will note that both prior events marked mar-ket tops, but only temporarily. In the December 26, 2011 issue I described commercial timing in Treas-urys as impeccable. (I will not repeat the detailed review as you can look it up in the year-end issue.)

Since catching last summer's big rally in Treasury prices (circled), I have recommended standing aside Treasurys, for a couple of reasons. First there is the unprecedented support from the Fed, which is ob-sessed with keeping long-term interest rates from reflecting the obvious credit risk. This limits the near-term downside potential for Treasury prices.

The second caution has to do with the threat of a renewed downtrend in stock prices. Bear trends in stocks typically trigger flight-to-safety flow of money into bonds, which may help the Fed in one regard. A natural limit to Treasury prices makes the risk/reward unattractive for bulls as well as bears.

TREASURY COMPOSITE Weekly

January 23, 2012 Bullish Review Page 2

ICE DOLLAR INDEX Weekly

DOLLAR INDEX: The near-record spread between net-long CTAs and net-short commercials is apparently getting a lot of notice. How to use this information, however, may escape the majority of casual observers of COT data.

The state of the primary trend is paramount to interpreting trader positions. My view is that the major trend turned up with the May 2011 COT buy signal. The COT/price pattern has been consistent with a major uptrend--including timely buy signals and untimely sell signals (which we have ignored).

In a bull market, bearish COT readings and ex-treme net positions are expected. I have marked earlier points of extreme spread between CTA bulls and commercial bears on the chart above, includ-ing the record divide set last October. You will note that all of the previous extremes resulted in trading tops in the Dollar Index, but in every case the tops proved to be temporary.

I have been warning for several weeks that the extreme spread between the two large trader groups made the Dollar Index vulnerable to a pull-back. A COT-Fisher sell signal was triggered this week. If this leads to the expected pullback, we will be on the lookout for another buying opportunity. But you cannot count on a timely warning of the next bull leg. The biggest bull moves typically provide the fewest COT buy signals and buying op-portunities.

SOY COMPLEX: True to form, last week's COT-Fisher sell signal warning, based on our composite net positions for the soy complex, advanced to an actual sell signal this week. Unlike the dollar, this COT signal agrees with the direction of the major trend, so we expect it to mark the next bear leg.

As detailed in last week's issue, commercials nailed the September 2011 market top. If this bear market follows historical cycles, there is a still a huge profit potential for market shorts.

Composite Soy Complex Weekly

January 23, 2012 Bullish Review Page 3

January 23, 2012 Bullish Review Page 4

COT INDEXES (Futures + Options)COMMERCIAL HEDGER LARGE SPECULATOR SMALL TRADER LAST

SYMBOL 15. Jan. 2012 CHANGE 15. Jan. 2012 CHANGE 15. Jan. 2012 CHANGE COMMENTINDEXESCRB 77% +2 20% -3 22% +5 #874

> DowInd 36% +1 47% -1 86% -4 #877NASDAQ 30% +5 64% -5 66% -4 #877NIKKEI 83% -3 21% +15 42% -15 #838S&P500 57% +6 31% -7 62% -2 #877METAL

> GOLD 83% -3 12% +1 37% +7 #876COPPER 72% -11 27% +12 31% +6 #860PLATIN 85% -5 17% +5 6% 0 #870SILVER 81% -4 20% +8 8% -8 #872CURRENCYAUSSI$ 36% +2 61% -6 59% +7 #873POUND 69% +3 36% -2 12% -3 #875

>> CANAD$ 100% +4 0% 0 16% -12 #875>> EUROFX 100% 0 0% 0 19% 0 #875>> $INDEX 0% 0 95% +1 86% -10 #871>> YEN 4% -1 96% -2 81% +9 #874 > Kiwi $ 28% -8 72% +8 60% +1 #866

PESO 84% -4 14% +4 29% +3 #866>> SWISS 97% -3 +7 -2 +8 +8 #875

FINANCIAL3MO-ED 66% -19 29% +20 55% +10 #836

>> 5YR-TN 2% +2 85% -8 97% +9 #874>> 2YR-TN 0% -44 93% +55 100% +19 #870>> 10Y-TN 5% -23 100% +18 61% -4 #874

30Y-TB 24% -16 66% +21 84% +2 #874GRAINSB-OIL 77% +18 24% -20 14% -9 #877CORN 71% +24 26% -22 49% +2 #877KC-WHT 65% +8 33% -9 35% 0 #859MN-WHT 38% +3 68% -8 49% +3 #774

>> OATS 95% +4 22% -1 0% -11 #835>> RRICE 100% 0 1% +1 26% -3 #877

SBeans 73% +15 42% -7 25% -15 #858S-MEAL 85% +8 13% -8 19% -6 #877

>> WHEAT 97% +10 1% -7 12% -19 #877MEATFEEDER 22% -7 83% +8 36% -6 #865CATTLE 70% 0 25% +2 71% -12 #865

> HOGS 55% -2 41% 0 81% +8 #865FOOD/FIBER

>> COCOA 93% +1 6% +2 17% -20 #851 > COTTON 57% +1 37% -5 63% +10 #865

COFFEE 72% -14 30% +13 21% +7 #859LUMBER 86% +6 14% -4 69% -6 #876OJ 64% +1 32% -4 64% +8 #871SUGAR 89% -7 9% +4 17% +11 #862PETROLEUMCRUDE 14% -4 83% +3 75% -2 #871

> H-OIL 20% -6 54% +10 98% -2 #877 > NATGAS 31% -11 78% +9 34% +9 #877

Gasoli 9% +1 88% 0 81% -3 #686>> = COT Extreme Level (COT Index above 90% or below 5%) > = COT Extreme Movement (Plus or minus 40 point change in COT Index within last six weeks)