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 April
10, 2005 Commentary (weekend edition)-
I would like
to again welcome all the new visitors to the website. As I said last time, I
have been mentioned favorably on some popular forums lately, and my traffic has
ramped up big time. I hope no one was offended by last week's little note about
free education and such, but, talking in my usual (and appreciated by many, I'm
constantly being told) straight-shooting manner, if you really don't agree with
what I said, this website probably isn't for you.
I'm not saying you aren't welcome,
as everyone is welcome here; it's just that perhaps my philosophy, which runs
through all my work, might not be for you. I can say that I was quite
surprised, though, as to how much positive feedback I got saying that they like
my style and how I lay it out and tell it like it is. Just understand that it's
the way I am, and give yourself some time to get used to it. Enough
said.
I was growing concerned that some who are new to this commentary
might mistake the almost boundless enthusiasm I have for my methodology and the
progress and developments I am making, especially lately, for arrogance or
cockiness. Nothing could be further from the truth, and if you interpret it
that way, you are not viewing me as I am. I am a big proponent of humility and
humbleness, in my trading and in my personal life.
To clear this
up a bit I am going to relate a little parable. It's been a while since I've
done a parable in here. And yes, I can hear many of you saying 'Oh, no, not
another parable. What did we do to deserve this?' Well, one of the nice things
about being the one 'in charge' around here is that I can do whatever crazy
ideas I come up with. So, pull up your chairs and follow me up to my parable
pulpit, and we'll get started.
"I look at the market like it's a lion, and
I'm a mosquito. I wait around in the shadows until the lion is asleep, or quite
groggy. I then pick my moment, look around very carefully, and I sneak in for a
quick meal. I keep my eyes open, I take my shot, and I'm gone, back to the
shadows to reassess. I then regroup and start over, being very cautious and
reading all the clues.
If the lion is nearly comatose or exceptionally groggy,
I may go back in for two or three more meals. I know the longer I stay around
without stepping back and reassessing, and looking at the bigger picture from
the clarity of the sidelines, the higher the risk gets. I only want to push so
hard, but I also want to 'make hay while the sun shines'. I take advantage of
the situation, but then I go, and watch from the shadows.
I've known
many traders who have a different approach. These are the traders I sometimes
mention in various places in my books. The ones who say things to me like:
'You're too cautious, Jim', 'I'm a risk taker, and trading is all about taking
risks', and 'You worry too much'. Here's their approach.
They walk up
to the lion in the light of day while he's resting or napping, kick him really
hard right in the butt, and say in a very loud, firm tone of voice: 'Get up,
lion, I want to talk to you right now. When I'm hungry I'm coming over
here and getting me a meal. And I'm going to eat as much as I want. And while
we're on the subject, I'm coming back as often as I want. You understand? And
that's the way it's going to be, see?'
Every last one of those traders, and as I
said I've known quite a few of them, suffered the same exact fate: ROAR,
crunch, game off. When it comes to the market, I'm humble. I'm filled
with humility. There is no doubt I'm also very confident. I'm not nervous or
scared. I'm surely not arrogant or cocky, that's for 100% positive. I'm
confident, but very, very humble. Trust me here, and don't ever
forget this parable."
I'll step down from my pulpit and we'll get
to some charts. It was another magnificent week, and I'm just blown away by how
well my methodology is pointing out the 'action spots' for me. I'll start with
one that I posted, in advance, in my members' section, as well as
in one of the forums where I have been doing a little 'guest posting' by
invitation.
This one was a real beauty, and I watched and waited for it to come
together. It did on Thursday's close, with a nice trigger right after the open
on Friday. I'll show this in the SPY, but my play was an SPY and options combo
for the longer hold, and using the bias for some great mini setups for intraday
plays. The setup could be done on the S&P cash or the ES, too.
The SPY hit the lower grouping to the
penny and dropped like a rock. My management plan gave me no signals at all
to close the trade or scale out at all. Given I knew the trade was initiating
on a Friday and was a good-sized pattern, and I don't like holding over the
weekend if I can avoid it, I decided on which plan I wanted to go with. I could
cover the SPY when I got a signal or near the close if this sold all day, and
hold the options. If I didn't go this way, I would have covered some SPY as
above, and held the rest for the bigger move.
Now, maybe this move is it. That's
just fine with me. The stop is now moved down in accordance with what I laid
out in Kane Trading on: Trade
Management, and some of the play is off. This puts me where I want to
be, in the 'theoretical no-lose' position. I say theoretical because this is
excepting a huge gap or market shock event of some sort. Barring that, it's in
the 'single' category right now. Even if it goes straight up from here, it's
still a great play for me.
The interesting thing is the larger scale 'context' for
this, as a possible first 'retest' of what might be a major market top for some
time to come. Maybe not, and I'm no top picker, but there were things I have
been watching, and it rolled over right on cue, and then the expected ABCD
short setup. The potential reward/risk for me is better in this case, because
it might be the start of something, as the January lows are taken out and
nothing but air sits below.
The other thing was how poor the breadth was today. It
was bad, and I mean bad. Look over some numbers. The S&P was 426 decliners
to 66 advancers. This might indicate we are getting oversold if we've been
selling down a bit, but after a nice run up, to roll over hard and do it with
numbers those bad, well, that's ominous to me. I will wait and see what they do
from here, but I'm positioned as I wanted to be, and this came together like a
pre-ordained script for me.
Before I move on, take a look at the 3 and 13-minute ES
charts leading up to this area, and down from there. I had my bias, my
'context', and if you've looked at those charts, seemingly endless setups and
chances to make my intraday mini plays.
Look at that ABCD on Thursday completing
about 13:50 at 88.75. I called that live in the chat room. There was, among
other things, an ABCD pattern, a modified Schiff ML lower parallel, a .618
retracement, and the daily pivot. This, together with my 'context' and bias. It
doesn't get any clearer for me than that.
Let's take a look at a recent setup
I mentioned in advance in the members' section in MUR. Understand I'm not
picking out the few that 'worked' amongst many that didn't 'work'. I am not
going to make any claims here whatsoever, and the service is not a
picking service, it's purely educational, to help the most serious
traders learn as much as they can about what I do, but I'm surprised at how
well I've done at showing things in advance and having them 'work out'. Hey,
buy the books, get the two week
trial, and go through the now extensive archive and you'll see. It's all
there.
Let's look at the setup in MUR on the 130-minute chart. I'll just
show the basic outline. You should put your own area together to see the
entirety of what I was watching.
I have an ABCD pattern in a strong uptrend.
The XOI was showing the same pattern, as were many issues, like the UCL I
showed last week. I have a modified Schiff ML lower // hitting right at the
completion area. I have to recreate the ML set as best I can with this
software, since I can't do the modified Schiff with it. Now let's see what
happened, and what I was keeping an eye on.
MUR rocketed up, and as it approached the ML
upper //, I put on two retracements that would hit right at the line as the
price approached the area. This is not all I did, of course, but it shows what
caught my attention the most. This helps me in my management decisions. But
nothing happens for me until I see what price action does. Let's see what
happened from here.
MUR reacted right off that spot. For me, it's
time to start some 'scaling out on the way down', as is my style. Off course I
was watching on the lower timeframes, and some very interesting things were
happening there. I posted many of them in the members' area.
The nice
thing about that venue is that if I see something noteworthy in an issue I have
been discussing, I can post a note any time I want. I then e-mail out to the
members that I have just made a post, and they can see it in a timely fashion.
With this free commentary I'm quite limited as to what I can show.
It all
depends on how much detail and timeliness you want, and how much you want to
see things that I am looking at, pretty much when I am looking at them, as I
explain what I see and what I'm thinking. The free commentary is designed to
'show you the ropes' and give you a chance to see if the methodology might be
helpful to you.
Don't expect to learn it all from this column. If you try, you'll
be trying it with only some pieces of the puzzle. Take this column for what
it's designed for, to acquaint you with what I do, to see if it is for you.
Don't try to do it all without the full understanding.
The next
commentary will be next weekend's edition, posted by Sunday evening, April 17,
2005.
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