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 August
14, 2005 Commentary (weekend edition)-
Well, it
seems the dilemma continues. I think I may have added more confusion last week
with my XAU commentary than I thought I already had altogether. (Nobody seemed
to have had any trouble following the MR series, though.) So I'm trying to
clear things up and I may be making things worse. I spent some time thinking
about that, and came to a few conclusions.
The main thing I have come up with
is that in the early days of this commentary I was showing some layouts and
setups, and how they played out, and I was leaving it at that. Fibonacci
groupings, and perhaps an ABCD or a 5-point pattern. Nice, spoon-sized bites
for the masses, in a manner of speaking. It's never been my style to appeal to
the masses, in fact I've been told many times I scare a lot of people away with
my 'for those willing to do the work' and 'being a professional trader is like
any other skilled profession, and may take as much work as being a doctor'
lines.
I was like a professor who was teaching college algebra at that
time. Now my methodology has advanced quite a bit, and been refined. I have
added many new discoveries to it. I've done mentorships and learned a lot about
how people learn from me, and I've written more books. I've also started the
members' area, where
I've taken it up to a much, much higher level. I make assumptions everyone in
there has all the books, has all the concepts down or on the way to being down,
and I go full bore. But, since it is a teaching forum, I don't 'tell the
answers' all the time, I do what was called, when I was a teacher, 'guided
discovery'.
This is a process, for me, in that area, where I show many setups
in advance, and then I update the progress and show various aspects of what is
happening. I use a lot of questioning, a lot of it rhetorical, to point to
specific concepts and areas that are important to me at that point in the
process of that layout. It's an unfolding example in most cases. I cover
my style of 'trade it, fade it, or stand aside'. For me, 'a pattern is not just
a pattern', which is actually one of my slogans. I use a lot of 'context'
filtering to decide what I think the probability may be at the 'action
points'.
A good example is the last Jim's Chart of the Week. This will
demonstrate the dilemma I am in here. I showed an ABCD pattern in the dollar
index, and mentioned that the area will tell me a lot, especially if the ABCD
fails. It did. Now here's what was going on in the members' section, as best as
I can recreate it. First the dollar formed a 4-Point Continuation Pattern,
which I showed in advance to the members. I also said I didn't think the
pattern would 'play out'. Why? Not because it isn't a 'good' pattern, but
because the 'context'
didn't appear the way I needed it to be to take a setup like that.
I was also
doing extensive intermarket analysis with issues that played into the scenario.
I was watching treasuries, gold, the other currencies, the stock market,
grains, the CRB, crude and the other energies, and so on. I was also watching
sentiment. I was showing many charts and setups on these issues, most in
advance, and discussing the various ways that I see them working
together.
The 4-Point
Continuation Pattern didn't play out after the initial reaction. It
used my median lines incredibly well, though, and told me quickly what it was
doing. The next step, I pointed out in advance, was the ABCD pattern it could
form next once the 4-Point Continuation Pattern gave way. That's the one I
showed with the chart as Jim's Chart of the Week. I told the members', in
advance, that if I didn't like the 'context' and intermarket analysis of the
4-Point Continuation Pattern I wasn't going to like it for a very deep C point
ABCD just below. I fully expected the ABCD to fail, and I said so in
advance.
I mentioned very early on how I thought all the currencies looked
more like 'wave 3's' than potential CD legs (wave c's for you strict
Elliot wavers out there). Do some chart work on your own on this. Look at the
4-Point Continuation Pattern, and do the median line work (according to my
median line parameters, not the classical ones). It would be clear what my play
would be (short off the anticipated failure of the 4-Point Continuation
Pattern, in an area that wound up giving a great entry trigger and a very
tight, technically placed stop).
I would then be using the various
'action spots' such as the ABCD point to judge if the play was unfolding as
anticipated. I want to see the ABCD fail, and produce little or no reaction as
it does. If it doesn't even see the area, I feel I'm on the right track, and I
weigh that in to my management plan. The dollar did see the area,
hanging around but not bouncing. This told me it wasn't likely an ABCD, a
corrective phase right then and there, and it could take the area out and
really move. This was all happening in conjunction with some stellar layouts
that were playing out to a 'T' in other intermarket areas.
I was working
on gold and the XAU, which was moving off every single area I was finding, like
it was following a script. I told the members' that the 10-year was coming up
to the first area where I frequently see a 'wave 4' start. It came off the area
within a tick and is up four days in a row now. I am discussing all this
step-by-step in the members' area. No, I am not telling anyone what to
do. I am not saying straight out anything like 'Okay, if the bonds hit this
point I'll be getting long with a stop here' or anything of that sort. And why
not?
First off, my members' area is not a 'picking service', as I
have said many times. I am not showing areas so people can take trades they
don't understand because I point something out. I have the service to help
people try to understand what my methodology is about, by showing them my work
in a timely manner, where they can follow along, in many cases, as things
unfold. Next, it's all about price action for me in the 'action spots'. There
is no way I can say what I may do at an 'action spot' until I see how price
behaves, and seeing if I get an entry trigger.
What I try to do in the members'
area is discuss the price action, and what I look for, and how I tend to
interpret various behaviors. I have a very clear methodology, but it is also
discretionary. I make a lot of decisions. I try to show the members how I go
about making those decisions. Even if I were interested, there is no way
I could say in advance what I may do at a given PTA. I also emphasize how only
10%-20% of my 'Trading Plan' is about the PTA (potential trade area, the
'setup'), contrary to the 90%, or even 99%, of most traders (especially pattern
traders, it seems).
My plan is to look for an accumulation of small edges
across the 'Trading Plan', not an unrealistic edge in the 'setup'. I have
discussed this, and written about this in detail, many times before. So, with
all that said what am I getting at? Well, look at this very brief overview of
what I'm doing on a daily basis, and what I'm discussing in the members'
section. Now, what was I able to do here? I showed one chart in Jim's Chart of
the Week, and said this area of the ABCD would tell me a lot. Need I say more?
Get the point?
I am now more like the professor who is working with a few elite
graduate students, talking very advanced stuff on a daily basis, and almost
feels alienated in the sense that few can follow along with the discussion. I'm
not saying my methodology is so complex few could grasp it. I'm saying
it is a fully detailed, very advanced methodology I have developed over many,
many years and close to twenty thousand screen hours (yes, you read that
right). I teach the nuts and bolts of that to a handful that really want to
learn it via the mentorships.
I have the books for those that want to see
what I am doing, see if there is anything in there that can be used for their
own 'Trading Plan', and to give as much detail as I possibly can in a written
format, of what I do. There is a reasonably sized core group of people out
there that are interested in new, advanced Fibonacci and pattern work, and
that's what I do. Then I have the members' section for those that have the
books, perhaps have been mentored, and want to see me show various work I am
doing as it applies to the market today.
The problem is that I am 'evolving'
more and more every day to a level that 'caters' to the very advanced Fibonacci
and pattern trader. It is almost impossible for me to show something in the
free commentary that is of the quality level I require because it takes so much
background now that I know my readers don't have. And how do I know that? The
advanced material is based on my 'prerequisite' material, and a lot of it is
uniquely mine. I discovered it, quantified it, developed it, and have released
it to very few so far. There is no way you could have the background unless you
got it from me.
Here's an example. Say I didn't 'release' the .886 retracement,
which I quantified. I am doing work that specifically requires the use of that
number. Now someone comes along and says they can follow right along. Only if
the know what the number is, and until I released it, no one was using it. But
it's not just numbers. It's pattern variations that no one else has come up
with. It's ways to work with median lines that I came up with. It's 'context'
filtering that I came up with. It's putting it all together in certain ways to
form synergies. That's all mine. And I can't show all that in here.
My writings take up close to two
thousand pages now, and the members' commentary, all archived, now reaches
about one thousand pages in Word format. Yes, a thousand pages of archived
top-level commentary. So, you tell me, at this stage of the game, what do I put
in here? Everyone who wants to know what I do, and wants to study it, has the
books, and if they like what they see they go on to become members'. Some
mentor with me. Then they go on to keep working on their 'Trading Plans', and
many become creators themselves. Again, you tell me what to do in here? I'm
seriously asking for some answers.
The purpose of this commentary is to give
people a way to evaluate my material, and see if they might want to buy the
books. How much decision-making does that take? If what I have shown already
hasn't convinced someone, what more can I do? Do another two years of
commentary? Another two hundred columns? If you are reading this, and after all
of what I have done and shown in here you still haven't bought the books, what
do you want? I am not addressing those who just come to see what they can get
for free each week here. You are welcome to keep reading. But those that aren't
in that group, I want you to tell me what you think I should do, since I don't
know. It's your column, you tell me, before I wind up giving up on doing
it.
Now that I've gotten everyone thinking, and really seeing the
dilemma I face, let's take a brief look at the XAU and those gold stocks.
Here's the meat of my 'working chart' for the XAU.
Now, here's the point. I found this great
looking setup in the XAU at a reaction line (where the lowest Fib numbers are).
It was a new variation of an ABCD pattern that I will be 'publishing' soon. I
showed this in advance in the members' section, as well as discussing the three
stocks that follow. As soon as point 1 on the chart was approached I saw the
two lines intersecting (plus I was doing my usual grouping work), so I
commented that this is an area to watch.
Now, what's the point of that? Some
traders might be looking at a short there. Some may have a management plan that
calls for tightening up stops at the first area of a counter setup. I stress
knowing what one's plan is, what the expected move is, and so on. The XAU
rolled over and headed to the next area I mentioned to watch, in advance, the
next line intersection at point 2. Again, I did some grouping work here, too.
My stop, from Kane Trading on: Trade
Management, was below that area for other technical reasons, so I had
an area to 'block' for my stop.
The XAU came off the area, hit the ML upper
//, stalled a little, and exploded upon taking it out. It headed right for the
next line at a key 1.272 external retracement area. I mentioned ahead of time
to watch this area next. The XAU reacted right off this spot, which was also a
5-point pattern area, as highlighted on the chart. But it was much more than
that. As this area was approached I put the numbers (1, 2, 3, and 4) on there
that you now see on the chart.
This was setting up as a potential 'wave 4
bounce trade', a pattern I have discovered. Although it does involve some
Elliot wave 4 structure, it has a lot of other parameters and conditions that I
have uniquely discovered. I pointed out the area around point 4, again in
advance. The XAU went right there, and bounced strongly, completing part one of
the pattern, exactly as I suspected it might. The nice thing about all this is
that everything I just said is all in the archives. I have many subscribers
that can attest to the accuracy of the timestamps on those postings.
Now, what is
my thinking here? Another phase of the pattern is shaping up. Take a look at
the charts that follow. The point is not for me to tell the reader, okay, I'm
now long x number of shares of xyz at this price, and my 'profit target' is
this other price, and my stop is here. That teaches nothing to anyone. I
discuss areas, how I find them, what I think of the 'context', and on and on,
covering various aspects of my methodology. What you are seeing here is a very
brief look at that. It's not something I can do in a once a week free
commentary.
Let's look at ABX.
Here's ABX with an 'adjusted' ML set with a
reaction line. The first arrow shows when I locked the set in. The second arrow
points to the time when the XAU setup came together. Just look at that ABCD
pattern right at that reaction line. I mentioned this one in advance. Look at
how it reacted at each of the XAU areas I just mentioned. There was nothing to
tell me to scale out of anything here yet. That may not be the case with
another trader, with another set of goals, and another 'Trading Plan'.
Let's move on
to GLG.
Another 'adjusted' ML set, with my new ABCD
pattern variation, the same one as the XAU. Note its position, and where it
made its move as the XAU hit its spots. The same comments from ABX apply here.
My play was long, for a bigger move, not a single thrust move. Every trader has
to decide for him or herself the move they are trying to capture. This is right
out of Kane Trading on: Trailing
Stops.
I'll finish with NEM.
The first arrow shows a .618 retracement area
that hit as a first 'test' of a big weekly ML set that I had. I highlighted
some of the areas where the lines were guiding me or showing me the
significance of the sets I had on my chart. The second to last arrow shows the
point where the XAU hit its area. Look at NEM's placement right now. Do you see
the larger ABCD pattern here? Wave 3, or CD leg? If you are watching this
unfold as I explain things step by step it should be very clear what I am doing
and why I am doing it. I have to leave something for the readers to discover on
their own.
I hope that this clarifies some of what I was trying to
show last week. I will not be doing commentaries like this every time. I did
this to clarify things in here. You can see that if I feel what you just saw
now was a small fraction, in an abbreviated form, of what I do in the members'
section, it is just not feasible for me to do this level of work in this
weekend format.
As I close, let me say that soon I will make an announcement in
here about how I plan to make available my newest ML work, and my new ABCD
pattern variations. This is 'old news' for the members, but I am not going to
get into the details in here yet, until the time gets a bit closer. It should
be very exciting, though, and quite beneficial for all those that really like
my work.
The next commentary will be next weekend's edition, posted by
Sunday evening, August 21, 2005.
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