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 December
4, 2005 Commentary (weekend edition)-
Another week,
another slew of great setups. This market is just trading fantastically, in my
opinion. Until that changes, I'll probably start out every commentary from here
forward with that line. That's not to say every setup works, of course not. But
as far as tradeability, it's been as good lately as I can ever recall seeing.
If you trade 'across the board' like I do, and by that I mean all timeframes
and all liquid issues, then the field is just wide open. Look at how those
metals are trading. I follow gold, silver, copper, and platinum (this one isn't
very liquid, but I use it for information). They have been insane lately. PD is
one of my favorite trading stocks, as it tracks copper very closely. Take a
look at how that one goes from setup to setup to setup. Just amazing.
Look at
energy and treasuries if you want to see issues that use the harmonics and
median lines, as I have shown here, just over and over. I don't even have to
mention to check out the currencies. It's long been said that the currencies
like the Fibs better than anything else. I don't know if that's true or not,
but I sure do see the currencies 'seeing' my areas on a regular basis. All
this, without even mentioning the stock market. Point is, no matter what I want
to trade, I can apply the same methodology. I'm not trying to 'sell' you my
methodology with that observation. I'm pointing out that I specifically
designed it that way.
If you are working on your 'Trading Plan',
with the intention to run it like a business, give some thought to how specific
you want your plan to be. If you have one technique that works on one timeframe
and in one market, from a business standpoint you are very vulnerable. I knew a
trader once who had the most insane technique applied to one small group of
stocks in one very specific manner. The money he made, and I actually watched
him trade live day after day so I know he really did this, was just beyond
comprehension. I mean this in the most literal sense. I won't even hint at the
rate of return, because it was out in the stratosphere, but I will say it was
higher than the highest phony claim I ever saw from all the dream peddlers. It
was a true case of him finding a 'weakness' in the system, and he was hitting
it full throttle.
I used to tell him that it's great he's making that kind of money,
but he is dependent on one specific thing, and if anything changed he would
have no job, no business any more. I encouraged him to study other ways to
trade also. He used to get very angry with me, telling me not to be so
negative, and telling me basically to mind my own business. I mentioned that I
thought decimalization may end this technique, but he said if anything
decimalization would help it. I let it be. Decimalization came, and it flat out
ended the technique in one shot. He had nothing else, and soon 'retired' from
trading. He's never been back. I'm still 'plugging away'.
I'm making a
business point here, not a trading point. I'm a 'businessman'. I have a
trading business. I trade for one reason, and one reason only: to do it as a
business. Any business should always be studying itself and its weaknesses. I
learned this the hard way in other businesses in a long ago time and place,
when everyone said I worry too much, and I'm too negative. I simply look at
what could happen and assess if it is worth trying to protect myself against
that. I designed my 'Trading Plan' to make it able to adapt to any trading
vehicle, on any timeframe. It is not resistant to everything, but it should be
very, very adaptable. I plan to be in this for a long, long time. Just
something I think everyone serious should look at, if they really want to be a
successful businessperson. I hope this gives you some useful ideas to look
at.
Let's catch up on the 10-year. I'll start with last week's Jim's
Chart of the Week.
There may have been a problem with this chart
being viewed last week. I posted it Monday, but discovered some time I think
Tuesday evening that I couldn't get the latest chart. I loaded the correct
chart, but somehow I think the command on the popup page for the updated link
didn't 'take'. I got that fixed, but you would have to have looked back at the
last version I posted of this chart to see this 'real time'. The same area and
arrow were on there from way back.
Let's see what this did from here.
There was a key .382 retracement right at
this area. I am only showing a framework here, and I had a lot more on my
working chart than what you see here. I am trying to show areas I am watching.
You'll have to do some work on your own. The ZN rolled right off this spot, and
is now approaching another areas of interest. Although fundamentally I suspect
treasuries may go lower, right now this has a 'wants to go up' feel. Check out
Jim's Chart of the Week, which I will confirm is working today, for my next
area of interest.
Let's follow up on gold.
Let me quote from last week: "...Given that
GLD went up on Friday I suspect this may not want to roll down just yet, even
with that line there. We'll see. My play is long, and in management mode. I
wouldn't even be thinking short here regardless of whether I was in a long play
or not, since the trend is clearly up. I am watching gold very closely for my
intermarket analysis." Gold did exactly what I suspected, and not only that, it
'tested' that line from above. This is as good as it gets for my methodology
(this entire setup and movement). I can't help but wonder about these big
metals moves in a 'no inflation' environment.
I'll finish with a series on one
I'm watching, and discussing in the members' area, YELL.
YELL was in a tear upwards, and pulled back
in a nice-looking ABCD. I will leave it to the reader to drop back and look at
this with more data on the chart. I zoomed in on the pattern here. YELL came
right off the pattern and made a nice move. I wanted to look at the first area
where I felt something might happen. I put an 'adjusted' median line on my
chart, and a key .382 retracement. I have more on my working chart, but this is
the starting framework. YELL reacted in the area.
Let's drop down to the daily
timeframe and look at this in more detail.
I added a very obvious sliding parallel onto
the chart. I actually have several other retracements in there, and they come
in above that .382, one almost dead on the actual swing-high there. Drop down
to a lower timeframe and study the price action and see if you can 'read' it in
this area. There were some clear, and interesting, things happening there. The
main thing for me is what happens now. Where am I looking? If you know my
methodology, you know the answer to that.
Let me add a few things onto the
chart.
I added the .300 and .382 retracements off
that swing-low on there, which give me my first clues about the intentions of
YELL. I also added a line on there, 'locked' at the first point of contact with
the uptrend. For now the slope is a 'secret' that I am working on, but if it
keeps showing me the positive results I am seeing so far I will likely explain
it in my work at some time. So, you can see where I am watching this.
This is one
of several things I am watching to give me clues about the transports. Given
how that index is setting almost daily new all-time highs, I want to fish for
clues with various issues to see what I can pick up. This has a big ABCD which
should predominate. It hit the first big overhead area and rolled on cue. Now
the key areas are coming up that tell me if that overhead area will likely be
respected, or not. Which area will hold the biggest sway? This helps me in my
overall assessment of the market and various sectors, which is far more
important to me than any single trade. I'm always trying to see the bigger
picture, and think ahead.
I have one more thing I want to share, so let me quote
from the members' section as I get ready to wind this up: "I also want to
mention that the commercials added significantly, again, to their short
position. The small speculators added to their longs. This is the biggest short
position the commercials have had (at just over 50,000) in a long, long time
outside the over 100,000 position they had at the peak of the bubble. It is
getting more and more curious that they are building short as new all-time
highs are set daily. They apparently don't want to make money on this, they
want to lose money, since every day it goes up the smart guys lose more, short
more, and the small speculators (also known, without meaning to sound
condescending, as 'the knuckleheads') make big money. I'm not sure I buy that
that is how it will wind up playing out in the end..."
Lastly, keep
an eye on crude and the other energies. I haven't forgotten that chart I showed
on that. Crude is approaching a critical spot, in the same manner I was
watching before, and its intentions may be clear soon. It has some steam behind
it right now, but I want to see what it does with the overhead areas. If that
set it has been following for so long gives way, it may be a solid trend. This
will have serious effects on the economy and the market.
The next
commentary will be next weekend's edition, posted by Sunday evening, December
11, 2005.
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