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 December
11, 2005 Commentary (weekend edition)-
It's getting
harder and harder for me to say anything new in the commentary. I am just
repeating how good I think the market is trading, and that's about it. My point
is that I think the action is very good for my methodology, and if you are
following what I do and trying to build setups and such, if you aren't finding
them it isn't the market. Perhaps you just need to work some more until you see
it. Of course if you don't have the books and you are trying to do this
just from the commentaries you are pretty much flying blind, and these comments
don't apply to you. I'm speaking to those who are working with the material but
are still not at the point where they see the setups I am discussing.
I'll start
with some follow up on gold.
This has long since rolled out to the
February contract, and shortly will roll out to the April contract, which is a
big one for gold. I am still showing this on the December contract because I
have all my nice lines on there. I will roll the charting out soon, and already
have awhile back in the members' area. Gold is still exploding, and is in
almost a buying frenzy. All right off that ABCD setup. Look at silver,
platinum, copper, and other metals. This is serious business in my opinion, and
I don't buy the non-stop talking heads junk about jewelry demand. This is a
funny new secular 'bull' market with the metals hitting two-decade highs and
the commercials getting shorter and shorter the S&P (see the note at the
end).
Let's catch up on the 10-year once again. I'll start with last
week's Jim's Chart of the Week.
I pointed out the next area I was watching on
the 10-year, at that line intersection. Keep in mind I am not trading off the
lines or the line intersections alone. They give me part of my framework. I
will discuss this more in a bit, on the lower timeframe.
Let's see
what happened from here.
The ZN reacted right in the area of interest,
as I suspected. It bounced right up to that same median line upper parallel. I
highlighted this area with an arrow for the members', in advance, of course.
The ZN reacted dead off that line and rolled right down. The next chart will
explain a bit more of what I was looking at there. Now it is back at that
warning line. It can only do this tightening line bounce game so long before it
busts out big in my opinion. Let me pull from some of the members' commentary for the
remaining charts. This will also include some follow up on that YELL chart from
last week.
"Let's go to the 15-minute chart, this time on the March
'06 contract, and take a look.
The ZN goes up in a clear ABCD pattern. It
hits an alternate ABCD right at a (number, but not line, deleted for free
commentary, sorry) retracement, right in the area of that overhead line. I also
had a 'crazy' trendline coming in right there. It is all about the reaction at
this point, and the entry triggers. Here it appears to gap down, but I'll leave
it as an exercise for the readers to do this with all sessions data and see how
it 'tested' the area twice and rolled over with various nice, clean entry
triggers.
Point here is that the framework told me I might want to look for a
short opportunity here. The line wasn't a reason, a sufficient premise to
short, just something to point me there. The pattern in combination with the
line and the layout became the premise. The entry trigger initiated the trade.
It took all of that (and all the smaller pieces that we know are part of my
'Trading Plan') to turn this into a potential opportunity. I will try real hard
to find some examples of some setups that trigger and then stop out, based on
similar premises to what we are looking at now, for the educational value they
may provide.
Let's finish with YELL.
This is a good example of why I seem to have
so few good examples to show about ones that 'don't work'. I will leave it to
the readers to drop down to the 15-minute chart and look at the price action as
this rolled down. Notice the small reaction at that .300 retracement was a gap
up and then straight down. No hint of any trigger there. It hits the key area
of interest, hangs around a bit, and just rolls right through. This is why I
developed the entry technique confirmation concept. Nothing happened here, and
that's that. Next. Maybe it rockets right up from here. If I have a setup here,
then I watch that. It did nothing of interest at the area I showed, so no harm
no foul. See the point I'm making?
Let's look at crude on the 15-minute
chart.
Crude comes off that ABCD I pointed out and
runs to the 1.272 external retracement (I'm such a broken record, huh?), where
that overhead ML upper // lies. It then rolls dead off the area... Now look at
the structure at this point. I am trying to show how I was not surprised when
this rolled dead off the area it rolled off of. Notice the time factor here,
too."
I tried to choose examples that show various aspects of my line of
reasoning here, and how I am using the various frameworks. I can only show one
or two aspects per chart, but I am just about always using most or all aspects
of what is in the books in any given case. I try to show key points and things
that I am watching in a given situation. I don't want anyone to get the
impression from some of the Jim's Chart of the Week's, for example, that I am
simply trading off a single line, single retracement, or even one line and one
retracement, as that is far from the case. I am showing salient aspects of each
setup, and trying to explain or show things about that. If you want to see
every aspect at the same time you need to get the books. It isn't a matter of
me trying to sell books, it's a matter of it being too much to show on a few
charts in a small commentary like this.
Let me finish with one more thing from the
members' area: "As I close let me mention one thing, again. The commercials are
still adding significantly to their shorts. Including the mini contracts
(which, as I have said, I feel is necessary), they are now short over 67,000
contracts. Outside of the greater than 100,000 contracts they got short at the
bubble top this is by far the most I recall seeing, and is now approaching what
I would call a borderline massive short position. This is complemented by the
small speculators doing just the opposite. So, either they see some serious
downside to the market coming, or the 'dumb money' is going to make a huge
windfall at the expense of the big players, the ones who truly run the world.
This doesn't mean I get short here since this isn't a precise timing tool, but
until they take those in I'm aware of it, and I'm thinking something big is
potentially brewing."
There are a lot of things setting up here,
and the action has been very pronounced lately. I am keeping a very close eye
on all the basics, which you all know from my previous commentary are
currencies, treasuries, metals, and energy. I am also paying particularly close
attention to retailers right now. I have a feeling this market might be headed
for trouble, and that they may 'hold it up' as long as possible to get those
bonuses and year end results. Perhaps it stays strong until the end of the
year, perhaps longer, perhaps 'forever'. Maybe it's done right here. I don't
know, and I don't need to know. It's not about predicting, it's about finding
setups that provide an edge for me, and playing the probabilities. Working the
'Trading Plan'. It does what it does, and I respond to the setups that form,
not I predict what it does and act on that. There's a big difference
between the two.
The next commentary will be next weekend's edition, posted by
Sunday evening, December 18, 2005.
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