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 October
23, 2005 Commentary (weekend edition)-
Now, how
exciting has this trading been lately? For me, it's been the best trading this
past week that I can recall. Wednesday I had the best day for my methodology
ever in the mini's, and the other days were pretty incredible, too. If it can
get better than this, I can't imagine how. I've been working on some
refinements to my tick chart entry triggers (you know I never stand still, I'm
always striving to get better and develop new refinements), and they have been
working very well for me.
I have also found the trading action to be just superb
for everything else that I follow, too, from stocks to treasuries, metals to
currencies, all across the timeframe spectrum, I feel it's just been great. I
am really surprised at how few 'retail' traders seem to be left out there,
given that I believe this is the best action, from a 'tradeability' standpoint,
that I think I have ever seen. Sure, the late 90's were wild, but I didn't have
the skill then that I have now, and wild is not always the easiest to trade if
you care about drawdown and wild equity curve swings. I am quite happy with
this market, and I hope everyone reading this is, too.
Let's look at
that cyclical index from Jim's Chart of the Week last week. I'll start with the
chart I posted.
I showed a basic grouping here right at a
median line from a 'standard' set. As you all likely already know, I almost
never have just one area that I watch, although I may lean towards one of my
areas. In this case I has two spots I was watching, and then as the situation
developed I looked at the structure of the move and added in numbers, a
pattern, and lines from that. This helps me refine my focus.
If I have two
close areas I am not necessarily looking for a reaction dead off one or the
other, either, and if the latest data hits right between the two initial areas
I am fine with that. It then becomes all about the price action and entry
trigger. I am looking for an area so I can go to work, not an exact
spot. Sometimes the reversals come dead off the exact spot, but that's not
always the case, and it surely isn't a requirement.
I'll add on
the framework of my second area. I showed this in the members' section, in
advance, of course.
I had what I call a 'crazy' trendline (it's
explained in Median Line and
Fibonacci Synergy), and it hit just above, right at a key .382
retracement. This was a second area of focus. As you can see, the CYC.X hit the
first area dead on as far as the time factor, and made it almost to the second
area. My concern was how this looked on the lower timeframe as it unfolded.
Let's look at that on the 60-minute chart.
A beautiful ABCD formed on that big ramp day,
as it did with just about all the major indices and sectors I follow. This was
a very key, very expected pattern I had been watching and waiting for, and it
was the main topic of discussion, in advance, in the members' area, across the
spectrum of issues. Here I had a grouping for the ABCD, an upper division line
for a 'standard' ML set, and the additional dotted line is an upper warning
line from a modified Schiff median line set (I just showed the one warning line
to keep the chart clear).
The area was clear, and regardless of this falling in
between the two areas I was watching, this is as close as I could realistically
expect. The total spread from the lower area to the upper area is about 6
points on an index with a value of over 700. This is under 1% on a big daily
chart pattern. My three 'sub-groupings' are spaced apart well less than most
traders' entire area. I explain in great detail how I interpret and use this in
various places throughout the books.
Once at this point it's all about the price
action and entry trigger for me. Let's drop down to the 15-minute chart and
look at the action there.
I put various potential trigger lines on
there, from swing point violations, to a 'slope' trendline violation, to a
moving average trigger. It doesn't much matter what choice I went with here, it
was clear when the area was hit and the price action had rolled over. This is
as clean and clear as it gets. And before anyone even asks, I follow a
lot of indices and sectors for patterns and triggers, and then I play
ETF's if they are available (and liquid), and if not, I look for key stocks in
the sector that have a setup I can work with.
I'll finish with a look at that
10-year that we have been following.
I have been doing a nice series on the 10 and
30-year and the yield indices in the members' area. I can only show a small
fraction of that here, but I'll keep trying to do my best. The last arrow shows
where I pointed to this 'action spot' in advance, as you'll surely recall. The
10-year got very close to the first of the alternate ABCD's and has started to
bounce. This sure looks like a 'wave 4' in a 5-wave from the area of that first
arrow. I'm watching the .300 and .382 retracements as this bounces.
I am leaning towards this move down
not being a CD leg, but a 'wave 3', and I think the areas are all going to go.
My assessment of the underlying fundamentals (yes, I do look at that, at least
as far as money flow and market/business cycles) screams for higher rates. I
will only do whatever the price action and my 'Trading Plan' guides me to do,
but my leaning is down. I can't really explain how I will evaluate this in here
because it would take much longer than I have.
I am watching the currencies (where
the Euro sits on the edge of a cliff it doesn't want to fall over), gold (where
I just had a setup triggered, which will tell me a lot if it follows through,
and if it doesn't), energy (where unleaded gasoline just started bouncing right
off a key line), and so on. I have my 'rollover' areas on my charts, and price
action will tell me if they are rolling in areas I would expect them to roll if
they aren't going to follow through. This, combined with all my index and
sector layouts, guides me in my assessments here. Even the bias I form in the
higher timeframe indices guides my mini trading. It all ties together.
The next
commentary will be next weekend's edition, October 30, 2005, which may be
posted late because I'll be mentoring a student all weekend. I
may get it posted by the usual Sunday night, but if not I'll get to it as soon
as possible, maybe by Monday night. I'm usually completely wiped out after I do
a mentorship because I give so much of myself and go so non-stop (you should
see the student by the end, though!), but I'll give it my best in here for
everyone, so keep checking back.
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