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 January
1, 2006 Commentary (weekend edition)-
Happy New
Year to all my readers. Yes, it's New Years Eve day (despite the date on the
commentary above), and I'm still going to take the time to write a commentary.
I'll cover a few items of business real quick here, and then we'll get to some
charts. First, I want to make it clear that although I'll be making various
changes here at Kane Trading, as I recently discussed, one of them will
not be dropping the free commentary. I received a few comments about that,
and the plan is to keep the free commentary. I apologize if that wasn't clear.
I may experiment with the format a bit at some point, but that's not in the
immediate plans right now. So, don't delete your bookmark off just yet.
Next, a
reader made a suggestion, and I'm going to follow up on that. He mentioned that
he thought the commentary from two weeks ago was especially good, and he
thought perhaps with the holidays some readers may have missed it. He thought
it might be good if I brought that up, and suggest they check it out. If you
missed the commentary from December
18, 2005, click on the date there and see if you think it is as
worthwhile as the reader who sent me the suggestion.
Lastly, I am
working on the revisions I have planned for next month, especially in the
mentorship program. I plan to 'announce' what I will be doing in the commentary
on January 15, 2006, assuming I finish the mentorship and course upgrade pages
by then. Again, this is nothing big as far as the mentorship program itself,
just some user-friendly updates and a few more options and such. I'll also lay
out the other changes I will be making in other areas at that point.
Let's start
out with a current look at that 60-minute ES chart from last week.
I wanted to show this chart just to show how
the framework from before was still 'seen' by the ES long after the initial
setups played out. This is a very common thing that I see, with lines being
'seen' well after the area has initially been left by price action. It strikes
me as remarkable that sometimes months later price comes back to 'old' lines
and 'sees' them repeatedly. For this reason I don't delete things off the
second a trade is over. If my chart is too cluttered I clear the primary
working chart, and retain the work on a secondary chart.
Let's look at
something in Friday's MR, which I'll lift from the members' area.
"The market is dead, it's asleep, and yet it
still follows the methodology. They gap it down hard and sell it off. It hits a
big alternate ABCD on the 13/60-minute timeframe, at some 'classical support'.
Although I may feel this area won't hold long-term, I may want to trade against
it for a much lower timeframe trade. The MR runs up, pulls back in a near
perfect Gartley pattern, which mostly matters to me because of the ABCD. I have
a modified Schiff ML set on there with some upper warning lines (for later, in
case), and the pattern completes dead on the line. How much more can I ask for
if I want to trade off the bigger setup for a quick play in here?
Let's see
what it did from here. I'll scrunch a lot of data on in order to be able to
make some additional points with just one chart.
The MR triggers beautifully, runs to the ML
and stalls, then ramps to the upper //. It rolls over, drops right to the ML,
and turns up. It reacts by that upper //, 'testing' it from above, and runs to
the warning line. Right back down to the upper // from there, then back to the
warning line. I highlighted most of these spots with the arrows. Is that
something, or what? All this on a low liquidity, low interest day. After
breaking out the MR does a shortened ABCD and then explodes. Do some line work
for that one. You can see where the next warning line will be, right? And do
you see what is in the last pullback before that last thrust up? An ABCD. It's
all right there, if I just wait for it."
I was debating on using the rest of
the charts for more MR setups from this last week, but I decided to show some
work in the XLE, especially because this one was laid out to provoke some
thinking. From Wednesday:
"The XLE formed a nice 1.000 ABCD pattern,
with a tight grouping coming together off obvious swing points. The two ML sets
had two lines coming into the area. The reaction off the area on the lower
timeframe was clean. Now it sits where? Put a trendline on there over the
swing-highs. It's time for energy to reveal its intentions. And is that
important? Did you see airlines today? This is important. Now, what don't I
have in here? A line from below.
Let's look at this with more data
on the chart.
Here's a bigger picture view of this. You can
see the pattern off on the right. Notice that bigger move, and how it hit that
lower //. Now, I'd rather have this come together at that lower //, but it is
what it is, and I have to decide based on that. If I wait it may not come
together, or the ABCD may be too extended. This is the discretionary part. Do I
like the 'context', especially based on this set? Does 'up' look impulsive or
corrective in here?"
From Thursday: "Let's look at XLE on the 60-minute
timeframe.
XLE reacted nicely off that ABCD, as we saw
last time. Now, what did it do from there? Here's the 'standard' ML set with an
upper warning line, and the modified Schiff ML set, on the ABCD. I also added a
.382 retracement off the top there. Lastly, I put an offset line on there for
the amount XLE exceeded that lower // there. Two key lines hit right at the
.382 area, and price hit right there at the same time. Price and time factor
here in the same spot. The XLE rolls dead off the spot. This stuff can get
pretty obvious at times, can't it? Notice how the XLE first fell short of that
upper //, almost the exact amount of a 'displacement' offset line (not shown),
rolled to that line intersection area highlighted with that lower arrow, and
then made its move to the last rollover spot we just examined. This is just
great material."
As close, I can't even begin to mention how many setups there are
across the board in all the indices and sectors, as well as my intermarket
favorites the treasuries, gold, currencies, and energy. I'd love to show them
all in here, but there simply isn't room. That's what the members' area is for.
The commercials are holding their massive short position, and if the market
doesn't start up here right away many very notable areas will get taken out.
This may prove to be an incredibly exciting year for trading, and I'm ready,
I'll tell you that. Despite the death of the 'retail trader', this has been the
best trading market in as long as I can recall.
The next commentary will be next
weekend's edition, posted hopefully by Sunday evening, January 8, 2006. I say
hopefully because I will be mentoring next weekend, and I may not get to this
until Monday. If you don't see it, keep trying back.
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