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 April 2,
2006 Commentary (weekend edition)-
Jim! I
thought you were mentoring this weekend and might not get a commentary done
until later, if not Monday? Yes, I thought I was, too, but I had my wires
crossed. I'm not mentoring until next weekend. So, whatever I said last
weekend, well, hold that thought for one more week. I'm here, and ready to
work. This week I will do some follow up, given that I have had some very
positive feedback on the work I have been doing lately.
Let's start
with last week's Jim's Chart of the Week, as I have been lately, in the housing
index.
Let's see how many people figured out what I
was looking at, and why, from the chart I showed. The HGX.X had come up to what
might be a potential short spot for me at the third arrow. I had the set
'locked' by the time of the first arrow, and the near perfect reaction at the
second arrow, coming down from another near perfect reaction at the division
line (not shown), increased my confidence in this 'proven' set. But what is the
'context' here? I will leave it to the reader to go to the higher timeframe(s)
and decide if I was bearish here.
Without giving it away, let me say that if I
see a very key area being approached and I don't like the 'context' I may just
stand aside, or I may look to fade it (trade it in the other direction) if I
get a setup for that. Here the HGX.X reacts to the line dead on, drops about
what I would expect, and then start to rush up, back to the line. It may roll
over here, but it is acting very strong. Hence, I put the up arrow with the
question mark, to imply I suspect the price action may not respect the line in
here. Just some thoughts as I watch how it behaves.
Let's see
what the HGX.X did from here.
The HGX.X went just above the median line
upper parallel, and tried to approach that key trendline just above, and then
it faded off. It sure is 'seeing' this area. Nonetheless, it isn't selling off
very hard. There is a lot going on here I am watching, much of it from
my latest two books. I
chose the new area here I want to watch for my latest chart of the week, so you
can go to that and see some of the work I am doing on this right now. Housing
is key to the economy, and I think this is a very important thing to keep an
eye on. There are a plethora of issues that I can use to play off this
layout.
Let's look at where we left off on the 10-year.
Here's last week's chart on the ZN. Let me
quote what I said as we wrapped up on this one: "Now, based on that parallel,
and the offset line I have there, you can see why I am now watching the area
coming up." If the downtrend in the ZN were to reassert itself this area right
here was the spot I most expected that to happen. Remember, posted in here, in
advance. This was not a prediction, I am just making a comment that I showed it
in here, before the fact, where I wanted to watch.
I'll add a
few things onto the chart, and we'll see what the 10-year did with the area.
I added a .786 retracement on there, and
another sliding parallel off that previous overshoot. This clearly defines the
area of interest. Of course there are other things I am watching, but you know
me and my frameworks for the commentary.
The ZN rolled right off the area
and took out the low for the entire move down. It didn't do much at the median
line, and hasn't done much so far with the area of the division line (not
shown). It has exceeded the 1.128 external retracement and almost reached the
1.272. This is more than enough for me to get some serious work done. I
will leave this one as an exercise for the readers to determine the areas I am
watching now, and what type of price action clues I am especially interested
in. Hint: I am focusing on some fairly obvious areas.
I'll wrap up
with a follow up on gold.
Here's where I left off on gold, as it
started to react to the latest area I was watching. I had overhead lines I was
watching, but only from the perspective of long trade management. As I
mentioned, my interest was in that larger ABCD long setup from before, at the
third arrow.
Let's see what gold has done from here. I will show the April
contract because that's what my previous chartwork for this commentary is on,
but keep in mind the open interest has rolled out to the June contract now. You
can look there in your own work, and I will move to that contract in here
shortly.
Gold didn't care about any lines, or anything
for that matter, and that told me a lot. It went right to a new high for the
move, exceeding the 1.128, and like the 10-year, almost to the 1.272. That's
quite a coincidence, huh? I don't do all my intermarket analysis just for the
fun of it. Look at the metals, the treasuries, currencies, and energy and you
should very quickly see what I mean. It should jump right off the screen at
you. Now, any idea what areas I am watching next? Was I thinking this is where
I take off any position I may have at a 'profit target' here? Of course
not.
This is where I usually start to make management changes based on
what I laid out in Kane Trading on:
Trade Management, and let the market tell me when it is done. I have
zero idea where gold is going, and I don't need to know to trade. My 'Trading
Plan' is designed to keep me in the runs as long as possible, and then 'sell on
the way down'. It's a 'give back' strategy, and as I explained in TM, it
is the one that I have found is best suited for me and my trading goals. I
can't catch the runs if I take my trades off at 'profit targets', and my style
is to ride with the flow, until the flow stops flowing. The market tells me
when that is, I don't tell the market.
The next commentary will be next weekend's
edition, hopefully posted by Sunday evening, April 9, 2006. This may be delayed
because I am doing a mentorship (I'm pretty sure it really is next weekend),
but as always, I'll do my best to have something for everyone as soon as I
reasonably can.
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