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 April 9,
2006 Commentary (weekend edition)-
Well, I'm
just now sufficiently recovered (barely) after my weekend of mentoring to get
to this commentary. I give as much of myself during these as is humanly
possible for me, and it wipes me out. But, alas, we all know how I am, so I was
ready to go for every tick of the market this morning, and I was glad of that.
The Russell was amazing again today, with two spectacular trending moves that I
would have been kicking myself over if I was off somewhere 'resting' while they
happened. Once the market closed I just about went comatose, and that brings us
to now.
I never cease to be amazed (my favorite word) at the caliber of
people that come to work with me. This time I was working with a very
successful commodity fund manager. One of the best parts of my mentorship work,
and a strong motivation for my doing it, is the people I meet and the hopefully
long-term relationships that I establish with them. I assumed most of the
people that would want to work with me would be small traders trying to make it
in the trading business. I do get those, but mostly I get very high-powered,
very successful and well-established traders who want to get better, or better
develop their 'Trading Plan'.
Perhaps the most common comment I get about
my methodology, and why they are drawn to it, is how it seems to apply to any
liquid issue on any timeframe. It seems to be applicable, for them, in all
liquid markets under vastly different circumstances. This weekend was
refreshing to me because this gentleman works strictly commodities, and does so
with some serious 'size'. Since I absolutely love the commodities I
particularly enjoyed this session.
Maybe I don't give myself enough credit in
regards to what I have actually developed, but I am always surprised when
someone of very high caliber wants to work with me, and chooses me to mentor
them. I'm the most humble guy in the world. That's why I find it so comical
that some misinterpret my manner of discussion or writing as some type
arrogance. How funny. With that said, let's do some work before I fall
asleep.
This time I won't start out with last week's Jim's Chart of the
Week, since I am having a data issue with the HGX.X. There has definitely been
some interesting action with this one, so I will leave it to the reader to
follow up on that, and if the data gets corrected I may follow up on that down
the road. Let's start with the 10-year instead.
Here's where we left off last week on the
10-year, as it set a nominal new low for the move right off my area of
interest. I am watching this one very closely not only for the individual trade
potential, but because rates are critical to the economy here, and the housing
market. Take a look at a much longer-term chart and see if you can figure out
why I 'worry' rates could make a serious move to the upside. That would crush
the economy in my opinion.
Let's follow up and see what has happened since the last
chart.
The 10-year kept rolling down, and had
exceeded the 1.272 external retracement (not shown) a bit before starting a
slight bounce. You can do a curious thing and clone this set and move it, and
you will see the move down here from that last small swing-high was just about
the exact width from the median line to a parallel. Very curious. I can also
discover that with offset lines. This is in management mode here, and all I am
doing is letting it play out as it will. Regardless of what it does, I have a
plan already in place for that.
Let's look at gold.
Here's where we left off last week, on the
April contract. Gold had accelerated off area off the first small pullback, as
I suspected it might. I commented that I had no idea what gold would do. Maybe
tank, maybe go straight up, maybe do anything. I can't see the future. I just
look for setups, try to figure the odds, and take trades I feel have an edge.
Then I let my management plan go to work, trying to keep me with the trends
until they end.
Let's see what gold did since then. I'll update to the June
contract.
The arrow shows the initial potential trade
area off the ABCD pattern. Gold is still going, and is now solidly over $600.
It is creeping up along the median line, and is past the 1.272 external
retracement area now (not shown). It is trading over $607 in the aftermarket.
It does look like gold is doing exactly what I suspected it would, way back in
the members' section, and that is: 'exploding'. Time will tell, but for me, the
mode is 'ride'.
Let's talk inflation. The best way to do that is to show a few
charts. I'll start with silver.
I'm showing the July contract here, which is
not the front month. This way if I start any work I won't have to roll my work
out for in here soon after I start it. Silver is smoking, and is now trading a
fraction under $13 in the aftermarket. So, do they still think all this
precious metal buying is for jewelry? Give me a break.
Just look at
how many of my patterns and setups there were to get on board this trend.
That's just incredible. My trailing
stops and trade
management methods aren't even hinting at any scaling out in here yet.
Take a look at platinum, too. Nope, this definitely doesn't imply inflation.
They must need the platinum for those catalytic converters. Yeah, that's
it.
Let's look at copper.
Again I chose a latter contract here for the
same reason, this time July. Copper is 'on fire'. I recall when it was well
under .60 what seems like not too long ago. This time it's housing demand,
usually said from China. The point of all this? There are two.
First, notice
how they have a 'excuses' for every run to explain why it isn't inflation? You
see, it's 'different' this time. Yeah, right, Uh-huh. Second, I look for
well-established trends and then I use my methodology to get on board the
trends. I am not trying to buy beaten down tech stocks, endlessly saying 'this
is the bottom, they must be a bargain down here'. There are some smoking
markets out there, and they are, and have been, easy to spot. Look at those
transports and rails. It isn't a big challenge to see where the trends
are.
Let's wrap up with a 'bonus' chart.
The ES went to the edge of doom, bouncing
dead off the almost month long range bottom to the tick. Take a look at the
Russell mini for a little bit different viewpoint. I am anxious for tomorrow,
as it looks like some serious action may be about to start. I wonder how the
market feels about new all-time high crude, which I suspect is coming very
shortly. I heard the London market did set an all-time new high. Rates may be
backing up big-time. The likely cyclical bull is long in the tooth. The
commercials are net very short. I respect the trend, but I'm on red alert. Now
we see if the 'manipulation rampers' are going to play games with this thing,
or if the bull is truly on the morphine drip here. Every day that goes by I
think the latter gets closer to the most likely case scenario. We'll
see.
As I close, take a look at that Euro chart I posted for Jim's Chart
of the Week. Look over all the commodities, as many are doing some incredible
things here. Look at cotton and see if you can see what I am watching there.
Make sure you look at a long-term chart. Look at soybeans from a very long-term
historical perspective. Look over all the currencies, and energy. I wonder what
significance, if any, there is to the launch of the new oil ETF, trading under
USO. Boy, I couldn't ask for more action than there is now. Is it ever
'showtime'.
The next commentary will be next weekend's edition, posted by
Sunday evening, April 16, 2006.
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