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 April
23, 2006 Commentary (weekend edition)-
And yet
another great trading week goes into the books. I've just decided to start
every commentary that way. Actually, and this is just my own opinion, this is
just a fantastic trading market. Just when I thought the intraday Russell just
couldn't outdo itself, it did. The commodities are simply awesome (again, my
opinion), as are many, many areas within the stock market. I couldn't
ask for any more than this, unless I were asleep dreaming, and even then, I'm
not so sure.
Let's get right to work. We'll get back to starting with last
week's Jim's Chart of the Week.
Here's what I showed with the 10-year last
weekend. My main point was that this was approaching a 'layered' line area
(I'll show this more on the next chart), based on a lower parallel. It was also
forming a small '3-drives' pattern down into this area. It was surely a place I
wanted to watch, if for nothing more than a bounce. The 10-year would tell me
if is was going to bounce, reverse, or completely ignore the area. Keep in mind
the larger scope 'context'
I am operating under for the 10-year as this is unfolding.
Let's see
what happened.
I added on another offset line, creating my
'layered' line area that I referred to. Keep in mind, this is a framework, not
my entire workup. The basis and methods behind this linework are detailed in
Kane Trading on: Median Line and
Fibonacci Synergy, the book I feel is my best to date. I get a lot of
feedback telling me the very same thing, so it seems I am not the only one with
the opinion that I really hit the ball out of the park with that one (No, that
is not bragging whatsoever, the point is, I really had it come together nicely
with that book, showing to best of the best of what I have discovered).
The 10-year
did exactly as I suspected it might, and bounced right up from there, to about
the area I expected. At that point it stalled. Do some additional work with the
Fibs, and drop down to a lower timeframe and looks at the pattern(s). This one
is loaded with clues, and these clues guide me in my suspicions and
'expectations'. There is a little price action clue right in here now that is
hinting at something for me. I will leave it as an exercise for the reader to
see if you can figure this out.
Let's do a quick follow up on gold.
I had some trouble with my lines on this one
(they disappeared), so I had to recreate them. I didn't do all the division
lines, just the one lower one shown here so the initial area could be seen
better. Now, was it unexpected that gold got hammered where it did? Was it
unexpected it bounced hard where it did? Is there anything here that says the
trend is over now?
I'm a trend trader, and if I can't stay with the trends,
I'll stop being a trend trader. I find most people can't trade the trends, as
they can't handle the discipline it takes to ride out the 'heat'. I'm not
saying that I would not scale some as the sell off started, only that if the
traded timeframe is the daily, or slightly higher, this is still trending
nicely, and I would not be signaled out in full by any technique I use. The
details are clearly spelled out in Kane Trading on: Trade Management,
and also in Kane Trading on: Trailing
Stops. Now I see what happens from here, and manage
accordingly.
Let's look at the Euro.
Ah, there's so much here, and so little time
and space in this column to discuss it. So, I'll give the abbreviated version.
The Euro did, in fact, see that area we looked at before, from the earlier
Jim's Chart of the Week. It first did that little headfake shake to take out
the stops, even doing it with clues indicating it may be 'for real', and then
the price action opened strong last Sunday evening, and it was clearly headed
up. Given the area I was very quick to switch my bias to the long side. The
higher 'context' always gets a higher weighting than the action on the lower
timeframes.
Notice the area where the Euro rolled over slightly from, with the
offsets. I feel there is a bigger pattern potentially unfolding here, though,
and that is what I chose for this week's chart of the week. This thing has been
amazing lately in regards to the line ping-pong it has been playing. I think it
will be showing something very critical in here shortly, so keep a close eye on
it.
Let's finish with cotton.
Recall I mentioned to keep an eye on cotton.
Here's what I was watching. This is especially critical because of the higher
timeframe 'context'. If you haven't already, take a look at the higher
timframe(s), including a very long-term chart. Once you see that, you'll
understand what I am getting at. In the meantime cotton sets up this ABCD right
at a key line, loaded with a tight grouping of key Fibs. I also added the upper
parallel of a modified Schiff median line set on there. I left off the rest of
the set for clarity. This is what I hoped everyone was putting together when I
said to watch this.
Let's see what happened.
Now, that's sweet. Cotton rolls right off the
area, and heads right for the lower parallel. A little offset work here is in
order. Do some work on the current position of cotton and see what you think,
and assess what you think I might be thinking. Look at the big picture and
watch the clues. This one is really interesting. The changing of the timeframe
and the 'context' assessment can totally change the trade premise for me, and
frequently does.
As I close I don't need to say much. Copper is on fire, and crude
is moving. I know, I know, gasoline over $3.00 per gallon (I said way back I
thought it would likely break $4.00 this summer/fall) won't have any effect on
the economy or consumers. Nothing will. The market will go up forever, there
will never be another bear market, and the rising commodities indicate this,
that, or this other thing, but not inflation or anything 'bad' for the consumer
or stock market at all. And if you believe all that let me know when you get
back from bananaland, as I have this really nice piece of very developable
swampland I've been trying to unload. Point is, watch all this, and rates. You
will not get the 'truth' from the news media. Critical things are
unfolding here.
The next commentary will be next weekend's edition, posted by
Sunday evening, April 30, 2006.
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