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 January
28, 2007 Commentary (weekend edition)-
Another great
week for trading, in my opinion. The market just continues to move, and
frequently off areas I am watching. Keep in mind, I am stating my
opinion here, not making any claims about the methodology. It's up to
everyone to look over what I show here, do their own due diligence, and decide
if anything might be of any use for their own 'Trading Plan'. I'm just
personally impressed with how well I think the methodology, as I apply it, can
find areas that various issues 'see'. If the market was as random as many used
to say, I suspect I wouldn't be finding so many areas where reactions occur.
But, maybe it is just a coincidence...
Before we start I wanted to make a few
comments on the forum that I briefly alluded to a few times in here. There is a
free private forum for those who have purchased the full book set or have done
a mentorship with me. This is an area where those following the methodology can
post charts and discuss the methodology with others, all without any of the
restrictions I ask readers to adhere to (such as not posting some key numbers,
certain line techniques, new patterns, etc.).
This forum is not on my website, it
is run at another site. I haven't mentioned it in here because I e-mailed all
those who qualify. Nonetheless some people have stumbled upon the entry page
for this, and have asked to join. I guess my point is that, right now, this
would be one more educational tool that would be available if you purchase the
book set. In my opinion there has been some fantastic, high-level posting and
discussion in there.
I will start with last week's chart of the week, in
gold.
The setup was at that lower arrow, at the
convergence of a pattern, lines, and a tight Fib grouping. I wanted to see how
gold would act at two obvious overhead lines. This would give me some
information I could use from a management standpoint. If I had the
'context' for a short trade
I would be looking at this area, if I had other supporting aspects. If I feel a
long has more to go, I use the area for information. And, perhaps, how gold
reacts here could shift my ongoing premise.
Let's move
ahead to today, and see how gold acted.
Other than perhaps a tiny reaction that one
might be able to see on a lower timeframe gold didn't 'see' those areas at all.
That's a bullish clue for me. The high for the recent move, at the A point of
the ABCD, is being approached, getting within a dollar. This caused a small
checkback, right to the trendline, 'testing' it from above, where it reacted
with a nice bounce of almost five dollars. This has now reached a critical spot
for this uptrend, where the move through these two lines has to prove
itself.
Let's look at the price action on the way up on a 240-minute
all-sessions chart. I suggest you redo this on a tick chart.
I have had a trendline on here for some time,
anchored at the first two arrows. Now gold is right back at that trendline, but
this time checking back to an .886 retracement of a previous swing, and that's
deeper than any previous pullback. This adds to how critical this spot is for
me. Keep in mind that if gold checks back quite a bit here that doesn't
necessarily imply the run up off the pattern is over, just that a correction is
under way. You can see now what I am watching on this one, and why. I'll see
how it acts and take that into account from a management standpoint.
Let's look at
the rates.
Here's the same chart I have been showing for
some time now. The lower reversal point at the .382 retracement was the
original setup I discussed way, way in advance. Rates bounced at the upper
parallel, right down to the division line and key Fib area, as we discussed
previously. The parallel gave way, and rates started to move. This week they
came out of 'congestion' strong, and have been smoking up since. Notice their
position at that upper division line. Do the work on the weekly and up and see
where you think you want to focus now. Amazing move so far, huh?
Let's look at
this move up in rates on the 240-minute all-sessions 10-year. Recall that this
will trade inverse to the rates chart.
This is the same set I showed way back, that
I had 'locked' in, in early December. Just look at how this set has been
followed for so long, and how reasonably smooth the price action has been. This
reminds me a bit of gold. Notice that 'stab fake', too, above the upper
parallel, and then right back to the channel. Keep that in mind watching
gold.
I'll finish with one that has been a topic of discussion in the
forum, the OIH.
This is set work I was able to get on my
chart back in October. Over two months later price got to the area of the upper
arrow, where the two lines met with a key .618 retracement area. It's amazing
how the line intersection pointed to a time factor that the price hit right on.
The OIH dropped to the next line intersection, at the second arrow. Keep in
mind I am looking at this area, not the dead exact spot. The OIH reacted
off this area, and has started to roll a bit. Take a look at the XOI, too, and
see how, although it has totally different setups, it hits its areas sometimes
right as the OIH hits its own.
Let's look at what I am watching now.
The OIH rolled off a key .447 retracement,
and has dropped to a .382 retracement of the push up. Point? It has to decide
pretty soon which trend will predominate. What's the higher timeframe
'context'? What does crude look like? What are some potential premises? The OIH
is at a spot I want to watch, but only for clues for or against a premise I
already have, not to decide, alone, what I think the OIH is
doing.
As I conclude, I want to mention that on Friday I waited all day
for a 'special' on a financial television channel about the return of
daytraders. It was pretty well hyped up, and I waited with bated breath to hear
all they had to say. You see, I think there are, essentially, no daytraders
left, or not many to speak of. Twenty zillion vendors, and like three
customers. The 'public' is gone, in my opinion. I base this on my
website and e-mail traffic, and the number and level of postings on various
forums. Sure, there are a few forums left that are free and have some
following, but how many followers (that word makes my skin crawl) are actual
profitable full time traders?
Anyway, the 'special' was only for like the
first eight minutes or so before they went to other unrelated topics, it said
little, and in no way convinced me that daytraders were back. At least it was
as I expected. I'd hate to have thought they were going to show it was like the
late 90's, and somehow I was just that out of touch with reality. I guess I'm
just pondering, with the commercials still so short, if this isn't a cyclical
bull in a secular bear market?
The next commentary will be next weekend's
edition, posted by Sunday evening, February 4, 2007.
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