LETS TALK BIG PICTURE
Here is a weekly chart of the world's favorite market to discuss, the US Dollar. Yesterday as I was doing my weekly setup ritual for the coming week something just jumped out at me. While at the same time this was happening, a weekly COT summary from the only newsletter I subscribe to Bullish Review by Steve Briese, came into my inbox. It normally comes on Monday but for a couple of reasons he sent it out Saturday. I find this coincidence interesting, because he was looking at exactly what I was, and felt it was necessary to get this word out to his clients.
When I went through all the markets I trade and made note of commercial buying or selling which I do every week just as a general fundamental backdrop to work from, something very unique stood out. Commercials are sellers, and in record numbers in many places, in almost every single market I watch! They have been buyers in only 3, the US Dollar, Interest rates and everyone's crazy uncle Natural Gas.
The selling everywhere and buying in the dollar and Bonds is basically the same message as inverse relationships are in place there. Natural Gas is a zaney market that dances to it's own tune regardless of what is happening around it. Kind of like Leslie Nielson's character in the original airplane movie. In reality, every single market except the dollar and Bonds is setup for a decline based on commercial activity. I do not remember this every being the case before, although admittedly this is just based on my memory and not an official log of things.
When I note that, and also read Briese's comments who is one of the foremost experts along with Larry Williams on the COT data, I thought it was worth pointing this out. Here is the trick with this information. Commercials have been sellers in alot of markets during this huge rally we have had, and that is not particularly unusual. They are hedgers and are often positioned opposite of the trend. However, when we look at weekly charts and see that it could still be argued that all of these moves are retracements against larger time frame downtrends, it takes on a little different meaning.
I think this emphasizes the importance of this market juncture we have at hand. As I stated in yesterday's post, if the stock market does not hold these levels right here the party could be over. It will require a stock selloff to ignite these commodity downtrends, and we could be on the verge of that right here. When I see record commercial positions on the short side like that of Oil and Gold specifically which are two strong bell whether markets, I have to conclude that the preponderence of the evidence does suggest that we will not hold here. I posted the Dollar chart just because it is the de facto default for everything right now. Even though the commercial buying is not overwhelming in that market alone, the selling is in many of the individual currencies. This basically translates into a buy signal for the dollar.
From a trading perspective, it is still look for a buy signal here and if one does not develop, look to go all in on the short side across the board on any bounce. The problem with this rally, if there is one because it has been spectacular, is that it is a huge air pocket with no support levels in place to hold a decline. If we were to break down, this could be a very sharp move and happen very quickly. The PPT has not been active in the last couple of weeks for whatever reason. If the gates open here they are not going to be able to contain this.
In listening to the talk radio shows with the finance guys on them, the buy and hold strategy is once again gaining momentum. The theory that you always have to be fully invested but be "diversified" is being pushed. It of course is no coincidence that their fees come from amounts committed to things, so buy and holders make them the most money. What a short memory people have if they buy into this theory. Timing the market can not be done, etc.. they cry!
Quite frankly it is not an easy thing to do, but there are the Bruce Kovners and the Tudor Jones, and Stevie Cohens of the world that prove that these scrubs who claim it can't be done just don't have the skill to do it. As much as I think Soros is a jackass and would rather take him into the octagon than praise him, he certainly has made billions timing markets, have these people never heard of him either?
Great Opportunity is here