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Tuesday, November 10, 2009

Now that we have rocketed up and out of that critical support area that I pointed out, where do we go next?



Well that is a very good question. The obvious targets remain 1122 and 1154, these are numbers I have mentioned before. One is symmetry on our 3 wave rally off the lows, and the other is a 50% retracement. One thing is clear, it is virtually impossible to make money shorting virtually anything except the dollar right now. I do expect this to change, but for the time being fighting this trend, or any other uptrend in other markets is just suicide.



As long as this recent low at the beginning of October holds, I see no reason to get overly excited about shorting the market. Those big picture wave comments I made this weekend, are just that, big picture. There has to be a short term catalyst or movement in the direction of the big picture view to confirm it. We have not had that yet. If we had some type of failure double top right here, that might be one possible indication that things might be changing. However, we have not had that yet.



Almost every timing technique I know to try and pick short term turning points is failing in every market. This tells us the trends are strong. I have made this comment before in here, but will make it one more time. There is something just not right about what is happening in these markets overall. To see all of these intermarket correlations with no fundamental basis continue to hold up is very troubling to me. It is one of these it is different this time scenarios, which usually turn out not to be.



If I can ever figure out some reasonable explanation for this I will post it. You could say it is the dollar, but yet it's normal relationship with other markets is out of whack also. I have not seen the PPT be obviously involved except on Friday for a bit to prop up things after the NFP report. However, other than that there have been very few obvious PPT appearances recently. We can never know for sure when they are active, but there are certain times when it appears to be obvious based on just looking at discounts and premiums and what normally triggers buy programs. Then you see them when none of these conditions exist. I have not observed much of that lately.

4 comments:

robert said...

I know your post isn't about gold, but I wanted to comment here because its your most current.

In spite of the COT data showing the large commercials are short gold, it be may possible that gold is rising because Central Banks are buying gold.

With the value of all fiat currencies being openly questioned these days, could that explain the price action?

Robert Campbell

Chris Johnston said...

Robert it is hard to say. All of my views are based on fundmentals in commentaries like the recent ones in gold. It is impossible to trade on arbitrary opinions like that, even when they are right. We do know that small investors and not large ones are driving the price which historically has been unsustainable. It could very well be that such talk has driven individual investors into this market, and is the explanation behing the huge surge in small speculator longs. What I focus on is not how but who.

I know from 23 years of trading that I want to fade small investor positions and sentiment. It is difficult to use this situation on a daily basis because speculative blowoffs are very difficult to time. I do believe it is only inevitable that a $300 plunge is coming, it is just a question of when and it could happen at any time.

Once this decline begins it could be staggering how fast it occurs too many people. There is not big money to support it.

I have been wrong on this market as I thought the turn would happen last month, so maybe my opinion is not worth much here.

robert said...

I don't consider the current rise in gold to be spectacular by any means - either recently or on a historical basis.

That's why I don't think gold is a bubble - and it's why I would be rather surprised by a "speculative blow-ff" as you put it.

What's interesting is the fact that there is so much COT interest from small investors yet very few people are even aware of what is doing right now.

If gold goes to $2000, let's say, and everyone is jumping aboard the money train in a "can't miss trade" then I would be concerned about a speculative blow-off.

But that simply isn't the case right now.

Chris Johnston said...

This is what makes markets, different opinions. I completely disagree with you on the can't miss trade. This is more of a can't miss trade than Real Estate was. It is on the front page of newspapers, Dr Laura, Glenn Beck, Sean Hannity, Larry King , et all are selling gold on commercials on their talk shows. I hear it as the subject in idle conversations everywhere I go.

The short dollar long Gold trade is the most crowded trade I have ever seen in my 23 yrs of trading. The rise in speculator buying is so spectacular Larry Williams has even recently gone out of his way to speak out about it. This is a rare event what is happening with the COT stuff in this market.

However, it could be "different this time." I am no know it all and this has not led to a decline yet so at this point I am wrong. I do not feel however that speculative bubbles like this can last, they usually don't as we have seen time and time again. The theory that it is a store of value and good in a crisis is factually inaccurate, at least by historical measures. Prior crisis periods have not led to a rise in gold from my studies.

So we disagree, but as you know I do respect your opinion, so let's just see how this plays out. It really should not go much further than it has if I am right. Also, when COT conditions like this exist it does not mean just go out and sell, if just means that the next large move should be driven by what I have written and be down. This is just a market setup for a decline fundamentally in my view, not one that is a short today etc..