Reality Show Time

Following my post last night about the setup trade in the Silver Market, it was triggerred today so now I am short. What we can see on the chart is the point of entry at the red arrow, and the other red arrows also indicating we are under the trend of the momentum line which at least in the very short term, is the confirmation I want when entering a trade. Although the price trend is clearly up in this market, the shorter term momentum as measured by what is in this indicator, is trending downward.

This is a trade against the trend that is initially targeted for a short term move. However, since I am very bearish on this market, if we happen to get going on the downside, I will try to ride this for a bit. I think this and the GOLD market could drop by 50% once the trend changes in them. I have no idea at this point if or when this will happen. It is my goal to try and position myself for the next short term move, and then see what happens.

The GOLD market is such a sharp spike upwards, that it is likely when it turns to come down, it will move just as sharply if not more so. As a result, when the turn happens, it may not give an initial decline then retracement for the ideal entry. Silver has been different in that it has progressed upwards in a more orderly fashion.

I was talking to someone on the golf course today about this trade, so Jeff if you are checking in, this is the visual of the trade. You need to look back to yesterdays post to get the fundamental backdrop behind why I did this trade.

Nit picking this a bit, it would be better if the Large Trader Proxy Index had crossed down over it's momentum line indicating that the large traders were actually selling this market here. However, it is not realistic to expect to see that on the exact day of the high, when it reverses like this did. Large Traders are momentum traders, so they typically buy and sell and 20 day highs and lows. It would be rare to see them liquidating at a multi-month high. It should happen if the market were to start moving down some more.

It was a little suprising given the move down in equities today, that this did not move down more. Maybe that is a sign of underlying strength, time will tell. The strength is actually pretty evident right on the surface, we really don't need to look underneath!

Some might argue, what is this idiot doing selling a market that is in this strong of an uptrend? My answer to that is a trade is a trade. When my setups show up I take them, whether they be against or with the trend.  Generally, trading against the trend I shoot for smaller profit targets due to the bias of the trend. However, from most testing and research I have done over time mechanically with entries and exits, there is not as much of a bias in the direction of the trend for entry and exit techniques as most people think.

Equities did have an outside day reversal down today, which might be the sign of more to come. In the midst of this big upmove we have had several short term patterns that seemed to indicate more downward movement that did not lead to it, so we will have to see what happens. The trend in the oscillator has turned down there as of today also, whether we get any follow through who knows. I don't see this as an obvious signal, so maybe it will catch a few by surprise and follow through?

Readers of this blog know my overall bearish bias big picture on equities overall from this point forward. The strong seasonal up bias and the PPT should keep us relatively strong through the end of the year. Next year I think is going to be a different story.