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Monday, February 08, 2010

ALMIGHTY DOLLAR


For those of us who were bullish on the dollar, although we were very few in number, we were also correct. I hope John Q Public is learning a lesson here, but I doubt it. The masses are doomed to repeat the same mistakes over and over and that in reality is what provides opportunities for us who think differently. Make no mistake about it, being a contrarian is a lonely spot most of the time. It is important to distinguish from being a contrarian just for the sake of being a wise guy, from being one due to market driving reasons. I am not one to shock people at cocktail parties, I really could care less about that. I am a trader, and my family just cannot afford for me to follow the herds over a cliff time and time again. I need to make money trading to pay for my life, so if I am gathering at the water cooler engaging in the fiat currency crap, I am not doing that. Do I really want to share the same market views as the cable guy?

What the world waits for will never happen. The world was waiting for a Dollar collapse and Gold moonshot, this is why it did not happen. Although I would argue that it actually did. I never understand how someone can look at a chart like the Dollar that was pummeled for months and predict a crash after one has already happened. The move they predicted had already occurred. This is the problem with the masses, they get bullish at the tops and bearish at the lows. It is not because the economic justifications of why it "should" happen were unsound. The problem with them is that those aribtrary opinions are not what drive markets. It could still happen at some point in the future, none of us know the future. My bet is that the normal factors that drive market movements will tip us off to that scenario being on the horizon at the right time just like they tipped us off that this move was coming.

On the above chart you can see that virtually everything I watch on a daily chart is bullish, confirming the uptrend. I am looking for a sell signal up here based on the weekly chart now. I think that signal will be a brief dip when and if it comes. I do think in general we are off to the races here for the balance of the year. However, there has been a ton of commercial selling happening recently, they are trying to cap this rally. The failure of the commercials to stop this rally is very bullish so far. Remember they are often very early on their positioning which is why we cannot just blindly run out and sell when they do and vice versa. Last year should have taught anyone who did not believe that. We saw commercials opposite moves all year. They were right in the end, but very large moves happened opposite their positioning prior to the reversals.


Alot of things are in place here for a sell, the one problem is that via that gap strategy that I discussed in here awhile back, the trend is actually up now. We see the massive short position the commercials have here along with the huge small speculator long position. Also the sentiment is now very bullish. I am watching for something to develop here on the short side but so far, things look very bullish. If we do get an equity pullback, we will likely get our retracement here.

3 comments:

Metalda said...

I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.

Lucy

http://forextradin-g.net

robert said...

Chris, as you have been predicting, asset deflation has returned.

I looked at the weekly charts for GLD and DXY and each chart shows a 1-2-3 trend reversal.

Good work.

Chris Johnston said...

Metalda,

Thanks for the nice comments

Robert,

I wish I had been wrong about that, a deflation wave could be scary