NUMBERS CAN BE MISLEADING
Before I get into anything I want to offer up an apology for any recent sharp tone in either emails or posts. My wife and I rescue Saint Bernards and are huge animal lovers. At any given moment we will have 5 here on our ranch along with our horses. There are tremendous ups and downs doing this, and we just recently experienced one of those downs. I have been trying to be conscious of not giving terse responses knowing that I have been deeply effected by this. Based on a couple of emails I have gotten I may have failed in trying to avoid this. I want to apologize if anyone was taken back by something I have entered here or in a response to an email.
There is much to talk about this weekend after this recent week, so let's get to it. First, here is the conclusion of the Sugar Trade I made that I had mentioned previously. We got a large down bar yesterday which hit my 25.95 limit order to exit the trade. This was a large win for this market. Rarely does this market move this much, but as we are seeing, the recent volatility is effecting virtually every market.
I have noticed a big uptick in the readership of the blog, so I am venturing a guess that is in relation to the stock market decline. This is another sign of how complacency had set in, now people are paying attention again. As easy as it is to get lulled to sleep during times like we have had recently, there have been signs all over the place that things were about to change. Investing is a 24/7 endeavor nowadays, so keep that A game going at all times.
The one thing we know about markets is that cycles will always change, lack of volatility begets volatility, up goes to down etc. Once any cycle gets extended in one direction, there will always be a reversion. Timing the reversions is not always easy, but they do come eventually. GOLD and SILVER are perfect examples of this. We are seeing that in alot of places right now. I do feel alot of these experts are just missing the big picture here.
You are going to have to enlarge this chart to see all the things I am going to discuss. First, you can see the Commercials Hybrid is still solidly in the buy zone. This in my view is misleading, hence the headline of the post. If you look at each time it has been up here, on the surface they have been good buying spots. If you look underneath the hood, something else appears. This index is run based on a comparison to prior readings, in other words it is relative to where it has been in the past. I used 13 weeks on this. However, when the look at the gross numbers on the longs, you can see that even though on a relative basis to the last 13 weeks it is high, as a gross number it is not. The prior three good moves that came out of the higher reading all featured a noticeable increase in longs in the gross number. I have these marked with red arrows. At the current time we are not seeing that yet.
We are now drifting into a couple of key time dates for peaks. I had said the other day that we could be setting up a tradeable bounce. My feeling now is that bounce is not going to last very long. I think we are at a very short term low right here, but the bigger picture is not looking very good. I have stated that the technical damage to individual stocks has been extensive. The indexes as a whole are manipulated by the PPT, hence they look better than individual stocks do for the most part.
As to the PPT, it does appear they made another appearance yesterday, although that late rally did come from a very obvious fibonacci support level, so it could have been others as well. However, late Friday saves are a trademark of the PPT in action generally speaking. They won't let this go without a fight. In summary, I think we will rally up a bit here, then have another significant decline. This rally could just be a few days to a week. I will be on the lookout for sell entries, but am going to be trying to trade some stocks if I can find any to buy, from the long side for the next few days.
Since GOLD is the market now the world loves to watch, let's see how things look there right now.
Not too long ago in here I pointed out the reason why this market was going to decline sharply was the record high in Small Speculator Longs, marked on the chart. This coupled with a record short position with the commercial players, made this a once in a generation setup. We have now seen this decline begin. Along with it we are seeing some commercial short covering as their short position is getting smaller indicated by the red arrow. Coupled with this, Small Speculators who got clobberred buying too late are running for the hills. This is where using the COT data gets a little tricky.
All else being equal, when you get commercial buying on dips in an uptrend on the weekly chart like this, that is a buying situation. In spite of this big decline, the uptrend here is still intact. We are into a buying zone on a shorter term basis. Since we have seen conclusive proof of the current link of this market ( makes no sense but it is there ) to stocks this week, if we get a stock rebound, this market will also rise. It is my view here that when we get a unique condition like we had that jump started this selloff, that should create a very large downward move that would take place over many months. However, even if that takes place there will be opportunities on both sides of the market. We are at a short term buying zone here, it is time to look to the daily charts to see if there is anything saying to buy.
There are some divergences going on here with the accumulation and momentum oscillators. I do see something potentially setting up here this week maybe on Wednesday. However, this is far from a great looking setup. If I do any trades here I will post them, I have not really looked at this in enough detail at this point to be sure what I want to do here. For you short term traders, I would suggest looking for long triggers here on things, but if we were to take out Fridays low on Monday, the short term buy setup would be off the table. I still think we are going to $600 or lower here, but it will not be a straight move down. The bad news is that if that happens, it would likely mean stocks have taken out the March Lows also and that would be bad for everyone.