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Saturday, May 29, 2010
THERE ARE FREE LUNCHES
I did find a free screen capture program to use for today, but alas it kinda sucks, but is better than nothing. I cannot draw any arrows or put any text on the charts. Basically what we see here is the Dollar Index above with a few momentum oscillators on it. Then at the bottom, a longer term trend measuring line. The first two which are LarryWilliams creations indicate that we are in a downtrend in terms of momentum, yet the third panel indicates a strong flat lining uptrend. It could also be argued that in the top two panels the momentum line has gone down much further than price, which is an exhaustion and therefore is a buy signal. That is a judgement call.
I have colleagues who are looking at this as bullish and they may be right. If we all agreed prices would never move. I am short this market now with stops above. I will get stopped out for a loss or hit a profit target for a win. I lean to the short side of the debate here due to the accumulation/distribution indicators, the Green and Purple lines. You can see they are heading down ahead of price. This is just another trade. I want them all to work but really don't care one way or the other about any individual trade. Trading is too stressful to get too hung up on individual outcomes. All your hair would fall out if you did that. The EURO of course is the mirror opposite of this being setup bullishly.
You can see here in the EURO the dramatic increase in COT longs ( RED ), and more importantly, the huge short position in Small Speculators ( GREEN ). I always look for opposite moves when the Small Specs start leaning this heavily in one direction. Also, this is a trade the "World" is short. I am for the world, but when it comes to trading, I want to be against it for the most part. I tend to like to play the EURO due to it moving more, but the DX you can dial in the risk better due to the smaller movement per tick. If I know I want to risk X dollars, it is easier to get it close with the DX. I always wind up too far under my 2% risk factor due to rounding down numbers of contracts, when trading the EURO.
Next we have a similar situation going on in the BOND market. You can see below the heavy Small Speculator long position that was evident right at the recent high. This is a market I have mentioned recently as something I was looking to short. I am hoping we get an early bounce next week there for a shorting opportunity.
If the stock market happens to collapse again obviously this market will rally. For this trade to work we will likely need to have sideways moves in stocks for a few days, then a rally in them. Will that happen? You got me!