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Wednesday, June 30, 2010
SPEAK OF THE DEVIL
I mentioned that GOLD was setup fundamentally for a decline and that I would show the trades I made if and when they came up. There is an entry setup for today, where I have orders in where indicated on the chart above. As I type this these orders are not filled, but we are very close to the entry price.
You can see how the trend oscillators have been diverging during this move up over the last month, both short term and longer term. We had a huge outside day reversal bar on Monday where a short entry could have been done. One of the filters I use that will not be disclosed here did not confirm that entry, so I passed on it. There is really not much else to say. At this point I do not know if this trade is any good at all, if it is, there is a chance it could turn into a big one. There is just no way of knowing that at this point. Certainly based on fundamentals I have described there is a potential for this market to fall sharply at any moment, but that does not mean it will.
This is one of the last bubbles that has been inflated, and as we have all seen in recent years, these bubbles can continue on for much longer than most of us can predict properly. I just know that I want to be short when it pops be it today, next month, or next year. I will not blindly short it just based on what I think the near term fundamental picture is, but I will take all sell signals that meet my rules.
Lets take a quick look at the stock market after yesterdays wipeout, things do not look very good. With Fridays non farm payrolls report coming up, which we know if it is reported even within a country mile of the truth, will be a bad number. There is alot of risk to the downside now after yesterday, although technically we are still holding in general the lows of this decline. We are right at the bottom, so custers last stand is right here, right now.
We can see the two main trend indicators confirming down. The third longer term Momentum indicator is getting into a flat lining sell condition, which is not good. Flat lining sell conditions are often indicative of long term trends developing. There are also no bullish divergences in the accumulation/distribution indicators ( green and purple lines ). In summary, there is now nothing saying to look to buy this market. This also comes at a time when the seasonals are pointing down and Larry Williams forecast road map is also pointing downward for a few months. This looks dicey, so I expect to see more downside action here.
The recent comments I made about looking for something down but not big were wrong. That is right I said it and admitted it. I do not know why market prognosticators never admit when they are wrong. Even the very best traders have losing trades. I was reading some commentary yesterday by one such prognosticator who I greatly respect. He had mentioned a position trade he had put on when the SP 500 got over 1100. It had been based on the market getting above the longer term moving averages again. You can see from the above chart that he basically bought the high of the retracement. It was a bad trade, so what get over it. Bad trades happen, I had a boatload of them this month. His commentary yesterday said it was exited without taking a loss, are you f....ing kidding me? Just the term position trade implies it is something you are going to hold for awhile, often months. You do not micromanage a position trade like that, you put it on and walk away.
The only way that could have been exited for no loss would have been based on a 5 minute or less intraday chart. It is just a lie quite frankly. When you put a position trade on you have to push back from the table and let it have some room to move. If you watched one through a 5 minute chart you would never be able to hold it. I must be the only guy on the web who actually admits when he makes a blunder. I will never read his commentary again, he has taken away years of credibility with that in my eyes. Maybe someone reading this blog can give me a better answer, but here is why I think people do this. They are always trying to sell something, in this case a trading service. Investors are so fickle, that there is always a fear that even one loss will cost you clients. This is actually true it will. However, do you really want to be such a whore for what you are selling that you check your integrity at the door on the way? Do you really want a bunch of clients who think you never lose? What will happen is that they will all leave immediately when the real results start rolling in. Why would anyone want that turnover? Go Figure.
Not me, never have, never will do that. I have losses, I guess I am the only one who trades who loses money from time to time.