DUMB MONEY

As I watched last night ( Sunday ) and saw the decline across the board, I went to sleep knowing when I woke up it would not last. The Dumbest money just has to be the Sunday night index traders. I do not have a specific count, but I must have seen 20 declines in a row on Sunday night get reversed like this before the NY opening. I am looking to buy a decline at this point but as you can see from projecting tomorrow to move up above what so far is today's high, the momentum indicator does not turn up. Although this indicator is slightly different than the one I trade with, that also shows the same thing here. You can see with the other 4 red arrows, that the good upward moves had good slopes in the the CJ short term timing line. There was one exception which you can see recently, in that we have been rising the last couple of months without any momentum confirmation in the timing line. That is unusual, but does happen from time to time. Since this recent move has solely been driven by the futures indexes with very low institutional participation, that may explain this discrepancy.

What to do next? This is simple for me, look elsewhere for trades. I am bullish on this market, but I still have to have my patterns to pull the trigger, and none of them are here yet. The way this indicator works, as well as the other ones I use, there are two scenarios that I see that could take place. First, we could just drift for a day or two, then the line could turn back up confirming a buy signal. The second scenario is that we drift for a week to a week and a half, then it turns down, which would be a sell signal. It is my opinion that the PPT is not going to allow this to roll over before the elections, so I doubt #2 plays out but you just never know. This leads me into what I really want to talk about today, and it is a response to John's comments in one of the other threads about the dollar.

It should have become loud and clear for daily readers here of my blog, that I stress trading on technical studies, not on my opinion. I do throw my opinions around just like the one above about the PPT. However, I do not trade based on them at all. John, your comments about the dollar and with the QE the fed is doing, and the printing of dollars you say is going on, that might well be true I do not know. What I do know is that I do not care. That has absolutely nothing to do with how I trade. As I have said time and time again, opinions are very difficult to trade with. I think it is mandatory to review your past trades to see what you have done right or wrong. It is very easy for me to look back at something 6 months ago, and look at my indicators and learn from my mistakes, or even pat myself on the back for doing something correctly. How exactly would I go about doing that if all those trades were based on my opinions at any given moment in time? I would have to make a journal and write down 20 pages of notes with all my thoughts at the time, so I could go through all of them to try and determine which one of my arbitrary thoughts led me astray. I suppose you could do that, but I doubt anyone could completely recreate their full mindset 6 months hence, to really understand what went wrong.

I will not argue against some of the theories that some of my readers have about the dollar, and how a greater supply should make it worth less. I have some very bright people that I trade emails with that read this blog, and for all I know, they know way more about such things than I do. This all comes down to what your trading style is, which I covered in detail in a post quite some time ago. There are many different ways you can go about trading, and I am for the most part a 3 to 15 day trader. As a result, alot of these types of things are just irrelevant for time frames such as that. That time frame is where I think the ultimate risk vs reward ratio lies, and that is why I focus there. There is alot more pressure to get things right when focusing on longer periods of time because you get less trades. Here is an example that for me reinforces all of this.

I have been dead wrong about the GOLD market with my opinion, and been wrong for about a year. I have thought and continue to think this is the biggest bubble in the history of mankind, and have been and continue to be wrong. I have many readers here who have been right. However, I would bet about any amount of money that I have made more money trading Gold and Silver than any of the readers of this blog. How can this be? If you are a long term investor, you have to be careful about how you allocate your capital. It is unwise to put too large of a percentage into any one thing since you won't know if you are right or wrong for years at a time. However, as a short term trader, you can leverage things much more heavily. Also, I trade both sides of the market, and any readers here are well aware on some of the nice moves on the corrections to the downside, how I have pegged these pretty well and taken very good profits. I have also gotten on the long side several times, so even though I did not buy Gold at say $400 and hold it, I went in and out many times with larger size, and took a good amount out for myself.

This is why I trade within the time frames I do. It is up to individuals to select what is best for them. However, this is why I just don't concern myself with bigger picture economic views, even though I have them just like everyone else does. They don't make me money. If any individual reader has a view they feel strongly about, and opinions is what you use to trade, then you should invest your money accordingly. The point of today is just that I do not go about this business that way.