A TEACHABLE MOMENT
Of course I would assume my readers understand the sarcasm in today's title, enough said. This is actually a case in point of what I said yesterday about why I would not short Silver regardless of the pattern being very good. You can see that today we have gone on to make another new high here, GOLD has not.
It is very clear to me that this chart of GOLD shows a dramatically different picture. I harp on this constantly, but see so many people ignore this. You ALWAYS need to buy the strong and sell the weak. I cannot tell you how many times this idea has saved my ass, including here. There is a reason why this works, and it is pretty obvious. Stronger markets have much more buyers ready to enter in at the slightest pullback, vice versa for weak ones. This is why trading a reversal in them is so difficult. Here you can see that had you sold below the prior day's low in each of these and stopped it above that same day's high, you would have been stopped out in Silver already. With Gold you would actually still be slightly profitable as I type this.
As it is with trading, so it is with life, this does not work every single time. There will be times when a weaker market will move more than a stronger one. However, you need to tailor what you do to probabilities. If you know that by and large weaker markets decline more and stronger rally more, you cannot get too tied up in the few exceptions that take place. Nothing is 100% in life. This is about as close to that as it gets in trading.
Study this on your own, make of it what you will.
Here is my entry from my trading journal last night that might be helpful, when I was debating what to do here today.
SILVER - Sell but strongest metal, never sell the strongest
GOLD - Clearly weaker, but the pattern in the indicator is not as good, and there is no bar pattern
tough to pass on a setup in Silver this clear but follow your rules - NO TRADE WAIT
That is exactly as it appears except it is not in red print. This logic saved me thousands of dollars today, about $10,000 to be precise.
Meanwhile back at the ranch, here we have the SP 500 in the process of declining after the non farm insult your intelligence report this morning. Now that the government has once again changed how they are measuring things, this report does not make the sense it used to. Can't we go back to the days where they just modified the data to show what they wanted it to? That is better than having it be based on a bunch of BS premises, oh well. This is exactly why you should not pay attention or trade off reports. That is just a guessing game, not for me. The logic goes something like this. If you use indicators to trade they will have taken into account reports and all sorts of market influences. How they effect the market will already be in your indicator as you study patterns in it from the past to trade off going forward. As a result, you do not need to babysit reports when they come out. Just place your orders based on your rules and move on.
At this point this market is getting pinched into what technicians call a triangle or wedge. There are all sorts of takes on which way the probabilities favor the breakout to be. I have never seen anything conclusive enough for me to weigh it in either direction. As a result, I fall back to my indicators, and price action. In this case we have a higher short term low a couple of days ago, and are now working on a potential lower short term high. You could trade this in either direction in my view based on the price bars. Either breakout could be justified to be with the very short term trend as defined by highs and lows.
My technical indicators seem to be telling me the same thing, so I don't have a definite read here. The DAX is the weakest index having just broken below the prior day's low just now. That would be the place to go if you are inclined to short something right here. As to the other indexes, I don't see a trade today. I got taken out of my NAZ short yesterday for a small loss, and am waiting now to see which way to play.
I guess I am going to take my toys and leave the sandbox for today.