TRIANGULATION

Here we find ourselves in a classic triangle situation. There are lots of takes by various all stars as to which way to play these breakouts. I personally do not trade this pattern at all and the main reason why is that I have never found any consistent approach to determining which way to play the breakout.

The low of 5/5 took out the little pivot low of 4/25 so that tells me that even though on the surface this appears to be just another garden variety pullback in an uptrend, the recent pullback did a tad more damage that is obvious by a quick peek at this reveals. Also, the trend line on the top side is a bit steep to be meaningful to me. You can draw lines on a chart all day long if you wish to and create a map that looks like what Christopher Columbus used, that is otherwise known as Gann theory. I think when you do that, just by pure chance something will happen at some line somewhere. That does not mean that it is something to trade from.

The trend is up obviously, and as of today I do not see any obvious reason to short this market. However, I also do not see a buy signal, so I have nothing to do in the Bernanke Indexes for today. My Oscillator as you can see at the bottom is in the buy zone, so that should tell me to lean to the long side here. I am just not sure here so I am moving on to something else. What is that something else?

Here is the Canadian Dollar one of the weakest currencies. I think this market is setting up for a sell signal. I know even saying the word sell in any market is heresy at this point, but that is what I see here. Maybe I am wrong? It does in general require a down move in stocks for any other market to decline except the dollar and Natural Gas, so it may well be that no sells ever get triggered here. We have many markets across the board that are in sell the rally status now due to the big down moves last week. Were those dips buys?

There was a story out there that a big hedge fund bought a bunch of Silver Friday, and so far that is certainly working out well. Above is what has typically happened when a move down like this happens. Some of the other examples look a bit different, but most feature a basing period or bounce for a few days to a couple of weeks, then another move down. This is why I am waiting to sell the bounce. One thing that I have mentioned over and over is that markets like this create really bad habits, that will come back to bite you if you are not aware of the fact that buying something like this is generally not a good idea. It is a great idea nowadays but when major tops do come and they will at some point in time, those who do this are going to get wiped out. The trick is that we do not know how long this huge uptrend will last. For all we know it could be years and you could make millions doing the wrong thing and have the luxury of pissing it away from a much higher equity position. This would be a good problem to have.

I could put up charts of other markets like Crude, but many of these look the same. I am looking for sells on the rallies here not buying these dips. Maybe we will just sail away once again and I will be left behind, who knows?

Good trading to everyone