WHAT WE CAN LEARN FROM SPORTS
Sports analogies get very old and tiring, but there is something we can learn from watching sports that applies to trading, the concept of Momentum. I mentioned recently in here that the Lakers were an example of a team being hyped constantly by the media and their supporters. I am also a Lakers fan being a San Diego resident. The net chatter was that "oh they will be alright, once the playoffs start they will just turn things on again,etcc." I had made the point and I made it in here, that from watching them closely all year, they were just not any good. They had one lapse after another where it was clear to me they were not lapses. Something had changed with them. As I watched them get rolled by a far superior team over the last week, I was proven correct. My best friend is a General Manger of an NBA team, and even he did not agree with me on my view of the Lakers. He just texted me after Friday's loss saying I was right and he just did not see it.
Does this sound familiar to what is happening with the US Dollar? This market has been in a steady downtrend and it is assumed it will continue to be in one. However, this recent move could be the equivalent of when the Lakers lost to the Cleveland Cavaliers who had barely won a game this year at the time. It was an early warning that something was changing. It did not change right away but change it did. This is also what I think will happen here. If we can equate half an NBA season with a couple of weeks in a financial market for a second, a sideways move to consolidate this bounce would be the equivalent of what happened with the Lakers. They just never regained any consistency even though they had good stretches. So it could be with the Dollar Index here. However, if we just roll right back over again and blow out the lows, then we could view this as an anomaly that means nothing. That would mean team downmove in the Dollar is still rolling and this bounce was a glitch and not the sign of problems.
Sports are microcosms of life because the momentum swings are the result of human emotions. Since there are fewer people the swings happen more frequently, such as during a second half of a game. The markets are comprised of millions of people's emotions, so the swings that happen take longer to play out. The Dollar and the metals are examples of teams who have already been given titles. They have had their celebrations for future championships they have not won yet. We have seen the crack in Silver which although we knew it was going to happen, was impossible to pick to the day. Now we have a big break there and it is very unlikely that those highs will be seen again. If you research huge spikes like that which I displayed a couple of weeks ago, they normally mark decades worth of price highs not just weeks of them.
Watch now for a retracement in the Dollar to get long, and a bounce in the metals to get short. Crude Oil is not quite the same thing, but a close enough cousin to be in a similar spot.
The Soy Complex is also one I have mentioned in here recently that I think is ready to make a move upward. Below is a weekly chart of Soybeans. I have labeled where the Commercial buying has been coming in on this pullback in the uptrend. The daily price action is a mess, so I do not see any long entries setup there yet but this is a market to have on the radar for buys.
The last market I want to cover today is Bonds. We have had a spectacular rally in this market recently, but now we are into an area on a weekly basis where we could run into some trouble. This market is being sold by the big boys on this rally, and we are still in a weekly downtrend. This does tell us if we get daily sell signals we should take them. As it is with Beans, I do not see a sell signal anywhere on the daily chart yet, but another market to keep an eye on.
I am not sure about equities here, I do see some buys here if we rally, but nothing right here for today.