THE BIG PICTURE
I have been reading alot of different things lately for some reason, which I usually do not do. I think the way information is disseminated so widely and so quickly now makes it impossible to just trade in isolation without hearing any one's opinions. I have a link below that I found somewhat interesting. This guy subscribes to alot of techniques and signals that I have not found to be that accurate ( Dow Theory signals for example ). However, the overall price map he is talking about I think it about the same is what I am looking for. His rationale as to how he arrives at these projections is not the same as mine, in fact there is not a single thing he looks at that I use. That does not mean anything, for all I know his techniques are better than mine. It is just a general map that somewhat matches up what I have above here.
This forecast in red has been incredibly accurate over the last few years. Since it is something that was given to me by someone else I am not going to divulge what it is or how it was derived. It does not matter anyway, because the logic behind it actually makes no sense at all to me. What does make sense is how incredibly accurate this has been. I came across this a few months ago, so the recent decline it has called right on the money was known one year in advance. It is one of the things that has led me to say for months that I thought June was going to be a top in the market. When I combined this with Larry Williams annual forecast that has about the same timing, it led me to believe that we were going to see a decline in this time frame.
As it is with all forecasts like this, it is about time not price. The large decline it shows may or may not be accurate, it is the dates that should be. It shows a low point the week of October 7th. Here is how it did the prior period to what I have above.
One thing to keep in mind with this, the points in the forecast are known 1 year in advance. You can see how incredibly accurate this has been. I have never seen anything like this in all honesty, I just wish how it was calculated made sense to me. I believe things need to be conceptually accurate to be usable and this is not really. However, I still am deferring to this until I see it go astray, which it has not. This tells us we should trade down into October, which also is the normal seasonal pattern anyway. The next chart is that of the weekly Bernanke 100 with the bands that are probably familiar to people at this point. I had mentioned a few days ago that we needed to take out the prior weeks high or we risked the trend changing. We did not, so in my mind the trend in the weekly chart is now down. Generally when we get a few bars clear of these bands the trend has changed. During this whole rally off the 09 lows we have never had a period where all three of the Bernankes had multiple bars clear of the bands on the down side.
As I have noted on the chart, we have a couple of bars clear of the bands and have also taken out the prior pivot point in the Bernanke 100 above. You can see the last time we had 2 bars clear, we did not have them clear in the other two indexes (not shown) and we also were holding the prior pivots by a big margin. In our current instance we have taken out the last pivot. This tells me now that the change of trend is confirmed and now I want to sell rallies. My strategy therefore is going to be to try and catch this long this is about setup here, then look to get heavily short once the bounce peters out. I have no idea if this is a world ending wipe out like so many are predicting, or just a garden variety trend change that leads to a move down in an orderly fashion. It is not necessary for me to know that to make money trading. One thing I will state is that for those who look for these gargantuan moves every time they see something that confirms a direction, you have to get with the program. That is an overly emotional view and emotions will separate you from your money in this business very quickly.
My good friend who I have mentioned recently many times is like this. Every time there is a short term signal he views it as a monster move coming. I think alot of people do this. You can make a good living just consistently catching smaller moves. Do not get caught up in the cocktail party syndrome of wanting to be "that guy." The trading landscape is filled with people who wanted to be the guy who predicted blah blah blah. That is all ego and you should chuck that. Who in the world cares who predicted what, nobody will ever predict every major turn correctly. Catching tradeable moves will at times result in you catching big ones anyway.
I don't care one hoot about the conjecture of the Greek crisis as being the catalyst or any of this other crap written by people who do not even trade. I am a trader, so I watch what helps me get in sync with what the next price move will be. Opinons about macro economic conditions are of no value in that regard. I do acknowledge that from a general perspective, these issues are going to cause big problems at some point, so I am not completely raining on the parade.
In summary, the trend has now changed to down so my plan is to look for this long setting up right now as a short term trade. After that I will look for a move down that should be larger. At the bottom is the link to this other guys forecast. He is a gold bug so you know my views on these guys. It may well be that he is using this logic to try and convince people to load up on Gold. I did not read anything else from his site. You all know my views on that so enough said.