HINDSIGHT IS SOMETIMES 20/20
I harp constantly about buying the strong and selling the weak. I have fellow traders who do not agree with me on this, but I just got tired of arguing with them, so I just let them make the errors on their own. I have seen this play out over and over and over again. In the above example we see a prime time real money version of my point. The first chart is the trade I made, and the second one is the one I should have made.
I debated this decision for about an hour and made the wrong one. What I missed was how much stronger the accumulation was in the Soybeans than Soybean Oil. I got too hung up on the actual bar patterns and the fact that the Bean Oil was much higher above the recent major lows than the Soybeans were. In reality they were about the same it was a minor difference, and the accumulation was alot different, I blew this one. The Soybeans were setup more strongly, and I went long in the Soybean Oil instead and it cost me a ton of profits. If you look at where I have indicated my stop would have been had I not exited above it before it went down there, it is misleading. The actual price never went to where my stop would have been, so I could reason I would have never been stopped out. However, in the thin overnight electronic markets, I would have had an order for over 20 contracts sitting there 2 ticks below where the actual low was made, and it clearly would have been picked off. As a result, I know the actual low would have been lower than what the price shows had I placed that order. Hence this trade would have been a scratch had I not exited at the above price, so that was a good decision. The bad decision was not having gone long the Soybeans instead of Bean Oil where the trade was never threatened and would have been a home run. Hopefully readers can learn from this blunder I made. If there is any good news, I made 5k on a blunder. Small money, but better than a loss.
Hindsight is not always 20/20 like it was in the above example as we are also seeing with Comrade Ben right now. He is already on the verge of QE3 when it is clear to see that all QE2 did was raise the stock market. His hindsight is clearly not too good...... unless......
What if the sole purpose of QE was to raise the stock market only for political gain? We see the virulent comments he is making about the default discussions and how adamant he is what damage it will cause. Does this mean that things are not as rosy as they have been leading us to believe all along? If you do your homework you can find out that the social security fund is actually separate from the general fund, and that money is already there to make the payments, at least for now.There would be a small shortfall most likely which would require dipping into the general fund, but a very small portion of the $200 billion of monthly income the government takes in would be needed to get these checks out. Net net, we are now getting lies from both the executive branch and the Fed on this topic. This makes me even more sure that they have been doctoring the numbers they are releasing to us each month. Can anyone really doubt that at this point?
Excess liquidity caused this whole problem, free money. I find it hard to believe the answer to that is then more free money like Comrade Ben is pushing. We are seeing in Greece that this solution does not work. It is like loaning money to a junkie and hoping he will buy real estate instead of drugs with it and become Donald Trump II. Unfortunately these guys are going to bring us down, but that is very good news for traders. The shorts if we can catch them correctly, are going to be incredible moves. The lies about how good things are will also give us big rallies for short periods, which will also be big trade opportunities like we saw recently.
The current price projections are still showing the same thing, up for stocks which is not pictured, and down for Bonds. They should move opposite so this makes sense. My short term indicators are still telling me for the moment to look to buy Bonds on this dip, but if this projection is correct, that buy will never set up. As I have said many times in here, don't get too hung up on these projections, overall they are pretty good, but at times can be absolutely dead wrong.
In summary, I am still looking for a stock bounce, and a bond decline in the very near term. After that I am looking for shorts in stocks and longs in Bonds. I do not know at this point if those trades will set up since I do not have actionable buy signals for stocks yet, or sells for Bonds. The debt debate is chopping the markets right now, but we cannot trade on speculation of how that will work out, that is gambling. Stick to your rules which is what you should ALWAYS DO. Also, make sure when buying to buy the strong and to sell the weak when selling, it will pay off.