BILLY BILLY BILLY.... BERUE
The one thing that makes me a bit nervous is how good this is appearing to be shaping up for the short of the year. What I am looking for now is a bounce of 2 or 3 days as I have diagrammed on the chart. I do not know if the COT Synthetic will get into the sell zone if that were to happen or not. As I have mentioned often in here, I am not quite sure exactly what the best way to use this indicator is, but I do know when it gets into the sell zone, when other things I watch are indicating a sell, the trades are pretty good.
The blunder I made last week was party predicated on my thinking that I was looking for an initial drop, then a bounce to sell. I did not think the initial drop would be as big as it was. It may have been exacerbated by the politics of the debt negotiations, we will never know for sure. In any event we are where we are, and we have all sorts of things supporting a sell here. My weekly trend measurement as readers know turned down quite some time ago, about a month ago now. This told us to look to sell rallies and it is still in a down trend mode. Today was a wild range in many markets which makes stops too big for many trades tomorrow. The Copper market which is one I am looking to short, had an insane range today, so shorting it requires way too big of a stop for my taste.
Here is the Lean Hogs chart and why I am looking for a short entry. We have a seasonal high due, and a pretty consistent track record with my indicator in this market. Each time we have drifted into the sell zone here we have declined. We are on the verge of going there again. Tonight ( Monday ) we are seeing a possible breakout upward. If we close above these recent highs tomorrow, it will set up a possible trap trade for a reversal. We may just take off, but if we were to break out and then quickly reverse, yours truly will be a player here. You can also draw a pretty basic trend line up here the if broken would indicate a possible trend reversal. I don't think just blindly selling it up here is wise, because we have not broken the up trend yet.
Let's hope we get the index bounce, keep your powder dry. I think the recent drop was a preview of coming attractions. On a side note, I have a story to tell about Gold buyers. I met recently with someone who has started his own company, and he was interested in me potentially helping him with some aspects of his trading operation. After listening to what he was up to I was not interested, but did question him a great deal about what his plan was. Basically he has a programmer ( of course who does not trade ), who is designing an arb type of operation. They are going to try high speed scalping all day long. Since they are still in beta testing on this programmers ideas, they are making money doing a few other things. One of them is selling Gold to their clients. They told me they can't get enough of it to sell to them. This of course we know, there is a frenzy in this market. I commented to him that as a trader who had seen many of these boom and bust cycles play out, I did not understand why people would pay such a premium to buy anything.
They actually agreed and were surprised at how willing the people were to pay his "competitive" markup. I asked what it was thinking he would not tell me, but since he was proud that his rate was pretty low he gave it up, 38%. Now I know we all know Gold is going to $5000 but I have to ask people, does it really seem prudent to pay a 38% markup above the market price to buy anything at all? These types of momentum moves can last longer and go farther than anyone can imagine, but they all end the same way, and when people least expect it. See housing for any questions. This has already gone beyond where I thought it would in terms of price, not necessarily in terms of time.
Take that for what it is worth. The cyclical work of some very respected people call for this rally to continue through the end of this year, so maybe we have a ways to go still. On a short term basis, it does appear Silver is setting up a sell signal in the next couple of days.