WELL WE'RE WAITING!!
One of my favorite lines out of Caddyshack. As we sit here and wait for Comrade Ben to tell us whether or not he is going to raise the stock market again or not, we have to find other things to do. It is odd that the world's most powerful man is not our President, he is the chairman of the Fed. Since everything revolves around money, with religion coming in second, this one person essentially controls the world. To think that there is not really a regulatory function with them is shocking. I guess on paper the house has some type of authority, but nothing ever happens. When they ask them questions, they get obtuse answers. When lawsuits for disclosure of their activities are filed, they simply ignore the court orders. Sound like an ever par round to me.
The above market, Copper, is giving me fits. I just cannot decide what the hell to do with this market. This market is setup fundamentally on a weekly basis to rally, we have commercials buying in an uptrend, and the small specs heavily short. Here is my problem with this trade, and I hate it when thoughts like this come into my head. This market has a strong down seasonal just about to kick in, and it is also tied very closely to the stock market. I ask myself in dark hours, why would I want to be long in a market that is very closely tied to the stock market, which I think it is going to continue down for a month or two? Also, when I add the seasonal here, this just becomes a debate. I want trades to just be automatic go now types of situations like Coffee was recently. When I start himming and hawing over things, I then have no conviction once I get in them. You have to have conviction in your trades to stay with them through thick and thin. I do not have it here. I would be playing this trade for just a few days pop, and even though that can still be alot of money in this market, I think it is best to pass. Also, yesterday when the Dow exploded higher, this barely moved up. I consider that to be a negative correlation. Copper should have risen more than 10 points yesterday, and it did not manage even half of that. We are also not seeing any real accumulation here, so even though this may move up, it is just not an obvious trade to me now.
This next chart is RB ( Unleaded Gasoline ). This is kind of the same scenario, although you can see with the purple line, we have quite a bit of accumulation going on here. The projection tool does show a small rally here. The stop is big, over $4000 so not for the faint of heart. This one is the strongest of the energies, so if you want to be long that complex this is the market to play. Once again though, we have that really bearish seasonal lurking right around the corner. Seasonals as I have stated many times, are not the gospel, but I think when we have a market that is following the seasonal pattern, we need to pay attention to it until the time it strays off the path. We should look for approximate turns as it indicates, until we see one that does not work. Since the seasonal has been " dead on balls accurate" for months here, I think we have to pass on the long and look for an upcoming short. I am against my mentor in this market, which is never a comfortable place to be given his track record, but I call them like I see them and suffer the embarrassment for being a dumb ass like a man afterwards. I may rethink that, it might be best to be a coward and hide when I make a blunder?
Here we have the worlds market, the Bernanke 500. The projection tool interestingly enough is showing about what I am looking for now, makes me wonder if I should not be looking for it now? Rarely does everything play out perfectly, and it seems when it does, we should pass on those trades because they lose! In all seriousness, we have my COT indicator down into the sell zone here and you can see how good the sells have been recently in this market. They have been "money." Using the same logic as I just discussed with the seasonals, I heed the words of this tool until it is wrong once, then I tread more cautiously. In this case it has really been in sync with this market, so I want to trade in the direction it is telling me. It is not saying sell yet, but it appears to be setting up to move into the sell zone.
If we happen to trace out the pattern shown in red of up for a few more days here, the indicator should drop back down into the sell zone confirming we want to be short here. Time will tell if this happens, and this indicator does not always drop on rallies and rise on declines. That is my main problem with the Commercials Proxy Index that someone asked about the other day. It seems to just always rise on price declines and drop on rallies. That is not truly emulating commercial activity. Although that is what they do most of the time, they do not always do it and therefore I want something that gauges it a little better which this seems to do.
In summary, although both Copper and RB are setup very nicely fundamentally, I am passing on these longs due to the seasonal influences and what I feel is the risk on risk off nature of the stock indexes. Since I see them as setting up for another decline, I do not want to be long in markets I deem to be heavily correlated with them just to catch a few days up. This may be bad logic and it is always risky publicly stating things like I do in advance, but this is what I am doing. For those who are more aggressive traders, these two markets are setup for advances based on weekly charts.