I WILL RAISE A FEW EYEBROWS WITH THIS ONE
As I prepare this early Wednesday morning it certainly appears the seasonal tendency for a rally this week has been dead wrong. This is why I tell people seasonals are not the end all of trading. They are tendencies not absolutes. I will buy a bit more of the SPY today on weakness, I still have less than half the position on. For the purposes of that trade, this is exactly what I was hoping for. I want to scale into buys on weakness not strength. As to whether the trade is any good, that is another matter. The trends are down on all time frames, so it appears to not be a good trade. I will honor the parameters on it and see what happens. The goal is to hold it until Mid January or thereabouts.
The chart above is sure to make a few people think I am a whack job. It appears to me that the EURO is setting up for a nice rally. The seasonal tendency is for a rally about now. We also have some heavy divergences in some of my proprietary things not shown here. On top of that we have a possible trap pattern setting up here. This could very well just be a break down and this things just gets crushed. I am fairly sure that is what most people are expecting. However, if it were to close right here, then immediately reverse back upward, I think it would be a dynamite buy. It is hard to find a market that the world is more bearish on than the EURO. With all that has gone in this market has held up remarkably well overall. You would have thought this would have been way lower than where it is with what appears to be a part of the world that could basically vanish financially. I like these trap situations, and if this one reverses it is likely a trade I will be in.
I had mentioned that I passed on the short entry in Cattle and would be looking for it again if we bounce a couple of days and that is exactly what has happened.
So it goes when you do a blog like this. You get some things like this dead on correct and other things like projecting a rally this week in stocks, dead wrong. In Cattle we are now lined up more in sync with the seasonal tendency, so this is more to my liking now and I am looking for sell signals here now going forward. Look at how well the swings in price have lined up with the very short term seasonal data. This does not happen that often, but my feeling is when it does you have to pay close attention to it until the train gets derailed. Maybe it will derail right here but maybe it will stick to it for a while longer, it is impossible to know.
All we have is tendencies to follow, there are no guarantees of anything. I am still looking for the energy markets to bounce setting up sell entries. The equity weakness has brought everything down, so these have not bounced at all yet. Since we are on a weekly basis now, right at about where the low in stocks should be, I am sticking to my call for a rally into the end of the year. I guess when I see the manipulation level of the government at such an extreme level, that they can trade on insider information and basically not even address the public on it, I think they will also manipulate stocks up for political gain. The corruption is at such a level now that anything is fair game. However, here is one thought. What if it has always been this bad and we just did not have the discovery power we have now?
I think it is both to some degree. If you think about it, most criminals escalate their crimes until they ultimately get caught. Most of the things that are making the news with government officials are crimes and they seem to be getting more and more outrageous. What if we knew it all? It does seem hard to imagine we could have a stock rally in the face of all of this with the European crisis also at hand, but I do not trade based on things like this. We have certainly seen very clearly in the last two years how disparate economics and stock prices can be. One last thought, I am looking at Gold and Silver for shorts within the next few days, no chart included today.
To my US readers, have a great Thanksgiving. Maybe you can toast to the pinhead calling for a stock rally and have a laugh at me over a glass of bubbly!