OK CLASS EVERYONE RISE NOW
I have been waiting very impatiently for the year end rally to begin. I even stated in the last post that it was possible that after a couple of days of upward movement we could even have a short term sell signal. I did also mention that we would have to wait and see if we moved up if in fact my shorter term timing tools indicated a sell was in order. At press time here we are making another overnight rally attempt going into Tuesday. Of course as is par for the course, virtually every single market is rising along with the ES. Will this stick today, it did not yesterday? I tend to think it will today.
I still stick by my Tepid rally post, that we are not going to rip roar upward here. However, with all the market manipulations that have gone on the past two years, and the political risk to the dems of a stock decline here, I think all the stops are going to be pulled out to make sure we don't rollover here. The overhanging POIV divergence is the only thing that makes me hesitant at all here, and that is a significant problem. One thing I have learned with this bad boy though is that you have to look at the major not minor divergences. What is it telling you overall at the significant highs and lows? In this case it told me to look for a turn down recently, and we have gotten that. That divergence now is not meaningful, it has already given us a move albeit small. You don't know with divergences whether or not they will result in small or large moves. For now it appears we are going to move up and the year end rally is going to happen, and that short term sell setup is not going to be here this week. It could change obviously, but that is what I see at the moment.
Here is the DX and you can see another divergence and this is one that I mentioned in recent posts, I do not recall which one, but it was at the end of it. We made a new high that was not accompanied by a new high in POIV. Now we are starting to turn down. This would logically follow if we are going to get a year end rally here, since the DX is trading opposite most other markets. Again I have my COT Synthetic which has done a pretty good job of picking the swings in these two markets, with one exception that I labeled. It is now in the sell zone as this divergence is occurring adding some credence to this short term top theory. Of course this means that the other currencies are likely to rally. I had been watching them just like the stock indexes, for potential sells after a couple of days of rally and I suppose that still could happen. However, trading is not a static endeavor, things can change in a hurry. The Pound could still technically be a sell if it were to roll over here, but it has rallied so much already today that I doubt we will see that now.
One thing that I think most people know, but maybe not all of you, is that often when you are looking at a short term setup, the window is narrow. Once a couple of bars roll out, things can change quickly. This is not the case with setups I show on Weekly charts. Those tend to be good for a few weeks or more. That is why at times there can be a contradiction between a short term trade and a weekly setup. I know people that read Larry's stuff complain about that to me all the time. You just have to understand the difference. Just because Larry or I or someone else says the Euro is setup for a buy, which I said recently, that does not mean you just go out and buy it. That is a weekly fundamental setup, you have to find your way into a trade there is you think it is valid. That could take some time, and often I actually trade short term for spurts against these setups if my tools tell me to do so.
The comments in the last post are a perfect example of this. From a larger perspective I was and am looking for Euro buys, but on a short term basis, I was looking for potential sell signals to catch one last thrust down. It does not appear we will get those and that is the way trading goes for me. I establish what I am looking for and sometimes it just does not develop. Other times I am just wrong. Yet at other times everything rolls out according to the plan. I wish it were different but it is not.
I have been doing a ton of research on stock trading, and I am more convinced than ever about how I am going to make some changes going forward trading them. All of the market manipulation causing all these huge opens like we got today, has just ruined stock chart patterns. There are just gaps everywhere. This reminds me of when the Bond market got ruined by the overnight moves several years ago. Many of the old reliable ways of trading open to close relationships were just taken to the woodshed. It is my theory now that entering stock trades above highs and lows is not a valid way to trade anymore. When I launch my website, I will have daily stock trades available based on this new research and they will be the exact trades I am doing. I have not yet completely decided what to offer, what to charge and when I will do this, but it is getting close now. The win loss percentage on the stock trades is going to be very high.
The last chart for today, is GOLD. I did mention recently I thought a short term rally would take place and we are getting it thanks to the stock market stabilizing here. It does seem to me even though I hate to say this because every other cat in town is saying the same thing, but hedgies appear to be dumping Gold during declines to cover stock losses and redemption's etc.. This could explain why these markets are getting tightly correlated again. I have no proof of this it is just a thought in this pinhead of mine.
I am hoping for a sharp rally here into about mid January, to get short. Things can change in such a hurry, that who knows what things will look like come January, but that is the plan at the moment. I think a huge down move is coming here if we close under that recent low.
I still like the Grains on the long side if they pull back and also Cocoa of all things to do the same.
If any readers have anything specifically they would like to see me offer when I launch my website email me at email@example.com. I am still trying to dial in what to offer, what to charge etc.. so any suggestions would be welcome.