I GUESS SOME CALLS ARE BETTER THAN OTHERS
I had no idea we would fall out of bed today ( Monday ) when I said over the weekend that the Euro was a sell right here. However, I did say it and it crashed 300 points today, so obviously this call was not half bad. I was not short so it does not matter. As I have said time and time again, predictions are for cocktail parties not account balances. In any event it was a pretty good market call and it is simply proof that when you look at larger picture fundamentals that is when you get on the correct side of the bigger moves. I suggest people spend more time on setups and less on the wiggles in the oscillators, they are more important. If you get the bigger picture correct you can almost enter in any fashion you want and still do well.
I did also say I thought since we had advanced 20% in the indexes, that a pullback would happen because it was not sustainable. I appear to have gotten that right, but I blew the call at the low missing the huge up move, so overall a C - on the stock market or worse. It does appear to me now that my short term indicators could very well setup a sell signal on a bounce up now and high re-test. Since there is somewhat of a cyclical tendency to go down into a late November buy point, I will be looking for this sell signal to develop. It is not there yet and I am not short the indexes at this point. Overall though I do think the market is going to close the year higher than where we are right now by a decent amount. Maybe that means any sells are short term or maybe no good. The political stakes have never been higher, and there is no way they let this thing fall off a cliff to end this year.
One comment on the European situation which I know is out there in the press now, that absolutely irks me. The big banks have once again been saved by the governments by the terminology is the agreement indicating the 50% bond hits are voluntary therefore not defaults and not subject to default insurance. When in the world are they ever going to establish a level playing field and quit picking winners and losers? The answer is going to be when the meddling they do creates a massive implosion that makes the last one look small. I don't know when, but I do know what. It seems in life the rules are there but if you are special, they don't apply to you. The other problem is what it takes to be special, but that is another subject entirely.
One trade I was in that I exited today probably poorly, was Live Cattle.
I am going to work through my logic of why I exited here where I did, and admit it was actually a mistake. I had mentioned this recently along with Hogs as two markets that I thought were due for a decline, which we got. The Hogs went down ahead of and more than the Cattle market. However, these two do trade quite differently at times, so I really don't consider them to be the same. We had four consecutive down closes here with a lot of overlap on the bars each day. I did a pattern search for that and found that on average this type of occurrence tended to be a short term low more so than a continued decline. I also noticed that we were heading now into a seasonal low point, and also that we were very close to a short term target I had been looking at.
I had not decided whether or not to take the near target or shoot for a bigger one coming into today. When I saw the overnight implosion in the indexes which we know drive the world right now, I thought it would likely cause a gap down opening in this market which does not have a Sunday electronic session. Since my near term target would be hit if we gapped down and traded just a little bit lower, and the pattern history showed a tendency for a bounce, I watched the open, and exited a bit below it. At times gaps can be the end of a move, an exhaustion so to speak, and this trade was just not moving a lot.
At the moment it appears to have been a blunder, but I still made a good profit on the trade and finished off last month adding another $16k to my total, so it was not a disaster. Time will tell if this was a prudent exit or not, my gut is that I should have held this for a bigger target. However, the trade is over, my logic is now exposed for me to be revealed as a pinhead or a genius, so it is time to move on. I really can't stress enough that you cannot get hung up on individual trades be they wins or losses. It will eat you up. You have to examine the trades, what you did right and wrong, and what if anything you can learn from it. After you have done that you have to look forward, so that is what I am doing.
I mentioned the bullish Bond setup was still in place, and right on cue they rise 3 full points today. I did not see a short term long entry there so I am not long that market. The path of the stock market retracement here will dictate what so many other markets do. It appears to me that towards the end of this week from a cycle stand point, we should be in the sell zone for quite a few markets. It so happens the Government Fraud report otherwise known as NFP is released Friday. Perhaps that will be a trigger for a few declines. I do find the spreading going on between Crude and Unleaded Gas to be interesting here. I cannot remember a time when it has been this pronounced. Corn and Wheat are also starting to look interesting to me on the short side but not yet.
At the moment I am flat and do not see any new trades for tomorrow as I write this.