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Friday, February 17, 2012

POT POURRI




One of my favorite phrases that is going around right now is "don't be that guy." Some loudmouth in a local bar kept saying that to a buddy of mine recently, who was an ex linebacker. He just kept repeating it over and over. This buddy of mine is a pretty calm happy go luck sort, but everyone has their limits. He is also a great looking guy the girls always love. This moron had obviously singled him out for some unknown reason, who would pick on the biggest guy in the place? When I looked at Vinny laying on one of the dog beds in my foyer the other day, I noticed he almost matched the color of my Travertine stone floors. For some reason the thought of "don't be that guy" came to me. Obviously it was a different context than the first scenario. In this case it was a mesh I had to clean up and believe me he was much dirtier than he looked like here.

In the first tale above, things ultimately ended badly for the local loudmouth, and I suspect he won't use that phrase much in the future. In the second instance, it ended ok for Vinny but not for me. He made a huge mess that took hours to clean up. The point is generally the phrase does ring true to some degree. You don't want to be that guy doing the wrong thing constantly. It is easy to become that guy when money is involved. It is so important in our lives that it makes us do the damndest things.




This above graph shows the days of the week, and what happens just selling the open every day in the ES. You can clearly see that Friday is the best day to be a seller in this market. It is really the only one that really makes any money to speak of. I know from personal experience, that some of the largest market declines have occurred on Friday's, so this gives me some graphic proof of this. This certainly does not mean you just blindly go out and short all Friday's, I would never do that. What it does tell me though is that if I get something going to the downside on Friday, I have a better chance of it becoming something big, than the other days of the week. If I pair that with today, also being one of the two best sell days of the month for the ES, it tells me if I get a trend change to down on the intra day charts, that I need to look for an entry on the short side. Will this happen? I doubt it, but you have to be prepared in advance for when something that does have some bias, might be developing. At press time here before the open, it does not appear to be in the works, but who knows what will happen.

Don't be that guy who is not prepared!




I mentioned Natural Gas, and here is the trade I made yesterday. I said I was looking to buy it and I did. Do not get hung up with the Bollinger Bands, I don't use them they were just on this chart setting I put this on. This is an extremely over sold market, the biggest down trend on the board. It has meandered around here for a few week down at the lows and appears to be making a breakout upward. We will just have to see how far it goes. It could be another false breakout that turns right back down. I am on for the ride now one way or another. I am off the ride on the next chart.




Here is the chart of Gold and my attempt #1 to short it. I took a small loss as indicated. I will look for another entry in the next few days. If we were to close up today and Monday, that could make this prime for another shot. 0 for 1 so far trying to catch a down move.

I read trading books just like everyone else, and I found the following quote out of Elder's "THE NEW SELL AND SELL SHORT."

You can hear the market bell when you recognize and event or a series of events so far outside of the norm that it may seem as if the laws of the market have been repealed. In fact the laws of the market cannot go away, no more than the law of gravity can. They can be only temporarily suspended during a bubble, creating an illusion that normal rules no longer apply. The markets do not exist to put money in the pockets of amateurs.

You tell me where this phrase most correctly applies to the futures markets? Where are most amateurs making their bets right now?............

GOLD

Have a nice weekend



10 comments:

Robert said...

Chris,

As i have stated before love your blog and have learned a great deal from your writings .Just don;t get your dislike for gold ---you are constantly putting it down--even though its one of the best preforming assets the last 10 years-
As i say price rules and gold is looking good--as far as a bubble just don't get it.
So i guess Apple is in a bubble , the NASDAQ and the list goes on
Gold was up i believe 16 % last year--that's a bubble -
If you owned a stock that was up 16 % for the years i don't think you would call that a bubble.
Love your site ,but why the dislike for gold all the time
since Jan i have made a nice profit on gold --that's all i care about .Call it what ever you want but the object is to make money

John M said...

Nice post. Great dog.

SS said...

Great Blog I enjoy reading this daily when I can. I missed the NG trade, but thanks for the blog, it is refreshing.

Chris Johnston said...

Robert I guess I am just a party pooper. I would be willing to bet I have made more money on the long side of gold the last few years than any reader of this blog. It has just reached a point where it is a bubble. That does not mean I won't go long if I have buy signals. I did make money on the long side this year already, now it is time to short it.

Anonymous said...

Chris,

great call on natural gas. A wild beast, is it not? Looks like your work will pay off for this month.

Equities ever surprising again. Even though Apple looks pretty much done the party is in full swing. Well, maybe this becomes sort of a specialits´ trap. We will see. I do not know about Larry´s latest works but didn´t he talk about Mondays that open above Friday´s high and then build a red bar being the best indicator to sell the S&P short?

As to Fridays there is a strong tendency to follow through at the open on Monday. That chart of yours looks pretty interesting.

Dino
www.fundatrend.com

Anonymous said...

As to gold:

Gold Bulls Expand as Billionaire Paulson Says Buy (http://www.bloomberg.com/news/2012-02-17/gold-traders-get-more-bullish-as-billionaire-paulson-says-buy-commodities.html)

What does that tell us about gold? One would think this guy has already bailed ouf of GLD. He probably needs more liquidity to sell the rest of his stake. These guys do not step up on Bloomberg to tell you were to invest unless they can profit, most likely by being on the other side of the trade.

The weekly chart looks a little enticing though, if the price of gold can surpass recent highs.

But how come equities rally and gold cannot? It is lagging now. There is something wrong. Robert, just to show you another reason why gold might not be the best bet. Sometimes it pays off to contemplate what the hell makes traders take the other side of my trade?

If they have good reasons to do so, one might consider moving on to another playing field. I bet if we do see equities correct some time, gold will be done in no time. You were pretty smart to make a profit in precious metals. Commercials held the smallest short position in silver but look what happens now, same with gold. Enjoy your profits and bring your stops closer to the market, so you can keep them, should we see gold go lower... .

Robert said...

Chris,

Thanks for the reply---why do you call gold a bubble ? Don't have the exact numbers but gold is still only owned in ETF's , funds by about 2-3% .All the adds i see on television and paper are all about selling your gold ---everyone is selling --in a bubble everyone is buying like crazy--that is just not the case --ask any dealer and people are selling not buying-
Have a good weekend !!!

Anonymous said...

Actually, the place where your quote seems most applicable to me right now is not gold, but the broad market. The laws appear to have been suspended. All dips are bought with a conviction and regularity that is disturbing. Being long this market right now feels to me like walking way, way out on a thin branch at the top of a tall tree. I just know the thing is going to break at some point without warning. But being short the broad market right now would be crazy. Nuts.

Chris Johnston said...

Robert I have fully explained my position on Gold enough times, you will just have to read through the old posts. One other thing I always say, I could be wrong. You Gold bugs could be right and it goes to 50,000. I just don't believe in the it's different this time arguments, maybe I am just stubborn.

As to Apple, yes with ADX recently having gone above 80 that is definitely a bubble by almost any definition.

On the other comment about equities, I would agree that the NAZ looks scary to me. There is certainly no reason to short it, but we know things when they start ascending at an angle like this do what Silver and Gold did. ADX recently hit it's highest reading ever of 82 in the NAZ. When a decline happens, I do not know but we are nearing the mystery charts date for a short term top.

I am not familiar with that pattern of Larry's that is mentioned in the other comment, and I think I know most of them.

sergio said...

huge drop in gold!