FOOLS GOLD

The topic title today was prompted by the pending legislation attempt going on in Congress to force the administration to stop lying about the unemployment numbers. Isn't it amazing now that we need legislation to enforce laws that are already in place because they ignore them? Should they be lying to us in the first place? This report is fools gold as most people know by now. Does anyone really believe that jobs are being created at this rate from their own life experiences? Are there local companies where you live in a hiring binge mode? Of course not.

I was working on my golf swing with my swing coach at Aviara Golf Academy yesterday afternoon and things were going quite well. We have reached a breakthrough point. In any relationship between teacher and student, the challenge is always how to get the points as the teacher to sink into the students noggen. It is easy when you teach someone a craft to know what it is they need to do in order to improve. It is another matter finding the right words to get the thoughts to sink in. I have always had the same problem as Tiger woods, I don't stay level on my downswing with my shoulders. I tend to drop my right shoulder back and to the right. I have pretty significant swing speed ( about 115) even for a 52 yr old, so when I come down too far on the inside with my right shoulder dropping, all sorts of wild shots happen.

Finally after we had worked on one particular idea it hit, and one pure shot after another just flew off the clubs. This is the same with our little profession here of trading. Most approaches require you to make some judgments on when to do what. After all, it is pretty easy to trade if you know which way to look. There is no sure fire way to know this that I have found, but having a bias then looking for a place to play it takes a lot of pressure off the decision making process. The chart above to me now is pretty clearly in a sell the bounce mode. We have the COT stuff clearly telling us the wrong people are bullish up here, and we also have a clear break under the most recent short term pivot point.

It is true that COT "looks" like this when the markets are in strong trends sometimes are way early. It is also true that in strong trends at times you get bear traps where there are false breaks below trend lines or support points that trick people into looking the wrong way at the worst possible time. As my golf  instructor said to me after I hit a drive that we figured flew in the air a bit over 300 yards, take 9 of those a round and 5 misses that are in play, and you are in business. The point being, take the play that is good most of the time and realize that not all of them will work out. I know that even though setups like what we have here can just be continuation patterns where the market just flies right back up, the odds favor that not happening here.

What I would really like to see is the market just stay right here and give us this small range that we can sell below on Monday. If we were to start going on the down side today and form an outside bar today, I will have to take at least a partial position and then try to add to it next week. In our world where everything looks the same, we have the next chart, GOLD.

We are in the sell zone here, so it is just a question of how to enter the trades. Ideally we would bounce a bit more than this, but at times we don't always get what we want. I am not going to show exactly how I enter trades here until after I get in them because that is something I should charge for. I think situations like this are tough. You are damned if you do and damned if you don't. We have a very good setup for a sell so I don't want to miss it. At the same time I don't want to piss away a bunch of money foolishly just swinging at this. I tend to take a smaller than normal initial position in situations like this, then try and add to it. In any event, this is a very well setup market fundamentally for a decline. The COT picture speaks for itself.

When you see a dramatic rise in Open Interest like this and it is almost completely driven by small speculator buying, that is a textbook Larry Williams sell situation. What you do with that is up to you.

As I sign off it is looking like next Monday is going to be a great day to short some things. Have a nice weekend. Thanks for reading, this week was my biggest week ever for traffic here according to the stats.