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Tuesday, March 06, 2012


A QUANDRY IS DEVELOPING




As we sit on what appears to be another incredible call by the mystery forecast for a high on 3/2, we face a big problem going forward. I have to admit in all my years of trading I have never come across anything like this. This has been dead on balls accurate for so long now, there is absolutely no way to not put it at the forefront of my trading. As I have mentioned earlier, this forecast measures things about the Eurodollar, although in a very unconventional way. I will at some point reveal exactly what this is once the word gets out. It is not my creation as I have stated, so once the creator goes public with it, I will explain what this is. It really does not matter, it makes no sense at all to me. Once readers know what it is they will also reject it as being ludicrous.

However, as we see it peg almost to the day one market turn after another, I face a big dilemma in June. This calls for a significant low to form and a rally that will last through the end of the year to begin. This is in almost direct opposition to Larry Williams forecast, which is a big problem for me. I have seen his forecast work so well at times that it is hard for me to go against it. However, this suckers track record so far is blowing away the forecast in terms of how accurately it has picked the turns. At times his forecast just picks turns, so there could be an inversion meaning that a high can be a low if we decline into it, so maybe that is how this will be resolved. For now that is 3 months off so there is plenty of time to armchair quarterback that play call.

I would love to tell you I am short the indexes, but I am not. I have had my ass handed to me over the years trying to short breakdowns in running markets like this has been, so I have not done it yet. I do think now in many markets, that the bounces from here are shorting opportunities since we have broken below the most recent pivots in most places now. The way markets have traded recently, they may just roll over here with no bounce. We have seen one V top or bottom after another. I recently went through many of my bad trades last year, and found one thing after another that they had in common, they were against the trends. That is not a surprise since I do try and get a bit cute at times doing this, but I was surprised at how the charts looked at the times I did the trades. Had these trades been done by a student of mine, I would have scolded him to no end, so I get no hall pass either.

No matter how fancy anything you use is, there is one thing I always find in common to any trading style when I go back and see where it bought and sold. The best trades and biggest wins are always with the trend of the market. Yes there are exceptions here and there, but the question is do you want to be consistent, of just swing for the fence over and over and hope you finally connect on one? That answer is an easy one for me, and it is why I am not short the indexes yet. The next chart just shows something very basic that I am sure most people already get, but I can tell you this is very valuable to keep in mind.




If you just keep an eye on the most recent pivots that precede that last new high or new low, you will stay on the right side of the trend most of the time. You can see here now for the first time, we have penetrated the last pivot low that was formed prior to the highest high. This is a short term trend change, and now I will be looking to short rallies. It is true that when markets get choppy, these levels can get violated and not mean as much, but there is no holy grail. If you keep this type of thing in mind, you will have the wind at your back most of the time. It is for this reason that I have not shorted this market yet, but now I am looking.

Good Trading


6 comments:

Anonymous said...

Chris

Is this mystery chart you are reffering to by Tom McLellan?

Chris Johnston said...

yes

colin said...

Chris, when you talk about the 'last pivot low before the high', I see there were some higher pivot lows before the actual recent peak. How come you dont use those? (the ones formed by the outside days).

therefore, I guess the question is, how do you define your pivot lows?

Thanks

Anonymous said...

Thanks Chris for the hint. Here is a link to the author's public disclosure of the model. Cats out of the bag! http://www.mcoscillator.com/learning_center/weekly_chart/eurodollar_cot_indication_calls_for_big_stock_market_top_now/

Chris Johnston said...

the short term structure of the market in terms of trend changes when the most recent pivot gets taken out. There is no magic to it, if you want to go back more than one, that is a personal choice. I have not found that to be significant in my research and trading.

I guess we can talk about the mystery chart now.

Anonymous said...

"...this forecast measures things about the Eurodollar...I will at some point reveal exactly what this is once the word gets out... once the creator goes public with it, I will explain what this is"

it is public and all over the web:

http://www.mcoscillator.com/learning_center/weekly_chart/eurodollar_cot_indication_calls_for_big_stock_market_top_now/

rotrot