Here is another view of the same Comex Gold chart. I have displayed the Large and Small Speculators below. These two groups are notoriously wrong about market direction. Notice how I have market off a level with a horizontal line of bullishness amongst the small speculators. The two vertical lines represent the last 2 times their level of bullishness was in the same area that it is now.You can see that both of those instances preceeded a price correction. We are approaching that level again now. This is more reason in my mind as to why someone would not want to chase this price move right now. You can also notice the same general occurence in the large speculators in the other graph. The only conclusion that I can draw is that a pullback is coming soon.
4 comments:
How do you get access to knowing what the Commercials do? If this system works so well, as it seems to, why don't all traders use it? Why don't Wall Street mutual funds use it?
Thanks for the charts, they're cool.
From my experience people in general tend to act in an undisciplined fashion when it comes to investing. Emotion and opinions take over. Even experienced traders, do not use this like they should.
They always think they "know better." I could give countless real life examples of this. I have a good friend who thought he knew better last year on something. He thought he knew why for the first time ever, why a particular phenomenon calling for a stock rally, would fail for the first time in history.
I was not that smart, I just went with what I knew had never failed knowing I was not "smart" enough to know in advance, when the first time in over 100 years, this particualar event would fail.
Well, the dummy (me) prevailed, and he lost all his money fighting the rally.
People are just not disciplined enough to follow a correct program. I have so many examples of people who have taken the exact same trades I have. Those trades that went on to be big winning trades for me were losing trades for them.
How did this happen? They second guessed the rules, and got out at the wrong time. They inserted their opinion about what was currently happening that made their exit the correct decision. They got a littel nervous when the trade went against them by a small amount.They just did not follow the rules.
Further, after taking a loss when I had a win, they concluded that since they lost money in the trade, that my trade was no good, and the system that generated it was not worth following.
Just to let you know, that particular system went on to have 22 more consecutive wins, before taking a loss. (This happened last year)I have seen this happen over and over, people get in or out right at the wrong time due to emotional decisions.
They went on to search for the next "holy grail." I suspect they are on to yet another search as we speak!
This COT data is available to anyone. It is a pay service to get it formatted like I have it here through Genesis FT.
Chris, what is your annual return using this method? What percentage of time are the commercials wrong? If it is so simple, why doesn't everyone use this system?
I do not know what percentage of the time the commercials are wrong. As I have said, this is a starting point to look for something, not a system in and of itself. There is no "annual return" of any kind, because this is a tool for a trade setup, not a method.
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