Golden Moment?



Here is the chart of the Silver trade I entered the other day just exited for a large profit. It certainly appears at the moment that my call over a month ago for a top in the metals by Mid oct might be one of the best calls I have ever made. We will of course have to see now what happens, we are drifting into an area that if the trend is going to stay intact on a weekly basis, needs to hold.



I also have displayed in a sloppy fashion another short trade a made last week in this market that was a loss of about $1900 per contract. It is always easy to just post everything you do right, and too many phonies out there do that. To be credible, I felt I needed to give the full picture of what I actually have done here. I still came out $4,000 per contract ahead on the 2 trades and that is the goal, to make a profit, not be right in a blog call.



The stage is set for a massive washout in this market if we do not hold right here based on the above comments about weekly support. Based on the fundamentals I have clearly layed out here, this could be the beginning of a substantial downward move in the metals. Alot will depend on the stock market and the dollar here. Many currencies appear to have topped here and the dollar is close to giving a buy signal, so this is all falling into place here. I do not expect the bulls to give this up easily, but with this being month end, if the funds cannot rally stocks here in the last few days with the standard window dressing skit, this does not bode well for the next couple of weeks in any of these correlated markets.

We are right at the 50 day moving average in stocks which from my testing does not mean anything, but it is a widely watched support area. If we are going to hold, we need to do it right here or fund selling will occur.

Are they Precious?

The Precious Metals took a hit today, maybe they are not so precious, we will see. Anyone reading here knows I have been calling for a top here in Mid Oct, so far so good.

I shorted this today at the indicated level, whether or not this is the precursor to something big or not, there is no way to know yet. It is a short term break of an uptrend. I mentioned this weekend that there was no sell signal in sight. There still is not from a long term perspective, this is a short term trade. We will have to see if it turns into something bigger. I have been saying now for a month or so that the largest trap that is out there is a long dollar short metals trade. The whole world is leaning the other way, or at least the individual investors are. As you have seen from my charts, the insiders are not leaning that way at all. They are leaning toward a downward move here and up in the dollar.

It will be interesting to see what happens bigger picture with this. This above entry is a short term trade, but has a decent sized target. However, if it were to leg down a large amount I would trail a stop and stay with it. There is no way to know at this point if this is anything more than just a short term break of a trendline, that will go nowhere or not. In trading you can never know that, you just have to take the trades and see what happens.

Groundhog Day

Here is Cash GOLD which traded sideways this week. As you can see the commercials have thier largest short position ever in this market. There is absolutely no question this market is in an uptrend, and no reason to short it yet. However, this condition is unique, so since I have spent 20 years studying how well commercials have tipped off big moves in the market, I have to be looking for a short here.

I mentioned in a prior post the possibility of a commercial capitulation in this market, similar to what occurred in the energy markets last year. Although there is no sign yet, I did read the other day that the worlds largest mining company was considering taking off their multi-billion dollar hedge. If this were to happen, it would likely cause a very large spike upward, followed by a larger decline.

As volatile as this market has been, this would make it off the charts volatile, and would prove the Gold Bugs right for a time. My call was for this month to be the top, so it is too soon to tell if I am right or wrong since we are trading in a trading range as evidenced by the daily choppy action. So far the Gold Bugs are right and I am wrong, but it is a nine inning game so we will see if we go to 5 or 10,000 here or back down to 500.

The one thing I feel needs to be stated though is that with the very tight correlation between stocks and everything else, if you think stocks are going down, gold will go down. So, a bet on Gold here at this level is the equivalent to buying the SP500 right here. Although not common, there have been other periods in history albeit brief, where this very tight relationship between stocks and commodities has been in play. It will end eventually, but it is anyone's guess when that might be.

" Turning Japanese I really think so"

This of course is a phrase from an old song and the theme today. I hope this chart is readable, if you click on it to enlarge it, everything should show up properly.

This is a current short trade I have been sitting on in the Yen with my trailing stop and profit exit displayed. This market has diverged from all the other foreign currencies who have been in space orbit recently. I will get hit on one of these two orders soon for a profit, it just remains to be seen which one. Hopefully the lower one.From a valuation and sentiment standpoint, this market is actually setup for a buy, but the shorter term technicals dictated a larger pullback first, so I was looking for a short entry.

You can see the significant divergence in the oscillator at the bottom of the screen as this market soared to it's recent highs. Timing is always another matter, but when I see this I begin to look for reasons the market will change direction. One popular pattern that is used is what is called a 1-2-3 high or low. This would be one of those although that is coincidence, it is actually a quite different pattern by things I have not displayed, but by chance it looks the same here.

Many years ago I tried the 1-2-3 pattern and found through losing money that it has no edge in the markets. However, the basic lower highs concept of it is sound. You just wind up trying to fade too many trends if you start by looking for 1-2-3 patterns. It should be the last component of an entry, not the first. Once you are setup for other reasons, it would then be ok to use that technique to use an an excuse to pull the trigger on something.

Is there a valid comparison between today and the great depression in stock patterns?



In 1929 there was the crash which represented a .618 retracement to a significant low made in 1921. In 2009 we completed a close to .618 drop also to a prior significant low point. At the end of 1929 into 1930 we had a very sharp rally that retraced a bit more than 50% of the drop and it took about 5 months. We are currently in a 7 month bounce that has retraced a little more than 50% of the drop.



The 1929 recession was the result of a Real Estate Bust, so was our current recession. Government patterns of intervention are also very similar to what occurred back then. Unfortunately, having just one prior occurence to compare to does not a lock prediction make. I have seen hundreds of patterns that repeated almost identically for many years, that now have no predictive value. As a result, even though the chart patterns and events surrounding these things are eerily similar, I am hesitant to conclude that this pattern will repeat. If it were to as you can see on the chart, we have a waterfall coming very soon.



With all of this aside, I am treading cautiously here because it is just impossible for me to believe some of these earnings reports that are coming out, especially from the banks. From some friends I have in commercial real estate, I have an expectation that we have some difficult times around the corner, and banks do not appear to be fully anticipating that in their write offs they are making. Also we have seen some commercial selling in the NAZ in particular, and Sentiment is creeping up to very bullish levels in advisors, which is bearish.



The net of this post is this. If you have been able to hold on through this bounce, I would suggest having close stops on what you are long. If we keep going then you stay in, but if we start to roll over, you can take your profits and be out in case we really roll over. By any measure this move is very extended having virtually no retracements. As much as it is great to see the account balances rising, these types of moves have a tendency to have a big air pocket in them. There is really no support points at all, so fund selling could hit the streets all at once if this starts to roll over.



I think this is mostly to all the market manipulation we are seeing by the government. It would have been much better if some decent sized retracements would have been "allowed." This way there would be meaningful support points to hold declines. I do not see a single one on the chart.

T BONDS

Here we have a market that I think is setup for a possible entry on the short side if we get a little bounce here.

We have broken the uptrend as evidenced by the green live on the left, and along with that we do have divergence in the oscillator at the bottom. We do have a very strong tendency for a rally to occur at this time of the year in this market. In fact it is one of the strongest seasonal tendencies out there. I have this marked with a red arrow in the second graph. However, seasonals at times can go awry, evidenced by this years stock market rally. It has completely ignored the seasonal tendency for a late summer decline.

So, this means that we need to be aware of them to look for possible opportunities, but not swear by them. I think a trade is best when it is also supported by seasonals, but if everything else is lined up and this is lacking, that does not stop me from making a trade.

There are some things that I look at that are not displayed here that dial this in a bit more for me, that should setup a possible sell entry with a day or two of a rally here. If we just sail upward from here for a week or so, it is likely my short term indicators will turn back up and invalidate the setup. As a result, look for a one to two day rally, then sell weakness if that takes place for an entry.

Is this finally the Golden Moment?

Let's revisit my call for a major top in GOLD now that we have reached the time period I designated. One of the distinguishments that needs to be made for those who might have stumbled upon this site for the first time is as follows.

I am a trader not an economist, so all of the trades I make are based on what I consider to be the fundamentals of a market based on what I have learned over the years through Hard Knocks University. I do not represent in any way that people's gloom and doom theories about our currency are right or wrong, and what if correct effect it would have on this market. Those opinions may well be correct, I really do not care. Trying to make big picture calls like that based on just arbitrary opinions is not how I approach trading.

It is much easier in my opinion to look for the next 3 months move in prices than the next 10 years. So lets again revisit why I am so bearish on this market. As you can see from the chart, we have the largest long position of small speculators in history. The horizontal line marks the old prior peaks. As you can see as clearly as can be, each time we have been at these levels, there has been a major decline in the price. At the same time you can see with the green line the heavy selling the commercials have been doing here. Also, Sentiment is in the bullish camp. You can also see what generally happens with sentiment bullish, declines.

Why is this true? After all I could just be drawing a line on a chart and be data mining for a result? In general small speculators are driven by emotion, commercials are driven by very detailed market information, they actually mine the product. As you can see recently, this whole run up has been driven by small speculators buying. There is just simply not enough purchasing power numerically for people buying one's and two's to hold up price in the face of selling by deep pocket players. Also individuals tend to be late to the party and wait wait wait, ok now let's buy now that we are sure it is going up. That was real estate in 2005. I cannot tell you how many people said, "well I am buying it as in investment." Some investment it turned out to be, a 50% decline in two years!

Since commercials have the most knowledge of the real supply and demand situation, they are the most informed. The one asterisk is that they are by nature hedgers, so they are often opposite the trend like this. This is why timing just using them alone is not enough. They can be wrong for months at a time, but in the end they are most often proven correct. Now the burden falls upon the individual investor to keep prices up here while the deep pocketed people are selling into this strength. At some point this will give way.

There is a seasonal tendency for a decline right now which is why I chose this time frame to make this call. However, if we were to go sideways here then roll over in a month I would still consider my call to be pretty good. Of course if we go up another $200 then the call is lousy.

I am looking for short entries every day here, but likely in Silver since it has been weaker. It is basically the same trade.

GROUND HOG DAY

Here we go again with the early morning weakness that has been evident often in this monster up move, it has typically been reversed into an up close by day's end.

I have projected on the screen what things would look like if today we close below yesterdays low, again it will require a minor miracle, but just for fun let's say it happens. After all the day most likely historically to have large down closes is Friday in the stock market, with Monday being the runner up. We once again have the 5 point megaphone pattern that has formed and as I have written about previously, these patterns are more significant when they occur after an extended market run like we have had here.

Along with that we have a 3 point divergence in the Pro Go Oscillator, a Long Time favorite indicator of mine created by Larry Williams. Again for the trade to be legit, we need a close under the prior days low not just an intraday penetration of it. Some times when I have used this I have entered intraday front running the close in case the market runs away from me, and just exited at the close for a loss if it does not close below the low. This time, I am going to wait due to the number of fakeouts we have had intraday during this run up here. There is really no reason to believe this market will top right here other than it is so incredibly extended by any measure to the upside, that a waterfall could happen at any moment. We have seen recently heavy commercial selling in the NAZ, which does tend to lead things. Also that index if you look at it vs the SP 500 is lagging considerably. This is not what we want to see in a up trend, and it is a warning sign that we are on thin air here.

We seem to be making an inordinate amount of V tops and bottoms in markets nowadays. I suspect this is due to electronic trading and it's influence on the markets. As a result we get moves like this from March that just go straight up with no retracements at all, hence no real support points to help when declines start. There is major resistance in the 1121 - 1154 area which are Fibonacci retracement targets. The first is 50% of the whole down move from 2007 and the latter is what we called an AB=CD leg which projects symmetry from the rally from March to June, then adds that to the minor low in July, and projects a completion of this leg at that level.

I am not a huge Fibonaccci fan simply because all they do is project numbers in space, but alot of the big boys on Wall Street watch these levels so at times they can become self fulfilling. If we keep going up and you have had the guts to stay long this whole time, take some money off the table in the 1120 area, unless you think we are heading to new all time highs.

It is time to grade myself on my recent calls. The beauty of trading is that there is no BS, whether you are right or wrong is measured in dollars regardless of what they might be worth!

Here are my recent posts and how things turned out:

Gold - I have been calling for a top about Mid October. We are here now so it is too soon to tell whether this call is any good or not. I did post a sell for Silver, which was a great trade that I personally did very well with. Grade A for the trade, and ? on the call, too soon to tell

Bonds - I said there were short term buy signals due to the seasonal. Well that lasted one day and we have gone down, D - on this one.

Crude - I mentioned if anything there were buy signals on the daily chart, we have gone straight up. I also said long term I expect us to go way lower. A on the daily chart comment, and ? on the big picture comment, too soon to tell.

Dollar - wrong about this no two ways about it. Took one short term trade that I exited wisely for a small loss and pointed it out live right when I exited. F for the call, B + on the trade. The trade was terrible, yet I made a great judgement on pitching it early. This is how you prosper as a trader, keep your losses small.

Cotton - No grade here really. I said we could be setting up a sell if were saw a reversal in the next couple of days, which did not happen.

Market correlation comments - A + they have continued incredible as it is and being aware of them saved me a bundle of money this week in both position size, and screening short trades.

Overall - very marginal, my analysis has been worse than it typically has been, C -. The only reason it is that high is that one Silver trade made a bundle, and net dollars is the bottom line.

Fitty Cent

An annoying talent less punk who " sings" but also possibly our currency.

As I post this the dollar is close to making new lows again in this bear market it has been in. As you can see from the chart, we are entering a seasonal up period on average, yet we have a big down trend, and also many oscillator readings are also bearish.

Once again I will state that it is my view the stock market is driving this down and not vice versa. Tonight we get the "bullish" earnings report, then the dollar declines. That is the sequence we have at hand. When you watch the markets tick by tick, the SP 500 always moves first, then there is a hesitation by the dollar, as if to say, are you sure you are going there. Once the dollar seems content with the SP move, it then moves in the opposite direction

At the end of the day, it might very well be that the government is pushing this rally ultimately to lower the dollar. A dollar decline is really the only way out of Barry's policies that won't ruin us for 50 years. However, I still maintain that the way to bet against Barry and his attempt to really fundamentally change this country, is to be long the dollar. A bet on the US is a bet on the dollar. Now, with that being said, timing is something else entirely. I really think that no one man can really ruin this country either by intention or accident. So the long term bet is on us, but I am a trader and there is no way that I can see to bet against him in a big way just yet.

It won't do me or anyone else any good to just buy into this meltdown blindly, just because I have a certain bigger picture view. We have retraced such a large percentage of the up move off the lows from years back, that a full retracement is now probably likely. I did take a swing at it the other day as discussed in here. I will also look for other entries. It could very well be that the real entry is a long ways away, we can never know the future. For now the trend is solidly down, so I will require a perfect setup to try again. I trade mechanically so I will take the setups when they come, but will filter them to some degree in this market until something changes.

This is the short squeeze of all time waiting to happen just like GOLD is a knife down in the making. Timing those moves though is the whole ball of wax, because they are both very strongly moving opposite of where I think they are ultimately going.

COTTON

Here is a market I have not covered before in here. This is the December Cotton contract which is potentially setup for a short sale. As you can see the seasonal tendency is for a decline at this time.

We have had several days with higher lows and higher highs, yet we still have not taken out the prior pivot high. The "secret" oscillator at the bottom is indicating a possible failure here of this rally to have a break out.

If we get a break down from this pattern here prior to taking out that prior high, or right afterwards, and a reversal, this will be a good short opportunity. This does seem to be a market that marches to it's own tune and is not caught up in the upward vacuum the stock market has created. As a result it could go down even if stocks keep climbing.

Most markets are so tightly tied to stocks now, that they will not decline as long as the stock market keeps rising. As I have discussed here previously, this relationship makes no sense, but it is what it is. This is taking place and has to be considered when making trades until it ceases. Here we can trade this market on it's own fundamentals and not have to worry about a stock market influence.

On a separate note, I will be re-entering the dollar long side trade tomorrow on strength if we get some.

FOR THE RECORD

Since I posted more or less the live entry into the long Dollar position, I am also posting the exit for credibility purposes. It is easy after the fact to say well I did this or that, and alot of people do that so you think they never take a loss. This is not believable, and I am always skeptical of people who tell you what they did after it is already profitable.

When I watched the overnight ramp up again across the board in almost all markets, it was my judgement that a short trade against it which is what a dollar long is here, was not too likely to work. We are in an incredibly strong bull market now, and I will continue to choose my spots to try and time the reversal that I think is coming. However, at the same time, keeping losses small is probably my single biggest focus.

I recently had a 22 trade win streak come to an end, and I know it is likely I will lose on a few here, so I am not going to give back too much of the house money if I can help it. This is what trading is, grinding it out. I am a reversal trader for the most part so trends like this do present challenges because alot of the signals I use are designed to time reversals in price. Even the best of them fire early in situations like this.

I am not so stubborn that I would not take buy signals, I would if they showed up, there just have not been any with my methodology. So it is a $300 per contract loss on this one and on to the next one. We did get another COT sell signal in the NAZ last week from the COT data, so as much as I hate to look for another sell entry with this moonshot that is going on, I follow my methodology come hell or high water. As a result, I will be looking for a short entry in the NAZ futures in the upcoming days.

Here we are again with my nemesis for this year the Dollar. I have been wrong on this market in terms of my big picture view, having expected a rally for awhile that has not transpired.



I went long this market on Friday where the red arrow indicates. As you can see we are at what in the past has been a seasonal low point, and there is divergence between the price and the oscillator. I have no idea if this market is actually going to find any traction, but I do not trade on my opinions. This is a buy setup for me so I took the trade, PERIOD. If I am wrong I will get stopped out and move on to the next one. There is a little bit more to this entry pattern than just what I explained, but I am not going to delve into it here.



In general, buying in steady downtrends like this is not a high odds probability. Often oscillators will diverge like this for months, and the price will just march steadily on. I do still maintain that this is a short squeeze in the making at some point. I know of nobody other than a few fellow traders that are looking at the long side of this market. The bears have been right, and I have done 2 different short trades on the way down that have profited. However, by and large I have missed the boat here being too bullish too early.

No Clouseau This Time

Last years runup was one of the all timers with the head of the CFTC inspector Clouseau "not understanding" how it could happen. That idiot of course was involved in classifying speculative funds as commercials allowing them to run the price. Thank God he demanded an investigation!

Here is how Texas Tee looks on a weekly chart. Notice how incredibly closely correlated to the Dow average this market is. This market has no historical basis for this, and in fact I did a comprehensive study on that relationship when I used to write my newsletter. I did it because I was so tired of hearing CNBC, one person in particular, explain equity swings based on the price of Crude Oil. Of course the study found absolutely no basis for this claim whatsoever. He is one of the hosts not a guest commentator, in all fairness to the guests.

Notice how well this market has followed the seasonal pattern, making the drop on schedule, then the low on schedule. We are due for a decline based on seasonals now. Also notice how well the commercials have done in picking buys on dips for us here since the low. All three red arrows spotted good buying opportunities for us when we were able to see they went long.

At this point this markets fate rests in the hands of the stock market. It has been lagging a little, but still almost moves up and down tick for tick with the Dow. I have been calling for a decline in stocks, so by association that would mean a decline here. I do believe that is the greater probability, but really do not see a trade opportunity here right now. If anything, the daily has buy signals right here. I am not taking them due to the seasonal down bias.

It is unclear here whether stocks will ramp up again, the recent high that was made if it were to get taken out decisively could launch the rock and roll show again, and this will likely get pulled along. If stocks do decline, this will likely go down. Big picture, I think Crude is going way lower than these prices before it is all said and done, but there is nothing to justify a trade right now.

BONDAGE!!



Here we have the 30 yr T Bonds weekly chart. We are nearing one of the better seasonal dates to be long this market as indicated by the arrow furthest to the right on the chart. Our friends the commercials have not really been of much help recently in helping us call the swings ( red line in third graph ). What has been of good value is one of my custom versions of COT study. Notice with the 3 Gold lines how well these sharp changes forecast the next move well. Unfortunately, there is not a good indication right now via this indicator.



We have had some commercial selling net over the recent weeks and months, so that does support a potential sell here, but the daily shows up short term buy signals right here on this dip into the seasonal period. In this unique period where so many markets are inextricably linked in ways they have not historically been, it is imperative that we view things in relation to these other markets.



So in summary here is what I see. A panic rush to the metals, gold specifically by small investors, the big players selling with both hands there. A stock market in a very strong uptrend and even though I have been calling for a decline, no meaningful one has happened yet. We have the dollar getting pummeled. Energy prices relatively weak.



In deciphering this it seems we have somewhat of a decoupling of the energy tie to stock prices, which never made any sense to begin with, a good thing. Metals tied at the hip to stock prices, with the currencies right there with them, of course the dollar being there in an inverse fashion. Bonds are decoupling a little also, as they are stronger than what I would have thought considering how strong stocks have been.



Net net, where the stock market goes is going to determine the fate of many of these other markets so in my personal trading any position in any of these I treat as the same as the others. If short Silver for example, that is basically the same as shorting the stock market. Being long bonds is also like being short stocks. Long currencies would be equivalent to long stocks. As a result, take this into account when determining position sizes in trades. If you were to be long the Euro, Gold and the SP 500 and short Bonds at the same time, that really represents one position times 4 in risk. All those trades will likely work or fail together, so you would need to take 1/4 of the risk in each one to have the same overall risk.



This has rarely been the case in the past, but it has always been the case that you need to know what the correlated markets are and adjust your risk accordingly.



I am trying to get long bonds and short currencies today, and long the dollar. I always buy above the market and sell below it, so I need moves in the desired direction before entering. So far none of the orders are filled so we will see what transpires. I have adjusted the risk as per what I just explained. I hope to get a more clear read on the Bond market overall soon but in the abscence of a clear sell on the weekly, I am deferring the the seasonal buy zone for long entries.

Am I just a Golden Fool or is this a top?





Gold is exploding this morning continuing its upward trend. This does not change the fact that it is setup for a decline. Being setup for a decline is different from a sell at the market call. We will have to see when the COT report comes out if this is the small specs again, but I suspect that it is. As you can see from the seasonal, mid month is about when the seasonal high kicks in, so this is par for the course here so far.





I have labeled a 5 point megaphone pattern that is in effect now which is a trap pattern I have written about previously that has been around for a long time. I did not create it, just learned of it. What is required for a short entry is a close below the prior bars low, so if that were to occur tomorrow, it would be a sell by this patterns rules.





Silver is a much weaker market by price pattern, and why I did the short trade I posted there this past month that worked out so well. That is also where I will be going to short this when I take another swing at it.





There is one possibility I can see for this market to really take off here and I will state that now. Rarely but occasionally, commercials ramp up the hedging they do like they are in this market by building a huge short position. They try and contain price will all their might. However, at some point they wind up losing more in this hedge than they can afford, so they capitulate, and give in. When this happens they go in and buy covering all of their shorts which causes a monster spike upward, that is quickly reversed. This is kind of like a rocket booster firing, it creates huge momentum for a burst, then fizzles out and a roll over of epic proportions happens. This is what occured in Natural Gas last year. It is very rare, but has happened a few times over the years so something that could happen here.





This is why it is very important to have entry and exit techniques that are sound. Just because we have this wonderfully setup market, it does not mean you just go out and short it, there must be some shorter term patterns to support the entry. Fundamentals are hard to time, you just have to watch them and be aware of them. The Gold bugs have completely different logic for their bullish view than this, it is not based on commercial positions but more on a gloom and doom economic view. They could be right, I am just a dumb trader.



If you think about it, so far my call for this market to top has been wrong, although I have said that this is a zone, not given an exact day for a top. However, I have made quite a bit of money on the short side in Silver over the last few weeks, while the market has basically gone sideways. This is what trading is all about.

"It's Money that Matters"



One of my favorite songs by Randy Newman, also the topic of the day, the US Dollar.



Here is a very busy chart, so let me dig into what all of this is. First of all the chart is that of the weekly dollar index, with the Black Line overlayed which is the closing price of the DJIA. I have green lines marking the very tight inverse relationship that has developed between these two markets. As you can see, they are trading in very tight correlation. Which is driving which is the subject of alot of debate and as per usual, I have a different view than most on this.



First of all, this inverse relationship is something that is not typical historically between these two markets. There has not really been a consistent relationship of cause and effect between these two markets. It is my feeling that the dog is the Dow and it is wagging the tail ( Dollar ). When I watch these markets next to each other, it is the DOW that moves first, which is then followed by an opposite move in the dollar index. I have never seen it be the Dollar first followed by a stock reaction, not one single time even on an intraday chart.

It is my belief that the reason this relationship currently exists is that really the only piece of good news in the world economically has been the stock market rally. When stocks are rallying everyone just generally feels a bit more optimistic. Individuals see their decimated retirement accounts increasing, and they become a bit more optimistic about the future. It allows a little more wiggle room for many bad things too happen.



One of the things the PPT has done over the last 10 years is to "arrange" for rallies in certain places that allow people to make some money while other things crumble around them. The Tech boom, the RE bubble, stock rallies etc. While inflating certain things artificially and doing this on a rotating basis, it has basically built the house of cards that fell last year.



Now we find ourselves in a quandry that the ammunition to inflate something else right now is being found in things that are obviously going to cause larger economic problems in the future. So, in the midst of all of this, a relationship between the dollar and stocks has developed that is more a sign of the times than really based in economic fundamentals. This could decouple at any time due to this, but it has persisted for awhile. Enter the PPT. They know that inflation risk is potentially out there yet we are in a deflationary spiral, so that risk for the moment is nominal at best. They can stimulate all they want without worrying about this. They have engineered this stock market rally and kept it up for awhile now which in turn has kept the dollar weak. However, if we do get a significant stock market decline, assuming this relationship stays intact, we are going to get a big dollar rally.



We are at the time of the year where seasonal peaks in many currencies have tended to occur, which is another supporting element for a dollar increase. The commercials have a fairly heavy long position in the dollar, but their buying which is the red line in the third graph was not able to stop the dollars decline earlier this year. I also look at GOLD as being a market setup for a huge decline as I have written about recently, which would also be bullish for the dollar. I think the stock market is making a significant top right here, again bullish for the dollar. We will know this week whether the stock decline last week is just a retracement, or the beginning of something bigger on the down side.




As a result, even though some direct dollar fundamentals are there for a rally and some are not, I have to lean to the long side of this market for the reasons just reviewed. It is hard to find anyone anywhere who is bullish the dollar other than a few traders who are some of the worlds best. That is the company I want to keep, not that of the armchair economists thinking that the dollar is going to get crushed.

I am a short term trader so I do not always trade in the same direction as the big picture views I have, I take what I see when I see it. I have made some money on the short side of the dollar recently even though I have been looking for a rally. As a result I still could do a short side trade in this market. However, for the big move, I think it will be up not down.



As I always say, I could be wrong and that is what stops are for.

We are headed for a big down opening today after the NFP report. As you can see this chart shows a buy on it, what does that mean? How could that be there when I was so bearish a few days ago, basically Friday?



That buy signal is a short term mechanical timing signal based on the Vix and a few other things, it is not a long term entry. If you look at the bottom of the chart, you will see the oscillator turning down confirming the down momentum we are obviously seeing in price. Bigger picture for a downside move this is what we want to see. However................



The gap down open we are about to get could very easily be reversed for a short term bounce, again the idea I have previously discussed about trapping the most people. I will be taking short term profits in some of the short positions I put on the other day on this open. This does not mean I am bullish, it means it is time to ring the register a bit on a big trade win. I will not be taking this buy signal and going long.



I was listening to one kid on CNBC this am after the number was released, who was essentially being consdescending to Bill Gross about his future outlook, when Bill Gross has been dead on correct with what he has done in recent months is so typical. I do not know why people can't set their ego's aside and just believe what they see. I know personally that when my ego gets in the way in trading, I lose money virtually every time. Who the hell is he but another liberal on the spin band wagon? The report was not good, any moron can see that. I would like to see his account statements to see how much money he makes or likely loses in trading with his profound insights that make him superior to Gross. Better yet he is probably an economist who does not even do any investing at all, and is wrong most of the time and it does not matter.



Gross has been right, why not give him his kudos and respect his opinion, even if you disagree. After all he has made billions from being right over time.

When I mentioned yesterday that I went short the SP 500 here is the trade I did. Short entry was 1053.75 and exit was 1043.

Why in the world did I exit so fast? Trading is a thinking man's game and you have to react to what happens. Yesterday was quarterly end, so my logic was that when we got the quick sell program move down, the institutions would do everything they could to rally the market to preserve what was a great qtr for them. They did not want a 400 spot layed on them in the Dow.

I got a bit lucky on the exit, it was somewhat of a guess. I did not expect to see it move down that sharply and had intended to hold this trade when I entered. However, when that sell program just crushed the price that quickly, I "knew" a reaction of some type was likely.

I did re-enter a short position in the SH when the SP 500 bounced back up to 1058 toward the end of the day, which is a position I plan on holding for a bit.

Sometimes you have to take what the market gives you regardless of what your plans were entering into something.

DON'T MISS MY BIG PICTURE COMMENTARY AT THE END OF THIS POST

Here are the results of the Silver trade I suggested the other day, how I did it. We are now having a bounce up today, which should setup another short entry any day now, perhaps tomorrow.



My entry was right where I indicated it should be at 16.82 below the low of that day on the chart I posted the day before it. I work with exit targets, so when we got down close to it and started to bounce without my number being hit, I went to the market to take profits. It wound up right at 4K per contract as I have indicated on the chart.



This is a perfect example of a fundamentally setup market combined with a valid short term entry and exit. It is the correct way to trade in my view, and I have tried just about every approach that has ever been thought up or written about over the years.



One big picture thought for the time at hand. The markets always have a way of trapping the most people looking the wrong way at the wrong time. This is not necessarily true of just regular every day activity, but more so at critical junctures.

It is my opinion now that the move that would trap the most people looking the wrong way is a huge dollar rally and huge stock decline, accompanied by a big rally in bonds and drop in Gold. Of course they are all linked so if any one of them happens so will the others. The danger now is that I don't feel from just the general vibe of things, that very many people now are worried about a stock market drop anymore.



The other anecdotal evidence, is the ads in the paper to buy your gold items for cash, urgently. That is akin to a front page wall street journal article about how you can't lose buying real estate for an investment in 2005. Certain things just jump out at you as very odd and signs of a top. This for me is one of them, especially when I combine it with the fundamental setup at hand for Gold. We also do have that sell signal from Friday in stocks based on commercial selling in the indexes. There is also a lunar/astological cycle in play here. I am far from an expert in this area, but I cannot dispute how accurate some of these darn things have been historically. Larry Pesavento who is one of the kings of this approach stated on a radio show I heard the other day that he thought Monday was the high based on this.



I would not usually pay attention to that, but when it comes at a time when all the other things I watch are in place, I think we got some trouble here. Time to exit longs or be short depending on how aggressive you are. I shorted the SP futures this am.

Just in case anyone is not sure what to do here is the summary

SELL!

House keeping first:

1) I hope anyone who is a short term trader took that Silver trade entry from a few days ago.
2) The final numbers from the COT report do support the Friday post with one exception, the sentiment was not as bullish. However, the sharp spike down in the Commercials position is confirmed, hence this sell setup is in place.

Here is a market that seems setup to fall, the Australian Dollar.

Notice in the graph with the red line the huge commercial selling we are getting and have been for the last few months. Combine this with what is now a very heavy long position by the large specs, the black line in the same graph. Notice how they are now at the same amount of longs as they were when the high was made last year and how much lower the price is. Also, the commercials are at the same level of shorts that they were at that same peak.

Neither of these positions are at historical high or low levels yet so it is possible more room to run could be at hand. It is typical for comms to fade trends as they are hedgers by nature. As a result, you can not just go out and sell the minute you see something like this. Had you done that a couple of month back you would have been clobberred.

What this does tell you is too look for entry patterns now that support this fundamental setup. It certainly would be better if we had this picture without as large of a rally as we have had, but you can't always have everything perfect. In face my experience has been when everything is perfect, I lose money on the trades!

Here we have a picture of our beautiful government sponsored stock market rally. The nice uptrend is apparent. As anyone who reads here knows, I have been wrong recently about the selling opportunity that I thought was here.





The last commentary on this, I had exited my short for a small loss recognizing we were heading higher. We have gone higher since that time as I thought we would. However, we now once again have some interesting things developing. The Blue line on the top chart is the price of the 30 yr bonds. You can see from the olive lines on the top chart that the bond market had been rallying sharply prior to the lows being made. This is a known bullish pattern, and it worked, the market rallied strongly out of those lows. That was one reason of many that I posted late Feb that I thought a rally was coming.





Now we have the opposite situation, bonds declining with stocks rallying, a known bearish pattern. Timing this is another matter, this is a big picture fundamental situation that can take weeks to reverse the price direction as it did at the lows. It is just something to be generally aware of as a backdrop in your analysis.





In the sub graphs, you see the red arrows. These final weekly positions are not in stone yet because the COT report has not been released. These are projections, so they could change. If they were to stay here, we have sentiment back in the bullish camp( bearish ) and my hybrid COT index in the bearish camp ( bearish ). There is also a technical indicator at the bottom that is too complex to explain here, but that is a sell pattern in it.





So, we have a fundamental bearish interest rate situation, with three shorter term bearish indications. As a result, once again I am looking for sell entries. This is not a sell at the market situation, it is a now look for whatever patterns you use to get in and out of things with, and take the sells not the buys.

Here we have a potential sell signal in Silver. I wrote the other day about Gold being a prime setup for a decline. Silver and Gold do trade together, and this market appears to be a tad weaker than Gold, so that is where I am looking to get short.

If yesterdays low were to go today, we would have a valid short entry, indicated on the chart. This may look like a basic 1-2-3 pattern, and I suppose it is technically. However, with a 1 -2 - 3 you really want the first leg to break a trend line and this has not done that.

This market is setup fundamentally, seasonally, and now we have a chart pattern. As a result this is a trade that has to be done win, lose or draw. We never know from trade to trade which ones will turn out to be the gems and which will be coal. I spend alot of my waking hours trying to pre-determine this to no avail.

As to the Gold Bugs that I have argued with recently, there is no way of knowing if this will just be a trade or a major decline. However, the fundamentals say a large decline. Time will tell. I still maintain that if you are someone who has had the foresight to have bought Gold or Silver in bullion or coins, you have had a tremendous run.

Don't get greedy

IS THIS A GOLDEN MOMENT?

To the left is a cash Gold weekly chart. You will have to click on it to enlarge it, there is alot going on here. Below price the first pane is the commercials positions, then next below that is the small speculators gross position in number of contracts held.

There has been an overwheliming media blitz on this market and why it should go to 1500, 2500, I even heard 10,000 from Joe Battalia( he was quoting someone else ). The question is, is this the time to get heavily invested in GOLD? Who knows maybe it will reach these lofty numbers.

If you look at who has been buying this market on this recent runup, it is Small Speculators in record numbers, basically me and you. While at the same time, the Commercials ( the large players with the most money ) have been selling it. It is not shown here, but the Commercials have their largest short position ever in this market right now. They clearly are in a bearish mode. Notice what has happened each time historically when this combination has been in place, where the Speculators net long position was at the level it is now ( horizontal line in third pane ), and the commercials have been heavy sellers. The red arrows mark these instances. We have had substantial declines in this market when this combination has been present.

Anecdotally, I literally do not know of a single person other than me that thinks this is a fantastic shorting opportunity. Maybe I am the village idiot, but I am a trader, and this is a very good setup for a decline. On a shorter term basis, a few things I look at shorter term are very close to lining up for a short entry and it could happen this week. Whether or not the commercials will be big buyers on a decline, will determine whether or not I am bullish on any decline.

I do not think with this combination in place, it is a good time for someone who is contemplating a long term investment here, to commit money to this. It is clearly a time for a trader to look for a short entry. Seasonally we have also tended to decline, make a top in October, so we are close there as well.

I have commented that this is now a bubble, now you can see why I think this graphically. The small money is driving this last move not the big.

Well after reviewing just on a preliminary basis and as well as reading one of the COT gurus takes on the new COT report, my preliminary conclusion is that the game is being rigged further. They are keeping some things the same but the added items are the ones that concern me.

If you think about the 2008 Crude runup and how that was perpetuated by the CFTC and their mis-classifying CIT funds as commercials, basically allowing speculators unlimited position sizes. Then combine that with that idiot or liar depending on how you look at it, Gensler who feigned outrage and vowed action. You have to conclude that this whole thing is just one rigged outcome.

It appears to me now that in the new report, the PPT may now be allowed hedgers position sizes and also have it be obscured to the point where we will not know, it makes me think that any meaningful decline could be off the board for quite some time. This is going to allow them to basically permanently rig the uptrend if I am right about this. I still need to read the other gurus review of this to see if he has different insights, but that is my preliminary take on this.

In the face of a record number of lies being told by the new administration, is the greatest one of all, the pledge for more transparency. This could not be more opposite of that. If I was not actually living through this period in politics I would simply never have believed this type of thing could occur in the US.

It appears to me that what has been decided behind closed doors is that they government is going to take over the stock market and make sure it does not go down. The reality of it is, this benefits alot of people but what I think will happen is that it will stay flat. In most socialist historical examples, things just kind of stay the same, the big swings are taken out. So, they are taking out the downside, but also likely the upside.

I will come back with more once I have reviewed this further.

Here we once again have a megaphone pattern on the daily E mini SP 500 chart. You can see the night session so far on Sunday is very weak. The trigger for this pattern is a close below the prior days low, so we could see it on Monday. The PPT will be lurking and will not like this action when they wake up in the morning if it stays here, so we will have to see if they will allow this. When the volume is this light they can push the market around very easily.

I will not play this entry as my main pattern I look for is not there and there is not enough confirmation on this trade for me. However, we know a correction is coming at some point and now that is likely to be at a time nobody expects. This setup for tommorrow probably qualifies for that. They have now made another new high so many may feel very comfortable we are off and running again.

This can potentially be a classic trap pattern where a new high gets made then is immediately reversed. These can be very powerful moves in the opposite direction when they occur.

Foiled again

Referring back to my last two posts on the Stock Market, August 29 then the one following where I said the mood had changed, it is time to admit to being wrong. I pitched my SH short position 2 days ago and took a small loss. As a trader there is a time to admit when you are wrong, and quickly head to the sidelines. This is how you survive.

The last minute rally before the holiday on the futures buy program by what appeared to be the PPT was my first alarm. I actually added at the close that day in case it was not the PPT. The very next trading day it was proven to be them by the price action. At this point also if you look at the chart, Sentiment has gotten pretty negative, a bullish sign. Also, my hybrid indicator of the COT report has moved back into bullish mode. Also, we have had yet another sell indication, the red vertical line fail.

When you get failed sell signals it is simply telling us not to sell, kind of obvious right? In all seriousness, when a series of sell signals fail, that is a buy signal in my view. I am still of the view that this market is being almost completely held up by the US government right now, which makes me fearful of a downside air pocket at any time. Since it is being done for political reasons surrounding the health care debate, they could let it drop any time to make a point if the bill appears to be going down.

This is overall as a result, just a treacherous environment to trade in, one of the most difficult I have ever seen. I will still be looking to see if another sell signal shows up, but will be very demanding of it at this point. We are almost at the point where the last trade trigger I use is going to turn up, which will eliminate sells entirely for awhile. It has not done so yet but will in a few days if we do not get a decline.

Net Net, I am now flat, and if yesterdays low gets taken today I will likely re-enter a short side position. Barring that is it time to be on the sidelines here.

Here is my nemesis market for this year, I have been wrong one time after another here. Although I am going to blame one of my mentors for this who has been bullish all year and just been way off.

Ultimately it falls upon us as individuals to be responsible for what we do, although the trend in society is certainly to blame everyone else and not yourself. I am a throw back, so I admit to being just awful here and I should have seen my errors on my own before now.

How did I blow this? Mostly as you can see there was heavy commercial buying all the way down here during this cliff dive. I know that in general that is bullish, but also that commercials hedge quite a bit, so when you see it in a strong downtrend, it does not mean nearly as much as when it is in an uptrend. This is where my error was made. Once the pivots were taken out, the uptrend was over and I should have been looking for commercial selling for shorts.

As you can see, we have gotten that in the last two weeks, and bingo a big decline. If the dollar does not stabilize here, the whole deflation scenario goes out the window. Just by watching the markets as a whole we do not quite have the plethora of uptrends in commodities to make me overly worried yet about inflation, but it could be a matter of time.

On a side note, if anyone who reads this has any political influence, I would love to see them stir up something on the PPT. What they are doing now is just so outrageous that they are ruining the markets. Markets need to be allowed to function normally, just forcing them in only one direction to support an Intern who gives a speech every day on something is just beyond anything I ever thought I would see. It is also an abuse of the PPT's original intention when it was formed. They were supposed to support huge plunges, not further political agendas on a daily basis.

So what if the market happens to go down on a day health care is discussed. That does not mean anything. They need to quit trying to manipulate every thought people have for gods sake. Maybe people don't like certain ideas because they are lousy, and those ideas should be modified. Have we entered a phase where a group of political insiders are going to tell us every thought we should have?

Golden Opportunity

Rarely does a sell setup get better than this one. We had that explosive run up in Gold this past week and as you can see, the buyers were the dumb money not the smart money.

As you can see from this chart, the commercials have been sellers of this market during this run upward. We are now once again in the 1000 resistance range, this being the fifth trip up here. From a technical standpoint, normally the 4th push breaks through and generates an explosive move, in this case it did not.

The key thing to note here is that the Large Traders who are trend accelerators have reached their maximum long position and have not been able to push this outside of the range it has been in. When you combine this with commercial selling, it leaves the small speculators with the burden of maintaining the buying on a level that will support this market.

As we all know anything can happen in the markets, but this is a very low risk opportunity for a potential huge trade on the downside. If you are a gold bug, I would not suggest buying this market at this juncture. If you are a two way trader, look for sell signals. Even if we get a breakout, it is hard to see how price could be maintained at that level with the dynamics I just described.

Also, as you can see sentiment has sky rocketed and rarely do rallies come from this type of situation.

Well it appears the mood of things has changed somewhat for the time being. This is an intraday chart of the SP 500 futures, and as you can see now all the rallies are being sold as opposed to all the dips being bought.



Todays comedy from the spin masters was that it was good news that weekly unemployment claims were only 560k instead of the 570k that was anticipated! Are you serious? How in the world do people keep their jobs lying like this. I am not sure if it is just me getting cynical with age or if the media has just completely lost all sense of integrity.



However, the grand act of manipulation is ahead of us tommorrow when the NFP report is released. They will doctor the current number but look for a revision on the last months doctored number to accompany it. In other words, they falsify the data or play with it to show a certain current month number then revise the previous months fake number to it's real number. They hope for that to be a behind the scenes number that gets overlooked with everyone focusing on the current headline number.



This is not a new trick from Barry's group, it has been going on for decades. However, they do seem to be ramping up the doctoring of things.



Look for a sharp spike up that gets reversed on that report tommorrow. I think we are in a sell the rally mode here for a bit.

HOT FOR TEACHER?





Great song by Van Halen, and also my mood. I guess I need someone to teach me what to do.





We have several conflicting signals at this point. To the left is the Pit contract for the SP 500, shows a very bullish picture except for the seasonals and a synthetic COT Index ( the red line in the top graph under the price ). This synthetic index has been a very good predictor of direction although not perfect. On the other hand the emini SP 500 looks almost the opposite of his picture, with very bullish sentiment and commercial selling. In general the emini has been the better predictor of price movement in the last 2 years, the volume is much heavier there.





What to do?





There is a new technology which allows projecting price movement matching recent activity, and if that is used as the tie breaker, it is showing a flat to slightly upward move for the next couple of months. Historically these maps have been pretty good. Also, there seem to be way too many people now calling for a correction. As the saying goes, what everyone waits for will never happen.





I am of the belief now that what is going to transpire is some type of correction in September, but it will not be a big one, then prices will kind of meander sideways for the balance of the year. I do have a short position on in ETF's the SH as I posted when I entered my first portion. I have added to it as we creeped a little higher. If we do get the downward move at the beginning of September, which I expect, I will exit this position. I no longer believe at this point that there is a large profit opportunity in this trade. It is marginal at best, and a scratch or a little better is probably the best that can be hoped for.





I will monitor all of my tools if a corrrection does occur to see if there is anything taking place that warrants a change of this view. I have watched one sell pattern after another either fail, or in the case of the Megaphone pattern, not get a fill on the orders. Failed sell signals are buy signals.





I have been of the opinion that the dollar would rally just because the crowd that is typically wrong, was very bearish. Even a blind sow finds an acorn, and they appear to have one in their grasp for once there. Of course if a sharp stock move down were to happen, the dollar is going to soar. At the moment that does not appear likely.



Part of trading is admitting when you are wrong and getting out without getting hurt too badly. I think the bulk of the upward move has occurred here but the trend is very strongly up and alot of historically bearish indicators are failing here. As a result, it is just not a good trade setup anymore. If we were to get a downward move then a quick retracement that failed the highs, and it was accompanied by commercial selling, that is what it will take to setup this trade well for a short sale.



I will be there if that happens. Back to my corner and wearing the Dunce cap for blowing this market call. Fortunately my trading was better than my market calls this month.

Friday was certainly an interesting day. It is entirely possible that I am wrong about this top and we are just going to go straight up. There is certainly alot of political engineering going on with this rally as I have discussed previously. HOWEVER.....

We now have a megaphone type pattern which I have written about in the past. I am certainly not the creator of this pattern, but I have used it often since I learned about it 10 years or so ago. Generally it is most significant when it occurs in extended market conditions like we have here. I like it when the legs of it have symmetry like this one. Also, if Fridays move were to be reversed just after making new highs, it would be a classic trap move.

Since the NAZ has a weaker pattern than the SP that is the one to short if a short play is made. Basically a close below Fridays low on Monday triggers this trade. As a short term trader I have to play this trade if it triggers and will probably enter it intraday if we go down. There are also a couple of other things I look at that are saying Monday or Tuesday could be the high, so my feeling on this is that if this is to be a top of any type here be it short term or long term, this needs to come down right now.

Add On Here

Now that we have gotten another push up, I added to my SH short position on todays gap up open above yesterdays highs. I do not know if they can keep pushing this, but these types of opens at times can be traps.

Keep in mind that this is a position trade not a short term in and out type of situation. Ironically some of these moves up are not being driven by the PPT, they basically show up on down days not days where the market is strong from the get go. If you google Plunge Protection Team, there is actually a couple of very good articles on them.

One thing the american public might not be too pleased with is to find out that some of the huge derivative losses in these large banks that got bailout money, were from PPT buy programs during last years wipeout downward. Interesting choice, they helped stabilize your 401k's eventually but also took your tax payers money to pay for doing it. I wonder how a poll would come out on that?

I have orders in to sell below yesterdays lows today in the SP 500, no idea if we get there, and also orders to sell at yesterdays highs, basically a gap fill trade. Also hard to say if that will happen.

Meanwhile back at the ranch, this overnight futures move has brought alot of commodity markets with it and they are setting up nice sell signals for next week. Unleaded Gas, Silver and Copper, and some of the currencies as well.

Lets see today if the gap holds, the intraday trade has been so light lately that it is possible we just move sideways all day from this open, but we will just have to wait and see. In a normal market time, this gap would have a decent probability of being reversed.

Buck You!

This is a market that in all honesty I have been wrong about recently. If you look at the green arrows on the weekly chart of the Dollar Index, they represent buy signals or buy areas based on fundamentals.

Recently many of these have failed, which could be argued is actually a sell signal. In watching the price action of the markets, I have a completely different view than most people, be it right or wrong. When I watch the intraday ticks, I see the dollar reacting to stock prices, not the other way around. Some experts are claiming the dollar is driving everything, I say stocks are, in other words the opposite of that view.

I was recently in a Heating Oil short that wound up being my best trade of the year, just exited it. During the trade it was evident that every time the stock market rallied 50 points, Heating Oil also rallied. There is absolutely no historical relationship between these two markets. However, recently since the economic downturn, really the only ray of light has been the stock market rally. It has carried many markets with it.

In 23 years of trading I have never seen the almost tick for tick relationship between so many commodity markets, and stock prices. It makes absolutely no sense fundamentally. My theory is that some whiz kids at the funds have zeroed in on this recent phenomenon and created mechanical buy and sell programs for all markets based on this relationship. This is an overly optimized trade, which will eventually result in these funds getting clocked.

I have been guilty of over optimizing trading systems, so I speak from experience here. Getting back to the subject here, if I am right about this stock market top, it is likely the dollar will get a big lift off here as it seems to be trading almost directly opposite tick for tick, the DOW. It also appears that many currencies are topping here, so that makes for more reason to believe we have a dollar low.

However, my favorite reason for this call is that every wize guy in the world thinks the dollar is going to crash, and I love being opposite the herd even if at times I am wrong.

Looking at the arrows you can see the commercials have recently been heavy buyers, and sentiment was recently very low, the small fries with sentiment graph. Also, Valuation vs Gold was very low. These are all reasons to look for a rally not a decline.

GOLD BUGS - I wish I could call Orkin on them

I heard on a popular radio show recently "once Gold gets to 955 it will go right to 1000." Actually once it hit that number it went right to 900. So just to define that, with commissions and transaction fees that are charged, if you bought at 955 for that free ride to 1000, and paid the close to 40% added fees to get the coins your adjusted basis is 1337. When the price went immediately down to 900 you had a brilliant loss of 46% on your "investment." This took place in about 4 weeks, at least the stock market took a year to take half your money.

I guess they have the right to decieve you, it is after all the american way. Figure out how to take someone else's money in a dishonest way. Ironically these people cite the same experts at the big brokerage firms and their expertise in making these calls. These are the same experts who did not foresee the housing or stock market crashes, yet they are now to be relied upon? A free information packet? If I hear that again I may just start shooting. They offer something free that will lead you to lose 45% in two weeks!

As you can see from the chart at the 3 points marked, every time the commercials have gone into the sell zone we have had declines. This is what really drives market action, not these god damn phonies trying to squeeze commissions out of you. Now we are in that sell zone again, so I would expect we will see another decline. I am looking for a short entry in the metals right now.

LET IT BE, LET IT BE, LET IT BIE oh LET IT BIE.......



This is a great old Beatles song and also a message to the PPT. Why in the world won't you let the market just have a natural correction?



Here is a 5 minute chart showing the PPT at it's finest in the last few minutes of yesterdays market action. Of course I have harped on this repeatedly, and here is the real reason why I don't like this. This type of action is going to cause a V top and a huge downmove when at some point a fund liquidation area gets reached, and even their volume will not be able to stop it. I think had they just let a natural corrective move happen, this trend could have really had some additional legs.



It still could have, but if you go back in history and look at times when the government has tried to artificially control prices on things, eventually market forces take over and big moves in the unintended direction occur. It would be normal and healthy to let the market correct some here, but just artificially improving closing levels to stop it is just postponing the inevitable, and I think making it worse.



All that aside, this may allow for legging into more of a short position for me up here which will be nice. I was kicking myself mid day yesterday having not put my full position on, thinking I might have missed the opportunity. They really fooled me yesterday, I told many of my colleagues that I did not think the PPT was going to show yesterday.

As Howard Stern's father used to say to him when he was young, "Don't be stupid you moron!" I found myself with that thought at yesterday's close. What an idiot I was to state I thought they would not show up.

The next post will be on the dollar, we might be on the verge of a major rally there.

Time to get short



I rarely do this, post a trade right when I do it, but will take a shot at it today. I just put a position on with the SH etf to short this market on today's opening. I think with all the things I mentioned recently, along with the seasonal, and this tremendous divergence in this oscillator, it is time to look for the decline to begin.



I have no idea if it starts exactly today, but the only thing missing from making this a perfect setup is a heavier commercial short position. However, what has been happening recently is the commercials doing scale down selling and scale up buying. As a result, they are not giving us the advance notice they used to.



The negative in this trade of course is the PPT along with several funds that have every interest in keeping this up for as long as possible. The PPT for political reasons, and the funds just to keep their bonuses alive. However, at some point natural market forces are going to push this down. The public is just way too bullish right now as well as the advisors which is even more meaningful.



Valuations are very high also along with some trend measures reaching historical levels. You did read that right, on some levels this could be argued to be the greatest rally in history. One trend indicator I use has only reached this level one time ever, so by that measure this could be argued to be the biggest or tied for it, rally of all time. Keep in mind we have moved 50% or so in just a few months.



When all of these things get put together, it tells me this is the time to not only be out, but to be short. There are those last hour buy programs that have shown up every day like clockwork, and there is no reason to believe that will not continue. It might be the PPT, and most of the time it is, but it is also institutions as well. No matter, this trade is a hold not a short term play.

The challenge with this is going to be once the correction begins, how to guage if it is a pullback or a big picture trend reversal. I will tackle that when it happens. If we continue to creep up I am going to scale in more to this trade.