As some of you know that I trade emails with, I have been saying that I think we will get a bounce at the beginning of March. Here you can see the seasonal pattern that has been pretty reliable in recent years.



It is accompanied by a huge amount of divergence in the Pro Go oscillator, which is one of the best accumulation/distribution indicators out there. Ideally we would be undervalued and sentiment would be bearish, neither of those two conditions exist. In fact sentiment is actually pretty bullish the way I measure it, which is bearish for the market. As a result this is far from a perfect setup.



One of my mentors Larry Williams has called for a sharp rally to start about now due to a valuation model that he has that measure bond yields against stock yields. I do not use that but it is a nice tool. When I take all of this into account what I come up with is that I think we will get a rally here possibly into May which if we do could set up a tremendous shorting opportunity. For those of you that have not bailed out of retirement equity positions, this could provide a chance to switch into cash in those accounts.

I will post at some point in the future, where I think we are going bigger picture, which is much lower. However, there is plenty of time for that for now I think we are close to a decent bounce.

Golden Opportunity?

Here is a gold chart of the cash market without prices on it. Sometimes it is nice to take the clutter out and just look at the price to see what it is saying.

As indicated by the line below on the COT data, you can see commercials are selling this rally. That by itself it is not necessarily bearish and can in fact be bullish. However, what we see here is a selling action right at prior highs. When I couple this with a friend telling me the other day that her 9 and 11 year old daughters asked her if she was buying gold, and why not when she said no, I have to conclude this is a top in price. Also, noted famous traders Glenn Beck and Sean Hannity are hawking it on their radio shows. It makes me wonder who else is left to buy?

Tops are made when the market runs out of buyers not when heavy sellers show up. We also have the seasonal tendency for a top right here. At the very least this is a shorting opportunity for a fall of $100 or more. After that whether the buy on the dip is the right play will not be known until it happens and we see how the commercials act on the dip.

Here again we have the US Dollar Index. I have shown up at studios of radio shows and thrown pies in the faces of the hosts at this point for their gloom and doom views of the dollar. I knew when it was under 80 and I was calling for a big move up I was right when I listened to virtually every single other person being bearish.

The short term trading opportunity to short never fully developed properly from my earlier post. Now we are up against last years highs, which is going to provide some short term resistance. I may even short it up here for a short term trade. However, big picture if we take those highs out we could see a moonshot to the upside. This will likely coincide with the stock market taking out last years lows which will further trigger the flight to quality into the dollar which we have seen repeatedly for the last year.

As frustrating as all the things the government is doing is to me with all the bailouts, it is providing great trading opportunities. It is now obvious to me that we just have to bet against the US in virtually everything economically for awhile, so all rallies except the dollar need to be shorted. I am very worried about where all of this nonsense is going to lead us, but I might as well make money from it.

Today provided a wonderful example of Americas finest the PPT at work. We were once again on the verge of a major rollover of the market. We had a gap down open, then rally to partially fill that gap only to fall to new lows. This is about as bearish a situation as you can have intraday.



By "coincidence" this was happening while all the negative feedback about this fiasco called a stimulus/porkulus package is being kicked around. However, the calvary came magically to the rescue once again. If it was not so blatant it would almost be funny. Magically this 5 minute chart demonstrates how in the last 50 minutes a late day save happened driven by some "mysterious" buy program.



This is how the us government manipulates markets and it is never more clear than on a day like this. That is not to say late day rallies cannot occur, but this is not how they look when they are not unduly influenced from the outside. This looks more like a pork belly chart after a government report than it does a normal stock rally at days end.

Enjoy this viewing and feel good about the fact that for a day, your tax dollars were used wisely and had a positive return unlike the returns we are getting over the last year, with their calamatous buying program all the way down which has lost untold millions.

Here we have the US Dollar Index Daily chart with the classic triangle pattern being displayed. The textbooks tell you to play the longside breakout here, and that may be correct. However, if you notice the last time we consolidated at this level we broke to the downside about two months ago, I think if we break below the lower line this is a good low risk short sale opportunity. In trading there are never any guarantees and many trades look silly after the fact when they don't work, this could be one of those. However, I like the fact that the pivots are lower during the last two weeks and that the one oscillator is leading downward as supporting this entry.



I have been bullish on the dollar for awhile and bigger picture think it will rise, but if we break down from here on a short term basis I will be short this market. A break upward just would further confirm the uptrend. I am expecting a bit of a bounce in stocks here this week so this should move opposite of that, which would be down.

Here we have natural Gas, I can't wait for my next bill to come so I can once again argue with the Gas company about how high the price they charge is relative to the spot price which is plummeting.

This is just a basic retracement in a trend setup. It is the simplest way to trade, just wait for trend to establish and enter trades on pullbacks. Based on a few things I watch, I think this pullback is going a bit further so I am not going to short yet, but this market is definitely on my radar. Commercials also have heavy shorts on a relative basis which supports this from a fundamental standpoint.

Same Ol Same Ol





The votes have been cast and the results are in, Obama's PPT is carrying on the same plan to try and stop the drop as W's team did. If you look at the panel at the bottom, the dark black line is the heavy buying of the Large Speculators in the E Mini S&P 500. Keep in mind that this group is generally the accelerator of trends, momentum scale up buyers and scale down sellers. This is the opposite pattern of what is normal as there is huge buying into a significant downtrend, and enormous losses for those doing it.





If you keep in mind the above normal activity what this tells us is that "someone" very large with virtually unlimited buying resources is attempting to stop this downward move in prices. There is only one entity on earth with this type of buying power that can afford to lose this much money and keep buying, our good old friends the US Government. These trades are done through large investment houses like Sachs etc and what better time to do it than now. They have a better scenario for tight lips than ever before due to putting money directly into them. Who the hell would spill the beans in that situation? Nobody!



This does not bother me in the least as I know it exists and if you know how to spot it, you can use it to reinforce your evaluation of the trend. This is a confirmation of the downtrend in this market. Maybe they can pull it off and hold this market here, but I do not believe so. If these levels at the lows do break it is likely we have a large move down coming. I have seen several forecasts from better traders than me calling for choppy action until the fall, which should feature a big drop. I have no idea if they can hold it up this long, but I would be surprised. The latest reports have shown a small amount of commercial buying in the indices, but not enough to warrant a trend change. I am short this market from a few days back and will continue to short bounces when they occur, taking profits along the way.

GOOD AS GOLD

Gold and Silver continue to climb and at this moment there is no strong reason to be shorting Gold, Silver is weaker and is a tad different.

Notice on this chart that one momentum oscillator is diverging and one is not. This is typical in trend moves, oscillators constantly telling you to fade the trend. They are merely tools and need to be used selectively. The 930 - 937 area is a significant resistance zone that if cleared could have this market really off and running.

I have to admit I am rooting against this market due to the ridiculous stream of people telling you on the radio that you have to put your money into GOLD. They cannot find a single world event that in their opinion will lead to anything other than a rapid rise in GOLD. It is no small coincidence that these same people happen to sell gold coins. However, they have been right recently.

British Pound

This chart image is fuzzy, sorry. It is a Daily chart of the Pound. You can see we are in a downtrend with a little bounce happening. A rally up to the 1.4500 area should represent a good short sale opportunity here. I have some propietary indicators not shown, that are lagging this bounce showing underlying weakness not reflected in the price. As a result this market appears due for another drop if we rally another 300 points or so first.

BONDS

My post on bonds was very timely as you can see what happened after my "Sellin Time" comments on this market. We are following the seasonal pattern to a T right now. We are into Weekly support at this point so it would not be a surprise to see a rally here. Some oscillators are diverging at this low so this is a possible long entry area. Bigger picture I think we go down but a bounce should happen in this area give or take a smidge.

GOLD

Instead of me bragging about how great I am as in the last post, in this market although I have traded it profitably, my views of where it was going have been lousy. The red S followed by the dotted line down show the last trade I made which was a short with a nice profitable exit which is the bottom line. However, I have been expecting lower prices in this market and we have not gotten them.

The Weekly chart still shows lower highs so until that is broken we are in a downtrend, but a very choppy one that is hard to trade. There is not alot of commercial selling going on yet so that is one bearish factor that is not in place. If we look at the whole metals sector however, there is an overall bearish position by the commercials.

Ideally for me here I want a push up that serves up a false breakout that reverses down to get short or I will just sit and wait for this to clear up somewhat. There are always opportunities elsewhere. I want to shoot fish in a barrel not in the ocean, and this market is just sloppy right now.

Strong Dollar



Indicated on the chart to the left was my call for a rally in this market, I happened to get the low exactly which I was not trying to do, just lucky. However, I know there is a longer term upcycle in this market that should last several years, and we were in an uptrend that had a pullback, so it was not really that lucky.



This is where actually being a trader vs an economist or some big picture theorist trying to sell you Gold coins on the radio comes in handy. I cannot afford to have some macro economic view that may or may not be correct, I need to be able to determine when and where the moves are going to occur, so I can position real money in the markets and benefit from it. This is a prime example of watching what is actually happening and getting past being hung up on what should happen. The fact of the matter is that the Yen and the dollar have become the flight to quality vehicles in this stock market wipeout, so why would anyone believe that stocks and the dollar will decline together? That is not what is happening, they are moving inversely from one another. Until that changes don't make investment decisions based on a dollar decline if you also think stocks will decline, they are moving in opposite directions.

Today we are having a huge breakout to the upside in this market not shown on this chart, further extending this rally.

SELLIN' TIME



This is a follow up to the post I had on 30 Yr Bonds. We have gotten this rally up I had indicated I thought would take place. If you notice the oscillator at the bottom is severely lagging this price action, a bearish indication. However, even without that we have had the bounce that has set up this short opportunity. It also coincides almost perfectly with the seasonal pattern. As a result it is time to look for whatever entry patterns you might use to get into this trade.



I will not disclose all of my proprietary entry patterns in this venue, but I will say that I have not shorted this yet, but will be looking depending on how today closes, for a short entry tomorrow. I do not believe in just entering on strength when looking to sell so most of my entries require some short term move in the direction I am looking to enter, but the patterns vary depending on the situation. The stock market crash that is happening right now is supporting this market for the time being but if we got one day of stable stock prices that could quickly change.

How do you like me now?

Obviously my post on the Stock Market was pretty timely. I did say to wait for a break which came the next day indicated by the yellow line at the top and confirmed by almost any oscillator one could have looked at.

I have maintained all along that we are nowhere near done on this decline overall and there is certainly nothing here that indicates anything different to me. I hate having that position because it is the common view unfortunately, but it is what I study tells me.

I see no reason to buy this index or stocks at this juncture even though we are now clearly short term oversold.

WHAT THE BUCK?

Here is a weekly chart of the US Dollar Index. It is clear the uptrend that we have been in and also equally clear why I have been bullish on this market. Notice the blue line indicating the commercials buying the market during the recent pullback in price. This is exactly what we want to see the go long a market.

There are alot of geniuses out there citing one reason after another as to why the dollar is going to take a mighty fall. They may be right, but for trading purposes all that hyperbole is worthless. It comes down to having a way of knowing what your signals are and tuning out the noise. This was a buy signal at the recent low, and I was outspoken about this in many forums including the piggington blog where I post occasionally. This chart shows why. At times I may trade short term against these types of setups, but big picture, these are what you want for large moves in the markets.

First off, Joshua thanks for the nice comments!

Today I have a daily chart of 30 Year Bonds displayed. The historic upward move is clear to see, just for some perspective, 112 to 142 is $30k per futures contract in a market where in the past a good trade was $2k per contract or thereabouts.

We have had a sharp break down from an odd flat ledge at the top. If we couple this with the strong seasonal bearish tendency in January, we should be looking for a rally as indicated by the arrow to setup a shorting opportunity. I do not know if we will get it but I think we will. As far as translating this into actual borrowing rates, that is a waste of time. There has never been the degree of disconnect between Mortgage rates and the underlying longer term bond yields than there is right now. There is so much gamemanship going on with banks pricing in outrageous margins on loans, which I suppose they justify with an anticipated increased default rate. Mortgages should be 4% right now or less based on the underlying.

Following up on yesterdays commentary, the rally has continued. One of the things I have learned the hard way over the years is not to fight trends. The short term trend is decidedly up so even though there are reasons to look for a short sale, until we get some type of breakdown I am staying out of the way of this.

Some of the shorter term timing things I use have already failed to pick this top and we are working on 7 consecutive up days in the SP 500 pit contract. Contrary to popular belief that does not indicate a good short sale entry. We are having extended bounces in most markets right here, energy, grains, currencies, softs, metals. I think most of these are shorting opportunities the challenge is timing them properly.

I have been away for a long time working on several different things. With all that is happening I thought it might be a good time to resurrect this blog.

As we head into 2009 this is how things look in the S&P 500 Index. The most important thing to note is how the commercials in the bottom graph have been on the short side of this market for quite some time. This has been typical during long bear markets in this Index. There is no reason to look for big rallies as long as this condition exists. If I had displayed the other indexes, they are much more bearish with the commercials than this chart shows with the SP 500. What this means is that rallies are shorting opportunities. January has had a recent tendency to have early upward moves which started Friday. The Vix is indicating low relative levels now which is bearish, so this rally on a short term basis could rollover at any time. I would suggest using whatever short term timing techniques you use individually to time shorting this market, it is time to be looking.

I will post some things on other markets soon. I am looking to short Gold on rallies this month, it is not setup quite right yet. Also, although a short term sell is setting up in the Dollar, longer term I am bullish on the Dollar going forward.

GETTING CLOSE

I have not posted here in awhile for a few reasons. First and most important lack of feedback. I have stated often here that I would prefer comments vs emails to encourage discussion. Since that has not happened I do not feel compelled to tackle the technical challenges of making these entries. Satellite internet and it's slow speed make this very difficult.

Secondly, in this day and age where so many people read one article from someone they don't know, and then they are the expert on every subject on earth. I am seriously contemplating retreating back away from the public and just trading like I always have. At times it is just not worth the stupid comments that are made towards you. The most recent was the accusation of me getting killed because I am a long term investor. An average hold time in trades of less than 2 days and I am a long term investor being killed by this decline? Just read the last post and several before if you view me as that.

Now with all that aside, and referencing my last post where I thought the low would come in March, we can see that a potential low is in fact setting up here. The strong seasonal tendency for the decennial pattern to have March Lows, combined with the commercials stepping up their buying here, and interest rates tanking, is the perfect storm. This is setting up very nicely for a major rally. We will see how we look at month's end which is the ideal cycle spot, but it is sure looking good right now.

One more dip would be ideal, but we do not always get what we want. FYI, this particular setup is actually a buy and hold for about 6 months when it goes unlike most of what I do.

Without having posted anything for awhile, there is some catching up to do.

First, the year end rally at the end of 2007 did not materialize which led me to exit the long side on the last trading day of 07. I felt that the weakness during that very strong seasonal period was a warning of things to come. There are times when you have to make judgements regardless of what your systems are telling you.

As we are now in free fall, with the commercials heavily short, and in a seasonal down time period, is there any reason to look at buying this dip? As I type this the globex S&P session is down a staggering 52 points during this holiday. Whether or not this is a buy is up to an individuals trading or investing view. As an investor, stocks are clearly on sale here being undervalued by a number of measures, in particular, vs bond yields. It is at these times that you simply must put money to work, but also not to expect immediate gains. Investing and trading are two different approaches. As I have stated all along, the end of the first quarter is where I was looking for a low to be formed, so we are a ways from that as traders but not as investors.

From a short term trading perspective, the market is severely oversold and these types of declines have to be bought into, but timing them is difficult. First, your stops need to be much wider than normal to adjust to the volatility, and second, your size needs to be smaller for the same reason. I do not look to make a killing during these periods because that is how you get blown out. I want my risk to be the same during all market periods for consistency. That means trading smaller size with wider stops.

If the market does gap down to the degree that globex is indicating on Tuesdays action, that is an opening so extreme that it is a buy in my view for a short term trade. It is completely counter trend, but it would represent a several standard deviation move, that statistically is probable to reverse. However, overall I think we will trade down for the next week or two, then find a meaningful short term low, work into a more significant one in March, then head upward into the end of summer.