Commentaries on the market
Comments as of close Weds, 3/17/10
Trading against the trend is like swimming up stream, going against the current. You have to have almost constant pressure against the trend to keep going since if pause for too long will run the risk that the trend (current) will take over again and quickly push you back to where you started from, or worse. Recently have been going against strong trends in Euro, Swiss and Dollar, it may now be time to stop doing this since could be close to trend reasserting itself. Whenever go against trend always have to be very alert to too much pausing of counter trend pressure since when trend reasserts itself it tends to do so quickly and sharply (action of grains week and half ago was good example of this - sudden, sharp reasserting of clear down trend after month or so of counter trend upside pressure).
What I am always trying to do is be positioned with what the lines will be over the next two, three days. Start with what lines are at moment and then try to anticipate where they will go next two, three days. This always tricky since requires some “guessing,” and especially so lately since day to day volatility so extreme. However, when going against trend tends to be better to get out a day or so too soon, than day or two too late. By giving up on counter trend moves now am running risk of doing so too soon, but better than too late. Can give these counter trend moves another day if want, but personally felt action today too weak (in direction of counter trend) to risk staying with these moves any longer.
June S & P - Status - Bullish (to Neutral). Observations - Marginal turn up in SL produces a weak crosscurrent buy signal. Could be good signal but will pass. Just feel since passed on buying much lower prefer to pass on such a shaky signal now much higher. Plus would only take small down day tomorrow to turn pattern right back to neutral. Sometimes when miss a move tends to be best to just leave market alone rather than chase and that’s what prefer to do here. However, can justify light longs with fairly close stops. Bottom line - Lines say can be/go long with stops tough to place but would not stick with longs on move, or especially close, below low 1150.00 area.
June Bonds & Notes - Status - Bullish/concurrent. Observations - Moderate up day but any strength here quite positive. Somewhat sluggish but still very persistent up move here has surprised me and may end up being best trade on board past week or so, especially if currencies and stocks turn down near term, as now may do. June Bonds now hitting 118.00 level for essentially fourth time over past month and usually will go to clear new highs when this happens. Do still have “best combination” for good sized, sustained up move since bullish /concurrent at same time COT has been very bullish for long time. Looks like should have had more faith in this rule since have just been token long here and in and out couple times due to lack of belief in upside potential. Bottom line - LInes say can be long with stops now probably OK a little under 117.16 basis June Bonds, especially/preferably after midday tomorrow (117.00 area basis June Notes looks OK now).
June Euro - Status - Neutral (to Bearish)/crosscurrent (but weakening). Observations - Mentioned yesterday that sideways here today would be more negative than positive and that’s what had. If look back to middle of Jan will see how once a counter trend move ran out of energy, the subsequent down move was quite sudden and sharp. Will also notice that down move then started when had ten days of SL above zero, so ML was just within margin of error to call down rather than up. Now in same situation with about ten days of SL above zero and so within margin of error for ML to roll over to down cycle. So, prefer to give up on any against trend longs (in Euro and/or Swiss) and any against trend shorts (in dollar). If should see decent down move in Euro tomorrow (137.00 or lower) or up move in US Dollar (80.25 - 40) will be able to make decent case for anticipation shorts. Pound on good against trend move, but down trend there so strong highly unlikely will be able to turn trend up anytime soon. Do have rule that says it’s really a bad idea to be/go long when both price and SL on recent highs and trend clearly down, which means the converse tends to be true as well - usually good idea to be/go short when price and SL on recent highs and trend solidly down. This is now case with June Pound. With ML on such strong up cycle any down here in Pound would probably be short lived, but could be sharp. Bottom line - Lines say sidelines and believe this probably best for now, and longer holds unchanged or lower tonight/tomorrow the better the case for some anticipation shorts in Euro or longs in Dollar.
June Yen - Status - Bullish (to neutral)/concurrent. Observations - This market really stuck in sideways pattern at moment, but lines remain positive and when this case odds always favor upside. If upside any good here it’s probably time to move up decently now or probably will not be able to do so. If european currencies head lower tonight/tomorrow, as well as stocks, then odds for decent up in Yen better. So can continue to make legitimate case for light longs, but really needs to be up decently tomorrow if this going to work in any good way. Still have potentially quite positive weekly chart here and this a good background positive. Bottom line - Can be/go lightly long with stops once again probably OK in 110.50 area or little lower, especially/preferably not entered until after about midday tomorrow.
June Aus$ & Can$ - Status - Bullish/concurrent (but just mildly so). Observations - Lines still about most positive in these two of currencies and so on that basis still best for any longs. However, Euro action weak today and if continues tomorrow would be a drag on these two. Really would not want to see SL’s turn back down in next few days in these two. So see longs here now as much tougher call than has been and so see putting any longs on some kind of probation (either up or out) as possibly the best approach (personally favor fairly strict probation). Bottom line - Lines say can be long and still see this as fine, but would not tolerate too much down, especially if Euro weak, and would definitely not stay long if should give back all or almost all of today’s good up moves.
Apr Gold/May Silver - Status - Bullish/crosscurrent (but neither solid). Observations - Mixed day with Silver ending up slightly but Gold gave back good early gains to close essentially unchanged. While lines are currently positive enough to fully justify being long, they are also such that could turn neutral to even negative if should get much down next two, three days. From bullish perspective really would not want to see SL in Gold turn down for a third time and SL turn down for second low (which would produce a big bearish divergence). Until/unless this happens longs will be at least somewhat justified. Feel what the US dollar does next day or two will probably decide what gold/silver does. A background negative continues to be quick negative short to intermediate term picture on weekly charts in all three precious metals, especially Gold. Plus continue to have the background very negative COT situation in Gold, and Platinum. So tough call and as with currencies when it’s tough call usually best to put longs on at least some kind of probation (either up or out). Personally prefer for this probation to be on strict side. Bottom line - Lines say can still be long both, but would not risk too much (1115.00 or little lower in Apr Gold, especially if see this anytime past early tomorrow or maybe sooner; 17.30 - 35 in May Silver, using same time period).
May Crude - Status - Bullish/crosscurrent. Observations - Up enough today to turn SL up and this produces weak crosscurrent buy signal. Even though mentioned yesterday any up today would justify longs, less enthusiastic about this now. If by some chance price should sell off enough to turn SL back down next two, three days (would not take too much) would end up getting a third lower high in SL as well as produce a double bearish divergence, both of which would be solid negatives. So, prefer to stick to sidelines for at least another day, but can make legitimate case to be/go lightly long, although would not risk too much. Bottom line - LInes say can be/go long and see this as OK, but would not stick with longs if should close 82.00 area or lower, or even trade there.
May Corn and Wheat - Bearish/concurrent (but these weakening rapidly) - Observations - Lines still indicate shorts but continue to prefer sidelines since just do not see enough downside potential and see lots of upside potential. Second good up day in both these markets and as rule when get two up days while lines clearly negative can always justify some shorts, prefer to pass on this here. Up move supposedly caused by weather (potential flooding in grain areas) and weather moves tend to be volatile and erratic. Bottom line - Lines still say can be/go short, prefer to stick to sidelines.
May Beans - Neutral/crosscurrent. Observations - Strong up day turned line patterns back to neutral/crosscurrent. Price back up to what have considered the key level of 9.60 in May Beans, and looks like will move above this level tomorrow. Getting close to being within margin of error to consider trend up. See much more upside potential here than down and so prefer to continue to ignore short side and look for any legitimate excuse to go long. Tempting to go long already since ML turning up and in position for solid up cycle and SL up move accelerating, plus strongest of group (along with Meal) and have long standing extremely bullish COT situation. Problems are trend still down and SL on just a one point turn up and invariably need at least a second higher low in SL to sustain an up move, although does not mean cannot go decently higher short term. So would not argue if want to be aggressive and try some light against trend, anticipation longs, but will probably pass for now and wait for something more solid on lines. If do go long probably have to risk at least back down to 9.40 - 45 area and this fairly large risk for against trend trade. Bottom line - Lines say sidelines and continue to agree, but some light longs in Beans and/or Meal very tempting.
May Cotton - Status - Bullish/crosscurrent. Observations - Lines still marginally justify light longs, but on weak crosscurrent buy signal and these only tend to last two to five days and now on fourth day of this up move. In addition have rule that when ML on very solid down cycle only tend to get two to three up days before solid down cycle in ML reasserts itself. Bottom line - Lines marginally say can still be long, continue to prefer sidelines.
Some additional comments - Very tough markets to call recently since line patterns so tenuous, in both directions, and when this case patterns can go from positive to negative and back again on almost daily basis.
