Commentaries on the market
Comments as of close Thurs, 3/25/10
As mentioned yesterday I don’t like going against lines since when wrong feel like an idiot and that’s how feel at moment about being long any of the grains today. Mistake was way over anticipating potentially positive line patterns and too much emphasis on very bullish COT data. These are my most common two mistakes. Problem is when do correctly anticipate trend change where have big support from COT data can lead to situation where have good base position that can add to on what tends to be good sized, sustained moves. This makes the temptation to anticipate in this type of situation very strong. When do this correctly I tend to forget it quickly since treat it as expected, but when wrong it is costly and takes while to forget. All can do when anticipate a line pattern and are wrong is just take loss and go to sidelines until have better, more solid situation. Worst thing of going against lines and being wrong is not only take losses, but also miss out on gains so ends up being a double loss, plus being bad psychological loss.
Have personal rule that when take a “hit” on one group of markets and have decent profits on other markets tend to take any excuse to take some profits as both financial and psychological offset. So prefer to take some profits on good recent shorts in Euro, Pound, Yen, precious metals and Bonds with idea of reshorting on next day or so of upside.
Stocks least positive/most short term negative in while after today’s downside reversal, but trends still clearly up so any down should not go too far or last too long.
June S & P - Status - Neutral (to Bullish)/weakly crosscurrent. Observations - Small downside reversal day and second one in past week. Last one did not produce any weakness, but this one has better chance to lead to at least some downside. Had fairly good next day down signal from VIX today since Dow up marginally on day while VIX up decently (.85). Now do have very minor third lower high on SL now, but so minor not very significant. However, ML now in position for sustained down cycle and with SL on very minor third lower high, plus next day down from VIX, and so do have most negative line/technical situation for stocks in long time. Problem is negatives all minor and recent upside pressure extremely persistent. All this enough not to be long, but not enough to be/go short other than for day trade. Had some relative strength negativity late today and on line basis Russell 2K now most negative/least positive and so do have some negative relative strength signs now. Bottom line- Lines say sidelines and agree (can make some case for day trading from short side).
June Bonds/Note - Status - Bearish/concurrent. Observations - Decent down day but less than yesterday, although would have been difficult to get as big a down day as yesterday. Basis lines can fully justify being short here. Only “positive” is fact now getting close to recent lows in both price and SL and so already a little short term oversold. Plus if stocks do sell off this could lend some short term upside support for bonds. So can make small case to take quick profits and go back to sidelines with idea of shorting again on next day or two up, but since just beginning sell pattern sticking with shorts probably best. Bottom line - LInes say can be short and agree. stops have to be on generous side for time being with at least 116.16 to 117.00 area on close basis looking OK for tomorrow (116 24/32 area or little higher on June Notes).
June Euro - Status - Bearish/concurrent. Observations - Small down day but this does show a little loss of downside momentum. Both price and SL now on recent extreme lows and market always has some short term upside vulnerability when this case. Never argue if want to take profits when both price and SL on recent extreme lows and see signs of loss of downside momentum, but rule is tend to be better to stick with shorts despite this when in solid bearish/concurrent to downside and that case here. So just a question of whether want to take profits with idea of shorting again on next day or two higher or just holding shorts through any short term up. Still on just a single high on SL and this an extra reason to take profits and wait to reshort, but as said this is type of pattern where can go lower for quite a while without needing a lower high on SL. (I usually don’t mention dollar since the way the dollar index is configured makes it essentially just a half size Euro that moves opposite. Dollar Index usually moves 1/3 to 2/3 of Euro move in opposite direction.) Prefer to stick to sidelines for moment in Pound and Swiss, and if still short any Pound continue to feel best to take profits and go to sidelines temporarily since on fifth day of crosscurrent sell and this about all tend to get on these. Bottom line - Lines say can be short and continue to agree. OK to take profits as long as prepared to short again on next day or two up. Stops “probably” not necessary for moment but still need to be at least 134.50 to as high as 135.00, preferably not entered until after midday or so tomorrow.
June Yen - Status - Bearish/concurrent. Observations - Second good down day in row with close on lows of day and back near lows of past many months. Price and SL quickly on recent extreme lows and so already somewhat oversold. However, pattern similar to that of bonds/notes and same applies here (could rally little, although “little” these days can be 100 - 150 points, but pattern so negative so quickly any rally “should” be limited in time and distance. Price only very briefly and slightly above suggested 109.00 selling level and this after letter went out, so did not give much in way of good price to short. If not short would wait for some kind of up to sell, but if short from decently higher “should” be OK to stick with these. Bottom line - Lines say can be short (and go short on moderate rally (75 - 100 points above today’s low of 107.62). Stops tough to place since would want to short next rally, not be buying on stops. Would need price to move back above 110.00 to change negative picture here, or at least near that level.
June Aus and Can$ - Status - Neutral (to Bullish)/crosscurrent. Observations - These markets were quite firm early, but faded late to close just marginally higher on day. Trends still solidly up and so next up turn in SL will produce a crosscurrent buy signal. However, to do this tomorrow both these would have to be up quite sharply tomorrow. These two still the most positive of foreign currencies and so best for any longs and worst for any shorts. Sideways would be more positive than negative since sideways always favors trend. Longer hold sideways or higher the better case for some anticipation longs but prefer to stick to sidelines for another day. Bottom line - Lines say sidelines and agree.
June Gold/May Silver - Status - Bearish/concurrent. Observations - Patterns still decently negative and price is working lower, but also doing so somewhat reluctantly. Had some decent relative strength from Plat today since it was up nicely while Gold only up slightly, but this totally reversed at moment in after market so cannot give it much weight. Uncomfortable being short these markets since going down so reluctantly (keep rallying intraday) and with both price and SL on decent dips, but basis lines and rules odds still clearly favor lower. Never argue if want to take profits when both price and SL near recent lows, but “should” go lower so if do take profits should be ready to reshort on any decent day or two rally. Bottom line - Lines say can be short either/both and continue to agree, but never argue if want to take profits when both price and SL on low side. Stops probably still need to be up in 1105.00 area or little higher on June Gold and 17.00 or little higher on May Silver, preferably not entered until after at least midday.
May Crude - Status - Bullish/Neutral/crosscurrent. Observations - Very marginal turn up in SL produces a very weak buy signal, but too marginal for me so prefer to stick to sidelines. However, pattern and action in this financial market (stocks, bonds, currencies, precious metals) is most positive of group. Also tomorrow a Friday and this market does have tendency to be up on Friday’s, although this pattern has been off past few weeks. So can make minor case for light longs, but will pass. Bottom line - LInes very marginally say can go long with stops OK little under 80.00 so not too much risk. This OK but only if market ends up decently tomorrow (will pass).
May Corn, Beans, Wheat - Status - Bearish/crosscurrent. Observations - Corn and Wheat marginally concurrent to downside, but not by much and should go crosscurrent within few days. Really wrong on going with anticipation longs here recently, at least today. Was trying to anticipate a quick turn back up of SL’s in all three of these markets and while this still possible to get it would need to rally sharply immediately and after today this seems unlikely. Since suggested stop levels hit and easily exceeded cannot make any case for even anticipation longs anymore. So cannot be long in anticipation any longer and prefer not to short on recent lows so will go to sidelines for time being. Would need closes back at least above 3.65, 9.55 and 4.78 area respectively tomorrow to be able to make any case to go long again. Bottom line - Lines say can be short and so far this correct. Stops on any shorts may be smart enough to have OK in 3.65, 9.55 and 4.78 areas on close basis.
May Cotton - Status - Neutral/crosscurrent. Observations - Decent down day and pattern now solidly neutral/crosscurrent. Current situation one of trend too positive for shorts, but rest of picture too negative for longs at moment. Continue to see sidelines as best for time being. Bottom line - Line say sidelines and agree.
Chick Goslin
