Commentaries on the market
Comments as of close Mon, 4/5/10
Reports continuing to give me hard time since this time went against my basic rule of just going into reports with whatever lines indicate (took profits in bonds and yen before Friday report) and so, of course, this time should have held into reports. Just got tired of major reports coming out against me and taking away good profits in few minutes. Just one of the “laws” of trading that will invariably be wrong when try to out guess rules and reports. However, there was plenty of time to reshort after report came out and did so in bonds, passed on reshorting yen though, for whatever reason (probably due to low SL/price).
One trait that differentiates so called professional traders from so-called amateur traders is the former have little or no problem getting back into positions after taking profits even when must do so at worse price. Have seen individuals unable to buy back in a nicely positive market if they take profits and then cannot buy again at a lower price. Have heard numerous stories from people who will say they were long some stock like Apple or a commodity like gold or silver at much lower prices but took profits too soon and then never bought again (just unable to do so if had to do it at a higher price). When I gave a few seminars years ago I used to say that when began my trading career soy beans were trading in 3.00 area and once took profits on a long at 3.10. Does this mean I cannot go long beans again unless can buy under 3.10, if so that means probably will never be able to go long beans again. No, the past in trading is dead, gone. What should always be asking yourself before making a trade is whether odds good enough that will be able to sell higher than buy, or buy lower than short. The current price level and what you did earlier in a market has zero relevance other than trying to learn from any mistakes made have made. We trade futures, not pasts.
June S & P - Status - Bullish (crosscurrent). Observations - Solid up day which added to small up after neutral unemployment report on Friday. Continue to have a mixed, positive pattern here, but price also keeps pushing higher and seems unstoppable. On a weak crosscurrent buy signal and so far it’s working much better than I expected. Will stick to sidelines but pressure still clearly to upside. Bottom line - Lines say can be long and cannot argue with this at moment. Stops on any longs probably OK in 1170.00 area now, especially if should close under that level.
June Bonds - Status - Bearish (indecisive but will go concurrent after tomorrow). Observations - Quite negative reaction on Friday to what appeared to be a fairly neutral report and this always a negative sign. Price continued under pressure today and closed down enough to turn pattern back to negative. Continue to see big downside potential in this market due to what will be long (endless?) period of heavy supply of govt debt coming to market. Some feel this not a negative but have to disagree. Feel an equally big negative, if not bigger, will be surprising increase in inflation over next six months or more (assuming govt ever gets even slightly honest about inflation). Only “positive” for this market at moment is very bullish COT data, even more so this week, but rule is should ignore this when trend down and that’s case now. Bottom line - Lines say can be short and agree. Stops on any shorts now probably OK in 115.16 area or little higher, preferably not entered until late in day or on close basis.
June Euro - Status - Neutral (to Bearish)/crosscurrent. Observations - Negative reaction to Friday’s unemployment report for this currency on Friday and a little more today. Any more down tomorrow and will get a sell signal. While pattern could and probably will go negative again soon, have lost a lot of enthusiasm for short side recently due to persistence of upside pressure past week or so. Down trend is weakening fairly rapidly now and Swiss close to being within margin of error to consider trend up. Pound can lead the three european currencies and that market has shown most strength in many months and this an upside warning sign for all three. However, with both prices and SL’s on good rallies and on high side odds probably favor downside for next two, three days, just don’t see good enough downside potential in these markets anymore so prefer to stick to sidelines in them for time being. Bottom line - LInes still say sidelines (marginally) and continue to agree.
June Yen - Status - Bearish (to Neutral). Observations - Pattern still negative and continues to justify being short. Was at least a little early taking profits here before report and with today’s close on highs of day prefer to stick with sidelines for moment. Lately has not paid to stick with shorts in any currency when SL and price gets to recent extreme lows and this continues to be case here. However, on longer time basis big picture quite negative and so any rally, if should get one, should be fairly limited in both time and distance and should be good opportunity to initiate new shorts. Bottom line - LInes say can be short and this OK but still slightly prefer sidelines (taking good profits) for moment. If short and want to stick with these would keep stops very generous since would want to short next rally, not buy on stops.
June Aus and Ca$ - Status - Bullish (weakly concurrent). Observations - Good up day for both, especially Canadian. Took profits too early here as well, but currencies so volatile past few months has tended to be better to be early taking profits than late. Both prices and SL’s now on recent extreme highs in these two markets and as rule when this happens and to not have both trend and ML solidly up tends to be better to take profits and wait for dip to reenter, and this now case in both these markets. However, pattern is becoming more solidly positive and recent rally so persistent now that next one to two and half day dip “should” be very good opportunity to initiate new longs. C$ doing a little better at moment, but these two seem to regularly switch relative strength and so far unable to find any reliable clues indicating when they will switch. In cases like this tend to just buy both, but if only going to do one C$ at moment a little better basis charts and lines. Bottom line - Lines say can be long and this OK but continue to slightly prefer taking profits and going to sidelines temporarily. If long and want to stick with them would use very generous stops since would want to buy next one to three day dip rather than sell on stops.
June Gold/May Silver - Status - Bullish/concurrent. Observations - Another good up day for precious metals with another day of positive relative strength (Plat strongest, then Silver with Gold least positive). This relative strength rule has worked extremely well since mentioned it several weeks ago with only one day where it did not work, and nothing works all the time. With markets on extended rally and SL’s now nearing recent highs could/should be due for brief dip/sideways, but with pattern now so positive and recent rally so persistent next one to two and half day dip should be very good buying opportunity. When get a sudden and fairly surprising persistent up move after long sideways in markets as popular for buying as precious metals tend to leave a lot of bulls on sidelines, or at least under positioned (me), and what this does is create a fairly solid, short term “floor” under market (lots of potential buyers on sidelines eager to buy next dip, plus lots of shorts somewhat stuck now eager to lighten up or get out). Weekly charts very close to turning quite positive and this will be solid support for longer term. Second week in row with decent commercial buying (new longs) and so while this data still very negative, much less so now. Always find it much more significant when commercials go long these markets since they usually don’t. Bottom line - Can be long with no stops since want to buy next dip, not sell on stops.
May Crude - Status - Bullish (concurrent). Observations - Picture here very similar to that of precious metals, only even more positive, and so same comments essentially apply. Both price and SL on recent highs now and so market very short term overbought, but rule is can/should stick with longs when this case if both trend and ML clearly up and that case here now. As with gold/silver bound to have left a lot of bulls either on sidelines or under positioned in this market as well as shorts over positioned and this should provide very good support on any short term dips. Continue to see good upside potential in this market. Bottom line - Can be long without stops since want to add on next dip, not sell on stops.
May Corn, Beans and Wheat - Status - Bearish/concurrent. Observations- Prices and SL’s on recent extreme lows and so all three now short term oversold, but patterns remain negative and will be difficult to turn any of these patterns positive anytime soon. Just no interest in short side of these markets at moment, due to “low” price and very bullish COT data (which is more bullish in corn and wheat this week, marginally less bullish in beans). This has been obviously wrong so far, but will stick to sidelines regardless. Bottom line - LInes say can be short any/all three, prefer sidelines.
May Cotton - Status - Bullish/concurrent. Observations - Decent up day and now on good three day rally. Pattern has turned a little more positive each of past three days and now concurrent to upside, but still don’t see it as solidly positive since will need to keep pushing higher next few days or will go back, at least temporarily, to crosscurrent. Would not be surprised though if have seen some kind of low, just “should” have a more solid pattern to be long with in another week or two. Sometimes/often the best patterns will come after recent lows have been made and believe will see this here, but sometimes markets don’t cooperate. If long would stick with them now as long as prepared to ride through another short term dip before set up for sustained up move. Continue to see big upside potential in this market due to the big rally saw month ago since those type of sudden, very big, sustained up moves tend to be good predictors of coming big up moves. Bottom line - Can be long with no stops now since want to buy next dip, not sell on stops.
Chick Goslin
