Commentaries on the market
Comments as of close Tues, 4/20/10
Trading Day by Day, copyright 2010
Comments as of close Tues, 4/20/10
Two good rules that work almost all the time (and which I frequently have tough time following) are: 1) the spike rule, and 2) the rule that says anytime trend clearly up (or down) and get both price and SL on recent lows (or highs if trend down) can make case to initiate new longs (or shorts if trend down), I call this the “faith in trend” rule.
June S & P - Status - Neutral (to Bullish)/crosscurrent. Observations - Trend solidly up but ML slightly down so market in mild crosscurrent mode. Action positive on good up day and this enough to make back all of Friday’s news related, against trend down spike and so spike rule worked well again, and once again I was skeptical that it would and once again was wrong. No point in me coming up with this good rule if so rarely follow it, but that’s life in the trading business. Unless down sharply tomorrow pattern will give somewhat weak buy signal, but not interested in long side at this time. Nothing much in way of relative strength indications so nothing there in way of help. While has not had any impact yet, volcano could have negative impact on all stocks around world if should get significantly worse, or even just continue as is. Bottom line - Lines say sidelines and agree for at least another day.
June Bonds/Notes - Status - Bullish/Neutral (in between crosscurrent and concurrent to upside). Observations - Trends a little indecisive here but see them as little more up than down. Momentum line patterns remain quite positive and since now on two day dip “should” be ready for some more upside pressure. SL still on high side but fact have dipped decently past two days this no longer a problem (i.e., no longer overbought too much to initiate new longs). Have to keep in mind COT data remains very bullish and has been for long time and so should give long side more weight. Bottom line - Lines in between longs and sidelines and either OK, but still prefer longs in either/both. Stops still look OK in 116 1/2 in Notes and 116.00 in Bonds, preferably not entered until after midday or so.
June Euro - Status - Neutral/crosscurrent. Observations - Trend slightly down but ML slightly up so market remains in crosscurrent mode. Action negative on decent down day with close back near recent lows, and down more tonight. Volcano may be having negative impact on all european currencies and this difficult to predict. Have not cared much for shorting this type of momentum line pattern, but it is getting more negative by day. Prefer not to short on this big a dip with this type of momentum line pattern so will stick to sidelines, but longer goes without any good up now the more negative picture will become. About same picture in Pound but action there a little more positive. Had nicely positive pattern in Swiss and was on two and half day dip and so tried long side, but so far not working and has hit suggested stop area so feel going back to sidelines there best. Not how much, if any, volcano impacting negative side of these markets but this will be a potential big negative for quite a while now and may keep a lid on upside potential of all three of these markets and so may have to adjust and focus back on short side (have been looking for trend change to upside). Bottom line - Lines say sidelines in all three european currencies and now have to agree.
June Yen - Status - Bearish (to Neutral)/crosscurrent. Observations - Trend clearly down but ML just as clearly up so market remains in solid crosscurrent mode. Action quite negative on good sized down day with close near lows of day, but still quite a bit above recent lows. Felt could dip some more here and did, although little more than expected. When ML on this solid an up cycle usually does not pay to short a big two day dip and that’s case here. Bottom line - LInes say can go short with stops having to be at least in 108.25 area, but prefer to stick to sidelines for at least another day or so.
June Aus and Ca$ - Status - Neutral (to Bullish)/concurrent on Au$ and Bullish (to Neutral)/weakly crosscurrent on Ca$, Observations - Big up day for both, especially C$ and while expected some up did not expect this much, quite impressive. Today’s up good example of how the rule of buying when trend clearly up and both price and SL on recent lows can work very well. I call this trade the “faith in trend” trade since this is essentially what are doing when buy big dip in clear up trend, in other words buy before short term momentum turns back up in anticipation that it will do so soon. However, did not go with this yesterday and do not see overall pictures as positive enough to come in here and buy after a big up day. So tough call and slightly prefer sticking to sidelines, if smart enough to have bought yesterday might as well give these another day or so. Bottom line - Lines say can be long either/both and this fine but will pass for now.
June Gold/May Silver - Status - Neutral (to Bullish)/crosscurrent. Observations - With ML turning to clear down cycle precious metals markets now in solid crosscurrent modes and rule for this is to expect more choppy sideways than trending action. The rule that says always can make at least some case to be/go long anytime trend clearly up and both price and SL on recent lows (extreme recent lows now). However, a few things here don’t care much for since SL’s has gone too far, plus the solid down cycles now in ML’s. So still see some light longs here as worth risk, but picture not positive enough to justify full or big long positions. Bottom line - LInes say sidelines and this OK but still slightly prefer light what are now anticipation longs in both/either gold and/or silver. Stops in 1130.00 and 17.70 areas, preferably not entered into until at least hour or so after tomorrow’s pit opening time (8:30 Atlantic time zone).
June Crude - Status - Neutral (to Bullish)/crosscurrent. Observations - Pattern now solidly crosscurrent and rule for this is to expect more choppy, sideways action. Do have reliable rule that says anytime both price and SL on recent lows and trend clearly up (case now) can always make some case to go long in anticipation. Would not argue too much with this but see better opportunities elsewhere. Bottom line - Lines say sidelines and agree.
July Corn - Status - Bearish (to Neutral)/crosscurrent. Observations - Good up day coming after big down day is positive sign, especially since never came very close to trading even one tick lower and closed on highs of day. This one still weakest of group and so least attractive for any longs and only one can make any case for shorts (although still not interested in shorts here regardless of line pattern). Close back above 3.70 would be quite positive sign and close to that after today. Believe this one will eventually go considerably higher as well as beans, meal and wheat, but prefer to see more positive pattern before trying long side again. Bottom line - Lines say can be short, prefer to pass.
May/July Beans - Status - Bullish/concurrent. Observations - Decent, firm up day with little in way of intra day weakness and close back near recent highs and this positive action after yesterday’s down. Pattern clearly positive and in position to become more so over next week or so. Worth noting that both Beans and Meal have ML’s that have made third higher lows and this positive. Continue to have best combination for good sized, sustained up moves in these two markets since COT bullish and patterns now positive as well. Oil continues to be weaker than “should” be basis trend and lines, but cannot fight price so have to stick to sidelines there. Not unusual for Meal to lead Oil in bull markets. Bottom line - Can be (and still go) Beans and/or Meal with stops around low 9.70’s and high 270.00’s respectively (would not enter until at least after midday tomorrow.
July Wheat - Status - Neutral (to Bullish)/weak crosscurrent. Observations - Big up day after even little bigger down day yesterday has to be seen as very positive action. Mentioned yesterday thought that yesterday’s big down might turn out to be final down move for this potential big bull market and this looking correct at moment. Had to buy quickly today and pay up to get decent entry point, but even if not already long see today as positive enough to go back long in anticipation of getting legitimate line pattern buy signal soon. As have mentioned repeatedly past many weeks this market has had and still has an extremely bullish COT situation (commercials at possibly record net long levels) and when this case and trend finally turns up tend to get good sized, sustained up moves. Not sure if market being helped by volcano situation but if not see this as potential big bullish factor if should continue, and especially if should worsen which is distinct possibility. Believe eastern Europe (Ukraine) is a major wheat producing area and this would be right in path of any big volcano eruption, plus in past big eruptions have lowered world wide temperatures and produced major crop losses for at least year or two. Wheat is the basic food of world and so if should have even chance of shortage would see big up move in prices. Bottom line - Lines say sidelines and this OK, but once again prefer anticipation longs. If upside good from here, and really now should be, then would not expect to see much down so should be able to use stops in mid 4.80’s area basis July, with late in day/close only stops best.
July Cotton - Status - Bullish/concurrent. Observations - Pattern now clearly bullish/concurrent to upside on limit up bid close. Tough to be fully positioned with SL on single higher low, but anytime market goes bullish/concurrent to upside at least some longs fully justified, and especially when up trend as solid as is here. Today’s up has look of potential breakout type day and finally may be getting the long awaited continuation of big up move month and half ago. If not long already see no real problem in going long even at these new highs since see so much upside potential, but next one to two and half day dip will be excellent buying opportunity almost regardless of where this comes, which could be quite a bit higher. Bottom line - Can be (and still go) long with stops now probably OK in 82.00 - 82.50 area, preferably on late in day/close basis.
Chick Goslin
