24, 2006 Commentary (weekend edition)-
was never any doubt what I would be writing about this week. I was so excited
Monday I wanted to 'stop the presses' and write the commentary right then. But
I figured I had worked so hard on last week's commentary that I didn't want to
take it right down before many had even read it. So, I waited until now. It
played out so well, and so dead on what I was suspecting that I just wanted to
share it right away. As soon as I posted the chart last weekend I started to
get e-mails from my mentor and most serious students, saying I read their
minds, and asking various questions on how I was viewing this or that aspect of
There is also a forum specifically for Kane Trading full book set
buyers and mentor students where they can post on the methodology and discuss
ideas with each other, and this setup and the various things that unfolded were
the hot topic of the week, with some outstanding posts in there. It was just
quintessential Kane Trading methodology, and I'm pretty happy I posted it in
advance in here so you got to see it unfold, and to have time to do the work
and be ready to watch and study, on your own, in 'real-time'.
out with last week's chart of the week.
I'll start with a quote on the chart from
last week: "...this week's chart of the week is for you mini traders. I laid it
out like I did for a reason. Do the rest of the line work and see if you can
figure out what I am watching, and why. What clues are present on the chart
right now with regard to that ABCD? This one should be a good educational
example." Notice on the chart I showed a fantastic looking ABCD with a tight
grouping and a median line lower parallel all coming right in together. Isn't
this a classic, near-perfect setup? If so, why did I highlight the area with a
small arrow, but put a bigger arrow downward, with a question mark?
Well, what's the 'context'? How
many times have I said 'Without 'context' you have nothing?' The reason I say I
may trade it, fade it, or stand aside has to do with my evaluation of the
entire layout, including the 'context'. My 'context' filtering, as laid out in
Kane Trading on: Multiple
Timeframes and 'Context', and the other books, gives me some ideas on
what I think is the most probable scenario.
filtering lines up with a setup I'm inclined to trade it, if the price
action supports that. If the 'context' says 'no way' I may fade it (trade the
other way), if the price action supports that. If I come up with
something in between I may stand aside, or look for a lower timeframe premise.
The market is far too complex and dynamic for me to just look for a setup and
blindly take it. If that works for you, great. I'm happy for you, and I'll
shake your hand next time we meet up. I'm just saying what I feel I need to do
for me in my quest for long-term survivability.
Let's go up
to the 60-minute chart for some 'context'.
I had a bigger set I had been watching for
some time. The first arrow shows where I was watching that smaller ABCD. The
second arrow shows a very key area of interest for me. Not only was this a key
line, it was a much larger pattern there that I was pondering. It just didn't
seem like the market was ready to burst up to another new high with such a
small correction here, with that lower parallel magnet calling to it. Hey, I'll
just go with the price action and flow, but if this sets up a 'fade' play
that's what I was hoping for. The preliminary clues were on the chart already,
and if they unfolded as I preferred, I wanted to 'see' the area.
down to the 3-minute chart for some detail.
I was discussing with some students how there
was a potential pattern from the latest ABCD book possibly setting
up just a bit higher, right where I had a line waiting. I put one of two sets
on the immediate action here, this one a 'natural' set. I put an offset line on
there, and a few key fibs off the main swing-highs, to flesh it out.
opened up and not only completed the pattern I was watching for, it also did
another pattern at the same time, right to my area of interest. I had all this
work on my chart (and more, of course) when I posted the chart of the week on
the weekend. So, I was thinking 'fade' the setup and watch for that lower
parallel on the bigger set, and watch for a smaller setup to help me fade, as I
essentially never just jump in anything without entry triggers, and for a fade the
setup premise preferably a fade setup.
Let's move ahead and see what happened from
It was just unreal action, and the Russell
took a big dive, really hitting the toboggan slide. Just when it looked like it
might have sold out they gapped it down hard the next day, and kept selling.
Was there ever going to be a bottom on this one? Notice, too the patterns all
the way down for add-ons, reentries, and so on. The action was just
spectacular, in my opinion. It was the topic of the forum, that's for
Let's go back to the 60-minute and see where this action fits in
You're kidding me, right, Jim? No, I kid you
not. Notice the last bar, and how it closed strongly. By this time the bounce,
essentially dead off the line, had started already. It's not really going to
head right for that line and then bounce, is it? You saw my arrow on the chart
of the week last week, right? You did the work, right? You had this line,
right? Please tell me you did the work so you could watch this
I'll add a set on right out of Kane Trading on: Median Line and
Fibonacci Synergy, and we'll move forward to the current price
The second arrow shows where I was watching
last weekend, and the area where it bounced just over fifteen points in a
beautiful 5 wave structure. The third arrow shows where I was watching next.
You've seen me post enough charts in advance to know I don't create these
'after-the-fact', but well in advance The Russell went right to that line,
rolled right over, sold right back to the bigger lower parallel, bounced up,
and sold back to the line, forming a pattern. This may be a small 'wave 1 and
2' (see this week's chart of the week), but if it doesn't hold, well, you can
assess what that means. I'm still pondering the chance for a nice pommelling
once the year end phony mark up is done.
I'll finish with a chart on that
10-year. I could easily have done this week's commentary on rates, as they are
just incredible right now, but all I have room for is a quick look.
Here's the same set we looked at recently.
The arrows were from our recent work in here. Notice how the 10-year went right
back to that lower parallel, and then up to the upper parallel at a key .382
retracement, and sold off after some very nice entry triggers. Patterns, lines,
fibs, 'context', entry triggers, it was just all there. Look at the 10-year
index chart we have been watching, on the daily and weekly timeframes. It's
still moving up off the area I showed (in advance) on the chart of the week
awhile back. I am watching the overhead areas of interest on this one
very closely, since it is so crucial.
As I wrap up
I hope this was a good example today for everyone. There is no way I can do
more than this from an educational standpoint. If I explained ahead of time in
full detail every aspect of my process here it would be unlikely anyone would
learn anything. All you would get good at is hoping someone will tell you what
to do and when to do it. My only interest is in trying to make a contribution
to people's journey to become independent traders, thinking and functioning on
their own, making their own decisions. I want to provide a resource they can
study and see if anything in that resource pool is of any use to them. Maybe
some is, maybe not. At least it's there to study and then you can use what you
As I close, I was thinking some people might be saying 'Geez, Jim,
you even write on Christmas, and next week, on New Year's? Don't you ever stop
and take a break, and be with your family?' My first thought is no, I'd
actually rather be working my charts than going to a party. I was thinking that
if Monday has to be a day without market, at least I can use that time (you
know, Christmas Day) to get caught up on some things, and get all my
charts cleaned up. And then it hit me. I'm the same old Jim.
recent loss I realized I will never be able to do all those things with that
person that I had been planning to, and kept putting off and putting off. I
always thought there would be time. I thought I had more time. I didn't.
Now the chance for that is gone forever. But all is not lost, since I made the
decision to not make the same mistake going forward. Yet I'd rather work my
charts on Christmas, and my better half has been calling me on and off for two
hours now to do something I had promised her we would do, and I keep yelling
'Soon, just let me finish the commentary'. But shortly we have to leave to go
somewhere, and the time to do what we were going to do will be gone. Same old
I wanted to relate this not only for the obvious message here, but
also because I got to relating this to my mentoring students, or my potential
mentoring students. I started to notice that I had only like one in ten people
sign up that were what I would call '100% sure' students. These are deadly
serious, high-caliber people who I was certain would sign up any day. And they
never did. I also noticed the reason was the same with all of them. They were
working on their transition from a high-paying, high-powered job, working a
hundred hours a week, to full-time trading. They all said the same thing: 'As
soon as this or that project ends I'll be freed up, back to just sixty hours a
week, and then I can do the mentorship.'
Want to guess the rest? I would
follow up at the prescribed date when the project would end, and I would get
the same exact cloned response from every one of them: 'As soon as that was
done the boss dropped a much, much bigger project on me that will last at least
a year. Just when I thought I'd have some time, I have to up it to one hundred
and twenty hours a week now... But I can't pass up the money.' If you are
thinking they are all just saying that to be polite, and that they really had
just changed their minds on the mentoring, that's not it. They e-mail me back,
and discuss setting it up once more, and then the same thing again. Over and
over, person after person. Now, the point, since Jim always has a
The people that are serious enough to mentor with me and have
decided, long before they found me, that they want to transition to full-time
trading, are generally super-high-achieving type A personalities, where sixty
hours a week is a vacation week. They are 'in deep' and really can't get out.
As soon as they try, they get pulled right back in. They want to transition, a
lot to just try to have more time, but the system, the job, has them. How much
time do you think they have for their families? Are they there when their kids
do all those significant things they do as they grow? This is messed up.
Maybe we can't change how we are, but at least I can be aware of it, and try to
make you aware of it. I thought I had more time, but I didn't. I'm going
now to be with my family...
The next commentary will be next weekend's edition,
posted by Sunday evening, December 31, 2006.
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