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 September 17, 2006 Commentary (weekend
edition)-
Wow, am I having fun! No, this isn't another
commentary starting off the same way, talking about the great market (but I am
still finding that just insane, too). I'm referring to my first mentoring at
the new locality. I am squeezing in this commentary before I head over there
for today's work. Yesterday I mentored looking out the window at 'the lake'.
For lunch I suggested something like I said I planned to do in that mentoring
'sub-page', not knowing how my student would feel about it. I suggested a walk
instead of working through lunch with our sandwiches. The 'new Jim'. He
responded by showing me the new hiking boots he bought on the drive in for just
such an occasion.
We took a walk through pristine temperate rain forest in the
national park, and went to see the largest cedar tree in the entire world. Now,
that's a big tree. No words can describe how cool a simple walk like that was.
My student had me taking pictures of him, and overall he was very pleased. The
night before, shortly after he arrived, we went out for pizza at the local
place down the road from where he was staying, and 'talked shop'. After the
walk he asked about an incredible trail very close by that I am quite familiar
with, and a waterfall. I told him it was a must do. Then he asked if I could go
with him on that one, too? Could I go? Are you joking? Oh, yes, I can go. I
like the 'new Jim', and the new mentoring plan. Tons of work, and some
incredible play thrown in. This is good. This is way better than
before.
This week I'm going to review crude, and then follow one theme on
gold. I want to look at price action. I can only do so much in this limited
commentary format, but nonetheless, it is some solid material, and really shows
some of the aspects that I look for as I read a situation and study a potential
trade area (PTA).
I'll start with a 60-minute all sessions chart on crude. Keep in
mind they are rolling out to the next month on this, but I will show it in the
October basis because that's where we started the work in here. Again, this
looks better on a tick chart, but for now I don't have a way to get that data
for in here, so do your own work on this.
The D point on the upper left is the
completion point of that ABCD setup we looked at before, the one that formed as
price action came off that larger long setup (I copied that from last week's
commentary, because it still applies here). So, crude just kept rolling down,
and didn't 'see' or care about any areas at all. That's the way it is
sometimes, and it's why I require entry triggers.
Crude is in
management mode, as I mentioned, and has now hit 'home run' status. It's the
relatively rare trade that gets to that point, but when they happen, my plan is
to ride them until they tell me they are done, not until it hits some 'profit
target'. Support and resistance are only support and resistance after the fact,
once they have shown a response. Until then, they are only potential
support and resistance. Imagine taking off this trade at any of the 'support'
areas on the way down that were not 'seen' at all, and seeing it continue on
like this. That's not my style of trading, I'll tell you that for sure.
Let's move on
to gold. I'll start with the daily chart, to show what we are going to look
at.
Recall how gold 'popped up' out of the narrow
.618 range, and then rolled over? I added an obvious line on the chart, created
by the first two arrows along that line. The third arrow shows where I wanted
to watch closely. Remember I mentioned how I don't play 'breakouts' and such,
but stick to my methodology? Was there something here I could have done using
my methodology at that line area by the third arrow? The answer is: it totally
depends on what the price action was doing.
Let's drop
down to the 60-minute all sessions and look at that.
Here's the move up, and one of my 'adjusted' median line sets. The
red line across the top is my recreation of the daily line. Gold 'sees' the
line, and the upper parallel, and starts to fade off. But it goes right to the
lower parallel and starts to bounce. But, alas, a lot more is happening right
here than that.
I'll add a few things onto the chart, and we'll assess what we
see.
I added another one of my 'adjusted sets',
and a .447 retracement off the top. Why the .447? I tried several, but the .447
hit right at that upper parallel, so that's the spot I was wanting to watch the
most closely. There is also a pattern forming right at this spot, and full book
set owners will likely see that literally jumping off the screen at them. Point
is, this should explode off this point to the downside if all
that is to play out. In doing so, this would take out that key lower parallel,
and that may cause a big flush. The premise is a move off the big daily
downsloping trendline, but that's just 'traditional' analysis. I wanted to see
if I got anything from my methodology to set me up for that potential play. And
I sure did.
Let's see what gold did with that area.
I have a very technical term I use to
describe this kind of action, one I frequently use, too, when I'm in the
Harmonic Trader chat room: SWOOOOOOSH! Gold comes dead off that setup, takes
out the key lower parallel, and flushes strongly, just as I suspected it might.
Now, what is the position of this play for me now? Management mode. Another home run.
All forms of potential 'support' being ignored. I'm sure glad I don't use
'profit targets'. Do they all work out like this? Are you kidding? Only a small
percent go and go and go. My trading life is made up of 'singles'. But when the
'home run' comes up, my plan is designed to have me ride, not close out at a
single.
I'll use another of my very advanced technical terms, scrunch, and
scrunch the chart up to get the current perspective.
Gold has continued to drop, and in doing so
has formed multiple patterns, reacting just about
dead off those patterns. Those patterns would be trade setups on their own.
Notice, too, how the swings are getting bigger? I find it amazing how all this
was triggered dead off a very, very clear setup based on my methodology. But,
amazing or not, I don't find it surprising at all, since I see this type of
thing pretty much every day. I am looking for the same types of things on all
issues across all timeframes, as long as the issue is liquid on that
timeframe.
It was just incredible to me how, in the mentoring
yesterday, we looked at an example in the British pound from just above the
daily timeframe, and we saw a ceratin layout. Then we looked at wheat, and
finally a tick chart of the Russell mini, and we saw this same particular fake
in the PTA and then the 'real' move. I explained how to spot this, and how it
is based on my patterns, Fibs, and methodology. The point is not how great
seeing and understanding that little fake out is, it is that it was on varied
issues and highly varied timeframes, all the way to the tick chart on a mini.
As I keep saying, this methodology is highly fractal.
I'll leave
everyone this week without any specific thoughts to ponder on the market, since
I have to get going to my mentoring. Four straight days, and I still get up
early and do a commentary for my loyal readers. What a guy. Make sure you look
at the chart of the week (go to the home page and click in the upper left where
it says Jim's Chart of the Week). This is a very interesting setup in the LC,
and should provide some good educational material no matter what
happens.
Oh, and keep an eye on that 10-year, it seems to be thinking about
a key decision in here. Oh, and the pound came dead off it's PTA, and went
exactly to the area I had expected, and rolled right down off it. Now we see
what it really intends. I have been discussing that one blow by blow with my
big hedge fund student. Okay, so I did do some final comments. The 'new Jim'
still has some work to do...
The next commentary will be next weekend's edition,
posted by Sunday evening, September 24, 2006.
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