We look at price from a closer perspective now. Around 115 there appears to have been some kind of a halt. Even though this may look like a wonderful opportunity to those who like to just buy at the support to go long, I would be careful around here. The problem isn't that buying around support is a wrong activity. What's problematic and at times dangerous is not keeping the context in mind. It is clear that price drop has halted for the time being. Notice though, the kind of strength price has shown to go up. So far after that drop from 120, price has showing little gumption to cross 117. The behaviour so far is showing that although the price has stopped going down there hasn't been a sustained and strong upside pressure shown by price. Until that spark of strength shows up we're left to conclude that the long side is to be avoided. For me cash is better at this juncture. The downward movement has halted for now and it's the end of the year with focus a bit reduced on the price action. Perhaps the new year will bring an opportunity to initiate some kind of a position. Considering the drop so far from 138, it wouldn't be too far fetched to assume there are going to be some rallies during this down trend, a downtrend that's been going on for some time. Does the fact that price has been dropping for this long have any influence on our decision making? In my case, yes, it does. I am a bit hesitant in initiating shorts this late in the game or without some kind of a substantial rise. This may not be the correct thinking, but a person has a right to not engage the market when not completely aligned with it. Those with quicker fingers and greater asset distribution might have a different mindset to make use of the opportunities on the short side now. We've had a short from 129 to 119, and a scratch with a loss of 1 point. All in all it hasn't been too bad. The idea is to keep the focus and follow our plan. Almost all of the drops have had seen price make new lows and then consolidate for a week or so. It's not a guarantee that it's going to keep repeating the behaviour in the future but it is something to just take a note of. All we're trying to do is assess the relative strengths of the demand and supply, and decipher which side has the upper hand, and whether that strength is sufficient enough to warrant an action. So far we've been silently folding our cards. From Zen and the Art of Poker: RULE #1: Learn to use inaction as a weapon. Most of the time, the market is indeed random. One can only win consistently by avoiding activity most of the time and trading only the few times during the day when a high probability trade occurs. It is our job as traders to wait more than we trade. (William) One of the best rules anybody can learn about investing is to do nothing, absolutely nothing, unless there is something to do. Most people always have to be playing; they always have to be doing something. They can't just sit there and wait for something new to develop. I wait until there is money lying in the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime. Even people who lose money in the market say, 'I just lost my money, now I have to do something to make it back.' No, you don't. You should sit there until you find something. (Jim Rogers) Using inaction as a weapon means simply that one must learn to be "aggressively inactive" while waiting for what he has proven to himself and for himself to be high-probability setups. Someone else may think that his HP setups are completely loony, but that's not the point. They are his bread-and-butter setups, and whether or not anyone else can profit from them is irrelevant. He wouldn't be implementing them if he weren't making money with them. Unless, of course, he himself is loony. It is the nature of trading that the trader is going to spend a great deal of time waiting, unless he doesn't have the discipline to wait for what he wants (though he must of course also know what it is that he wants, which is where defining the setup comes in). If the trader doesn't know exactly what it is he's looking for, then he is far more susceptible to being sucked into low-probability trades, particularly if he is eager to trade. By thinking of inaction as a weapon and using it as such, he will find himself aggressively withstanding the Sirens who are tempting him to act impetuously. He will be "aggressively inactive". (DbPhoenix) Gringo
You're doing all the hard work Niko. I am only lending a helping hand. It's Db who's most responsible for keeping us all from self destructing. You my friend also have a Merry Christmas, and I wish you and your family the very best for the coming year. Gringo
Given the large number of books written on the subject of trading, I have a very small "library" on the subject - Zen and the Art of Poker is one of those books. I've made something of a study of trading and gambling, or even (heaven forbid!) trading as gambling. The trader, even more than the card player, enjoys the luxury of "inaction," in that there is no need to "ante up" in order to play. No need to play every hand, i.e. no need to trade every minute or every day or every week depending upon the trader's time frame. The trader has the luxury of waiting for a situation that tips the probabilities one way rather than the other. Doesn't mean he wins, of course. But an "aggressively inactive" trader should be right more often than wrong, and should win bigger than he loses. Great journal, and a Merry Christmas to you! PVT
GDX is exhibiting price behaviour that's somewhat different from the price behaviour exhibited by GLD. Price in case of GDX has refused to go down about three times now. This failure to go down can be looked as some sign of strength. Although the trend is down and I don't have a signal for a long, it is nonetheless an occurrence worthy of a mention. Today is a shortened trading day with lower participation and volume. It does somewhat taint our analysis. Currently the price is moving up and showing that demand is in charge. Is is sufficient enough to initiate a position yet? I think not. Lets notice something else. The price in case of GLD made a pretty clean lower low a few days back when it dropped to 115. In case of GDX the price barely went below the swing low and appears to be resisting a drop. In case a clearer signal does show up for a long, I am tempted to think that GDX might be a stronger buy as compared to GLD. When and if that time comes I'll be keeping both these vehicles in mind. Gringo
Price in case of GDX moved significantly and ended up poking its head above the supply line. It was a shorter trading session but despite that the volume for this up move was considerably larger. We don't know for sure but this kind of behavior is indicative of strength. I would be waiting for a pull back to see how serious the up move has been and whether demand was using the holiday season to cause this unusual activity. So far strength is becoming more and more pronounced, and I would be keeping a close eye on any further development that might provide an entry to the long side. I would prefer if gold futures and GLD also showed some strength. It's strange that gold miners are stronger while gold itself is not so. A price reader must maintain focus on the behaviour of the instrument in question, and not get too much influenced by factors not directly related. Although, I do understand this point, the divergence in both instruments is somewhat irksome. Irksome might be too strong a word. Perhaps, a better word would be 'interesting'. Lets see how the supply and demand dynamic plays out in the next few days and early next year. The kind of trading I do, signals don't show up every day. There is at times a gap of a few weeks, and missing on a signal usually means another long wait till the next ride arrives. So whatever the case may be, I might have to dip my toes in with something. Of course it's only if a signal to go long shows up. In its absence, there isn't much to do other than to eat candies and wait. Gringo
SLV is hovering close to support around 18. We had a bounce around here in July, and price has returned. This time around the pace seems to be slower and movement has turned sideways. Is it a precursor to a subsequent rise? There seems to be some kind of a shift in price action that isn't looking as bearish for silver. More evidence is needed to figure out whether this shift is worthy of testing out with real funds. We had been lucky enough to ride the up the wave when SLV was around 18 the last time. The analysis was done in a different thread at that time though. For my own records and ease of access, I'll post a few links dealing with that rise in this post. It will also round up almost all the live calls made this year in one thread. Those not interested can ignore the links. For the larger picture the weekly SLV chart is given below. I chose the line chart because of how cleanly it shows the movement of price. This line chart isn't the most accurate as the average of the weekly price move is reported. Nonetheless, it still is worthy of an inclusion. SLV calls made in Aug 2013: SLV Entry SLV Re-entry or add SLV Update SLV BO update SLV Partial exit SLV Complete exit Gringo
SLV daily is showing a downward sloping trend channel. There's also a possibility of value being determined around a hinge. Now, this hinge thing isn't so crystal clear to me but I am mentioning it nonetheless. The volume isn't decreasing within the hinge, making it difficult to give a proper meaning to this twirly behaviour. Compared to GDX the price behaviour of SLV seems a bit inferior. Deciphering the true intent is a bit tougher. The price movements are a lot more erratic, leading to an increased risk of an unexpected movement. Like a concubine that's no long performing well, SLV doesn't seem like it's in a mood to mend its ways. Little does it know how thin our patience is running, dealing with all these wild and erratic mood swings. Lets hope for a return to normalcy, and a continuation of a long and fruitful relationship that's built on trust, performance, and money. Gringo
How are you getting on with Silver and Gold Gringo? It seems like a real mess to me at the moment, and I wouldn´t want to be trapped in this range. I will wait for a breakout and a Ret to enter long or short.
I am not touching silver for now. The action is not clear enough and there is this trading range as well. My focus in on gold. GDX has shown greater strength and signs that the balance may be shifting in favour of demand. The SL breach is clear and the retracement is underway. I await a sign of strength here to deploy the first longs. GLD also had a SL breach and is undergoing some retracement. Ideally a few days of slow drop would be better and then a powerful liftoff. It's only and ideal condition. I'll have of keep an eye on what actually transpires in the market. As Db pointed out in another thread XLV, and SDY both might be close to giving entry signals, either long or short, based on what price does now. This behaviour of multiple trading instruments, all different but converging at price levels at the same time is giving hints that something significant might take place shortly. Of course I don't know if anything will happen, it's only that I am very focused on getting on in case a signal does materialize. The year is over and those who've been holding onto their longs for preferential tax treatment on capital gains in the US won't hesitate to take gains if they want to. This means if the major indexes start turning down, metals might start to rise on fears of further monetary stimulation and inflation. Of course in the past a major drop in equities also led to serious drops in gold and other metals as well. In reality we don't know which one is going to be in effect in case things start changing. That's why I am focused on the price behaviour itself to keep my mind clear of confusion. Too much fundamental information just has this ability to paralyze the mind with too many conflicting ideas. Gringo