Hi! Good thing Chick mentioned this journal in he`s letter today. I had no idea it existed. Anyway, I`m still reading the journal, but just a few thoughts: Chicks book was a turningpoint for me also. A pure no-bullshit guy like Chick is a rare sight these days. I quietly hope that he will keep the comments coming. I`ve been trading he`s method for the last few years and the last 10 months profitably. I also keep a trading journal in estonian website in estonian language. (pm me if any interest). Best of luck with your goals!!
Thanks Toorik! Yes it was quite a surprise to see that in the letter today. I'll have be be more careful about what I say now Just kidding, I'm glad you like my journal Chick, I couldn't have done it without you. Very few people share such valuable information with the generosity that you have. Following your example has made it easy to do the same with this journal and with others who ask for for trading guidance in my personal life. Thanks again my friend 5:00 AM comments I called Chick today and we talked for a bit. Some things we talked about: -A big wording error I've been making is with my order terminology, for example saying I bought a short or a sold off my short positions. This can do a lot of harm, Chick mentioned a few examples from his broker days when this mistake caused orders to flip backwards or unintentionally double up. So from now on I'll be more careful with that. Also I'll try to use "exiting X position" to keep my wording clean. -A problem with sizing large is that it subconsciously makes riding through short term movements against my positions much tougher. This compels me to pull my stops closer so that a stop would block against a bad single day movement. Chick noted this causes a lot of positions to fail because we really need a good enough safety zone for our positions to work. Single days movements much like intraday movements can be prone to random, "noisy" fluctuations. Chick said it would be much better if I lightened my positions and widened my stops by a good margin. I'll be doing this from now on. It will help me stayed focused on ignoring the short term noise and sticking with solid, more predictable price energy flows. -In times of potential trend changes or weak trends, it is ok to treat a strong ML as the trend. This is very interesting. I don't want to start overusing this rule, but thinking back I have had much success going with strong ML cycles in neutral trending markets. First market that comes to mind is bonds. Most recent example was when I shorted on anticipation of the ML turning down, I lost money. As ML continued to turn I felt the short side once again had a good case and this new down cycle in the ML has posted good profits in that market (and contiues to do so for my single bond short position) -In addition to the "trend/ML substituting" rule we can also discount an extreme SL when the ML is strong enough, that even a large counter-ML price spike would not be enough to change the SL enough to change the ML (I hope that makes sense) The reasoning for this is intrinsic: If even a large price spike is not enough to change intermediate term price flow, then it is probably not significant and will be short lived. Also when these strong ML cycles push price especially in a big down market like we are experiencing, it is very hard for the market to quickly come up with enough buyers for a large, significant price reversal. Short term fluctuations will always happen but much less so here, so 1-2 days of rally in a strong downcycle ML market are about all one can expect and make for a good shorting opportunity. -I asked Chick about the recent situation across the currencies, metals, and energies. He said he was very bullish in all 3 until crude lost upside momentum and then had a couple days where it plummeted. The first one ended up being insignificant, the second time when crude fell from 145 to 136 is what sent him a big red flag. He said after that happened his outlook across currencies and metals changed and he went from considering moves in each market to be extreme bullish, to neutral or having potential downside pressure (which is what we have gotten) Now with significant reversals in all markets, there is a great opportunity for the short side. Markets tend to fall much faster than they go up which can mean big short side profits. People also tend to underestimate the size of these moves so although most markets look oversold, there is a lot more potential left for those who are willing to ride through some rally reversals. Of course outlooks can and do change but that is the current picture. -Chick spots high or lower highs and lows in the SL and ML more aggressively than I do. I made a note of this mentally. Sometimes i discredit the SL too mcuh, but there is a lot of wisdom hidden in that little line for someone who can read it properly. I'll be paying more attention to these high/low patterns and divergences. Hopefully I'll balance it well without giving too much weight to it.
Having Chick say your commentary is "quite good" was high praise indeed. I also owe my start in successful commodities trading to Chick's books and newsletters. My hat is off to your for running this journal. I also agree that Chick's generosity is, to say the least, inspiring. Something I hope one day I can also share with others. Thanks for taking the time to put this together. I may not always comment but I'm sure to be a regular. I like what I'm seeing here.
Ditto.....Ashan...you have a great a journal here...I may not post much...but I follow your journal every day...keep up the good work buddy
Forum said to shorten my post to less than 10,000 characters, that's what happens when you put Chick's commentary in the same post as mine I'm personally expecting a good day in NQ tomorrow, at the very least good in terms of relative strength. NQ had the best pattern a few days ago and suddenly every other index has SLs accelerating to the upside and MLs turning up steeply, while NQ looks lethargic. However if there is some downside tomorrow I can't be too disappointed, The YM and ER2 both have SLs on highs (ES and NQ not so much) Always hesitant to stay in a trade for a long time when trend is against me but Chick mentioned this also and says he sees the picture as positive enough here to take this risk, which is significant. I really can't seeing price falling much mroe from these levels, then again i could have said that about a month ago as well! Mentally difficult to short natural gas once again at these levels but downside risk/reward looks about as good as it can get, it's just the short term lines are looking like a ball falling off a cliff and ready to make a serious rebound. But everyone else is surely thinking the same. I was considering, waiting for a rally to fade but in a market this weak this opportunity may not even come. I feel it is more risky to not be positioned than to wait to the sidelines. So I shorted another big contract at 10.552 on friday. Stops are wide to guard against a sharp news spike. I like Chick's comments about the copper trade, it made me ponder how he decides when a market deserves a couple more days to work vs strict probation (good performance or out the next day) That'll be a question to ask him next time I call. Despite the SL on an upcycle, ML will continue to the downside for at least a couple days (from dropping very high SL numbers) SL itself is on a bullish divergence with price and price did not hold its gains from an early rally after SL initially turned up. Trend is even down weakly. I am still comfortable with my heavy short position, though a little less after Chick mentioned the lack of downside being a concern in a couple days. I'm still a bit wary of the grains after some poor results in wheat, nothing too serious but a string of bad trades in a market tends to make me want to avoid it for a little while. Like Chick says, corn has been on almost a month long down cycle in the ML and although it has at least a little more to go, SL is on extreme lows and now pointing up. Even a modest rally will boost the very negative SL up quite a bit (it will even come up with price staying neutral) and ML is ready to deteriorate quickly if price/SL strengthens. Too many good opportunities elsewhere to focus on this group, although soybeans is looking a lot like natural gas from two weeks ago (Previously strong trend still up but suddenly at risk of turning, ML/SL both dropping from highs and making series of lower lows and highs on the way down) Obviously Chick correctly anticipated the cocoa market. Trend was/is still marginally up and not able to anticipate down yet so I guess this is another example of Chick using experience or other factors to read past the trend line. Even now after I've picked his brain and had some good experiences with the method I can feel like a newbie trader when a market move that is able to be anticipated eludes me. ML was strongly down and now SL is down but to me the situation looked quite unappealing for a short last week. Still trying to backwards analyze this which may be a wasted effort. Ever since I have watched the cocoa market it has not respected a ML downcycle for that long, cocoa seemed to be on a perpetual wave motion to the upside, with some occasional large corrections. It will be interesting to see if this market falls below the 2550 area. If it won't break that area I'll still be leaning towards this market as a long term bull market. The large downspike in sugar was enough to neutralize the trend. SL is at lows so I'm waiting for a rally to short this one. I could just short it now like natural gas but I'm already positioned in other heavy commodity shorts, so not being in this market until a rally is somewhat of an aggressive hedge against the upside. High reward potential in most markets is the reason for putting in a lot of money and letting it work with wide stops. The plan is to brace for some short term upside pressure (downside in stocks) because some most markets are feeling like they need some upside relief, even if only a quick one, before continuing with strong, sharp bear market selloffs back to more "reasonable" levels. Fortunately I'm at that point in time where I don't know where my balance is so losses don't affect me even on days of big losses. This seems to be the time when I trade the best actually. Much easier to disregard losses and focus on the longer term movements right now. Chick has seen these before and its nothing new to him. Probably one of the things I ask him about most is what the markets tend to do longer term, he doesn't say anything surprising (they can trend up or down for a long time, longer than most people think, or sometimes get stuck in a long sideways range) but living a term bull/bear market cycle and talking about them are 2 different things. It would have been downright scary for me to short natural gas alone without Chick's guidance. I'd probably be looking at it by now but insisting that the SL come up some (ie have an price flow against the actual trend) before doing anything. Funny how it takes a veteran to remind how markets move up or down. Some long sideways pauses and these endless short term fluctuations can distort such an obvious pattern for someone who hasn't seen these cycles repeated over and over. Here are pics of the metal situation. In short what Chick said is the lines are good for gold/silver, but relative strength is very negative.
Ashan- When you/Chick speak of Relative Strength with respect to Metals, are you meaning that Platinum and Silver should be leading Gold, and not the other way around? TIA
Yes that is correct which is counterintuitive because we think of gold as the primary market. But the relative strength pattern is Platinum leading, Silver in the middle, Gold at the end. If any of them disagree with each other then the relative strength signal is not that strong. Stocks had another 2 sided day and then dropped a good amount in the aftermarket. Very hard to tell if this is true downside strength or not. However apparently more big stocks failed to meet earnings today. Chick also said last week that Monday may see more weakness, but then after that lack of up would be more significant. Finally got some decent relative strength in stocks with YM closing the weakest, NQ and ES about even. ER2 was still the most positive but then dropped the most in the aftermarket (though all dropped a good amount) All indexes except NQ have SL on highs and getting ready to turn. NQ's SL did not make recent highs, but has already turned down from a slightly higher high. So if NQ intends to catch up it now has a chance to shine. Most other markets do not seem materially changed. Bonds had a decent up day but not what one would expect after a decent up day in stocks AND bonds being oversold with SL on recent lows (I'd expect more up than this) So I sill like my short position. Energies diverged today with crude having a smll up day and natural gas slightly down. Normally these two aren't supposed to correlate that well but lately they have been. Natural gas has not had any decent upside pressur for a while now and make need one to shake up downside speculators. Doubtful this is that big of an issue compared to before when there was a long, very obvious trend to the upside though. Copper went up a little, nothing significant. Chick noted that sideways here is more negative than positive but to a point. In 10+ days now trend will start dropping significantly lower values from a 3 week dip. This anticipation is too much though, "normal" anticipation up to 10 days off the end of the trend line shows trend to still be slightly down. The ML is still dropping higher values, but SL is positoned to go up enough to flatten the ML in a couple days if there isn't good downside soon. Chick's comment of giving this market a few more days before probation makes more sense to me now. There may be other reasons but the sideways action would have still been more negative for another few days because of what he knew the lines were going to show these days if price held this area. Small up day in cocoa but neutral to slightly down in coffee, sugar, cotton. Will probably add a few shorts today. Sugar has the most negative ML, and since trend is flat ML can be treated as a strong downtrend, but SL is at lows so this market is similar to natural gas. SL can be discounted when ML is this extreme so I'm adding some shorts.
Late night comments: As said before Chick is good at constantly re-evaluating a situation Not getting too attached to one side, something I feel I do too mcu hand am tryign to work on. Couple days ago stocks were looking good for a bull run, now situation has too much risk. Commodities were also looking very negative, now short term upside risk is high. I dumped NQ, bonds, copper, natural gas, cocoa. The natural gas contract was especially tough to exit but better safe than sorry. Sugar was still looking very short term negative, almost as strong as NG, so I shorted 4 contracts there. The sugar market is fairly independent so even if there is general strength tomorrow it should not be too much of a factor. I longed 2.5 full euro contracts and 2 gold. Not a mind reader but I think today's "pause" or slight up in many markets (energies, currencies, metals, softs) helped turn Chick a bit short term bullish so once again the more positive markets are looking appealing on their reward potential vs risk. Platinum's recent dive concerned me but gold was still tempting on the long side. Markets always open to change so maybe this is the right side, if not I'll re-evaluate tomorrow.