Gold: Waiting on a Correction

I am long term bullish on gold. Gold has broken out of it's base channel and I believe it will soon drop down to retest that channel before going to new all-time highs. This channel is drawn off the 1980 top.

I would love for Gold to fall back to the 1230 area before going fully invested into it. Right now we wait patiently for the pullback to occur. Until then I am not buying gold.

Is Copper Trying to Tell Me Something? ALSO BULL/BEAR ALT. COUNT

Looks to me that Copper may have already bottomed, or maybe just put in another X wave before the final Z wave down. Either way, this is telling me to be cautious about getting heavily into bear mentality. Copper so far made it's bottom on May 11th, over a month ago. In my opinion copper better start selling off and break the previous low or we're going to see one hell of a short squeeze on the bears in the near future.

Additionally, I was looking for a count that would throw off both the bulls and bears, and came up with a beautiful idea that would scorch the bears one last time, then kill the bulls. Check the green count in this daily chart.

From my research I've learned that wave 3 is less than wave 1 in under 5% of the cases, so I'm not giving this too much credence, but I'll sure be watching it!!!

Drop Into June Is A Long Term Bullish Signal

Since December 2010 I've been saying we should see an incline followed by a drop into mid-June 2011. It seems we are getting that drop currently. Targets for this drop were 1273, 1250 and 1220. On Friday I bought my first batch of SSO which is a 2x SP-500 ETF. The bears will say we're in wave 1 of P3 down, I say when will they give up?? Listening to Prechter would've lost you nearly 30%. Listening to the P3 crowd is NOT working. The support level for the SP-500 in 2011 is 920. THERE WILL NOT BE A NEW LOW MADE UNDER 666.

A yearly closing over 1220 in 2010 was a bullish signal. This bull market should last until late 2014 or early 2015. This should be the greatest appreciation of your wealth since the 2009 low. If you choose to try and short the market and not receive this gift that's up to you. I'm scaling into long term long positions for my IRA and my trading account.

On a side note, the Australian Dollar should also aprreciate during this timeframe. I have a bank account holding AUD. I sold half of my AUD when it reached 1.10 v. the US Dollar. I'm now rolling that half position into gold and holding the other half in AUD. I will sell that position when AUD/USD is at 1.76.

Here's my long term chart with annotations

NOTE ANNOTATION IN LOWER LEFT CORNER!


And here's my weekly cycle chart

It's Time To Buy

I apologize for my absence as of late, I've been dealing with some family issues. People are becoming extremely bearish as of late and that has me in the buying mood. Looking over a few charts tonight made me turn even more bullish near term. At least we can catch a sizable correction to the upside if not an entire bull move. The first chart getting me in the buying mood is that of the McClellan Summation Index. It recently broke below my bull support line, but is in an area where it has reversed some more.

You will also notice that the SI is coming to another bull support zone of the downtrending white line. This has me near term bullish.

Another reason I'm getting bullish is because of the inverse correlation of the USD and the equity markets. I believe the US Dollar put in a 4th wave up and is now in a 5th wave down.

The chart shows the dollar breaking back down under the 1-3 channel line drawn off the 2. If the inverse correlation holds the equity markets should soon reverse course.

Finally, my current wave count has either 5 waves down ending C of Y in an ending diagonal yesterday, or 1 more low coming to end wave C down. If we get a new low around 1280 it would be the latter of the counts. My bearish count is also looking for a wave 2 retracement upward. When a bull and bear count align in such fashion (both looking for upside) it's a good risk/reward situation in my book.

Today also gave me an hourly buy signal according to my ADX, which means a low is either at hand or within reach. I went long on the wedge break today and will add to my long position on new lows.

Thanks for reading.

geno0010

The

Trader

May 28th, What Really Matters

This past weekend the love of my fiance and my life passed away at 16 months of age. Within that time I have learned more from a dog than I could've in a lifetime listening to teachers, preachers, bloggers, etc. Sometimes in life I was more focused on the market than either my fiance or my puppins, so I would like to take this time you remind you of what is really important in life. I love playing the market, but personal relationships are WAY more important than money gained or lost. My pupppins actually stepped on my keyboard one time and entered a trade. She lost $300. She never did pay me back.  On this Memorial Weekend I think it's important for everyone to reflect on their lives and the people and animals who influenced it. I know my puppy made me a better man than I ever was, and that's important for me to remember.

As of the market I really don't care right now. I was looking for a correction to 1308/10 and the 1311 low should've satisfied that. I'm still looking for 1390 or higher.

Take care everyone and remember that making money is probably the least important aspect of life. People or animals don't love for money, they love for you, in your entirety!

Termination of Wave 2 before Wave 3 up

I had to slightly alter my count based on the price action recently. The move up to 1370 seems to only have completed wave 1 up of the ending diagonal, with wave 3 up to 1390 to follow. After the I'll be looking for completion above 1400. Here's is my updated daily chart of the SP-500:

This move down has been impulsive: An impulse A wave consisting of 5 waves, a 3 wave B wave back to test 1360, and now we're in the final impulse wave down, the C wave which will finish red wave ii down on the daily chart. Now let's zoom in to a 10m chart to view how this wave ii down has unfolded and how I plan on trading it.

So far I'm counting this as an impulse A wave and we're in the final impulse C wave. This can also count as a completed WXY down where Y=X today to complete wave ii. That is why I bought June  IWM and SPY calls today. Going with the impulse count looks to me like we put in 4 of iii with a 5 of iii down to the 1308/10 area to complete iii of C. After that we'll probably get another bounce up to the 1325/28 area before the completion of the C wave. I will be adding to my call collection at 1310 and finally around 1295.

Until next time,

geno0010

The

Trader

Whipsaw Nation & Trendline Support

This will be the first post of many which lead into you my swing trading intellect. I have been watching the hourly and shorter term charts whipsaw for a few days now. My previous call at 1350 was for a top to 1370 then a pullback. That happened nearly perfectly with the market topping at 1370 and change. The pullback I expected was to 1240/42, so I established long positions at that level. When the market dropped further I didn't fret, I added more long positions after I looked at my original anlaysis and deemed it correct. I sold out out of this position on Tuesday and have been in cash. (Tuesday 1358).

Some would say I missed this drop. I disagree. Per the stock market all gains made on the short side should be considered a bonus in my opinion. Also, I knew the drop was coming since I sold my long position. YOU DON'T HAVE TO PLAY EVERY SWING TO MAKE MONEY!!! You want to be on the longer term side of the swing!!

I believe these tops & drops are part of a consolidation pattern and I don't think we'll see new lows under 1329.

My next projection target comes around 1389.60 as long as 1329 holds. I am flat position wise and really don't plan on playing anything until my upside projection targets are met, or something on the short side triggers my interest. If anything happens you'll be the first to know!

POSITIONS: FLAT...NO LONGS EVER, maybe short under 1329.

Until next time,

geno0010

The

Trader

PS WATCH HORIZONTAL WHITE AND UPTREND YELLOW



Turn Your Stock Market Gains Into A More Valuable Dollar

Alberta Rocks recently had a great post on the value of stock market gains, which he concluded an 19.4% gain on the TOTAL gain of your holdings. Now it's my turn to teach you how keep more than 19.4% of those gains, and even amplify the gains by 10-25%. Basically what we'll be doing is a carry trade, but there's no need to worry about interest rates.

What I've been doing since September of 2010 is turning my market gains into Australian Dollars. You don't need a Forex account to do this since the inception of ETf's and Trusts. A quick search turned up ticker symbol FXA which is a Rydex Currency Shares AUD. Another CiLian, Herz, recommended the Canadian Dollar, but I don't believe CAD has as much upside potential as AUD.

Since September of 2010 the AUD/USD has risen 18%. The US Dollar index has dropped 7%. This would give you a total gain of 25% on top of the market gains you locked in! Why hold dollars when you can hold foreign currency for the cost of one transaction through your brokerage? In the near term I believe the AUD is due for a correction. Anything down near the parity level would be a great entry, but I believe 1.02 or thereabouts will limit the downside. If you want to lock in your market gains in real rather than relative terms, why not test out this "carry trade".

Here is my current daily chart of the Australian Dollar:

It looks like the 110 area should cap the short term advance, but after that it's off to even more all-time highs. I also believe capital is flowing into Australia at high rates. This capital flow IS a global phenomenon. Somehow money finds the best investment and rides it into a bubble. The trick is knowing when to get out before the bubble bursts. I think the Australian Dollar has a chance to hit 1.76-2.00 before that bubble bursts, and plan on putting my USD into AUD the whole way. Until next time,

geno0010

The

Trader

Short Term SP-500 Forecast

With the SP-500 hanging around the 1310 level it's hard to get an exact read on market direction. Most indicators are still whipsawing making me believe we're still in a correction rather then an impulsive 5th wave up. On the following chart I noted a couple dates we should see a low put in if it's not in already. These dates are based on the triangle count proposed by Col1 and others. Each wave should take less time and travel a shorter distance then the previous wave. The reason I'm not totally buying into the 4th wave triangle is because some indices made a higher high on the proposed B wave, therefore, after the next low I believe is coming, I will be holding long.

I still believe we will see a major LOW in June which will be just as good of a buying opportunity as was March 6th, 2009 (at 666). This count of completing the 4th wave and rising up into the 5th wave during the beginning and mid-May still fit with that June low scenario. The June low would be my proposed wave 2 down before the surge of surges King 3. Until next post....

geno0010

The

Trader



Using the ADX

You can go to stockcharts right now and read about how to use the ADX, but I'm going to tell you how I use the ADX. I believe the adx can be used as a semi-predictive tool rather than the lagging, momo indicator it's intended to be. Of course, you should always use other indicators in conjunction to ensure proper market readings. The adx was specifically developed for use on daily charts for commodity and currency trading (NOT stocks), but I believe in it's value for all trades.

This first chart is the hourly chart:

As you can see, I have a red horizontal line at the 40 mark and a yellow line at the 35 mark. A lot of time the adx will give you a pop over these 2 marks that's tradeable. The first white circle in the chart shows how the ADX and the -DI (red indicator line) both sliced right through the 35 line and above the 40 line. This is showing a very strong trend. Most people wait until the ADX drops back below the 40 line before making a trade, but I don't. When the ADX reaches the 40 line there is usually a correction looming. When this happens, I wait for the ADX line to turn back down to hedge or cut my trade. This trade is represented by the second white circle. On this trade, after the ADX turned down it turned back up and made a higher high while the SP-500 made a new low. I wasn't overly worried because I had counted 5-waves down and there were positive divergences on the -DI indicator as well as other indicators I use. I simply added more long positions at the new bottom.

The triangle that followed didn't give me many clues using the ADX and DMI's so I had to rely on other information to get out of my new long positions. With the DMI's whipsawing I knew it was a correction within a correction so I was prepared to get short again. The ADX this time showed the trend wasn't nearly as strong as it kept turning down at the yellow 35 line. In my experience, if it gets turned down at the 35 line once it usually won't get up to the 40 line. In this case you hedge or cut your position on the first test of the 35 line. Every pop back up to that line is an opportunity to add to your new position or take more profit from your old position. Again, the -DI showed negative divergence on the new low was was a good place to get long.

Now we are long from 1250 and this is where I got into trouble for the first time. The ADX popped up over the 40 line again representing a stronger trend. It started to turn down around 1310 so I sold my longs and added some short positions. This was a mistake since I knew that if the ADX pops over 40 is usually represents a new trend and I got a little ahead of myself. In these cases you want to wait until the ADX pops again and fade that move. I did this at 1328 when the ADX popped back over the 35 line. Now I was holding short positions from 1310 and 1328 and the market started to whipsaw, as did the DMI's. This time I was a little worried because it could've been a consolidation at that level, but I stuck to my guns. The short ended up paying off, but not nearly as well as if I would've waited until the second ADX pop to the 35 line.

On this latest move down I covered those short positions in the 1303-05 area and added longs. You can see the ADX didn't even make it to the 35 line before turning down. This is a weak trend so I knew I needed to get out before the market rose back up. Also noted in the chart is yet another negative divergence on the -DI. It makes it easy to move in and out of positions with the help of these indicators.

What the ADX and DMI's are telling me about this move down from 1340:

On the move down the ADX failed to achieve the 35 mark telling me the downtrend was weak. Sometimes the first portion of a corrective move fails to achieve these numbers.

The move up from 1300 is not raising the ADX at all. The ADX is showing "no trend". Also, the DMI's look ready to whipsaw again. The +DI just crossed over the -DI, and they are about to cross again. This makes the move up look more corrective than impulsive. I would like to wait until the +DI shows me a negative divergence or pushes to new heights before taking a new position. I sold my calls at 1320 and am flat now.

In the next ADX Tutorial I will use a daily chart for longer term trades. I hope you can add the ADX and DMI's to your trading arsenal and make some extra money along the way!