The past two months we have seen all the focus from traders and investors be on the equities market. And rightly so and stocks run higher and higher. But there are two commodities that look ready to explode being gold and oil (actually three if you count silver).
Below are the charts of gold futures and crude oil 4 hour charts. Each candle stick is 4 hours allows us to look back 1-2 months while still being able to see all the intraday price action (pivot highs, pivot lows, strong volume spikes and if they were buyers or sellers…).
The 4 hour chart is one time frame most traders overlook but from my experience I find it to be the best one for spotting day trades, momentum trades and swing trades which pack a powerful yes quick punch.
As you can see below with the annotated charts both gold and silver are setting up for higher prices in the next 1-2 weeks from a technical point of view. That being said we may see a couple days of weakness first before they start moving up again.
4 Hour Momentum Charts of Gold & Oil:
There were two back-to-back directional changes for February and March. The computer was dead right AGAIN. February went up, and March went down. Even the Panic Cycle hit on target. On top of that, the decline was a perfect double 8.6 frequency of 17.2 days. Perhaps those who like to try to take shots and say the 8.6 frequency is a bunch of bull, yet offer no empirical evidence to support their claim just opinion, when the Dow Jones Industrials fell for 17.2 months. Gold just fell for 17.2 days.
You can not expect to do well in the market if you look at investing in a normal way. By definition, being average is doing what most other people do and since investing is largely a psychological game, doing what other people do is only natural. Average results come from normal people acting in normal ways.
To beat the market, you have to be different.
Not necessarily in a straight jacket bouncing off padded walls different, just a little off.
Here are 10 things that may help you be a better investor, some ways to think differently from the crowd in that pursuit to achieve market dominance.
1. Do not think about making money, think about losing money – the first step toward success is accepting that losing is part of trading. You will not be right all of the time, you can not always trade your way out of a bad situation. There will be times when you simply have to walk away with a loss. The key is to keeping the losses small and manageable. When the market proves you wrong, take the loss.
2. Do not think you can average down to win – it is a logical idea, add more to a losing position with the expectation that the market must eventually go your way. Many times this strategy will work but, when it does not work, the loss may be insurmountable. The market does not eventually have to go your way.
3. Do not think that your success is entitled – you may make a great trade, pick a really great stock and have a feeling like you really have the market figured out. Forget your gloating, no one ever has the market figured out. We must always remember that we have to work as smart for the next trade as we did for the last.
4. Do not think that talent is required – making money in any trading endeavor is a small part technical skill and a big part emotional management. Learn to limit losses, let winners run and be selective with what you trade. Emotional mastery is more important than stock picking skill.
5. Do not think that you can tell the market what to do – the market does not care about you, it does not know that you want to make a profit. You are the slave, the market is your master. Be obedient and do what the market tells you to.
6. Do not think you are competing against other traders – trading success comes to those who overcome themselves, it is you and your persistent desire to break trading rules that is the ultimate adversary. What others are doing is of little consequence, only you can react to the market and achieve your success.
7. Do not think that Fear and Greed can ever be positive – in life, fear can keep us from harm, greed can give us the motivation to work hard. In the market, these two emotional forces will lead to losses. If your decisions are governed by either or both you will most certainly find that your money escapes you.
8. Do not think you will remember everything you learn – every trade provides a lesson, some valuable education on what to do and what not to do. However, it is likely that your lessons will contradict one another and lead you to forget many of them. Write down the knowledge that you accumulate, return to this trading journal so that you can retain some value from the lessons taught by the market. Remember, the market is cruel, it gives the test first and the lesson after.
9. Do not think that being right will lead to profits – you may be exactly right about what the fundamentals are and what they are worth. However, timing is everything, if your expectations for the future are ill timed, you may find yourself losing more than you can tolerate. Remember, the market can be wrong longer than you can be liquid.
10. Do not think you can overcome the laws of probability – traders tend to be gamblers when they face a loss and risk averse when the have a potential for gain. They would rather lock in a sure profit and gamble against a probable loss even if the expected value of doing so is irrational. Trading is a probability game, each decision should be made on the basis of the best expected value and not what feels best.
In response to a bursting real estate and credit bubble in 2007 Bernanke’s solution was to crank up the printing press and flood the world with dollar bills. Unfortunately it didn’t solve our problems, it only made them worse. The real estate and credit bubbles stayed busted, but that liquidity had to land somewhere. In 2008 it went straight into the energy and agricultural markets spiking the price of crude, gasoline and food. This in turn collapsed a fragile global economy that was already reeling from the real estate implosion. The end result was the exact opposite of what Benjamin intended. Instead of halting the real estate collapse he just magnified the severity of the recession.
Unfortunately Bernanke has not learned from his past mistakes. The wicked sell off in 2010 was met with QE2. The even more severe decline in 2011, which should have initiated the next bear market and started the move down into the next four year cycle low, due in 2012, was aborted with additional money printing disguised as Operation Twist and the European version LTRO.
On the surface it looks like Bernanke has been successful. The economy has rebounded from near recession in 2011 but the unintended consequences are already in play as oil is now back above $100 a barrel and gasoline over $4 a gallon. Bernanke has steered the Titanic straight into the iceberg and now there’s no turning back. If Ben doesn’t raise rates and drain excess liquidity oil is going to continue to rise until it destroys the global economy again.
The dollar is at a very important juncture. The current daily cycle topped on day 11 which is right in the middle of being left or right translated. Left translated cycles are the hallmark of a declining market (lower lows and lower highs).
Right translated cycles are associated with rising markets (higher highs and higher lows).
How this cycle plays out is going to determine the path for all other assets. The current daily cycle topped right in the middle of being right or left translated. As long as the impending cycle low holds above the February intermediate degree bottom then the pattern of higher highs and higher lows will still be intact and the dollar will still be on the upside of an intermediate cycle.
In this scenario I would expect the stock market to roll over soon and begin moving down into an intermediate cycle low in late April or early May. Gold’s B-wave would resume after a short counter trend bounce and continue down to test the December lows.
If however, the dollar were to penetrate the February low it would signal that the intermediate cycle has already topped and the pattern has reversed to lower lows and lower highs. In that scenario we should see the dollar moving generally lower for the next 15-20 weeks.
In this scenario the runaway move in the stock market could continue for another 10-15 weeks, and gold’s B-wave probably bottomed on Thursday as another shortened intermediate cycle.
The next couple of weeks are going to be important. I’m expecting the first scenario where the dollar continues to make higher highs and higher lows, but I’m prepared to reverse course 180 degrees if Bernanke can break the rally and push the dollar through the February 29 low.
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