Lessons

1. If VIX is under 26, buy the dip. If VIX is over 26, sell the rip.

2. Always trade in the direction of the larger trend. Find the strongest trend in your time period.

3. Nothing as bearish as a failed breakout. Nothing as bullish as a failed break down.

4. Don't worry about the last dollar. Take your money and go to the beach!

5. No more than four positions at a time. Preferably 2-4. Scope out others. Pick the strongest.

6. Buy the strongest; sell (short) the weakest.

7. Nothing is guaranteed. Nothing.

Saturday, April 17, 2010

Change of Mind

The big red candle on the daily charts is saying - WATCH OUT - in big, red letters. This is the end of Wave 3 of 5.

Friday's action was also NOT conducive to the bull case for PMs. Also look at the TNX daily chart; in hindsight, its action over the past few days could be said to be flashing a warning.

I now believe that PMs may be headed down further, along with the general stock market. Accordingly, I will exit all PM longs on Monday. If I am wrong about this (20% chance), I will take my minor losses and be wrong. But based upon a number of factors -- Friday's action in all market sectors including PMs, TNX, etc., I believe that upside in PMs, in the ST at least, is limited. Gold could fall to 1100, Silver to $ 16.6 and SLV to $16.25.

Also, for the ES, this could be a test of the 1150 break out zone.

Added 4/18 at 9:23 p.m.

I think it is quite possible, however, that the downside in Gold will be limited to $1120 and Silver to 17.45 (SLV 17.1) (about 20 cents lower). There are rising trend lines meeting us there. At the very least, we should get a nice bounce there.

Accordingly, because I am bullish the stock market and PMs in the medium-term (1-2 months), and bullish PMs in the long-term (fundamentally so) I will start to leg back into PMs a few dollars down. I will also hold on to part of my position and not sell at a loss.


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