I like to think of market participants in terms of risk on/off. I create an image of that in terms of fear and greed. (not using either human emotion in a derogatory way).
A number of analysts were yet again calling out the bears on the S&P because of the falls on Friday and early in the week. Their reasoning was that the S&P ‘should’ have been rising, Christmas effect etc.
On Friday past I saw the fall but the market was still thin, then was surprised to see fall on Monday. I saw that energy (XLE) was leading the field. The reason seemed obvious, a line had been broken, the $50 in oil. Investors in energy had been fed that first 60, then 55 but finally 50 would be the floor, now fear rose and they started to sell, fear has that effect and it soon spread to the rest of the sectors.
The fear has abated because of what you have said, oil has stabilized, well at least for now anyways.
I was looking for signs of that stabilization (ranging) in the belief that fears would be eased and that bargain hunters (greed) would return. XLE (energy sector) lead the fear, it would likely lead the greed.
This is for me ‘context’, it is usually short term, the longer term stuff I leave for the economists.
The USD/JPY put the fear/greed or risk off/on onto a chart, the USDX helped only because of FOMC, a weak USDX would have encouraged the fear.
Well I have been thinking about adapting your way of thinking. We can’t forget what we’re here for after all. I’ve gone off track for a while. So as long we’ve got a reliable signal. That’s what we’re here for - to trade not to call tops or bottoms. And not to mention they can’t even get it half the time. We’re not getting paid doing any of those aren’t we ? I am looking forward to your no SL experiment !
I have been looking at S&P all day, no movement same goes for USDJPY and US10yr. Looks like XLE daily has found a bottom and now rising but we’ve got 50sma fast approaching which could set oil off to the downside again. Russell2000 stayed flat as well past few hours. I’m wondering what it is exactly thats holding them back from taking long positions on S&P500? is it NFP or have we got any key datas due ?
I do not think you are off the track. I only see the problem of being disturbed by no name analysts. You have awesome analysis out there. Instead of believing all analysts calling tops and bottoms, do what Peter does. Looking at the price action and perspective. You are great at technical analysis so who cares if they call bottoms and tops. We know that they are mostly false anyway. Do not bother to lose time on getting influenced by analysts of that kind. If price goes up then we trade up. They can call what they want. We tend to forget all the time when they are wrong.
And if the analysis are made by the broker companies, keep in mind: brokers make money when we lose…
Keep up your analysis and enter the trades based on those.
Good article Peter ! you’ve got nothing but wisdom.
FE, I’m no longer paying attention to analysts saying this and that. But what I have been struggling with is overwhelming amount of information. I don’t know if I should be letting them all in or putting up a filter. The fact that I’m easily letting this kind of information to get hold of me might have to do with the fact that I’m still in process of formulating my method or it may simply be me being young and raw.
I don’t want to be closed off and yet I don’t want to be easily taken off track as far as outside information is concerned. Finding the right balance has been probably the most challenging thing that I’ve ever encountered so far.
Over time you will find that you need less info, there is a book by a Mark Douglas, a trader, who named it “trading in the zone”.
What he is on about is that there comes a point where a person can feel or sense the sentiment of all the people who make up the market.
The pointers that I use help me sense or visualize the emotion in the market, I imagine how they feel. See how I said about ‘chill’ on Friday, after the hectic fear/greed during the week, that was like an exhaustion - so what happened?
The risk takers checked in their chips and chilled.
Information overload will lead to frustration, frustration is an enemy.
Take things easy, always a little at a time - then you will enter the zone.
[B]Others[/B]
Treasury Bonds - Neutral
VIX Index - Neutral
Dollar Index - Bearish
Not much to get excited about. Anyway, here are a couple of thoughts.
I’m still bullish on [B]Copper[/B], although not on a long-term perspective. The temporary divergence between Gold and Copper would be reason enough for me to initiate a long position had not been for my trading rule to swim with the flow.
[B]Sugar[/B] finally started a brief rally. Wonder how long will that last. It’s important to keep in mind that Softs are usually not highly correlated to any instrument, although they seem to obey to Commodities by and large.
[B]Dollar Index[/B] is really interesting. We were given another sill signal a while back (2014.09.16.), which was immediately followed by Commercial capitulation. Now, we are at an extreme again. I would not go against the trend which is that strong, but I think that we all can agree that we should see some kind of correction sooner or later.
I’m still studying Intermarket relationships, will share my findings later.
This week was interesting. It was pretty slanted. Just look at the totals. It pretty much went to 3 currencies.
Monday went to JPY.
Tuesday went to NZD.
Wednesday to NZD.
Thursday went to AUD.
Friday went to JPY.
And Friday ended up going to the Majors. Due to the JPY (1st) and CHF (3rd) at the top.
And since I went with the AUD across the board, that’s how many pips I raked in. It turned out to be +19%.
I’m so happy. Now I will have to decide whether to keep going or not. I’m gonna analyze them all. But, so far it seems like their (AUD) gaining momentum. It was an Asian week and good thing the AUD is over there.
I have the feeling again that we (you, Rookie and myself) post again less and less on our COT findings. Although your new style is good, I like that you mention all your products separately. Still, we do not post any charts and historical studies anymore. Of course if there are no trades then nothing to discuss. Still, I am interested on your USDX findings and would happily see some of the COT indicators or a historical study. Why am I interested? If you do find a retracement point, then it makes sense to wait with any long trades, wait for the retracement and then jump in. Can you please post some of your findings?
Thanks,
FE
Hi Mike,
I am very happy for you. Good job! Keep it up. Make your analysis and decide.
There is one 1 thing to consider. Some time ago I would have said +19%/week is a master performance. It is just a results what most people would be happy to get on a yearly basis and your reached it withing one week!!! As I learn more and more forex, I also learn if we have a huge ROI in a very short time, most likely we took way too much risk. So calculate please your position size and SL over, because if you won 19% in a week, maybe you could lose 30% also withing a week. That would we quite bad. As I do not know though your risk method, maybe it is all good and you made just great pips!
Thanks , Peter !
I like how you view things from an angle that isn’t too far where you ignore the tiny bits that can be the starting point of something significant and yet not too close where you lose track of the big picture and get all mixed up. Its a delicate job finding the right balance. The one that I have been struggling. And I think you’ve got it all under control. Been reading your old posts. If there’s anything that I should be filling up a note with it shall be your posts.
Good to hear your plans working out Mike! 19% in a week ? :35:
I used to do that, focus on someone else’s perspective of the market, but it’s not the way to go.
Trading is such a personal experience, incredibly personal. Take a look at any of the assets, doesn’t matter which one - see how if you were a bear this week you could have been a winner, or if you had been a bull likewise you could have won, the reverse, both cases you could have easily lost.
If a person doesn’t see or feel the market from their own instinct, from their own experience, then it will always be a struggle, a frustration - reason is they are not using their own thinking - can I suggest not to note - take any of my posts, this coming week, just look at the price moves, use a news site like forexlive and get the ‘feel’ of those people, get a sense of their emotions at work.
In the pro world many new traders express surprise at how they are dumped in at the deep end, no ‘mentors’, no ‘gurus’ - in my opinion just get to recognize the fear and the greed - it’s that simple.
I’m going to add to the above, about gurus and mentors and wise old men (and their posts).
The turtle experiment, long story cut short - they were given a system, basically a breakout system.
The thing that I took out from it all, one of the whizz kids in the experiment, the biggest winner (if my memory serves me right) followed the rules to the letter - each time there was a breakout he was in.
As you know, breakouts can test you, the word ‘fakeout’ became very popular, many of the turtles decided that they would filter the trades - of course their filters ensured that when the big breakout occurred they were not in, the whizz kid was.
Dennis sacked the guys who were being conservative with his money, the whizz kid was his hero - he followed the rules.
Then look at this link, did he follow his own rules. Gurus, mentors, and wise old men are only just as good as their last trade.
To be fear on R Dennis, I read his interview on Market Wizards.
It was the 1987 Crash and Black Monday no one saw except Soros and that was a huge conspiracy to stop the UK being part of Europe, exactly the theme now. You are right on everything else on following rules.
Yeah, Dennis is def one of the good guys, they are becoming fewer. (not sure whether he still trades).
The big thing for all of us, young and old, is to recognize the ability that lies within each one of us and not to figure what ability lies within another.
I remember that Monday well, not so sure about the conspiracy though, Soros didn’t act alone I grant, but those guys just saw the opportunity and took it - capitalist market etc.
Here is my COT analysis for the week. Just like BB, I am also happy to get the report once on time and not delayed by a whole week.
Silver
Nothing to report.
Crude oil
As I said last time, the net positions has turned. Still, nothing happens. It is interesting how more of you are expecting upside move. I just do not see it. I do not say it cannot happen but PA does not tell me something to the upside and I also checked ETFs, I do not recognize anything on XOI or OIL.
JPY
The yen is still holding quite good to most of its recent gains or even extended it. I am still looking for when to jump back against it.
RUB
Volatility went a bit down for the currency but the sanctions, falling oil prices etc. still made the Ruble to lose some value the past week.
EUR
Maybe the EUR is a good candidate for the next historical analysis. We are heading for the net positions extreme and the 3 years COT index is also increasing nicely.
NZD
At least someone takes on the gloves vs. the USD. NZD beat its American counterpart every single day of the week. It is interesting to see how NZD differs from the other commodity currencies. That is the only high yielding currency which makes some nice gains across the board. I like the story behind it.
Specs have been reducing their net shorts while commercials have been reducing their net longs. For the last 5 weeks there have been no significant changes as far as COT report is concerned. However on Jan 06-07 Russell bottomed and went up on daily TF. There’s no indication whatsoever as to how it did find a bottom. We’ll have to see next weeks report.
AUD - specs are bearish
Specs have been adding to their net shorts while commercials have been stacking up their net longs. Well that isn’t new anymore. However, commercials 3 year COT index reached 86 thats and Willco 95 as of 6th Jan. We’ve already had seen AUD rally on lower TFs, judging from these numbers where we’ve got plenty of room to COT index 93-94 historic high, and Willco 100. AUD correction might carry on to next week.
GBP - specs are bearish
No major correction is detected.
CAD - Specs are bearish
No major correction is detected.
CHF - Specs are bearish
Commercials 3 year COT index climbed up to 85 *historic high was 87 and Willco 99 as of 6th Jan. Correction might be due for franc. I’ve quickly looked over USDCHF daily chart there’s no indication of major correction just yet except for bearish candle close. However on lower TFs franc has been gaining against the dollar. If you’re thinking of selling of franc, beware of possible corrections across the board.
Thanks for the discussion guys. I also read Market Wizards and I am suprised that Dennis went broke. So I am happy it was pointed out. When I hear about Dennis then the conversation only goes about the turtles and not about his own trading. And like Peter says, it fits perfectly in our discussion why we should only listen to ourselves.
I like the last part, “for those too young to care” Thanks for thinking on the younger generation with the link.
What is your experience, does it makes sense to analyse Russell? I just ask because my historical analysis showed that S&P and Nikkei does not make sense to follow in the COT report because of low liquidity.
Your AUD and CHF findings are interesting, do you think it is because of their correlation to NZD and EUR? If you look at my analysis I pointed out the two of them too.
