Last week we had typical pre-holiday light volume trading going into
US Thanksgiving. The previous week I warned every one to trade with
extreme caution because of the light volume and the fact that the market
is on the verge of a sizable drop for both stocks and commodities. Any
price action could not be taken seriously because of the light volume.
We will not know until later this coming week what the big money wants
to do… Buy or Sell, also what the manipulators will do… Seems like there
are a lot of wild cards out there with Europe issues and both
unemployment and payroll numbers out on Friday morning.
Below are a few charts showing my intermediate term outlook for gold and silver.
Gold & Silver Futures – Daily Chart
You can see both metal are showing a possible reversal head and
shoulders pattern. While they have yet to confirm and close below the
neck line we must be aware of this pattern and the risk/potential it
provides us with. Both metals are still in an uptrend but showing signs
US Dollar Index – Weekly Chart
This chart is not really that helpful for trading stocks, commodities or options right now but I wanted to post it because it allows me to show you how I analyze the market and my trades.
As you can see, the past 3 weeks have been in a strong uptrend
reaching the first resistance level. The point of this chart is to show
you that if you step out to the next longer time frame you can get a
solid feeling of where an investment will find major support and
resistance levels. Any investment not matter if it’s a stock, commodity
or currency, if the price is trading in the middle of a large range like
this chart you should not be taking large positions because it almost
becomes a 50/50 bet on the market which is not a good winning strategy
unless you are very experienced at managing your trades and money.
If you are going to trade then you want to focus on the underlying
trend and you do that by looking at the next larger time frame. For
example: if you focus on trading the daily chart, then you must step
back each week and review the weekly chart to be sure you are trading
with the underlying trend which is up for the dollar right now.
Weekend Trading Ideas:
Tuesday morning we saw the SP500 gap lower and continue to sell off.
Traders started panicking out of their long positions and we could see
it using the intraday market internals charts, which I cover each
morning in the pre-market trading videos. Me being a contrarian (buying
into market fear, selling into market strength) I used that high level
of fear in the market along with the expected light volume holiday week
ahead as an excuse to book profits near the lows on SP500 using the SDS
bear fund allowing us to profit from the falling market. I feel we are
going to have some crazy moves on the markets going into year end and it
should be a lot of fun if done correctly.
Trading in general is a very difficult task especially if you are
doing it for a living and planning on using your monthly income to pay
bills, salaries etc… We all know the stress which comes with trading and
if do not have a solid trading strategy, rules and cannot properly
manage yourself (emotions) then you are most likely running into
problems like over-trading, getting shaken out of trades easily, and
taking bigger risks than your account can handle. Each of these cause
more traders to blow up their accounts and big up on trading.
I am giving away my book on how you can control your trades, money
and emotions. This short and to the point guide is full of my trading
techniques, tips and thoughts which will help you get a handle of your
emotions turning the market noise into music.
Download Book: http://www.thegoldandoilguy.com/trade-money-emotions.php
11-29-2010 7:35 AM