I confess I am sick and tired of an all too common complaint out there in Punditland. I’m sure you too have been subjected to this pathetic admission – here is an example I came across today: Although I have been investing in precious metals since the late 1980s, I honestly have no idea where gold or silver will go from here. If there is one thing I have learned it is that it is foolhardy to think one can predict the direction of the metals.
No, the only thing he has learned is that he has not understood how to apply the Elliott wave theory – and my tramline methods – to the charts. Perhaps he has not even bothered to find out what the EWT is. Perhaps he has tried it for a day or so and given up. If all the gold medal winners at the Winter Olympics had taken that attitude, do you think they would be clutching that gold medal now?
Like most so-called pundits, he is just too lazy to learn something new about the markets that could help improve his performance.
There seems to be a mania today for people in the limelight to confess they are totally ignorant of science and/or maths – and proclaim that as a badge of honour; almost something to be applauded. You mustn’t be seen in public as an ‘expert’ on a technical subject because today, experts are pariahs – at least to the liberal MSM.
So why do I bring up this as one of my pet hates? Simply because, I have been able to guess correctly ahead of time the roadmap for many markets, including the PMs. Not every time, of course. But I will stand by my record in this area.
So let’s look into my major gold trades for 2016, 2017 and into 2018. (The charts are weeklies, not dailies as on the charts)
Back in January 2016, gold was trying to form a low and when it made a small scale five up, I went long. As the weeks rolled by, the market advanced strongly with the Feb-March period showing typical wave 3 characteristics (long and strong) and when the market moved into new highs In May on a strong mom div, I was looking for an exit to take profits. That opportunity came with gold trading at the $1360 area (I used 2- and 1- hour charts for this).
That was an excellent campaign yielding a $250 profit. And all I did was read the Elliott waves – and sentiment.
After that, I just sat out the remainder of the year into December, so I missed another huge profit opportunity on the downside (I don’t catch them all!).
But when the market dropped into the Fib 78% support level on very oversold momentum after tracing out a three down, I knew a turn back up would highly likely which offered a very low risk trade. I duly obliged by going long at the $1140 area.
Here is the later period:
I was long in late December and watched the bull phase develop nicely but entered a very volatile period in April. But crucially, all of the counter-trend moves were threes which gace me confidence the uptrend was still intact. And when it surged up to the $1360 area 0n a mom div I know the end was nigh and took profits.
That was another very satisfactory gain of over $200. All from reading the Elliott waves – and sentiment.
In November, the market dipped again in a three and on virtually the same day in December a year later, I went long again at the $1260 level. As bullish sentiment built to an extreme at the $1360 level, I knew that was major resistance and again took profits.
That was another excellent campaign for a $100 gain. All from reading the Elliott waves – and sentiment.
To sum up, I made three major long trades for a total gain of $550. I started when gold was trading at $1100 and today it trades at $1330 – a gain of $230. My exploits gained more than double that span. If that’s being foolhardy, I would hate to be sensible for I wouldn’t make any money. These trades are documented in the records of the VIP Traders Club.
So was it luck I guessed correctly the direction of the market after my entries? Was it divine inspiration? Do I have powerful friends in the gold market? Do I know what the Fed will be doing on interest rates? You can certainly read screeds on those subjects from the pundits. And good luck gleaning anything useful from them.
I like to keep things as simple as possible – and perhaps that is why I can sometimes see the road ahead pretty clearly. I won’t clutter my mind up with postmortem analysis of trends that have just happened. I focus on the here and now and price action as displayed in the charts.
Another thing – I like to only take trades where I see downside risk as low where I can set a sensible stop loss if I am wrong. My prime concern is capital preservation, and that means take small losses on my losers. My secondary concern is making a profit. Why is that secondary? Because if you focus on the first, the profits will come along anyway. Lose sight of the first and you are sunk.
The dollar advances – as forecast
Last Saturday, I made the confident statement that the US dollar had made a low and was about to rally big time. I showed this chart in evidence
I identified last Friday’s low at 87.95 as the final completion of wave 5 of 5 which occurred on a massive momentum divergence. Remember, when we see such a beast, we know the selling pressure has just about dried up and the final purple wave 5 leg down was mainly a final towel-throwing exhaustion by the stale bulls. They had had enough of the water-boarding.
And those poor bulls had watched the dollar in steady descent even as US Treasury yields were rising fast since mid-2017. How could that be? Bond yields in Euroland were on the floor (and many lower than that in the basement at negative yields). US yields are one of the highest in the developed world and the spreads have been wide. So how can the dollar be weak under this ‘bullish’ scenario?
And that line of reasoning based on an obvious reading of the ‘fundamentals’ is what gets an awful lot of people in the soup. I see it as another zen aspect of markets. Basically, the Elliott waves in the dollar had not finished doing their work, which was to trap as many on the short side as possible before springing the trap at the wave 5 of 5 low and then zooming off into the wild blue yonder.
Hedge funds are notorious at holding large wrong-way positions at major turns and when the turn arrives, they must buy and cover their shorts in what we call a short squeeze. Friday’s COT readings will be interesting.
Here is the dollar chart updated on the 2-hr
This is my best guess for the road ahead. A wave 2 dip lies ahead and then a strong surge in wave 3.
So how’s that for a foolhardy prediction on the dollar? Pretty foolish, huh? You saw this in real time, so no slight of hand here. And even if the dollar turns hard down from here, I will still not lose money because I have raised my stop to break even at my entry price. I am running a risk-less trade – surely, the dream of any trader.