Tutorials

We took a different tack on learning, retro-engineering gold’s chart so that we could “trade” it without knowing how things would turn out. It helped that gold futures were approaching a breakout threshold, since this create volatility swings with many impulse legs, both bullish and bearish. You may be surprised at what we found, as well as at the subtlety of the lessons we were able to learn.

A particularly slow day in a seemingly interminable stretch of slow weeks allowed us to focus on some subtle technical points that might otherwise have gone unremarked. On the technical premise of a strong dollar, we scrutinized the euro’s charts, which paradoxically looked strong but which on further inspection revealed some small but possibly significant signs of weakness. We then shifted our attention to the E-Mini S&P charts, turning them inside out to ferret out a tradable nuance. So that you can share in the suspense we felt poring over the charts, I’ll leave the outcome undivulged.

When I ascribe negative traits to trading vehicles such as the E-Mini S&Ps, it is for good reason. For in fact, when the little monster moves wildly up and down, sideways, or sometimes barely at all; and when it gallops a mile just to hit "your" stop-loss, it is in fact doing the instantaneous bidding of a thousand wild-eyed traders, each attempting to second-, third- and fourth-guess all others in the game at every moment. During this tutorial session, we examined this propensity of stocks, commodities and index futures to move as though they were out to cripple and maim anyone who would seek to make "easy money". Enjoy!

Bullion and the broad averages were nearly comatose when we looked in on them this morning, so we spent the hour, not hunting for the usual, easy trades, but peeling back layers of visual clues to see how we might have jumped into some losers. The Dollar Index in particular proved fertile ground for mistakenness. Students may find themselves agreeing that the way in which we were able to find, in retrospect, a rationale for having avoided trouble is one of the subtler teachable moments in the recorded library.

Is that peak internal -- or is it external? The answer is not always perfectly clear, but the good news is that you shouldn’t worry about it too much. It is the big picture that counts, and this session focuses quite intensively on Google charts to show you exactly how to relax. Our hour together concludes with an analysis of the Dollar Index that shows why the greenback is all but certain to head higher in the weeks and perhaps months ahead.

Using Hidden Pivot analysis rigorously over time can help sharpen our trading and forecasting skills. Although the process advances through an accretion of mechanical skills, as our bag of technical tricks grows over time we begin to develop what some would refer to as “market instincts” or “horse sense.” Acquiring such instincts is a task at which anyone can succeed. All it takes, as this tutorial session demonstrates, is the patience and diligence to consider the myriad subtleties of impulse legs as they play out on price charts.

We must always be on the lookout for subtle technical signs on the long-term charts, since they can provide important clues concerning the temperament of a bull or bear market. It is on the monthly chart of the Dow Industrials that we looked for and found small details with potentially large significance. Has this summer’s 2200-point crash in the Dow marked a resumption of the secular bear? This session provides some illuminating details that bear directly on that question.

This session provided us with a front row seat to yet another dramatic day on Wall Street. The broad averages had been swinging wildly for two weeks, and on this particular day the Dow was down about 400 points after rallying 600 points the day before. Surprisingly, though, there were no bullish impulse legs to be found on the hourly chart, giving us reason to consider why stocks were likely to head lower. We spent the remainder of the session looking at December Gold, which resumed its furious rally as we watched in real time. This held little surprise or suspense for us, though, since we “knew” exactly where the rally was headed: to 1810.70, a middling Hidden Pivot resistance.

A feisty Silver Wheaton got nearly all of the attention during this session, since we hold a partial butterfly spread in the stock. One more trade is needed to complete the position, and once we’ve shorted some September 46 calls against what we already hold, we’ll have a virtually riskless bet on SLW’s continuing rise into early autumn. We also looked at the stock as a possible trade in real time, since it was stealing up on an opening-bar peak that obviously had trapped many bulls (and short-covering bears).