Here is the monthly chart on Gold. As you can see we had an unbelievable move in Gold where we literally traded from the monthly A up to the monthly A down in one trading session! The new levels for March are 1656 and 1766. With the weakness we are seeing in Gold, I would bet we test the 1656 level.
The ACD Method
- Thread starter sbrowne126
- Start date
I want to also give an update here on the action in the 5 day number lines. As I kept banging the drum over the past few weeks, this rally in risk assets was NOT being confirmed by the number lines. They were all getting weaker and weaker while the indices were grinding higher. That was the tell not to expect this market to just explode to the upside. Now the number lines are also not terribly bearish either so they were not indicating a huge sell off necessarily. However they were definitely warning that the market was going to at least pause or have a moderate pullback. For the first time in a long while we are seeing some real dislocations between the really strong and the really weak sectors. I'm going to list all the number lines that are plus or minus 5.
XLE -6
USO -6
XLY +6
XLF +5
XLV +5
EEM +7
TBT +5
A few items to note here. People often ask me why I like the 5 day rolling number lines. Let's look at oil. On Feb 24th when Oil was very strong and made a new swing high, we had a plus 8 on the number line. But within days we went from a +8 to a -6 showing the current weakness in oil. That's what you want to see.
Let's look at the Euro. Euro got really strong around feb 22nd when the number line went from -1 to plus 4 in one day. Sure enough, we rallied 300 pips and squeezed the shorts and got up to +8 on the number line very fast showing the strength. Now that the Euro has rolled over we are back to -3 again.
Also want to point out the amazing difference in price action between the Nasdaq and the Russell 2k. Spread traders are loving this action. There have been unbelievably smooth spreads daily trading long nasdaq against short russell. Right now QQQ's are +4 and IWM is -3.
OK, so now I can hear the question, Mav, how do you put this to work. Do you just buy anything that is really strong on the number line or sell anything that is really weak? No. The number line is an indication of price action. It's what's happening internally in the market and very often disagrees with price. The edge is when you notice the dislocation. For example, price going higher in ES with a falling number line. Internally the market is breaking down but price is grinding higher. For me, there is edge in finding high quality shorts because you know the market does not have the underlying strength to break out. Now we could roll over 20 or 30 handles in the ES and finally everyone will acknowledge the weakness. But you are getting in ahead of them. That also means your stop is way above theirs and your less likely to get shaken out of your position.
XLE -6
USO -6
XLY +6
XLF +5
XLV +5
EEM +7
TBT +5
A few items to note here. People often ask me why I like the 5 day rolling number lines. Let's look at oil. On Feb 24th when Oil was very strong and made a new swing high, we had a plus 8 on the number line. But within days we went from a +8 to a -6 showing the current weakness in oil. That's what you want to see.
Let's look at the Euro. Euro got really strong around feb 22nd when the number line went from -1 to plus 4 in one day. Sure enough, we rallied 300 pips and squeezed the shorts and got up to +8 on the number line very fast showing the strength. Now that the Euro has rolled over we are back to -3 again.
Also want to point out the amazing difference in price action between the Nasdaq and the Russell 2k. Spread traders are loving this action. There have been unbelievably smooth spreads daily trading long nasdaq against short russell. Right now QQQ's are +4 and IWM is -3.
OK, so now I can hear the question, Mav, how do you put this to work. Do you just buy anything that is really strong on the number line or sell anything that is really weak? No. The number line is an indication of price action. It's what's happening internally in the market and very often disagrees with price. The edge is when you notice the dislocation. For example, price going higher in ES with a falling number line. Internally the market is breaking down but price is grinding higher. For me, there is edge in finding high quality shorts because you know the market does not have the underlying strength to break out. Now we could roll over 20 or 30 handles in the ES and finally everyone will acknowledge the weakness. But you are getting in ahead of them. That also means your stop is way above theirs and your less likely to get shaken out of your position.
Let me further break these down a little bit. The two really strong sectors in risk assets are consumer discretionary and financials. EEM is the emerging market ETF and it is showing capital flows moving out of US stocks to overseas markets. XLV is a defensive sector, not a risk asset. Energy has turned down. And the most glaring dislocation is the action in bonds. TBT is the inverse short for TLT. This means bonds are getting weak along with equities which we have NOT seen in quite a long time. So there is a lot of mixed action here. Again, nothing is pointing towards a major move down or up. But the backdrop is changing. You don't go from very bullish to very bearish over night. It's a process. And we seem to be making the transition now.
Mav,
Once again, some very informative stuff. Your input and analysis on these numbers are golden.
I also agree with you that the market doesn't turn from bullish to bearish overnight, unless a major news event acts as a catalyst for the masses to change direction overnight.
On my side, The price action in the past couple of days confirmed everything you've just laid out here. It's the reason i initiated a short on the ES @ 1374.75 on Thursday. I'm using a relatively tight stop but I think we could be in for a 20-30 pt correction here.
Time will tell...
Once again, some very informative stuff. Your input and analysis on these numbers are golden.
I also agree with you that the market doesn't turn from bullish to bearish overnight, unless a major news event acts as a catalyst for the masses to change direction overnight.
On my side, The price action in the past couple of days confirmed everything you've just laid out here. It's the reason i initiated a short on the ES @ 1374.75 on Thursday. I'm using a relatively tight stop but I think we could be in for a 20-30 pt correction here.
Time will tell...
this is updated every 5 minutes i think shows whats hot and whats not you can go back and forth from buying on weakness or selling on strength or view sectors http://online.wsj.com/mdc/public/page/2_3022-mfgppl-moneyflow.html
off topic but I thought this was an important story regarding oil assets.
http://www.reuters.com/article/2012/03/02/us-fed-banks-commodities-idUSTRE8211CC20120302
http://www.reuters.com/article/2012/03/02/us-fed-banks-commodities-idUSTRE8211CC20120302
You mean on a tick chart?
