As I was afraid would happen, the Euro topped overnight just after triggering a lot of stops then reversed. You have heard me say before that the markets job is to inflict the most pain to the most participants. We all were feeling pain last night as difficult decisions were being made.
If you held onto your positions you are probably feeling relief this morning. If you allowed your stops to work you have a difficult decision to make this morning. The market got you coming and going. This is max pain. Recentcy bias will probably leave many of you on the sidelines of what should be one of the best trade set ups as I have ever seen.
So the first confirmation that the dollar made a bottom is exhaustion. The market has run out of sellers and buyers are stepping in. This results in what you see on the chart which is an exhaustion candle called a hammer. Looks a little like a hammer with a head and a handle. I have heard some say it is because the market is hammering out a bottom. Either way, candlesticks like this mark lows. This is the first confirmation. The second confirmation is still a long way off and that won't happen until Monday which is a swing low. By then the dollar could have already rallied a dollar or more.
Likewise, the euro has topped. This candle is called a shooting star. This is the first confirmation that a top happened.
Trading is hard. These kinds of events cause most traders to fail. It's why most people cannot do it. If you want to trade, these kinds of events happen. I try to make it as easy as I can for you but it is still going to be hard.
Again, today was most likely the top in the euro and the bottom of the dollar. Monday will most likely be day 1 of the new daily and intermediate cycle. If you want to participate in this trade it is still early.
The dollar will be on day 9 tomorrow of a blood bath phase. This phase is stretching longer and as it turns out I made a bad call shorting the Euro this early. I did not wait for the swing low or an exhaustion candle which is what I usually do. I assumed the market was turning at the FOMC announcement which was a mistake.
So here we are. I think you have three choices you can make. Most of you entered at the $1.18 level, so you could jump out now with about a $1000 loss per contract and try to time an entry later that gets you in at a higher price. You could also just let the stop take you out. The stop is set at $1.90 which would give most of you around a $1250 loss. The third thing you could do is to trust all the data and history which shows the dollar turns at points like this. I cannot guarantee this. Maybe the dollar is going to zero but that has never happened. I am trusting the cycles and the sentiment and am betting the market turns in another day or two. At 19, the sentiment level of the dollar has reached the lowest level since 2011 when it reached 18.
A 10 cent rally in the dollar occurred in 2011 following the low 18 sentiment level and I expect something will happen here soon.
I am turning off the stops on my euro positions rather than taking the risk of getting stopped out overnight with an exhaustive blow off move that will leave me on the sidelines. This is not something I am comfortable suggesting you do, but I don't have a 4th choice to offer you.
Message Tyler or me if you would like a conversation about it. Yes, I still really like this trade.
There is an important FOMC meeting on Wednesday. The Fed has their hands full trying to keep full employment going while the country is struggling with how to deal with a global pandemic. At the June meeting they have announced no interest rate hikes for the next two years. What else could they say Wednesday that could move the market? Interest rates could always go negative I suppose. Looking at the FOMC FedWatch Tool, there is pretty much a 100% chance that interest rates will be left alone. I am guessing that this will be a big nothing event.
FOMC meetings often act as turning points in the market. The timing of the dollar IC decline is as though it was written into the Fed calendar. The stock market, oil and metals rallies should all be complete by this time.
I am not sure what all this means for our trades such as cocoa or soybean oil but we need to be mindful of these events looking at our euro and gold positions we still hold. We need to be looking at the markets differently now. The dollar is on day 4 of a blood bath which usually lasts 5-7 days. This means this event could conceivably bottom the same day as the FOMC meeting.
The dollar has given us a failed daily cycle and a failed intermediate cycle. How much lower can the dollar go? There are still 2-3 days of blood bath left. There is support at $93.88 which would be a 61.8% retracement from the 2018 low to 2020 high. Maybe the decline stops there but if that level fails we could see a free fall perhaps as low at the 78.6% retracement in 3 days. This would certainly result in panic buying of gold to new all time highs and probalby launch silver to $26. I am playing with numbers here and would never suggest buying more metals now, but don't count out out a dollar drop to $92 or $91.50.
What I am attempting to show in the chart below is that the S&P closed below the 10 day moving average and it broke the intermediate cycle trend line. This does not mean stocks cannot recover but it is a major warning sign to anybody still holding to stock positions.
We know that the average daily cycle lasts 35 to 45 days and we know that the average intermediate cycle lasts 20-25 weeks. This daily cycle will be on day 19 Monday. Stocks should be trading into their daily cycle low sometime late next month. By then, the intermediate cycle will be on week 20-21. These are all in the timing band for a daily and intermediate cycle low. You are foolish to try pressing a stock trade this late in a daily cycle that is this late into an intermediate cycle. There are probably 17-22 trading days left before stocks find their respective cycle lows. This is plenty of time to make a very nasty drop into the ICL. Stock index trades will be off the table most likely until late August at the earliest.
We are stopped out of Platinum and Silver but still have an opportunity to make a few more dollars with gold. It basically boils down to what the dollar is doing which I have already explained. I intend to keep pushing the stops higher every day until the market takes us out. My gut tells gold will have a new all time highwhen this happens.
So the difficult grind we endured in the metals is now but a distant memory. You can see why I kept trying to keep us in these positions when it seemed so difficult. We captured nearly the entire move the metals have made. It is time now for us to say we made enough and move on to something different.
Probably the first trade we will make once we have a swing low in the dollar will be to short the euro. This was the first time I had ever traded the euro and buying the euro was really one of the easiest trades I ever made. I have mentioned before that the first move out of an intermediate cycle low is the most powerful of the intermediate cycle (except for blow off euphoric moves like metals are having now). Once the dollar has a swing low, I think we can make a very nice trade shorting the euro.
As these cycles top, I want to mention that the nature of these markets continually change and we need to be able to change the way we trade when this happens. Over the past two years we have grown accustomed to stock trades being easy and metals trades being difficult. We could see this change going forward. The chart below shows how stocks move from easy periods to difficult periods and back to easy periods. Metals do the same thing. Let's just keep an opened mind and practice good trading as we look ahead to the next daily cycle.
As you know, Wade Assurance is a small company just like the small businesses that most of you own. The crop insurance business has supported me and my family well through the years. The trading business is still pretty new but growing quickly. I am trying to keep that business small but have had the privilege of having my son join as a broker. We want to keep things small and manageable and low stress. We feel very blessed.
I will say that the trading business has just exploded. You guys trade A LOT! Heck, I trade a lot now. Most of you are making a lot of money which is a good thing.
My wife Conny and I do a lot of good with our crop insurance business. We hold farmers in the highest regard. It is an honor for us to serve farmers and we don't take that role lightly. That is our purpose for being here. We feel like our crop insurance business has supported farmers well through the years. That is a noble call.
So why do we trade? Does our trading somehow perform a function in the food chain? Does it help educate our children? Does it somehow advance our society? I have not figured that out yet, but despite the gains it feels empty to me unless there is a purpose attached to it. I am seeking a purpose for this business that is as noble as the crop insurance.
I want our trading business to mean something and to be important to somebody. I need to know when I wake in the morning and do what we do that there is a benefit that stretches beyond wealth creation.
One of the traders we work with closely presented me with a need from a family in Larue County. He is involved in a local organization called Accessible Adventures. We have supported this organization through the years and I can tell you that 100% of any proceeds they raised are used locally to support people with needs who have disabilities.
I hope you will take a moment and read about this little girl named Leah Faris. Conny and I have made a financial commitment to help build a gazebo which should greatly enhance the lives of this family from proceeds created from our trading. We wanted to extend the same opportunity to our trading group. If you feel blessed from your trading with us and feel led to help in this project just let me know. Perhaps this helps you discover your purpose for your trading.
This is from the mother of a little girl.
First of all, I want to thank you for your attention and collaboration on this gazebo project. It is truly God's work that has brought everyone together for the sake of helping this family. Gary wanted to pass this narrative onto you so that you could see the need for the family. Thank you so much and I look forward to answering any questions you may have. The following narrative was submitted to me by the mother, Brittany Faris:
Our youngest child was born just over two years ago. She completed our family of five. She was absolutely perfect and it took a few months for us to realize that she wasn’t your typical baby. She was very slow with her progression and we began to become alarmed. We were sent to specialist after specialist, each with a new diagnoses and plan for her. Being a medical provider myself, I studied her symptoms day and night in hopes of somehow figuring out exactly what was going on with her and how to fix it. We participated in every therapy that was available to us, including speech, developmental, physical, occupational and visual therapies. Finally, when she was around 15 months old, we were informed that she has a genetic condition which six other individuals in the world have. There is very little known about this RAC-1 gene mutation, other than most affected individuals have global developmental delays, severe motor impairments due to low muscle tone, seizures, and very low IQs. All of the individuals are non-verbal and non of them were mobile until at least age 5. Leah does have each of these diagnoses, but she appears to be the most severely affected of the reported individuals. She requires a C-PAP to sleep due to sleep apnea. She has Cortical Visual Impairment along with several other visual diagnoses. She wears glasses daily, but how much she actually sees is still unknown. She does receive weekly vision therapy through the Visually Impaired Preschool. Although she is able to eat purées, which I make for her due to the high caloric intake she requires, her eating habits are very inconsistent and she has a g-tube in place. She is unable to latch on a bottle and requires liquids to be given through a squeeze bottle or syringe. She participates in multiple therapies each week due to her very low muscle tone.
After her genetic assessment, her condition was clearer and it became increasingly more difficult to find reliable care for her. I eventually ran out of PTO and sick days and it became necessary for me to quit practicing medicine and move our family back home to LaRue Co, KY. This was one year ago. Since then, we have not been able to find child care for her and I am unable to work. Thankfully, my husband was able to find a job when we moved here. To say that she has changed our lives is quite an understatement. Although she is very content and happy - which is a huge blessing, she requires constant supervision. She is finally sitting up on her own, but she frequently falls over. She is completely non-mobile, so she doesn’t scoot, crawl, stand or walk.
She is now two years old and has a four year old sister and six year old brother. Yes - my hands are very full! My son is protective of his sister and always knows exactly what she wants. His empathy is unparalleled and having a special needs sister will definitely make him a better person. Her four year old sister is still trying to figure it all out!
Going places with Leah continues to be difficult. Last summer, we were unable to go outside at all due to Leah’s intolerance of heat as well as a severe reaction to bug bites. She is much more tolerant to temperature changes now; however, despite using bug repellent wipes, she develops large areas of redness with ulcerations at the site of each bug bite. It is also difficult to take her outside as she doesn’t have anywhere to just “be”. In other words, Leah is getting to the point that she is quite difficult to carry. She is unable to hold on when she is carried, as a typical child would, and frequently falls forwards, sideways or backwards when she is being held. So although she is only about 30 pounds, holding her for very long is quite a challenge. Her wheelchair and adaptive stroller are difficult to push in the grass and due to very thick padding, are quite hot for her if we are outside.
I tell you our story in hopes of receiving funding for a screened-in gazebo for our family. Funding for this item has been denied by other organizations thus far due to it not being medically necessary. I realize that this may sound like a frivolous request, but it would be invaluable to us. On a typical day, Leah’s siblings have to either go outside alone while I am watching out the window or they can’t go outside at all. We recently bought a house with a pond and my son absolutely adores fishing. He frequently asks me to go fishing with him, and rarely am I able to. He has asked me twice now why his sister is so much more important than he is and why she gets so much more attention - if any of you are parents you can understand my genuine grief and heartbreak with this question. I know a gazebo would allow us to be outside together as a family, and hopefully allow each of my children to see and know how invaluable they are. In addition, having this structure would significantly decrease the guilt that my husband and I feel due to not being able to go outside with all of our children. This gazebo would have a sturdy beam through the center so that I could attach Leah’s jumper or swing to allow her to play. It would be screened in to prevent bug bites and I would put padding on the floor for her safety. We have an absolute ton of medically necessary durable medical equipment for Leah and although I do realize that this request is not medically necessary for her, we can’t think of another way to allow our family to be together outdoors and still provide a safe and happy environment for Leah. I do want to clarify that the financial expense of having a special needs child, particularly one with the intense level of care that Leah requires, is exponentially more than raising a typical child. We simply do not have the money for our “wants” at this time. I am so happy to have heard about this organization and we truly appreciate your consideration.
Folks, the metals are entering the euphoria stage in the metals which will likely line up with a blood bath stage in the dollar. These usually last 7-8 days. We are probably on day 2. That said there is no way we will peg the top of this so if you have a different strategy than what we present, by all means let us know. The objective at this point is not to screw this up by putting you into positions late with stops below your entry levels. We will probably be advancing stops daily.
The dollar had a failed daily cycle yesterday. The dollar is on week 19 of the intermediate cycle and is in the timing band for an intermediate cycle low. We are likely going to also have a failed intermediate cycle. Given the extreme left translated nature of this IC, it would mean the next intermediate cycle will likely also be left translated. This will be a great environment for all our metals trades.
We are late in the intermediate cycle for the metals and silver usually performs better than gold late in the cycle. Silver tends to overshoot gold late which is why we tried to steer you this way. It is worth the excruciating sideways grind we endured a few weeks ago.
There is tremendous resistance in silver at the $21.25 level going back 4 years. This could be it a few days but I expect silver will eventually take that level out. As I write this silver is trading above that level so never mind. lol
Gold is still the driver even though it is lagging and gold is just getting started. At the rate this is going, gold could be at the all time highs in a week. If this is the case, we could see silver in the $23 area or more. $1923 is the target for gold and the target for when we exit all our metals trades.
Platinum is late to the party this time but we see no reason it can't reach the January high at $1046. At this point, we would feel more comfortable adding to platinum positions than anything else.
For the most part, most of our traders are well positioned to ride this out the next week. Happy Trading!
We cannot trade the dollar but it has tremendous influence over commodities. A weak dollar is a tail wind behind most everything we trade. The dollar is now in an extreme left translated intermediate cycle, and is on the verge of creating a failed daily cycle. If the dollar drops below 95.72 I think the fuel will be lit under the metals trades. This is worth keeping your eye on.
I have added dollar cycle counts to the cycle count page.
What the heck are these things? None of them are alike, but one is a lot different than the others.
First, the NASDAQ is at all time highs and really does not show any signs of slowing down. Price is stretched way above the 200 day moving average, and the 200 DMA is pointed steeply higher. The S&P is basically flat, unable to take out the June 9 high. The Dow cannot overtake the 200 DMA and the DMA is downward sloping. The Russell 2000 (small caps) looks even worse.
Normally, I would say that stocks are on day 10 of it's daily stock cycle but obviously all the index's are doing their own thing now. It's really anybody's guess what stage of the stock market cycle we are on. Ordinarily what would drive my analysis behind the stock market would be the fact that on day 9, the S&P was rejected from the pervious cycle high from back on June 9. This would ordinarily seem to be some major resistance around 3230.
Cycles wise, we know stocks should have a DCL in late August. The next daily cycle decline would ordinarily look normal, and ordinarily I would say it could top here at this 3230 level.
But there is nothing ordinary about the NASDAQ. At these levels, it looks more like a crash candidate.
There is a part of me that wants to believe that tech stocks are getting ready to take off in a similar fashion to the NASDAQ back in 2000 at the peak of the Dot Com bubble. The dot com bubble was fueled by a revolutionary new technology called the internet, combined with an explosion in personal computing fueled by the Y2K fraud that caused every business and individual to feel compelled to go buy a new personal computer. Those old enough to remember that mania will never forget it. Just for perspective though, we are a long way from reaching those crazy levels.
So I really don't know what is about to happen but my gut is telling me we will probably have another crash type of event that would correspond with the ICL, but again I really don't know. Anything could happen, especially when you consider how different all the indexes look. We won't be recommending any stock trades for now and are looking for safer set ups such as wheat and cocoa.
The wheat trade finally made it's move. The original minimal target of $5.25 was surpassed and actually reached $5.428 near the 200 dma. We could have made more if not stopped out at $5.30 due to Friday's WASDE report volatility.
But is wheat finished? I think wheat is finished for now. Wheat has extreme overbought RSI readings and it is against some major resistance. It is time for wheat to re-set.
If the 3 day RSI becomes oversold, we will begin looking for a swing low to re-enter. This would be at the bottom of a B wave which could actually be the right shoulder of a Head and Shoulders pattern maybe in the $5.20 area. This would be another nice spot for a wheat trade.
We are getting questions now about wheat. We are establishing stops on the wheat now at $5.00. After extreme oversold conditions such as what we just had, rallies run an average of 26 days producing 60 cents and a 19.71% average return.
As I am writing this, wheat is on day 7 off the low, has gone up 40 cents and is up 8.34%.
I understand most of you are breathing a sigh of relief today, especially after we turned the stops off last week. I suggest for now we put on some loose stops, say at $5.05. There is a WASDE (World Agricultural Supply Demand Estimate) report coming out Friday that will probably create volatility. We can tighten the stops up more Friday morning. Remember, an 8.34% return is way below the lowest return the past 3 years. 40 cents is still 11 cents away from the smallest rally. 7 days would be the shortest duration for such a rally by 3 days. There is no reason why prices should not continue higher into Friday's report.
We recommend keeping the stops at 5.05 for now and will look at increasing them later tomorrow or Friday morning. Heck, we could just exit some or all the positions ahead of the report.
The Speculation page is used for educational purposes and to talk about our opinion on trades and what is going on in the market. All trade recommendations are made in "The Pit". This is also a blog page where you can ask questions, post your thoughts, or ask for help. Be sure to use an anonymous name. If you have any questions feel free to reach out to us via email.