I am going to buy a VERY small position in stocks and metals. These are very small because they just don't look right but they fit the parameters for a trade. If you choose to trade these, stick with the micro's.
The S&P made a swing low today. It is possible that the stock cycle bottomed on Monday and today was the first day of a new cycle. What I do not like is that this cycle bottomed in only 31 days which is about a week shy of the normal timing band for a daily cycle low. That said, stocks had a good day and closed above the 20 day moving average.
The NASDAQ also had a good day also having a swing. It was just Friday that I recommended a NQ trade on a hunch that stocks could be preparing for a run away move to say 10,300 or so due to the market making new all time highs so quickly after the previous crash. Again, I think this could happen, but am recommending us keep things small until we can increase stops and manage risk.
This is not the way I like to trade. I am a contrarian. I like buying when everybody is bearish and selling when everybody is bullish. Because we would be buying on day one of a new cycle, we should at least have a few weeks of upside prices. I do not like buying though when prices are stretched this far above the 200 day moving average. Just before the last crash, the NASDAQ was stretched over 17% above the 200 DMA. Just last week we were stretched over 17% above the 200 DMA.
I recommend that tonight, we put in orders to buy a micro mini NQ at 10000 with a stop just below todays low at 9900. You would be risking 100 points. Each point on a micro mini NQ is worth $2.00, so you would be risking $2 X 275 = $200. A push to 10,300 would make you 300 points X $2 = $600. That would give you a 3 to 1 risk reward ratio. If price cannot make it below 10,000 overnight, we can re-evaluate the plan. Margin on the micro NQ is $1060. The order is to buy 1 MNQ@10,000 or better as a day order.
It is still possible that gold could explode through the 1800 resistance level and challenge the all time highs. Again, I do not like buying with prices near the top, but there is still time for this trade to work and the price of gold closed higher today than at any time since October of 2012. Gold is on week 15 of it's intermediate cycle so it has grown long in the tooth. The chance of gold busting through a major level like 1800 is better early in an intermediate cycle than it is late in the intermediate cycle. This is a riskier trade than if we buy at the beginning of an intermediate cycle.
So we are now on day 18. If gold breaks above 1800, there is still time to reach the all time highs but time is running out. Most of gold's cycles have been shorter than usual this year. This could turn into a long cycle. (but who knows).
There is virtually no resistance between 1800 and the all time highs. If gold can manage to break above 1800 and close above tomorrow, I think we could see gold reach the 1920 level quickly. That would be a 120 point gain.
The margin requirement on gold has been reduced slightly to $9020, so the micro margin would be $902. You buy the August gold micro mini at 1795. Your stop is at 1770 risking 25 points. Each point is worth $10 on the micro. You are risking $250. Your potential gain is 120 points. 120 X $10 is a $1200 gain.
I am going to trade a micro silver with the gold. I believe if gold makes a run for the all time highs, silver could make a run at 19.75.
Margin on a silver contract is now $8800. The micro silver is 20% the size of a regular silver contract, so it's margin is $1760. Each penny silver moves is worth $10 on a micro contract. If silver moves from 18.60 to 19.75, it would make a 115 cent move worth $1150. Again, we would place the stop a 18 which is just below the 10 day moving average, risking .60, or $600. This gives the trade about a 2-1 risk reward ratio which is about the minimum we want. You would want to buy 1 September SIL @ 18.60 or better.
Like all the grains, the price of wheat has been beaten without mercy. Even in a bear market as extreme as the one we are in now, eventually the market just runs out of sellers. The last time sentiment readings were lower than right now was in late August last year. Every bearish extreme sentiment reading is met with buying.
Seasonally speaking the wheat markets don't really get going for a couple more weeks, but once they go they go strong. Given the depth wheat prices have reached and the extreme nature of the sentiment and where we are in this cycle, I believe wheat could bottom earlier than usual.
Looking at the December Wheat chart, you can see that the RSI has captured nearly every cycle low. We are coming out of extreme oversold conditions now.
The weekly chart shows that we should expect a rally in wheat soon.
December wheat gave a swing low today. This would give us an opportunity to buy early and place a fairly tight stop.
Wheat of course trades in 5000 bushel contracts with $1500 margin requirements. I am recommending you buy the December Wheat contract at $5 or better with a stop at $4.90. You would be risking 10 cents X 5000 bu, or $500. I think wheat will probably rebound to the 50 day moving average minimum which is around $5.25. This would be a 25 cent gain on the trade and would give a 2.5 to 1 risk reward ratio. The total gain per contract would be $1,250 if it reaches that target.
I am buying the 30 Year US Treasury Bond here at 173. We are at a moment where stocks have had a fabulous run which has come at the expense of the bond. Today, we have some strength to the VIX. This could be a recipe for at least a short term bounce.
The 5 day RSI has reached oversold levels indicating we have a daily cycle low in place. Like gold, the bond cycle is somewhat blurry, but the previous daily cycle looks to be
We may be a few days from actually getting the CCI buy signal but I am willing to take a chance getting in early.
The weekly chart shows the Stochastic oversold already. The weekly RSI reading still not oversold, but for a DCL this looks like a nice set up. I don't believe this is an ICL.
Seasonally speaking, summer historically is a good time to buy bonds. The best month of all is in August.
I am jumping the gun a bit here. Bonds gave an exhaustion candle Friday which marks many bottoms. There is follow through buying today but bonds are about a point and a half away from providing a swing low. I want to buyh this now so that we can set the stop just below Friday's low. If we wait for a swing, we will give up $1500 in potential gains. I think we should buy this now.
The margin on a 30 year bond is $6050. You can trade 10, 5 and 2 year bonds also for less margin and they will all probably trade pretty close. Each dollar the bond trades is worth $1000. They trade with an apostrophe instead of a decibel because it trades in 1/32 increments. If you see a price like 172'16 it is the same as 172.5.
I recommend you buy the 30 Year Bond at 173. Set the stop at 171 risking $2000. The target price will be 177. Potential gain $4000. This gives the trade a 2 to one risk reward ratio.
I don't think this is a new bull market for bonds. I think this will be a counter trend kind of trade which is why I set the target price so low. I think stocks are near a top of some sort. Declining stock prices will help bond prices rally. Once the stock market decline is complete we will want to exit the bonds.
There is a possibility that stocks could roll over into an extreme left translated cycle into an ICL. If this happens we could make a LOT of money with this trade.
Message me on Whatsapp if you have any questions.
I am going to leave it up to you when to exit your stock positions. We have had a heck of a ride, capturing most of this gain since the march low. At some point you have to decide when you have made enough.
Tomorrow is day 14 in the cycle. I have said before I think stocks will probably climb higher into the FOMC meeting which is Wednesday next week. That said, we are also but a few points from the all time highs in the NQ. This could act as a resistance level.
I still believe we will see new all time highs in stocks in this daily cycle and probably a visit to 10000 before the daily cycle tops. I doubt we get a particularly deep half cycle low here and it may last but a day or two. Once we get the HCL we need to re-establish long positions.
There are several ways to do this. One would be for you to tell me at what price you want out. You could just tell me to get you out now. We could continue to push the stop up daily just below the 10 dma and maybe there won't even be an HCL. You could split your positions into piles, playing each a different way. I have 4 positions myself, and I will probably raise the stops to 9530 near the 10 dma on two and tighten the stops to 9600 on the other two. I will tighten all these stops daily expecting to get stopped out.
You need to tell me how you want me to proceed. There is no right or wrong strategy here. If you just want to exit now you have my blessing.
The metals have been very frustrating overall. Most of us made some money on silver, lost some money on gold and are still waiting on Platinum.
Since gold began trading into that incredibly frustrating triangle determining the beginning of the second daily cycle has really been just a guess. We got some confirmations but we never reached oversold on the 5 day RSI. One more down day and we should reach oversold levels for the first time since March. This should mark a daily cycle low.
I know you are warn out from the metals trades but the eventual breakout towards all time highs in gold are going to be enormous. As hard as it will be to send me an order once we reach a swing low, you need to be prepare yourself now for when I say the word. If it makes your stomach hurt, then just buy a micro contract so you have some skin in the game.
Recommended entry or exit prices may not necessarily be reflected on the track record. Markets can change quickly resulting in stops being moved or profit levels changed based on new information. Brokerage customers are the recipients of these potential price adjustments made after initial recommendations.