“But in all my experience, I have never been in any accident…of any sort worth speaking about. I have seen but one vessel in distress in all my years at sea. I never saw a wreck and never have been wrecked nor was I ever in any predicament that threatened to end in disaster of any sort.”
E.J. Smith, 1907, Captain, RMS Titanic
(The above quote was taken from The Black Swan by Nassim Nicholas Taleb)
Hope you all have a good weekend.
As you can see, the new highs multiplier continues to dwindle within a very low and tight range. Does this mean that we're about to see another major drop in the markets? Not sure, but one thing I do know, we probably won't see any meaningful rallies until we start seeing a rising trend in the new high multiplier line. I'm almost tempted to take this bearish reading as a contrarian indication (especially because the public is so bearish right now) and buy a little of the S&P, just a nibble, to start building a long term position. We'll see, only time will tell.
“Once you have a trading system with a positive expectation, you must establish money management rules. Follow them as if your life depended on them, because it does. When we lose money, we die as traders.”
Dr. Alexander Elder
Come Into My Trading Room
Notice that all of the prior breaks have provided great shorting opportunities. What I don't like about this one is that the break was more substantial than prior ones. So if I don't like it, then why did I put on the trade? Well, my TLT Trender System is still giving the Eur/Usd a sell on the daily level and one setup I like to trade is to fade channel breaks that occur on the 4 hour chart that break out against the direction of the trend (as determined by my TLT Trender) on the daily chart. Thus, if the daily chart says sell, I fade bullish trend channel breaks on the 4 hour time frame. Here's the daily chart for the pair:
My main concern with this trade is that I may get stopped out Sunday evening if a continuation rally occurs when Japan's market opens up. In forex, the Sunday night or Monday morning (depending on which side of the globe you're on) continuation rally is quite common. In fact, it can be a good trading setup in and of itself. Just find a pair that is really moving in one direction right up to the close Friday afternoon and put on a position in the same direction with a 30-50 pip profit target. Unfortunately, this continuation can be dangerous if you're fading Friday afternoon's price action (like I am). For this reason, I think I'll widen my stop a little and wait for the pair to open and settle down on Sunday/Monday.
Did you catch Ken Langone on CNBC this morning. I had never of this venture capitalist/investment banker until this morning. An eternal optimist, he had many practical and interesting things to say about our country, economy and current market that I found to be a refreshing change compared to all the doom and gloomers that are very popular right now. Here are a couple of small samples of what he was preaching:
DETROIT (AP) -Billions of dollars in government loans to prop up General Motors and Chrysler won't be enough. The companies, which have received $17.4 billion so far, filed plans with the government more than doubling that request to a staggering total of $39 billion.$39 billion more just to stay afloat!!! I say let them go. Good bye...glad my wife and I decided on a Nissan when we purchased our new vehicle last week.
“Any effort that has self-glorification as its final endpoint is bound to end in disaster. When you try to climb a mountain to prove how big you are, you almost never make it. And even if you do it’s a hollow victory. In order to sustain the victory you have to prove yourself again and again in some other way, and again and again and again, driven forever to fill a false image, haunted by the fear that the image is not true and someone will find out. That’s never the way.”
Robert M. Pirsig
Zen and the Art of Motorcycle Maintenance
As you can see, instead of breaking the neck line and falling, gold rallied hard. This is not surprising given that gold is currently in a very bullish uptrend...an uptrend that has burned up a couple of short positions that I previously had. 
My trend system is still in "buy" mode for gold so any short trade would have to very short term for me...probably short for a few hours to a day on the break and then either bail on waning momentum or use a trailing stop. 
“When a trader is asked what he thinks the market will do and answers, ‘I hope it goes up,’ odds are he is long and the market is going down. Hope should never be a trading evaluation. It is normally an indication of not admitting a bad position or having unrealistically optimistic expectations about a trend continuing forever. Once hope sets in, traders need to reevaluate their position quickly because hoping just doesn’t work.”
Marcel Link
High Probability Trading
