Category: Trades

Not to long ago I suggested that the head and shoulder pattern in oil would be a failed H&S formation.

Mainly because the idea of $10 oil seemed unlikely. But there you have it- target reached.
I also wanted to point out that the negative price of oil was really just the longs buying out the shorts. As a future contract expires you have two choices: Roll over to the next month or stay in the market and fulfill the contract. If you are long are you expected to take delivery of the oil. If you are short you are expected to deliver the oil. In this case, each contract is 1,000 barrels. Usually, everyone rolls over the contract a few days before the contract expires. Practically, I do this because volume dries up and strange price movements occur as you get closer to expiration.  On the last two days of trading before the May contract expired, the longs wanted out and did not want to take delivery. Mainly because of storage price and they had no place to put the oil. So the CME allowed a negative price to be traded so the longs could get out.
Consider an example.
I plan to open a car lot and sell used cars. A few days before the opening I plan to have the cars delivered from Company A. I enter into a contract with Company A that states I will take delivery of 500 cars on date X. But something happens with opening up my car lot and I am unable to get the lot. Company A is set to delivery a few hundred cars but I have no place to put them. So rather than have Company A dump 500 cars on my front lawn, I buy out of the contract. I send them a check to allow me to renegade on the contract.
The CME allowing negative prices to be traded was similar to the above example. There was no place that existed you could go to, pick up oil and the person giving you the oil hands you cash.

With the upcoming OPEC+ digital meeting, it seems unlikely anything will be concluded that will satisfy the market. This looks like a clear case of buy the rumor sell the news.

I got stopped out of the gold market for a small loss due to volatility. I am going long one last time with a stop at 1680.

Gold looks like it wants to test its all time high.

Gold completed a head and shoulder continuation pattern today. It looks like it wants to challenge its all time high.

Entered the market at 1714.9 with a stop at 1680. Target is all time high of around 1920. Read The Bull is Back.

Oil is making a head and shoulder pattern.
I am of the view this will be a failed H&S pattern. This is the reason I took a long position in anticipation of this move. If this H&S pattern completes to the downside, it has a target of $10. This seems highly unlikely to me, but anything is possible.
The Nikkei 225 might make a triple top. I will go short with a weekly close below 20,000.

The long bond just completed a cup and handle.

With the break of 165, it went right to its target of 175 plus some. Put simply, I just missed this trade. The bond bull market that started in 1982 is not over. I will last a lot longer than most people think. Before this is all over, you could see 30 year mortgage rates at 1.5%.

The oil market looks like it is going to make a failed head and shoulder pattern.

Normally, I would wait until it breaks the right shoulder to get confirmation of this. That would be a weekly close above $65. But mass panic over the coronavirus has caused such a wonderful buying opportunity that I can not let it pass me by.
By all indications, it appears the virus has peaked in terms of infections in China. Manufacturers are beginning to resume their operations in mainland China.
As this is happening, the bureaucrats at the CDC are causing a panic which is setting off the algo’s to sell.

Bureaucrats are risk adverse. ‘Better be safe than sorry’ is taken to the extreme. Yes the coronavirus has disrupted demand. But the worst appears to be over.  As speculators, you should look to the future.

I took profits on the Russell 2K trade. The target was 1750 but it has gotten close enough for me.

Naturally, I feel regret about the Nasdaq, SP500 and DOW trades. I looked for the exit to early. The charts were telling me to stay long and strong. Yes they reached the daily targets, but the weekly charts were telling me to let me profits run. My emotions got the best of me. Mainly being impatient. I am probably making the same mistake right now with the Russell 2000.
There is nothing worse than watching massive profits turn into losses. When you trade the futures market, your fortune can turn to misery in a few minutes. This is due to the high leverage. I am not a mechanical trader. I “felt” a correction coming. It never came. I left over 10K on the table. I wrote a list of trading rules long ago. I took another look at them today. These three jumped out at me:
Rule #11-There will always be another trade. It is better to miss a trade than to chase it.
Rule #12-Trading from my gut is a quick way to the poor house.
Rule #15-Losing trades, losing weeks, losing months and losing years will come. That’s the nature of the business. Nothing is guaranteed. If you don’t like it, don’t trade.

Rule 11 and 15 tell me to get over it. Not following rule 12 is what got me.

I am taking profits in almost everything except the Russell 2K. They have all reached the price targets plus some.

I still have a very small position in the DJIA, but I have officially closed it in the performance tab.
No point in getting greedy here. I traded my plan and made very good money.
The market looks like it wants to take a rest. A modest correction looks likely. I do not plan on waiting it out.