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John Bretthauer wrote:
>
> Rick,
>
> I don't know if you want this posted so it is being sent private.
>
> One of the things that has really cost me money is abondoning my signals
> because some fundamental story comes along.
>
> I told a friend of mine that I shorted beans yesterday and he faxed me a
> very good report on the historically tight supply/demand picture in beans.
>
> Today was limit down with the tightest supply in history. This may very
> well be why I'm seeing bottoming action in beans but it doesn't negate the
> fact that I had technical signals to short this market.
>
> I have found that fundamental stories have caused me to go long at euphoric
> peaks and to bail with the masses at panic lows. It is very frustrating to
> be trading on this type of advice to watch the fundamentals change before
> your eyes and your profits erode. I have solved this problem by not reading
> fundamental info.
>
> I look for fundamental evidence in things like COT, spread divergence and
> premium markets.
>
> I do not wish to bad mouth anothers approach to trading. In fact, my friend
> has made hundreds of thousands of dollars trading long-term fundamental
> strategies. It is just that in my time frame, his work is irrelevant at
> best but more likely harmful. My friend and I often take opposite positions
> and we can both be right.
>
> I prefer to do my own work.
>
> John
You won't get any arguments from me. I don't subscribe to fundamentals
mostly because it is usually already discounted in the market price. I
was just ready to post something about Soybeans though when I read your
message here. So, I might as well let your message and mine blend a bit.
Hope this is okay.
To be on the cautious side, I did some trend work to see how things look
so far. When you stand back, you no doubt will exhale and say, "ah, a
downtrend." However, this is really not the case in our short time
frame.
Note the graph below. I've included the swing chart for this market
starting with the bottom turn up. Follow along as I've included letters
to help explain. SEP SOYBEANS.
A market is no longer considered down when a previous top has been taken
out. Note (A) where from the low, a high top was made. When you look on
the swing chart to the left, you'll note the first swing up made a top,
small but still a top. Since this top did not take out the previous top
made WAY UP THERE, we are still down. But now, note that after that top
is made, the market swings down, again making a lower low. We are still
down. But then it goes back up and 'takes out' the last high top. Now we
are going up.
Once the move stops making higher highs and lows, it then turns down.
However, it retraces only 33% before preceeding back up again taking out
our next top at (C). This is STILL a short term UP trend. Now after the
(C) top was taken out, the very top of this move is then made. It
finally starts to make lower low and high. This cause us to swing down
again on our swing chart. Yet, until we take out the low of (B), this is
still an up trend.
Now here is something to think about. Our current price is approximately
.618 of the swing move up. It also stopped right at closing the gap. For
all intensive purposes, since this is still a short term uptrend, we
should be looking to go LONG, not short. Not until our (B) low is taken
out should this change.
I prefer to see what this market CHOOSES to do. I won't tell it, it will
tell me.
So, if you are going to short, be aware of this. If you are going long,
wait for the swing up to occur.
Below is the chart with the swing chart beside it. Also, the Range calc.
Note that the low and close now sites on this Fibonacci price level.
Trade wisely my friends.
cheers!
:)
rick
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