Thursday, September 29, 2011
Adam Hewison: Do You See the Trees In a Forest, Or Do You Just See the Forest?
If your involved in the markets, it is easy to fall into the trap of just looking at the minute or hourly charts, rather than considering the market as a whole. When you can’t see the market for the minutia, it means that you are deeply involved in a situation, and you are perhaps focusing too much on the inner workings of the market, and not enough on the big trends.
With all of this talk of problems in Greece, defaults, contagion and a host of other problems in Europe, it is easy for traders to get distracted, and not see the forest for the trees.
The most important element in trading in my opinion, is the direction the major trend for that market. It doesn’t really matter what the news is, if the market is doing something else. As traders I believe we have to look at the forest in this case the big trends in the marketplace.
Let’s look at them now: S&P 500 index major trend down. Gold major trend up. Metals major trend down. Crude oil major trend down. Dollar index major trend up. CRB index major trend down.
So, there you have it, all the major trends in all the markets we are dealing with right now.
Everything else is just individual trees, that don’t mean a heck of a lot in the big picture.
It takes a tremendous amount of energy to move a market and change a major trend. This kind of energy normally does not happen in one or two days. As they say in statistics, one data point does not make a trend.
Let's take a look at our Trend Analysis and Trade Triangles for Crude Oil......
As the equity markets go, so goes the price of crude oil. The November contract appears to be having some problems with areas of resistance at the $84.00 and $84.50 levels. With both our long term monthly and intermediate term Trade Triangles in a negative mode we expect this market to have another push down to test the $80 and possibly the $78 a barrel level. While this market is presently higher for the week, it is lower for the month and the quarter. Intermediate and Long term traders should continue to be short the crude oil market.
November crude oil closed up $1.43 a barrel at $82.64 today. Prices closed nearer the session high today as trading has turned very choppy this week. A firmer U.S. stock market and steady U.S. dollar index today did support fresh buying interest in crude. The crude bulls and bears are on a level near term technical playing field.
Monthly Trade Triangles for Long Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short Term Trends = Positive
Combined Strength of Trend Score = – 75
Check out our Video... "How To Use Fibonacci Retracements"