Trader Scott’s Market Blog
September 28, 2016
I believe the PMs are in a major bull market from the lows from late last year thru January.The daily chart #1 shows the very large ACCUMULATION (weak hands to strong hands) area in GDX. It is in the latter stages of that area. But it’s also in the early stages of an UPTREND. That’s what usually occurs. You have the strong hands still wanting to ACCUMULATE, but the supply/demand imbalance had become so much tilted towards demand back near the lows, that the strong hands could not “stop” the market from starting to rally aggressively (weak hands buying) before they were able to put the finishing touches on their campaign of ACCUMULATION. So you have this situation where we’re in a young bull market combined with an old ACCUMULATION campaign. (It’s incredibly important to follow/judge/interpret what the strong hands are trying to accomplish, by enticing the weak hands to sell to them.) So the market got “ahead of them”. They need to slow it down. This is all natural.
Maybe someone else does, but I have zero ability to predict market outcomes. I can’t tell the market what to do. But I can be ready to enter the market at what I consider to be the highest PROBABILITY/lowest RISK points. In the GDX chart below, I have outlined the entry points that I am watching/waiting for. I have no control over where the market goes. I only have control over where/when I enter a position and where/when I exit a position (profit or loss). So every day I must be ready if that opportunity arises.I use charts for one main reason – to judge the SUPPLY/DEMAND situation. More specifically, I’m attempting to judge/interpret/follow and then eventually act upon what the strong hands are attempting to do. They leave their footprints in markets by their actions. But those actions take time to set up. We need patience to let those processes take place. And it is those actions that form the basis for how/why I use charts. I don’t use so-called “chart patterns”. I don’t even understand them. But what I’m looking for in charts are what happens when the strong hands do their buying/covering/selling/shorting. The strong hands are the primary force behind the formation of: SUPPORT/RESISTANCE zones; overbought/oversold conditions; and ACCUMULATION/DISTRIBUTION areas, which allow for the UPTRENDS and the DOWNTRENDS to take place and which eventually ensue. That is mostly what I use charts for. Basically, I’m trying to find the lowest RISK/highest PROBABILITY entry points into a market, while being in harmony with the TREND, and getting in as close to the turning points in time and price. At least that’s the goal.
So the huge RESISTANCE area marked off on the GDX chart is what has basically put a temporary kibosh on the UPTREND. For several reasons, that zone has been a big stopping point so far. It’s where many of the “chartists” and “chart pattern” guys are using as a “confirmation” of a bull market, if GDX trades thru it. ( FYI, I NEVER buy into strength and I DO NOT use any price level breaches for “confirmation” of a TREND. How can you have “confirmation” of something which is completely about PROBABILITIES/UNCERTAINTY. I hear people talking about “confirmation” levels, but it has never made sense to me. If anyone can explain it to me, I’d love to hear from you.) And if I am supposed to wait for something to go from $12 to and thru $32 before there is a buy “confirmation” then I don’t know why I’d even be involved in this business. But let me finish with this – I’m sure there are folks who use buy and sell “confirmations” and are successful in markets. And that’s great. I don’t care what method one uses in markets. I just care about their consistency. And to repeat – the method is a small part of one’s success in markets. The main reason for success is the trading skill set and/psychology/emotions/mental strength/humility/competitiveness.
Trader Scott has been involved with markets for over twenty years. Initially he was an individual floor trader and member of the Midwest Stock Exchange, which then led to a much better opportunity at the Chicago Board Options Exchange. By his early 30’s, he had become very successful in markets, but a health situation caused him to back away from the grind of being a full time floor trader. During this time away from markets, Scott was completely focused on educating himself about true overall health and natural healing which remains a passion to this day.Scott returned to markets over fifteen years ago where he continues as an independent trader.