Its a wise trader/investor that knows how best to allocate his time at different stages of a market. Effective time allocation is a great part of mastering trading practice.
We have a low volatility lull here as directional and indeed cross asset spreads stretch and fail to comply to historical means. Whats more these spreads are failing to return to the mean. In essence this bull market is already breaking down and the majority of active traders lose money as direction chops up and spreads fail to return to their means.Volatility is getting ready to explode, in my view. Of course timing is everything in all trading matters.
For now, its a hard environment this unless you are really on top of your game and have time. What is the best allocation of our time during this process? I’d advocate narrowing the number of stocks and instruments you are trading for a start. Keep deal size small and leverage even smaller or better yet raise cash!
Much of my little time for my own book is spent looking at the key instruments of AUD, Copper, WTI, Gold, Brent, EURUSD, Materials and oil and gas equity sectors vs major indexes.
Why? As these are historically end cycle performers. Its far from a high conviction trade this but its a historical market hypothesis that must be tested and allocated to in some way. The AG price chart based tech analysis is exactly the sort of technical approach i take for my own book. I would like to see some more multi instrument charts to track relative performances but nonetheless a very useful pack.
Check the WTI, Brent pattern. The AUD pattern. The CCI at her 200 dma. The bullion higher high, hopefully. Why is the ftse recently performing more strongly? Check also the low volatility on the 6 month time frame and 3 month even better 9n some instruments! Check the nickle breakout. Check the material and oilers sectoral out performance. In my view its starting to firm up the conviction that capital is starting to flow to her old historic patterns again, like the text books say she should.
If you are familiar with asymmetric instruments start to dust off those charts and price books. Options on the eurusd playing off the recent low volatility as one example. Examine the respective historic volatilities across time frames and consider what sort of move and pay outs would occur on the various strike points.
This is how a wise investor with some knowledge will apply himself now rather than chasing chop to seek out relentlessly disappointing directional trades.
Here below the AG analysis. They are right to stick to their guns but don’t work on short time frame instruments and load up as the evidence is close but not their quite yet on the shorter timescale. Sentiment has shifted also. Id like to see it more bullish than it is. ECB talking (always talking June for action). Lets see.
Here the report:
Please recall i am holiday at present so comments and the number of proprietary and third party reports will be more limited until the 19th of May. Thanks for your patience.
Please recall as you look at the AG work the countering work of Fitzpatrick.
He is a mkt heavy weight technical director with a world wide reputation so we see once again, it takes two to make a market. He is in danger on his jpy position here. Practice wise we must always remind ourselves, there are no rights and wrongs in trading. We will get direction wrong but your practice must get yo in time when you are wrong and keep you in winning trades long enough. This is the challenge.
Here Fitzpatrick
The bulls have some life left in them most likely though they are having to work much harder now and super nimble to eek returns.
Rich