Futures Market - Silver Highlight #2
Trading technique exits silver positions 4 days after the first
half, 1998 price peak as news of Warren Buffet's silver purchases make
headlines.
(COMMENT #s 56, 67, 70)
UPDATED 19980205
COMMENT 1998-56
Did the Wall Street Journal have knowledge that "The 1997 $upertrader's Almanac - 2nd Half Edition" highlighted silver as its "TRADE OF THE YEAR" when the article on the front page of the second section was prepared today?
The Journal and all other media publications failed to credit "The Almanac's" suggestion to buy COMEX silver futures contracts (reasonable execution price was $4.30 on 970708), take delivery upon expiration, and use an appreciating asset as collateral to secure other trades.
Warren Buffet apparently realized the value of this strategy when he initiated his purchases two weeks later on 970725 (according to the WSJ).
Thanks for the boost, Warren!
(Silver purchase was also suggested in COMMENT #s 18 and 30).
Too bad the WSJ chose not to share such information with its readers.
UPDATED 19980210
COMMENT 1998-67
Just as simple trading techniques have been used to initiate positions, so can one use the same techniques to exit positions.
1. JYH provides such an example where the trading technique presented on pages 205-209 in "The $upertrader's Reference Manual" can be used to exit the position initiated in COMMENT #s 15 and 23.
2. Can you determine a reentry point if the position is stopped out?
3. Do you see how very little is RISKED in assuming these positions?
UPDATED 19980210
COMMENT 1998-70
1. Just as the technique was applied to the Japanese Yen in COMMENT # 67 to provide an exit stop on a long position, the same technique can be used in reverse to provide an exit stop on existing short positions such as the bonds.
2. Bonds tested and held their early morning low today and then traded up to the high of the day just prior to the close.
3. The market created an inside day (today's high was lower than yesterday's and today's low was higher than yesterday's).
4. For the moment, the market is likely to continue higher.
5. Since the low on 980123, the market has traded up in 3 waves to the 980130 high and down in a jumbled structure to the 980206 low.
6. The 980206 low was above the 980123 low.
7. The market then spiked sharply upwards in price from 12009 to 12107 followed by a correction down to Monday's low at 12011.
8. Since Friday's 12009 low held on Monday and Tuesday's early morning low held late in the day, bulls will be encouraged today and will attempt to drive the market higher.
9. In Elliott Wave terms, although it is still possible that the 980123 low / 980130 high was a "1-2" structure, the price action since suggests that this process will likely become a "1-A" structure and that the 3 waves from 980123 to 980130 will break down into the "a-b-c" waves of but an "A" wave.
10. If this is correct (and only subsequent market action will tell for sure), the move down from the 980130 high to the 980206 low was a "B" wave.
11. The "A" and "B" waves are part of a larger structure which is related to the 980112 to 980130 wave down which is either a "1" or a large "circled A" wave down (the nomenclature "circled" is used to distinguish between the "A" wave discussed in # 9 above and the larger "A" wave just identified).
12. In either case, we should have just begun a "C" wave up.
13. This "C" wave should complete either the larger "2" or a large "circled B" wave which will be related to the 980112 to 980130 wave down.
14. If the "C" wave is equal to the "A" wave, the wave will end at 12219 (just above the 980130 high at 12212 and sufficient to provide a false whipsaw breakout high and turn a large portion of the trading crowd bullish).
15. If the sharp spike upwards Friday morning was "wave i" of 5 waves up in the expected "C" wave, 1.618 of this move would carry to 12224 and would end either wave "iii" of the "C" wave or wave "v" of the "C" wave and, thereby, the entire corrective "C" wave.
16. The answer to whether the "iii" or "v" wave ends at these levels will be answered by the STRUCTURE of the anticipated corrective "C" wave.
17. This STRUCTURE should unfold in a clear 5 wave movement (waves "i" through "v").
18. If only 3 of the 5 waves end in the 12219 to 12224 area, a corrective wave "iv" and impulse wave "v" up should follow.
19. Now, here's the reason for all the above;
A. The move down from the 980112 high to the 980123 low required 8 trading days (FIB # = 8).
B. The move up from the 980130 low to the 980130 high required 5 trading days (FIB # = 5).
C. The move down from the 980130 high to the 980206 low required 5 trading days (FIB # = 5).
20. Hence;
A. Today is the 3rd day (FIB # = 3) from the 980206 low.
B. Today is the 8th day (FIB # = 8) from the 980130 high.
C. Today is the 13th day (FIB # = 13) from the 980123 low.
D. Today is the 21st day (FIB # = 21) from the 980112 high.
21. It would thus be IDEAL to complete the "C wave" today and thereby complete either the corrective "2" or larger "B" wave from the 980123 low.
22. If such an upside corrective process does occur, the market would then be in prime position to resume its "3rd wave" or larger "C wave" downside cascade.
23. Can you see how the minor "A Points" listed on page 398 of "The 1998 $upertrader's Almanac - 1st Half Edition" provide a likely TIME TARGET of WHEN this larger downside corrective process should end?
24. Despite this IDEAL setup, note that the IDEAL is not reflected in the notes which decreases the confidence that the scenario outlined above will closely track the IDEAL.
25. Traders should be especially watchful for a shortened, abbreviated "C" wave up which does not even break the 980130 high. Such a shortened "C" wave would suggest a very weak structure in the bonds. If the structure develops into a second wave "running correction" on the 21st trading day, it is among the very most bearish of all market formations and could easily lead to a VERY SHARP collapse downward in price. Although of small probability, the advantage we have now is the knowledge that such is a possibility that will;
A. Become known within but a few trading hours as the downward move either begins to evince itself or does not (simple as that statement might sound, it is the key to the unfolding of this particular process), or
B. Suggest that we "load the boat" to the downside at the slightest HINT that this cascade has even the POTENTIAL of having begun.
26. Note that the Elliott Wave was highlighted at this particular time even though it is not exactly clear (and rarely ever is) EXACTLY where the market is in Elliott Wave terms. The key is that the manner in which the market is unfolding in terms of TIME and PRICE is reflected in FIBONACCI terms thereby suggesting an underlying, supportive Elliott Wave interpretation.
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