## Tuesday, November 1, 2016

### IDEAS ARE CAPITAL

“Honey, tell me again why you didn’t buy it here.”
Now that October is over, in the next few days I’ll be posting for download the 5 months from June 2016 – October 2016 gold exhaustion moves; every exhaustion move gold made [RM=1 -4], no matter the time of day, is captured with commentary on the M1 candlestick chart. [Note: exhaustion moves of less than 9 minutes are not in the data; I explain in the tutorial why this is the case, but the short version is that statistically, they could be viewed as a random sequence, so they are left out. It’s not that they are insignificant for trading purposes; quite the contrary, but from a probabilistic point of view one could make a valid case that exhaustion moves less than 9 minutes are random and just total luck. In order to knock down that argument those moves are simply left out of the data.]
In total, there were 174 exhaustion moves [9 minutes or greater in length] from RM=1 to RM=4 representing \$1,573.94 PER Oz. Of these 174 exhaustion moves, from the very top/bottom to the end at the exhaustion lines, 91.4% [159/174] were EXACTLY EQUAL IN TIME [MINUTES] to cell numbers on either the Cardinal Cross or Diagonal Cross of Gann’s ‘Square of Nine’; the other 8.6% [15/174] were ± 1 minute from being exactly on the Cardinal Cross or Diagonal Cross. In total, there were 104 up exhaustion moves and 70 down exhaustion moves; RM=1 represented 84.5% of all moves [147/174], RM=2 represented 9.8% of all moves [17/174], there were no RM=3 moves, and RM=4 represented 5.7% of all moves [10/174].

Now, here’s the really important question to ask of the data; “what is the cumulative error rate in exact price for all the exhaustion moves that is away from the Cardinal Cross or Diagonal Cross? In other words, after 174 moves, what’s the total price missed by?”
THE TOTAL ERROR RATE = -\$0.18
THAT’S RIGHT, after 174 moves the algorithm came up on the short side by 18 cents.
I will show in the tutorial why mathematically this is then almost impossible to be considered “random”; in other words, not only are cycles present, but the math behind the algorithm that you see on your screen models exhaustion behavior extremely well, thus giving us the very best liquidation and entry points [for down moves] you can ask for.
This might be a good time for that “Oh Shit” moment you’ve been dreaming about; oh, and one more thing. The data for the DOW30 looks every bit as good as the gold data; the cumulative error rate for the DOW30 [price] for the month of October was +2 DOW30 Index points with the total exhaustion point moves [in Index points] = 2,651!!
“Go ahead, tell me again how it’s random bullshit?”
Turning to gold today … well, somebody lit a fire under the price in Europe didn’t they? With the daily calculated white horizontal line way below the market here at the open, we should get a decent buy signal on the first bit of market sell off; question is, after that can it continue upward and give us some nice profits?
Well, that didn’t take long did it? Got the first buy signal a few minutes after the open after a failed attempt at a new high; got in a little early on the slope change because I saw the “engulfing pattern” at the bottom, and as we got closer to the end of the M1, I knew that in a few seconds when the new M1 would start that we would see a slope change in the plum line. However, I’m not at all excited about being long up here in the mid to upper 1280’s, so my “trigger finger” to liquidate is going to be rather fast; first sign of resistance on the M1 that goes red towards the last half of the M1 is going to see me liquidate. After commissions it yields about \$1.25; skimpy, but better than nothing or a loss.The trade is directly below.
I’m reasonably sure will get some more downside to get me back in; moments later we get buy signal #2. And again, like the first trade, once we start moving up, I’m not only raising my “mental stop”, I’m also acutely aware of potential resistance lurking up here [read commercials bullion wall” of sell orders] to halt the rally; we need to liquidate before it turns around to ensure good liquidation fills, otherwise you know the drill. This trade captured about \$1.50. Trade #2 directly below.
Ok, so I’m sittin’ here just a tad below my daily goal of \$3; it’s going to take a decent sized sell off to get me back in, and quite frankly for a measly quarter, I’m not all that interested in giving anything back. Quite likely there will be more “buy signals” up here, but again I ask the question as we climb the price mountain again, “where’s it gonna go? Can we get above 1290 and stay there? That 'slaughter' in price on October 4th has more than a few retail spec position players shaken; I don’t see them coming back in the market unless we get over 1300 and stay there; so that leaves the bullion banks & dealers, and once they cull the order books and see the bids 'drying up', I guarantee you they will “monkey hammer” the price once again." I’m not sayin’ it will be today, but I just don’t see prices steadily moving higher from here without some very quick sell offs, that if your long near the top, you’re going to get some algo signals that aren’t very friendly towards your position. One minute it looks good, the next not so much. Thanks, but no thanks.
The data I first presented in today’s blog should have all of you readers in giddy shock. I’m not trying to be overly dramatic here, but after having seen a massive rally in June, “chop” in July and August, a killer move lower in September, and then basically “chop” in October, gold has “shown its hand” in basically all market conditions. And through it all, the volatility algorithm pretty much “nailed” the short term trading tops & bottoms with an accuracy that should have the hair on your neck standing up; if it isn’t (and it’s just as good in the DOW30), then as a professional trader all I can say is 3 things; 1) “either you don’t give a shit about trading and making money”, 2) “you see no need to trade and improve your financial life because you are comfortable where you’re at”, or 3) “you don’t believe the data.”
To the first 2, I can’t help you, but as to the third, you got 174 gold charts at your disposal [here in a couple of days] cataloging every single exhaustion move 9 minutes in length or greater over 5 months in every type of market conditions; look at as many as you would like and pay close attention to where buy signals occur in relation to the bottom of the move; it should amaze you, and if it doesn’t it’s your problem not mine.
Ok, off to the beach with my BFF; his nurfball, bag of Beggin’ Strips, a nice big beach towel, fresh cold water in the cooler [with other assorted beverages for humans], and of course the beach umbrella for some shade. All in all, it should be a great afternoon … both of us are sooooo outta here … until tomorrow.
Have a great day everybody!
-vegas