An unusual roadmap for 2009

Never make predictions, especially not about the future
Casey Stengel

A must read article comes from Doug Kass of TheStreet.com.
A map for 2009 as you don't read it elsewhere

http://www.thestreet.com/story/10455209/1/kass-20-surprises-for-2009.html Sphere: Related Content

Working hard for our money

We translate the rules to our chart of GLD (the StreetTracks Gold Trust Shares ETF).


As can be observed: there are three clear situations where a signal of the CCI is followed by a switch of the SAR which produces three times a nice trade.


However: if you short with the last trade than it is the SAR which produces the buy-stop because the CCI is not falling back to those levels to produce a buy signal.


No questions?


Thank you.


Than I hand out wishes for a mighty 2009.


Have fun tomorrow. And take care Sphere: Related Content

Gold rules

Time to put on some rules for dealing with renko-charts.

1. if the CCI comes from greater than -100 to >-100 than a buy signal is generated if the SAR switches from above the price action to beneath the price

2. if the CCI is above 100 and moves under 100 than a sell signal is produced if the SAR switches from beneath the price action to above the price.

This is the easy part.

Don't forget that CCI is dealing with the strenght of a trend. It happens that the CCI is weakening but that the SAR remains supportive. Than we follow the SAR-indicator and maintain the trade.

And vice versa.

The SAR rules once a trade is set-up.

Of course nobody is obliged to wait for a turn of the SAR to be stopped out of a trade.

Taking profits is not a sin.

There looms alway another profitable trade somewhere else.

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Refining gold

We want to elaborate a little further the renko exercise we started today.

First of all we fine tune the time frame and take 60 minutes as a base and not the daily price action.

Secondly we add two indicators in order to have a better idea of trends and the strength of that trend.

These two indicators were found on the stocktiger.com site. We have the commodity channel index and the stop-and-reverse indicator. Or CCI and SAR.

About the CCI we find on the Stockchartssite:

Developed by Donald Lambert, the Commodity Channel Index (CCI) was designed to identify cyclical turns in commodities. The assumption behind the indicator is that commodities (or stocks or bonds) move in cycles, with highs and lows coming at periodic intervals. Lambert recommended using 1/3 of a complete cycle (low to low or high to high) as a time frame for the CCI. (Note: Determination of the cycle's length is independent of the CCI.) If the cycle runs 60 days (a low about every 60 days), then a 20-day CCI would be recommended. For the purpose of this example, a 20-day CCI is used.

And on the Investopedia site:

Like most oscillators, the CCI was developed to determine overbought and oversold levels. The CCI does this by measuring the relation between price and a moving average (MA), or, more specifically, normal deviations from that average. The actual CCI calculation, shown below, illustrates how this measurement is made.
The one prerequisite to calculating the CCI is determining a time interval, which plays a key role in enhancing the accuracy of the CCI. Since it's trying to predict a cycle using moving averages, the more attuned the moving average amounts (days averaged) are to the cycle, the more accurate the average will be. This is true for most oscillators. So, although most traders use the default setting of 20 as the time interval for the CCI calculation, a more accurate time interval reduces the occurrence of false signals.

About the SAR indicator, developed by Welles-Wilder, you can read more here.

The result is the chart on top.

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Gold revisited

Yesterday we mentioned gold as an asset on the move. But let's look today with another chart to the evolution of the price of bullion. Where we could add some trend lines to yesterdays graph, we choose a renko-chart to illustrate the positive development.

Renko is about 'bricks'. The system is the same as the point-and-figure charts and permits to distillate in a much clearer way trends. The time factor is not as important as the price action.

We read on the Investopedia-site:

A type of chart, developed by the Japanese, that is only concerned with price movement; time and volume are not included. It is thought to be named for the Japanese word for bricks, "renga". A renko chart is constructed by placing a brick in the next column once the price surpasses the top or bottom of the previous brick by a predefined amount. White bricks are used when the direction of the trend is up, while black bricks are used when the trend is down. This type of chart is very effective for traders to identify key support/resistance levels.

This renko chart is calculated on daily values which gives a long term view on the price development.

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Gold

I always believed as a child that at the end of a rainbow you could find a pot of gold. I learned quickly that this was not the case. There was always a central banker who took the pot away by the time I arrived. And they hid it in their vaults.

But as we watch our monetary system dealing with the worst credit crisis ever, we think it will not last too long before gold will regain its luster. As long as the creation of money has not the desired effect to grease the wheels of our economy, deflation will be the talk of the day. But once the velocity of money is picking up again and increasing, the reaction of these same central bankers will be slow and too late. And inflation will rear his ugly head. As we never witnessed before.

Watch the dollar.

Is it possible that the gold price is already anticipating ?

Or is it just the seasonal uptick?

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Its cold, dark and empty - christmas 2008

So this is it. The empty space between Christmas and New Years eve. Time to try something new. Time to share.
Thoughts.
And ideas.
Let's jump into the abyss of stock markets.
No longer popular. Avoided by the herds.
This must be the time. When something is hated by everybody and prices have plunged. All we're missing is a glimpse of the bottom.
We have to wait.
But in the mean time we can have already a lot of fun.
Watch this space... Sphere: Related Content