Fundamental vs. Technical Analysis
Why you throw fundamentals out the window and focus instead on charts. They don’t lie and here’s why. I am going to make my case for why I switched. This is most important as we close 2016 and is everywhere.
In 2014 we had a huge crop supply due to good weather, actually the biggest crop inventory year ever worldwide, also called ‘stockpiles.’ The price of soy had been high historically due to the opposite—little supply. I will stop here on the economic backdrop but the prices and market juices were bullish hoping for higher prices as late as July 2014 as we whittled through the previous year’s record low supply of soybeans, which derivative contracts based off that short supply/high price, at that time, was climaxing. Think bank event, (July 2014, squaring up derivative contracts). Afterward we would focus on the new, big crop in the field. Higher price traders are called bulls, (bears are opposite). The soy crowd only saw higher prices.
Point is big crop, and farmers had sold their crops yet forward, (short futures contracts). That means we have new sellers that will need to sell their crop. Crop sold out. Professional money managers know that to act accordingly by selling before the farmers in this example. Prices plummet from the Summer, $13+ highs into September, still early according to fundamentalists because farmers need to sell their Oct/Nov. crops. This is called seasonal selling for obvious reasons.
My system gave a few numbers—very important for traders. There is noise in the markets confusing herd-type market experts during the precipitous price fall, (just think price crash), as everyone I’ve known in the business for 30+ years was afraid to buy. Take my word, “your word is your bond.” I want to teach a pro how to trade in what I think is a prudent, unique, well-thought-out strategy. A few of my recent unusual and numerous examples take into account what has happened since the historic stock market crash of 2008-09 and the massive bailout (fixed debt in $ trillions to the bank culprits that caused this rigged event). I rant on bankers in common man language. I have studies in which the following all use the same method. When the incidents happened, I posted.
The difference with me is that I have traded grains for the past 30+ years.
Explained again end 2016, wheat bearish fundamentals and a 70 cent rally off OLB $3.94. $3500 up move suggested in Feb 17′ month earlier story in VIP.
Why use technical analysis? Result in 2014 when soy price made multi year lows, also a technicians’ acceleration point as far as price discovery (downward momentum) from $12, $11, under $10 (an old historic high price), then as we raced to $9 you couldn’t find anyone, that had support until under $8, and $7 were peoples’ target. It is this panic and chaos when my numbers tend to give signals that the crowd wants to fade, (trade against you). I posted my $9.08 Olive line indicator. It’s just its name, OLB= Olive Line Buy in blog. The market spent a full week at $9.08, plenty of time. $9.05 was two attempts when exchanges are open overnight. One contract is 5,000 bu. Bushels. 5,000bu. x 1 penny =$50 per 1cent.
$9 x 5,000 bu. = $45,000 This is called notional value of the total value of the futures contract, per 1 lot.
That Friday $9.08 was the (day-session) low of the day and week in my book. It also means the trader that sold, that last $9.08, that day lost a lot of money. The price over that supposedly weakest seasonal time period went from $9.08 up almost $2.00, shy of $11.00. THIS HAPPENED IN CRUDE OIL BUY $29.00 EARLY 2016.
Soybeans did this at $9.40 in 2016 again, Corn ditto, wheat in spades all within a few months of one another.
System likes to buy when others panic sell. Seasonal s story, the last two crop years, explained due to big speculators larger than market, (electronic, speed etc.). My personal experience dates back to 1984, when I was young fearless and a twenty-something floor trader. I figured this fundamental pattern, by using monthly exports in February, I think, led to a certain percentage of the end left-over-figure (carryover), or how many soybeans were left over from the previous year, 6 months early. Low carryover years were so much fun to trade because price swings where big along with customer interest, and I was on the trading floor.
It was astounding to me as a young man but my pre- figure results were always around 3% or 4% of what is called “carryover,” get it? This predicted the end figure. My predictive figure said the carryover would be close to all time lows meaning big price movement for me to capture for my hard work. What happened to that fundamental analysis? I lost money the first year in my career. The government revised their figure later, much closer to mine. I fought the market six months, gave up and it came back down. I chucked fundamentals.
Charts don’t LIE? You can see when the investors are the wrong way in the market which provides speculative opportunities when it happens. You are longer term right? No? Then you look at shorter term charts because they both give the same patterns. These situations go against the logical grain, if you will. They are not though. I can show you how to trade a market that looks like it may crash, and still give you levels that can help make money. I will help you modify your thinking with what I think you will find logically interesting. Educating is my escape valve. [bestwebsoft_contact_form]
Send me an email describing a market you have thought or desire trading.
Here is how NASDOG gives a warning in something that turned out big, and totally out of favor with majority opinion from Summer 2016