Market Wizard Quote of the Day

“Don’t think about what the market’s going to do; you have absolutely no control over that. Think about what you’re going to do if it gets there. In particular, you should spend no time at all thinking about those rosy scenarios in which the market goes your way, since in those situations, there’s nothing more for you to do. Focus instead on those things you want least to happen and on what your response will be".

William Eckhardt

The GOLDen Route Update

Gold followed its bullish route I mentioned one year ago on 17th of October 2009 in a post entitled "GOLDen Fibonacci Uptrend". The post included the chart above with the following price and time targets: "1250 (161.8% Fibonacci projection) then around 1400 (the 200% projection) and 1600 (261.8% Fibonacci projection). We also have the 34-week cycles in April 2010 and November - December 2010 when we may record new highs around the levels above or just inflection areas."

Below we have the updated chart where we notice that the first target (1250) was reached in May 2010 a month later than its cycle time while the second target (1400) is supposed to be reached in November - December 2010 but it's close already today on 8th of October (when registered a high just shy of 1365). In a later post I will discuss more on the potential price and time targets of Gold.

Chart of the Day - S&P500

S&P500 reached a confluence of an upper side channel resistance and a 21-day cycle. With the potential volatility of the NFP news tomorrow we may be able to check if the next short term trend is stil up or turns down.

The most signicant lesson Soros taught Druckenmiller

The most signicant lesson Soros taught him, Druckenmiller suggested, was “that it’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong. The few times that Soros has ever criticized me was when I was really right on a market and didn’t maximize the opportunity.”

He learned this soon after he began work at Quantum. He had been unenthusiastic about the dollar and he took a large short position against the German mark. The position began to go in his favor, and he was quite pleased with himself. Soros dropped in on him in his ofce and discussed the trade.

“How big a position do you have?” he asked.

“One billion dollars,” Druckenmiller answered.

“You call that a position?” Soros said, a question that has become part of Wall Street folklore.

Soros suggested that Druckenmiller double his position. He did. And, just as Soros had predicted, even more prots poured into Quantum.

“Soros has taught me,” noted Druckenmiller, “that when you have tremendous conviction on a trade, you have to go for the jugular. It takes courage to be a pig. It takes courage to ride a prot with huge leverage. As far as Soros is concerned, when you’re right on something, you can’t own enough.”

Source: SOROS - The Unauthorized Biography, Robert Slater

FX Chart of the Day - EURGBP

The area around 0.8750 seems an obviuos target for now..the strong trend in EURGBP is the reason behind GBPUSD underperformance against EURUSD.

Chart of the Day - ELMA

Graficul saptamanal de mai sus indica potentiale targeturi zonele 0.80 - 0.82 si apoi 0.95 - 1.00 pana in luna decembrie 2010.

Black Swan vs Black Duck

“The trouble with the Recency Effect is that everyone all of a sudden thought they were Nassim Taleb, orinthological experts on the spotting of Black Swans. Every blip on the screen or blurb in the newspaper was fresh evidence of the next hundred years’ storm. Forget being fooled by randomness, people have become obsessed with randomness.

But as we’ve learned, not every aberration is a Black Swan in the making. Sometimes, it’s just an ordinary Black Duck. A negative event or possibility that is processed and dealt with, that doesn’t necessarily lead to contagion, panic and meltdown.”

Source: The Reformed Broker - Sometimes It’s Just a Black Duck

Dow at 38 820 in 2025?

That’s what Jeffrey Hirsch’s Stock Trader’s Almanac predicts:

“As markets and economies struggle over the next several years, remember to keep your eye on the future and get ready for the Next Super Boom and the next 500% move in the market. From the last bottom in 1974 it took eight years before the market really took off in 1982 and then another eight to move up the rest of the 500%, in line with Yale Hirsch’s prediction in 1976 for a 500% market move by 1990. A 500% rise in the Dow over 16 years from the intraday low of 6470 on March 6, 2009 would put the Dow at 38,820 in 2025.”

War followed by Inflation, Peace and Secular Bull Market Gains

Source:

Stock Trader’s Almanac: Next Super Boom — Dow 38820 By 2025 — Stocks Catch Up With Inflation, But First Inflation Catches Up With Government Spending

The Speculator As Hero

Victor Niederhoffer on speculation:

“I am a speculator. I own seats on the Chicago Board of Trade and Chicago Mercantile Exchange. When my daughters ask me if my job is as important as the butcher's, the doctor's or the scientist's, I answer that the speculator is a hero, and has been throughout history.

Some speculators are discoverers like Christopher Columbus, creators like Henry Ford, or inventors like Thomas Edison. Their job is easy to place on a high plane. My role in the grander order is indirect, relatively invisible and unplanned. The only discoveries I make are the routes that prices will travel. Like hundreds of thousands of other traders, I try to predict the prices of common goods a day or two in the future. If I think the price of an item will go up, I buy today and sell later. If I think that the price is going down, I'll sell at today's higher price. The miracle is that in taking care of ourselves, we speculators somehow ensure that producers all over the world will provide the right quantity and quality of goods at the proper time, without undue waste, and that this meshes with what people want and the money they have available.

…………………………

Let's consider some of the principles that explain the causes of shortages and surpluses and the role of speculators.

When a harvest is too small to satisfy consumption at its normal rate, speculators come in, hoping to profit from the scarcity by buying. Their purchases raise the price, thereby checking consumption so that the smaller supply will last longer. Producers encouraged by the high price further lessen the scarcity by growing or importing more. On the other side, when the price is higher than the speculators think the facts warrant, they sell. This reduces prices, encouraging consumption and exports and helping to reduce the surplus.

…………………………

I am proud to be a speculator. I am proud that my humble attempts to predict Tuesday's prices on Monday are an indispensable component of our society. By buying low and selling high, I create harmony and freedom.”

Source: The Speculator As Hero

Indecision in continental Europe..

DAX - still in range



CAC - still testing FIB 61.8% retracement



ATX - still testing FIB 61.8% retracement

Daca BETFI trece de 24.000 puncte..

..si evadeaza din triunghiul ascendent, urmatoarele praguri de rezistenta vor fi 26.500, 28.000 si 30.000 puncte. Se observa in graficul saptamanal de mai jos ca dupa retragerea de 61.8% a trendului ascendent inceput in 2009 indicele revine incet pe crestere si intampina rezistenta la EMA50 care se afla in jurul valorii de 24.000 puncte..

End of journey for AUDUSD?

Looks like the area around 0.97 might be end of journey for Australian dollar for now..and since we have around 93% correlation between AUDUSD and S&P500, what can we expect from US equity market?

Six Rules of Michael Steinhardt

Michael Steinhardt was one of the most successful hedge fund managers of all time. A dollar invested with Steinhardt Partners LP in 1967 was worth $481 when Steinhardt retired in 1995.

The following six rules were pulled out from a speech he gave:

1. Make all your mistakes early in life: The more tough lessons you learn early on, the fewer (bigger) errors you make later. A common mistake of all young investors is to be too trusting with brokers, analysts, and newsletters who are trying to sell you something.

2. Always make your living doing something you enjoy: Devote your full intensity for success over the long-term.

3. Be intellectually competitive: Do constant research on subjects that make you money. Plow through the data so as to be able to sense a major change coming in the macro situation.

4. Make good decisions even with incomplete information: Investors never have all the data they need before they put their money at risk. Investing is all about decision-making with imperfect information. You will never have all the info you need. What matters is what you do with the information you have. Do your homework and focus on the facts that matter most in any investing situation.

5. Always trust your intuition: Intuition is more than just a hunch — it resembles a hidden supercomputer in the mind that you’re not even aware is there. It can help you do the right thing at the right time if you give it a chance. Over time, your own trading experience will help develop your intuition so that major pitfalls can be avoided.

6. Don’t make small investments: You only have so much time and energy so when you put your money in play. So, if you’re going to put money at risk, make sure the reward is high enough to justify it.

Source: Six Rules of Michael Steinhardt

Potential target pentru SIF5..

..este zona 1.60 - 1.65 pe termen scurt, daca se va inregistra un breakout peste rezistenta din 1.48 - 1.50 pe volume in crestere. Strapungerea ferma a SMA200 si a laturii orizontale a triunghiului ascendent (care are implicatii bullish in general) dar si o numaratoare fortata de valuri Elliot care ne-ar plasa in valul impulsiv 5 cresc probabilitatea atingerii targetului mentionat aflat la confluenta unei retrageri si a unei proiectii Fibonacci. In caz contrar, linia de uptrend este aproape si ruperea acesteia probabil va intoarce actiunea in range. Vom vedea..

Potential EURUSD Elliot Trip

We may be in the 3rd wave or at the beginning of the corrective 4th wave of the bigger impulse 3rd wave (III) that may take EURUSD to around 1.39 - 1.40 during the next weeks. Where are the US$ lovers?