19 replies to this topic

[tradermama]

I thought I'd start a thread on Dorsey's pnf... I just got an alert yesterday that gold's RS (realtive strength) changed from X to O.. Below is an explanation of why it's important to follow this. I still have GDX on an X..which turned from March's O to X in June..however some of the miners I follow have had their RS change to O in the past 2 weeks. Whenver you decide to buy a stock you should look at RS..especially if in a down trend to see which stocks held up their RS..because they will be the first to move upward and be the leaders in their index..explanation below will make more sense. We still have sell signals on : GDX..target 39.50..47 would be a buy..it's weekly momo has turned negative Gold...it would need 1630 for a buy signal Silver...it would need 29 for a pnf buy If anyone wants to know how their miners look on pnf..I'd be happy to look it up..but all I can say, is using Dorsey's pnf has kept me on the right side and my profits this year. You can get a free 3 week trial if you are interested too. I believe it's $25 a month but I pay the $50 combined with mutual funds. However, I would suggest to read his book first. That said after Mercury leaves Saggi which is by the 16th..this "rally" should be over imo based on the weakness in the RS. No matter, the market dictates to me..but the RS doesn't change that quickly..we could get a buy signal and the RS is still in an O (supply)..it takes a while to turn..weeks to months..sometimes years..but the signals I have is for the short term trend..not the long term. So this is why I have come to the conclusion..that if we couldn't mustered up a good rally by now before the RS turned to O, we should break those Dec lows..If we don't and just stay in a range...and base..well, then that's a sign of strength to come. TM Relative Strength -------------------------------------------------------------------------------- Relative strength readings are incredibly important in stock selection in all kinds of markets. The relative strength calculation is simply done by dividing the price of the stock by the price of the Dow or any index you choose and then multiplying by 1000. This number can then be plotted on a point and figure chart. RS chart buy signals are given when a column of X's exceeds a previous column of X's. Sell signals are given when a column of O's exceeds a previous column of O's. Relative strength signals generally last about two years and tell the overall trend of a stock. Positive relative strength suggests the stock will outperform the market while negative relative strength suggests the stock will underperform the market. It's also important to watch for reversals for short term guidance. Say for instance XYZ was at $80 and the Dow was at 2,500. If we divided $80 by 2500 and moved the decimal we would get 32. This number 32 can be plotted just as if it was an $32 stock. Let's say the following week the stock falls to $72 and the Dow dropped to 2000. We now divide $72 by 2000 and get 36. In this case the stock dropped, the Dow dropped but the relative strength chart went up. This tells us that the stock is doing better than the Dow and it is possible that the only reason it is down is that the overall market is down. This stock could be one of the first to snap back when the overall market is ready. Remember according to a University of Chicago Study 75-80% of the risk in a stock is market risk, 20-25% is stock specific risk. Relative Strength readings are taken once a week and plotted on a Point & Figure chart. There three types of relative strength (2 for stocks, one for sectors). A stock can be measured on a relative basis versus the overall market and versus its peer group (other stocks within the same sector). Sector relative strength is a measure of that sector's strength versus the S&P 500.

Edited by tradermama, 10 July 2012 - 06:11 AM.

[dougie]

thanks TM: so how are you playing it: on the sidelines?

[tradermama]

thanks TM: so how are you playing it: on the sidelines?

yes..I would now be stepping onto the sidelines..I did play it for the Mercury in Saggi....we could just be in a range for this week ..I dont care if i get the bottom or top..I just like the meat of the run....it's all about managing risk..that's what Dorsey teaches...a buy signal would tell me most likely it's a short term rally only (which I'll play) because of the RS turning to O....but last week silver got the RS to O..and you need the 3 amigos..silver/gold/miners if this is a bottom imo..so when silver got that..then that was a first warning..now, yesterday gold did..but I saw weakness 2 weeks ago with some miners..I personally don't care to short the metals ..it's still in a long term bull..cyclical bear this year..but that won't last long.too much longer..

I'll play a buy signal if and when it happens....but I would play it as a swing..Only until the RS goes back to X and a buy..would I hold it longer...this change to O might just be a month or 2+ or just a few weeks...but the RS doesn't flip flop quickly....

with the way gold's volatility it could just be weeks..if there really ended up being flight to safety in gold..like up $100 days but it is an election year..and I dont think "they" will let it fall to the extremes as many are posting..otherwise that would show we are deflating ..Maybe we see between $100-300 down from here..and the markets would have to fall with gold for it to be deflationary...all must come down..and recently last week we got the NYSE Bullish Per Cent change to X for the broads..which means we are on offense..buy the dip in the broads..this signal normally lasts months..but in 2008 flipped back in 2 weeks..I've noticed there is a lot of parellel to 2008 in many areas too..so who knows if that happens..but right now it's bullish..I did get a little alert of weakness on the 10 week band changing to O..but that can flip back quickly too..

..I know Laundry has gold end of the year as a low...that could be a possibility with this change of the RS..August typically is a low for gold with the Indian wedding that comes around Sept which boosts gold..right now, I think it's all about the dollar..it has to top out before we see some real action in gold imo...Armstrong recently I read (someone posted) he called to buy gold..I still never found that..I just remember him saying we either top in July and go down into Aug/Sept..or go down into July and Top Aug/Sept..so far it appears the former. We'll see
TM

P.S..I think if we see silver breaking under 26..that's gonna be a sign gold will be following. Hey, I really don't know what's going to happen..this is just what I'm thinking for the time..the market dictates

[tradermama]

Yesterday got a 2nd sell with a spread triple bottom pattern on GDX..target now 37.50. Triple bottom spreads have about an 80% reliability. This is definitely pointing to testing May's low of 39.08 or breaking it. TM

[johngeorge]

Thanks TM for all the great stuff you have been posting. I have been on the sidelines for a long time now....seems like ages. Watching and waiting. Like you I don't try to catch the lows or highs. If I can get a 50% move that is more than satisfactory for me. Still holding my core positions (enduring some pain ), but, looking to buy physical if we see that $100 to $300 drop from here. Best to you.

[tradermama]

Thanks TM for all the great stuff you have been posting. I have been on the sidelines for a long time now....seems like ages. Watching and waiting. Like you I don't try to catch the lows or highs. If I can get a 50% move that is more than satisfactory for me. Still holding my core positions (enduring some pain ), but, looking to buy physical if we see that $100 to $300 drop from here.

Best to you.

Best to you too and thanks for your posts. Early next week Mercury in Saggi ends..so unless you caught that last bottom when Ken made his announcement, we really seemed to have gone flat for that..unless something changes Friday/Monday..so now starting the 15th of July thru Aug 8th..we have Mercury going Retrograde...this is a period where TA doesn't work well...and reversals happen quickly..rallies can be 1-4 days..this is overall..not just metals...typically you get a reversal on the day it happens or just around there too..plus the 18th we have a new moon...July 15-16 is a Merriman reversal period for metals..so if we are going down into that ..plus/minus 3 days..a reversal should happen..the fact Mercury in Saggi ends the 16th..maybe that's a big reversal or counter trend rally..we'll see...
Mercury in Saggi exaggerates..so this could be an acceleration to the downside too..20% of the time metals go down...20% a mild up..60% a big up..

I use my pnf to guide me but knowing the weather forecast with astrology might give me clues..and frankly, unless we have $100 big up days...everyone is looking for that break in Dec lows that a lot of them are gonna try and catch it around 1500..the RS to me is the clue of weakness..it takes a while to turn the titanic around..UNLESS, there is some fundamental news which will trump that..and cause it to go straight up..but so far, they seem to be controlling this so it doesn't get too carried away showing inflation..and yet holding it up not to show deflation..that is so far. Again, I am not a forecaster and the market will dictate to me what to do..right now, it is saying be cautious as the break could be coming very soon in gold/silver..

Best again to you

TM

[tradermama]

GDX's RS (relative strength) reversed back to O...last time it did this was in March. This type of alert kept me on the sidelines with miners. GDX still has a target of 37.50 also with a triple bottom sell signal..highly reliable fwiw TM

[tradermama]

If GDX hits 43..it will be a pnf buy.. gold needs 1630 and silver now needs 28.50 for Dorsey pnf buys TM

[johngeorge]

If GDX hits 43..it will be a pnf buy.. gold needs 1630 and silver now needs 28.50 for Dorsey pnf buys
TM

Thanks for the updates TM

Best to you

[tradermama]

If GDX hits 43..it will be a pnf buy.. gold needs 1630 and silver now needs 28.50 for Dorsey pnf buys
TM

Thanks for the updates TM

Best to you

GDX got a pnf buy at 44..it wasn't 43 as I stated above..sorry, poor vision!..target now 50..waiting and watching when I will get the RS (relative strength) change to X..
TM