See charts below with an On Balance Volume indicator and the Money Flow Indicator using a 13 period
I often say trading is about probability not prediction, however I did stick my head on the chopping block last week and say I thought the correction was over - why? There was so much volume coming into the market and perhaps more importantly, the volume was not dropping off with the price, creating a bullish divergence. So we got a rally this week, now what?
If you have ever read the book about Jesse Livermore there is a character in the book called "old Mr. Partridge". He used to hang around the brokers office never seeming to do a lot. When asked by younger traders what he was doing, he would reply "well its a bull market!"
What he was attempting to teach the younger traders was this: in a bull market try not to panic, buy the dips, stick to the trend and your method. Let others lose their heads but you keep your cool.
Easier said than done I know.
It does appear this market will continue up. The ASX is primarily a commodities based index (BHP alone represents around 12% of the top 200) and commodities are on a tear. Speaking of being on a tear, the gold price is on one. Looking at the chart below I have included the Fibonacci - taken from the breakout at long term resistance at 2050. I am not particularly a fan of any dead Italian mathematician, but it does show something important.
The amount of pull back the trend has. Also, it's a line chart, so much easier to read are they not?
As you can see the price has hardly retraced and this is important - for it shows how keen the buyers are, not wanting to wait (FOMO) for more falls before getting in.
Why?
They are AFRAID the price will rally without them so they do not let the price dip much at all. So, I intend to add to my gold stock positions next week, wish me luck!
Until next week,
Peter
