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Robert Edwards
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Contrarian daytrading technician who specializes in micro scalping of stocks (using 1 minute bar charts), swing trading of stocks overnight, weekly stock option premium selling, pre-market and post-market psuedo market maker and stealth trading activity, and selling commodity option strangles... More
  • What Is My Crystal Ball (Intuitive Logic) Telling Me About The Markets Right Now? 5 comments
    Jun 8, 2014 2:28 PM

    An Introduction: Finding Our Inner Crystal Ball

    It is true. Some people do appear to have a crystal ball. They possess intuition and call themselves "intuitives". Many claim to have some type of Divine inspiration. I would call myself an intuitive, but don't make any spiritual claims. I get my inspiration from science, and although on the surface, it looks like a bunch of hocus pocus, I feel my methods are grounded in mathematics.

    Having been a music major when younger, and an accomplished vocalist, I look at the markets as music. When I am looking at a chart, it is as though I am listening to a great symphony. I get lost in the rhythm or meter of the music (time cycles which I call "the count") as well as the change in pitch or space (swing magnitude called "the movement or degree"). Markets do appear to have predictability in both time and space, (think Gann).

    Many years ago I discovered my own inner "crystal ball", by trying to develop my ability to perform inductive logic rather than deductive logic. Deductive logic looks at the big picture and then boils things down to the small or minute. Inductive logic looks at the minute, and then builds and builds to create the big picture. It allows one to predict the future. I have had a long time to polish up my crystal ball and have gotten much better at seeing into the future, over time. Of course I am not always right because inputs from which the logical conclusions are based, can, and often do, change. However, I am right enough to make the whole exercise quite worthwhile, ... and it is a lot of fun. I am just as excited as anyone else to see if I am right or not on my predictions.

    My son has heard hundreds of my predictions over time, and although he hates to admit it, he strongly values my opinions. Whenever a trade starts going bad for him, he always asks me to do a "reading" and see if any danger is lurking ahead. If I do see danger he will look for an opportune time to liquidate the position. There have been many false alarms, where I have gotten him out at break even or a small loss, and he would have made some money by staying in. However, I have saved him from some very serious disasters and so he never faults me if things don't turn out exactly as predicted. Remember, all predictions are based on probabilities and one hopes to be better than 50/50 on guesses, and strives to approach 67/33 or as much as 85/15 accuracy. One will never be right 100% of the time.

    Let me say here that I got my B.S. degree in Philosophy but I specialized in Logical Thinking and took most of my coursework through the Math Department. I studied statistics and especially probability theory, calculating the odds of a future event occurring. I also am intrigued by game theory as well as gambling theory and consider speculative trading as an attempt to stack the odds in my favor to give me the best possible chance to "beat the house". Better yet, I try to find ways to trade in which "I am the house", since in the long run, the house always wins.

    Well, today I am going to show some charts where I will apply my intuitive logic methods to predict where the markets will go. Sometimes the melody of the markets leaps out, and is quite visible, while other times when looking at a chart, it appears to be a lot of noise. However, in all cases, there is knowledge to be learned from looking at the charts, through the light of our own inner crystal balls. It is not a gift which one is given, but a skill one possesses, and a skill that I believe can be taught.

    However, it is much easier if one has an intuitive nature, as I believe I do, to a very high degree. It also takes a certain degree of narcissism, arrogance and elitism, to be "an intuitive" and make predictions. It comes with the territory. Hey, if you don't believe your own B.S., no one else will. A particular judge I work with, loves to joke, "If you don't have the answer, ask Robert Edwards. He knows everything". I don't apologize for spending nearly every free moment that I am not trading or studying the markets, researching on the internet and discovering interesting facts and information. I am well versed on the latest developments related to politics, the law, medicine, science, mathematics, art, music, religion, personal relationships including sex, as well as sports. If I had a choice I would spend 24 hours per day on the internet and never sleep.

    If I was a race car driver, for the first 50 years of my life, I would see myself most like Dale Earnhardt Sr, "The Intimidator". He was a risk taker extraordinaire, and was killed in a racing accident just prior to his 50th birthday. As a fearless risk taker, I figured I would never see my own 50th birthday, so I tried to cram 100 years of living in my first 50 years. Once I reached the age of 50, it was as though I had completed my quest, and I could now slow down and did not have to rush on my next journey. Prior to turning 50, I had completed 14 years of post high school, college credit, managing to get a Bachelors, two Masters degrees and was a Doctoral Dissertation away from a Doctorate degree. However, at 50 years old, I vowed to never take another college level course and I have not done so. At age 49, I was still looking ahead and trying to figure out what I was going to do when I grew up. But at 50, I decided I was finally grown up, and the mold was now set. I made a radical lifestyle change. Now cars honk at me in anger, because instead of being "The Intimidator", I am a very courteous driver and slow down and let other cars move in front of me. I feel like I am on bonus time and any good that happens to me for the rest of my life, is just icing on the cake. I spent the first 50 years striving, battling, driven to get ahead. I want to spend my final 50 years in the passenger seat, helping other drivers get to where they are going. I also will try to make frequent stops along the way, to help others, and to give back to society. Who knows, I may even learn someday to take a break longer than a pit stop, in the future. Don't hold your breath.

    The Natural Gas Chart Should Top Out Both 3 & 9 Days Out

    (click to enlarge)

    The above daily August Natural Gas chart shows a 19 trading day rally from late January through the 3rd week of February 2014 (shown in blue ink). Then at the beginning of April, natural gas bottomed again and sustained a 19 trading day rally. Now again, a couple months later, in late May 2014, natural gas has bottomed again and has rallied for 10 trading days. I am looking for a cycle top to occur in another 9 more days, to complete the 19 day bullish cycle that occurred twice previously. Also notice that in the end of April, just prior to the last 19 day rally, there was a 6 trading day pop off the bottom where natural gas rallied off the bottom and then curled back down. This 6 day curling pattern also occurred in late May prior to our current natural gas rally, further confirming that we are in the middle of a bullish 19 days cycle. Also, if one does an alternative count, and counts 19 days starting from the beginning of the 6 day curling pattern instead of at the completion of the pattern, back in late March, most of the up move did occur within 19 trading days (shown in black ink on the above chart) and the final 6 days of the move was mostly sideways. Now in the middle of May, an alternative 19 day count starting at the beginning of the recent 6 day curling pattern, instead of at the end, we would be 16 rather than 10 days completed on the expected 19 trading day bullish pattern. That would mean that we might top out after Wednesday of this coming week, on June 11th, if the alternative pattern is the best fit going forward. But the regular pattern does not see Natural Gas topping until Thursday, June 19th.

    Copper Is Near Support Just Above $3.00

    (click to enlarge)

    In early March, July Copper fell for 9 days and then after a one day rally, fell hard for 7 more days, breaking below $3.00. Copper has since been in an uptrend and with a 7 day down cycle completed in the first week of May, and another 7 day down cycle completed on Friday, June 6, 2014. I will be buying copper when the market openings this evening in the Globex, as I want to be long copper, as mentioned in my last futures article. I expect to see a nice tradable bounce off of major support found at $3.00.

    Gold Should Bottom By June 10th & Then Rally $50

    (click to enlarge)

    In blue ink, I have marked three bearish 12 trading day cycles in August Gold counting from the March 2014 top. The last bearish cycle has gone on for 10 trading days so I expect a strong rally after we go sideways to lower for just 2 more days. Beginning Wednesday, June 11th, I expect to see gold start moving strongly higher and rally 5 units. In black ink, I have shown the magnitude in units that gold has moved up and down, with every $10 being one unit. From the beginning of February 2014, gold rallied 15 units ($150) until topping out in March. From the high in March, gold has fallen 11 units ($110), risen 5 units, fallen 6 units, risen 4.8 units, fallen 4 units, risen 3 units, and now fallen 7 units. It is due to bottom in a couple days and then rally 5 units ($50).

    Platinum Appears To Have Already Bottomed

    (click to enlarge)

    July Platinum rallied for 16 days from the lows in early February, until the third trading day of March. Then it did a 6 day sideways curling pattern before dropping for 10 days. If one skips over to the end of the 3rd seek in April, Platinum again completed a 16 day rally, followed by a 6 day sideways curling pattern. From the recent top, Platinum dropped 7 days and has now rallied for 3 days. Since we have completed 10 trading days following the 16 day rally and 6 day sideways pattern, I would declare that the bottom is already in on July Platinum, and would expect to see a further rally over the next 7 to 9 trading days.

    Silver Is Due To Bottom Now

    (click to enlarge)

    Here I see how 14 day down cycles in July Silver have already been completed as part of a major down cycle that has lasted for nearly 3 1/2 months. Silver is making little progress to the downside once it fell to support at $19/ounce. I reiterate my suggestion of buying the silver ETF (NYSEARCA:SLV).

    Crude Oil Should Start Moving Up In A Day Or So

    (click to enlarge)

    July Crude Oil has had a some nice swings up and down as shown on the chart. Every line on the chart is one unit and equals 50 cents per barrel. Beginning in February 2014, July Crude Oil rallied 19 units ($9.50) and then fell 13 units, rallied 9 units, fell 6 units, rallied 11 units, fell 10 units, rallied 13 units and has now fallen 6 units. Overall, crude oil has been in an uptrend with the only sustained down moves lasting 10 days beginning March 2014 (shown in blue ink), and again for 10 days beginning the middle of April. Since topping out in the latter part of May, Crude Oil has been in a 9 day down cycle which should be completed on Monday, June 9th. Beginning Tuesday, June 10th, I would anticipate crude oil showing bullish cycle influences and should rally for a couple weeks. I intend to scalp crude oil from the long side this week.

    Wheat Was A Week Late In Bottoming

    (click to enlarge)

    In my last article, I expected wheat to bottom, as it had fallen for about 16 days similar to the length of previous up and down moves. Well, the down move has been extended to 21 days, with finally a strong reversal rally off the bottom on Friday. I am short $5.75 September Wheat puts that I sold when September Wheat was trading about $6.42. The trade is now looking a lot better as we may now begin a countertrend rally.

    The DOW Could Rally Another 12 Trading Days

    (click to enlarge)

    Back at the beginning of February, the Dow Jones e-mini futures contract bottomed. It then rallied for 10 days nearly straight up, then worked higher for another 14 days. After falling for 4 days, another 14 day rally took place. After a 6 trading day selloff, we had a 21 day rally consisting of 7 days straight up, and another 14 days sideways to higher. Then after a 5 day selloff, in late May we started on another nice up move consisting of 10 days virtually all straight up. Just as it appeared we might roll over for a few days, on Thursday and Friday we ended the week with another 2 strong up days. I believe we have now completed 2 days of a 14 trading day up move and will be looking to scalp from the long side using the e-mini Dow futures contract if the strength of the last couple days continues into next week. There is no end in sight right now in the stock index futures!

    Other Markets

    In my last article I explained how I was long August Live Cattle. Well, that market has continued to perform wonderfully with new highs scored in Feeder Cattle last week and a nice rally in August Live Cattle along with Lean Hogs. I am quite bullish the meats for the remainder of 2014.

    The currencies are back and forth in a tight trading range right now, just about across the board. I won't show the charts but I believe that the British Pound and the Australian Dollar can be played from the short side. I may short one or both of them this week, on any further strength.

    Disclaimer:

    The thoughts and opinions in this article, along with all stock talk posts made by Robert Edwards, are my own. I am merely giving my interpretation of market moves as I see them. I am sharing what I am doing in my own trading. Sometimes I am correct, while other times I am wrong. They are not trading recommendations, but just another opinion that one may consider as one does their own due diligence.

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Comments (5)
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  • nclsamy
    , contributor
    Comments (123) | Send Message
     
    Thank you for your insight! Good studying material.
    8 Jun 2014, 05:16 PM Reply Like
  • mattitan
    , contributor
    Comments (9) | Send Message
     
    Robert,
    I do not know how to trade the futures.
    Is there a way to trade crude oil in the stock market outside of future contracts?
    Thanks and I always look forward to reading your posts as you have made me money in the market and have taught me more than you would know. Many Thanks!
    8 Jun 2014, 08:08 PM Reply Like
  • Robert Edwards
    , contributor
    Comments (587) | Send Message
     
    Author’s reply » There are several crude oil ETFs, you can find here: http://bit.ly/1pUbHH6
    The safer ones are the ones that are not leveraged. Some are for going long and others for going short.
    8 Jun 2014, 08:17 PM Reply Like
  • RMKLI
    , contributor
    Comments (9) | Send Message
     
    Nice article on trends! Not sure on wheat or crude but I agree that precious metals should rally soon especially gold and silver, already planning positions for both SLV and GLD. Question on your intuition on DOW, how high do you think it will go in 2014 and why?
    9 Jun 2014, 02:52 AM Reply Like
  • Robert Edwards
    , contributor
    Comments (587) | Send Message
     
    Author’s reply » I am not the best person to ask on the DOW because I am not that bullish on the DOW. I am just saying that looking at the chart there is nothing stopping it from rallying for about 2 1/2 more weeks.
    9 Jun 2014, 07:40 AM Reply Like
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