Market activity rules! It is the basis for understanding the motivation for all moves, up or down. If you want to know what smart money [controlling influences] is doing, watch when volume activity picks up, especially at highs and lows for that is when a transfer of risk from weak into strong hands occurs.
You do not have to pay attention to news, what others are saying about the market. You get far more accurate, and current information on where the market is headed by reading what the market is saying about others. This comes in the form of price/volume behavior. Smart money is very deft at hiding their hand. They move much larger positions, so it is during high volume activity when one can best determine when they are active, and what they may be doing.
One thing known about the markets is that the public does not generate high volume. They respond to it. The driving force behind sharp volume increases comes from controlling influences, what we call “smart money.” Another thing known about markets is that they never lie. All they do is generate information available for everyone to read at the same time. Charts provide the proverbial pictures worth more money than words, particularly when they reveal important knowledge.
Last week we posted our article, Copper – Poised For A Breakout. The market broke down, instead. We always go with the developing market activity known at the time. Change can only come when there is an unexpected change in market information. On the day when expectations were for an upside breakout, the market did the opposite, a very powerful message. It can be difficult to adjust to abrupt market moves, but that is what stops are for.
Were we wrong in the analysis? Absolutely, and not for the first time. It is okay to be wrong. The most important part is not to be wrong for long. Just move on to the next trade because profitable opportunities are always coming along. We deal in markets, not egos.
It is newly developing market information that either confirms or negates one’s position. To succeed in trading, one must always be flexible and go with the will of the market and not the will of the ego. What was is past tense and will not change. To survive, one must move forward and change with the market.
The monthly chart is from our last article, with an added comment. Anything can happen.
A valuable lesson to learn about the markets is that the factual activity, in the form of various bar ranges, from small to large, with accompanying volume, from low to high, and so much in between; these known market facts take precedence over any and all formations imposed on the chart structure. A triangle, a wedge, a trend line? They can be helpful as guides, but the bar/volume structure is supreme.
We never use mechanical tools, like moving averages, RSI, Bollinger Bands, MACD, etc. They work, occasionally, as does a stopped clock: deadly accurate twice a day. They are past tense-derived market activity imposed upon the present tense, and the two are often not related, except in the user’s mind that “sees” a relationship.
The most important information on the weekly chart is the high volume from last week. A lot of longs were liquidating, and losses mounted for those late in acting. The question not enough ask is, “Who was on the other side, doing all the buying?”
As an aside and pertinent to our non-use of mechanical tools, how helpful were they in last week’s dramatic change? Rely upon past tense tools at peril, from our perspective.
(The full article is available at Edge Trader Plus)
