The setting I use for the Money Flow Index (MFI) is 10.
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Trust me when I say that no indicator works all the time. This particular trick I am going to show you will, sooner or later, fail as well.
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But for now, it's difficult to argue with something that works.
When MFI (10) on the daily GLD chart makes a new high off the oversold spectrum it seems to give some very effective BUY signals.
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For myself, I will consider GLD has bottomed when I see the next signal. For now I must assume that GLD has not finished heading south.
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Click on the chart to ENLARGE
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Hmmm, the last time we had a bottom in the MFI like this (zigs and zags with no clear break up) was in the crash starting July 30, 2008. We're clearly not there now, but I don't know what to make of this pattern in the MFI. What do you think?
ReplyDeleteGarry - a couple of interesting twists for now are to set the daily MFI (20) and also take a look at the weekly MFI set to (5).
ReplyDeleteAlso, this is week 6 of red candles for $GOLD. I don't think this has ever happened since the secular bull began in 2001. 5 candles has ALWAYS been the max.
I'm of two minds regarding gold and the PM stocks right now. One is that we are going to see just a small decline here (to 47-48 in GDX) and then a buy signal from the TSI with a break above zero. The other is that price goes down strongly over the next week and we see GDX at 44-45. Both seem very plausible based on everything I'm looking at. Seasonality suggests the latter, but momentum does not seem strong to the downside, so I can see having a hard time moving to new lows.
ReplyDelete$BPGDM is apparently as confused as I am, moving along sideways trying to decide what to do next. The weekly $GOLD looks like it is forming a rounded bottom here and would need to close above $1200 for that to be the case.
I can see that you spend as much time at the drawing board as I do. When I looked back at your blog posts, I see that you came to many of the same conclusions I did. Your approach seems similar to mine in that I am always looking for new ways to analyze market action. I've been at this for over 35 years beginning with a mechanical pencil, chart paper, and the technical analysis bible, "Technical Analysis of Stock Market Trends" I did three moving averages by hand for years until Meta Stock software came out. After all these years and all this analysis, (not to mention all the money spent on software and "education" in the market, I keep finding new methods, like the ones you are using and I'm still fascinated by the workings of the market.
I think your TSI and $BPGDM methods are as promising as I've seen. I really appreciate you sharing them and responding to my questions and comments.
Thank you Garry. Perhaps you will send me an email sometime so that I know how to communicate directly?
ReplyDeleteYour two scenarios are indeed entirely plausible and my crystal ball is dark, as usual. My 'hunch' is that this correction in gold is, save for a spike lower, had its turn and should be done.
After looking at those 6 weekly red candles I thought to myself it is no wonder that the put/call ratio has spiked so high - why wouldn't people (human nature) be spooked bearish after enduring 6 down weeks?
So I 'think' the bull has done his job now to throw as many people off his back as needed to call it a day. But 'thinking' and 'hunches' are shaky ways to play the game and I do recognize that anything is possible.
Geez, 90% of my trades are in the precious metal sector and the past 6 weeks have been red. How in the world do I have a positive record? And how much easier will it be after 6 weeks of white candles? Yes, I thank 4 years of studying the TSI and hope someday I get it figured out even better.