March 9, 2001
This is an update on how the 4 "optimally filtered" XGO forecasts worked out.
Wheat bottomed about a week early. Fortunately, we had a trailing buy stop in just in case, so we got long at a nice price. But now, we are pressing our stop close. Why? The early turn may mean an inversion has occurred. Even if it has not, a pullback is in order.
Tbonds are on track, but the pullback was enough to stop us out, so we had to re-enter. This is the nature of a longer range forecast-the detail is missing, and somtimes that detail is important. Of course, one can do a shorter term analysis using a shorter term ZD filter on the XGO.
This S&P forecast clearly inverted. It is too soon to tell if it will re-invert. If it does not do so soon, this market is in for a tough spring.
The market came exactly down to the energy center, the Strange Attractor/Repellor (SA/SR) shown on earlier charts. Then it accelerated right through it. That is one of the possible actions at a SA/SR , and why you ALWAYS need to use stops. Most often, the SA/SR produces a turn, but not necessarily. So don't jump in assuming the turn will come. Rather, place a stop so you are only entered if the turn DOES come.
This forecast looked good for a while. Then it simply failed. That happens. I had made a small buy, so I just sold out. Trading these longer term trends isn't that hard. Start with a small buy or sell. If it works, add more. If that works, add more again. But if it doesn't work, get out of that small position. The time is just not here yet.
Keep in mind that chaotic systems can only be partially predicted. They always have two solutions. So inversions will always be with us. Actually, be glad of that. If markets were not chaotic, someone would have cornered them long ago, and you and I would have nothibng to trade!