Net Lines

It’s that dreaded day after Independence Day. The weather is gorgeous and I don’t really feel like trading either. The thought of just phoning it in had occurred to me, but as the new month just rolled over I thought I may as well take another peek at our monthly charts. Which uncovered quite some interesting perspectives that I’m eager to share.

But no worries – we’re keeping it light and easy today. Consider this a purist’s approach to market analysis as we’re going to ignore everything but Net-Lines.

 

japanese-garden-sand-zen-garden-1000x667The picture for today’s Zen moment.

Photo credit: istock

 

So what are Net-Lines? Before we get into the thick of it let’s quickly cover the concept of Net-Lines, which is purely price based and as such I don’t consider them ‘indicators’ in the traditional sense. There are in fact two types of Net-Lines, one for the buy and one for the sell side. The rules are pretty trivial:

Net-Line Buy Level (NLBL): Wait for three consecutive lower lows, then take the high of the first candle as your NLBL. The push above that high is your signal to go long.

Net-Line Sell Level (NLSL): Wait for three consecutive higher highs, then take the low of the first candle as your NLSL. A breach below that low is your signal to go short.

That’s pretty simple, isn’t it? No exotic mathematical formulas or price derivatives which may require a PhD in quantum physics to fully grasp. The whole idea here is to identify price inflection points as well as trending behavior. If you’ve been visiting the lair for a while then you know I have been using Net-Lines in the context of our market analysis for many years now.

So let’s get to the goods. Usually we focus on short term and daily charts but today we’ll be exclusively looking at monthly panels. The first one is the E-Mini and it’s the one that actually inspired me to write this post. If you look at the price action over the past five years then what do you see? A lot of red lines below it, correct. Those are monthly Net-Line Sell Levels and we’ve been trading above them almost the entire time. That is bullish of course.

 

1_spoos_monthly-840x686Spoos, monthly – net lines illustrated – click to enlarge.

 

However, what is it you are NOT seeing? Green Net-Line Buy Levels (NLBLs) – because there had only been one since summer of 2010, and it was quickly taken to the woodshed. A lack of NLBLs indicates strong trending price action which is unable to produce three consecutive lower lows. On the inverse however we see a ton of Net-Line Sell Levels (NLSLs) as the direct results of repeatedly producing three consecutive higher highs.

 

A New Market Phase

Now clearly something has changed in the past year or so. Because in the course of one year we have produced not just one but five monthly NLBLs. And we keep knocking against it, thus far however all those Net-Lines have been coalescing into a pretty solid wall.

There are two ways of interpreting this of course. One – we’re building long term resistance which will eventually drag us much lower. Two – we’re in a sideways correction and if we manage to push above the wall near 2100 then it’s happy days again. I think both perspectives have merit as I have long learned that markets can remain irrational for much longer than most could imagine.

But the take away message for now is that there is long term bearish potential, as long as the wall stands. Should it be breached then the bulls may just get another lease on life. Which makes this current market period and especially the coming fall season a very exciting moment in time.

But we’re just getting warmed up. There’s a lot more. Here’s gold which, not surprisingly, has been doing the exact inverse over the past four years. You see a lot of green NLBLs which are never so much as being challenged. Then early this year gold finally manages to push above a monthly Net-Line Buy Level and remained above it. And now it is in the process of breaching its upper 25-month Bollinger and there is nothing but air above.

 

2_gold_LT-840x700Gold (GC) monthly – the inverse – click to enlarge.

 

We see an almost identical perspective over in silver of course. A sea of unchallenged NLBLs and then earlier this year a pop above one which it managed to sustain. There may be another shake out on the horizon but to me this clearly looks like a floor pattern. But ask yourself this – which monthly indicator would have gotten you onto the long side ahead of that NLBL?

 

3_silver_LT-840x699Silver, monthly – more NLBL magic – click to enlarge.

 

Charts by Ninja Trader/ Evil Speculator

 

Chart and image captions by PT

 

This article was penned by the Mole and appeared originally at the Evil Speculator

 

 

 

Emigrate While You Can... Learn More

 


 

 
 

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

   

Bitcoin address: 12vB2LeWQNjWh59tyfWw23ySqJ9kTfJifA

   
 

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • Trade War Game On!
      Interesting Times Arrive “Things sure are getting exciting again, ain’t they?”  The remark was made by a colleague on Tuesday morning, as we stepped off the elevator to grab a cup of coffee.   Ancient Chinese curse alert... [PT]   “One moment markets are gorging on financial slop like fat pigs in mud.  The next they’re collectively vomiting on themselves. I’ll tell you one thing.  President Trump’s trade war with China won’t end well.  I mean, come...
  • The Dollar Cancer and the Gold Cure
      The Long Run is Here The dollar is failing. Millions of people can see at least some of the major signs, such as the collapse of interest rates, record high number of people not counted in the workforce, and debt rising from already-unpayable levels at an accelerating rate.   Total US credit market debt has hit a new high of $68.6 trillion at the end of 2017. That's up from $22.3 trillion a mere 20 years ago. It's a fairly good bet this isn't sustainable....
  • From Fake Boom to Real Bust
      Paradise in LA LA Land More is revealed with each passing day.  You can count on it.  But what exactly the ‘more is of’ requires careful discrimination.  Is the ‘more’ merely more noise?  Or is it something of actual substance?  Today we endeavor to pass judgment, on your behalf.   Normally, judgment would be passed on a Thursday, but we are making an exception. [PT]   For example, here in the land of fruits and nuts, things are whacky, things are...
  • Getting High on Bubbles
      Turn on, Tune in, Drop out Back in the drug-soaked, if not halcyon, days known at the sexual and drug revolution—the 1960’s—many people were on a quest for the “perfect trip”, and the “perfect hit of acid” (the drug lysergic acid diethylamide, LSD).   Dr. Albert Hoffman and his famous bicycle ride through Basel after he ingested a few drops of LSD-25 by mistake. The photograph in the middle was taken at the Woodstock festival and inter alia serves as a...
  • Rise of the Japanese Androids
      Good Intentions One of the unspoken delights in life is the rich satisfaction that comes with bearing witness to the spectacular failure of an offensive and unjust system. This week served up a lavish plate of delicious appetizers with both a style and refinement that’s ordinarily reserved for a competitive speed eating contest. What a remarkable time to be alive.   It seemed a good idea at first... [PT]   Many thrilling stories of doom and gloom were published...
  • US Stock Market: Happy Days Are Here Again? Not so Fast...
      A “Typical” Correction? A Narrative Fail May Be in Store Obviously, assorted crash analogs have by now gone out of the window – we already noted that the market was late if it was to continue to mimic them, as the decline would have had to accelerate in the last week of March to remain in compliance with the “official time table”. Of course crashes are always very low probability events – but there are occasions when they have a higher probability than otherwise, and we will...
  • Claudio Grass on Cryptocurrencies and Gold – An X22 Report Interview
       The Global Community is Unhappy With the Monetary System, Change is Coming Our friend Claudio Grass of Precious Metal Advisory Switzerland was recently interviewed by the X22 Report on cryptocurrencies and gold. He offers interesting perspectives on cryptocurrencies, bringing them into context with Hayek's idea of the denationalization of money. The connection is that they have originated in the market and exist in a framework of free competition, with users determining which of them...
  • No Revolution Just Yet - Precious Metals Supply and Demand Report
      Irredeemably Yours... Yuan Stops Rallying at the Wrong Moment The so-called petro-yuan was to revolutionize the world of irredeemable fiat paper currencies. Well, since its launch on March 26 — it has gone down. It was to be an enabler for oil companies who were desperate to sell oil for gold, but could not do so until the yuan oil contract.   After becoming progressively stronger over the past year, it looks as thought the 6.25 level in USDCNY is providing support for the...
  • The “Turn of the Month Effect” Exists in 11 of 11 Countries
      A Well Known Seasonal Phenomenon in the US Market – Is There More to It? I already discussed the “turn-of-the-month effect” in a previous issues of Seasonal Insights, see e.g. this report from earlier this year. The term describes the fact that price gains in the stock market tend to cluster around the turn of the month. By contrast, the rest of the time around the middle of the month is typically less profitable for investors.   Due to continual monetary inflation in the...
  • Flight of the Bricks - Precious Metals Supply and Demand
      The Lighthouse Moves Picture, if you will, a brick slowly falling off a cliff. The brick is printed with green ink, and engraved on it are the words “Federal Reserve Note” (FRN). A camera is mounted to the brick. The camera shows lots of things moving up. The cliff face is whizzing upwards at a blur. A black painted brick labeled “oil” is going up pretty fast, but not so fast as the cliff face. It is up 26% in a year. A special brick, a government data brick of sorts, labeled...
  • Russian Gold Rush - Precious Metals Supply and Demand
      Goldfinger Strikes, Sort Of This week, we saw a tweet from a prominent goldbug. He said, "Russia added another 9 tons of gold to its reserves in March. The hits just keep coming." How many errors in this short quip? We count six, exactly one error for every two words.   This one's got everything: Smersh, Spectre, Putler and Pussy Galore! [PT]   One, we call this the fallacy of the famous market actor. Russia is famous. Its purchase of 9 times is therefore imbued with...

Support Acting Man

Item Guides

Top10BestPro
j9TJzzN

The Review Insider

Austrian Theory and Investment

Archive

350x200

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

Mish Talk

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com

Diary of a Rogue Economist