Raven/Matt, which trading platform do you recommend that can automatically execute the trades for your mechanical system? Thanks

Matt & Steve, Great call on A-Power, APWR. I bought on the low tick based on your charts. Just spoke to a sell side analyst and he said there is positive news coming next week.

Matt what do you guys make of the market action today?  I was sure today would be a big move lower.  Now i'm confused.  Thank you.

from Kitco  Matt/Steve what about DBA???

Today's first main topic is the implications of the current commodity bounce, and how to track it.

Whenever any asset class has plunged from a particular trading range all the way down toward an important support level, its immediate subsequent behavior gives you valuable clues as to its future direction over the next several months.

As a rule, when any very depressed asset attempts to continue to decline, while experiencing gradual positive divergences, this is a classic setup for a sustained rally of higher lows. For example, if gold and silver had continued their pullback, while gold mining shares had fallen each morning and mostly recovered each afternoon (see May-August 2005 for a classic example of this behavior), this is how powerful bull markets are made.

Whenever a recently collapsed asset instead enjoys a powerful rebound, while closely correlating asset classes move in nearly perfect tandem, this sends a danger message that the recovery is false and cannot be sustained. As a rule, bear-market bounces tend to be heavily synchronized; they tend to induce heavy short covering by an army of late-arriving amateurs; they tend to see the formerly weakest groups suddenly becoming the strongest; and they tend to be particularly intense.

We are experiencing exactly this kind of false rebound for commodities and their shares. Not only did precious metals move higher today, but so did all other commodities. The U.S. dollar, which clearly remains in a major bull market that began on March 16, 2008, plummeted sharply.

In other words, all of the general commodity/currency trends of the past five months saw a nearly perfect inverse day in the opposite direction of these trends.

Why did this happen? The answer is simple. As commodities continued and accelerated their respective downtrends, the media began to turn gloomier toward commodities. A number of analysts began to ask, is the commodity bull market over? Especially during the past two weeks, amateurs have been piling into commodity bear funds and unloading their commodities and commodity shares. Amateur short positions were piling up.

The financial market hates any crowded trade. Therefore, it will always shake out all late-arriving participants to any important trend by staging a dramatic countertrend designed to scare anyone who is not an experienced player.

Many people had asked me whether precious metals had bottomed, or whether other commodities may have bottomed. Until today, I was not sure. Now I am positive that they have not, because the only possible sequel to today's action is the eventual resumption of another major downtrend for commodities and their shares.

How will you know when this downtrend is about to resume? The key lies in the behavior of a fund which is little known to the general public, but which should be familiar to readers, DBA.

DBA is an exchange-traded fund of futures contracts for wheat, soybeans, corn, and sugar. Agricultural commodities, having been the latest hot-money investment choice since August 2007, seem to have been established as the leading edge of the hedge-fund trading universe.

Therefore, for all of the past year, if you see what DBA is doing, you know what the commodity complex will do the following week.

Today, DBA reached a mid-morning peak of 38.16. If you take the high for DBA of 43.50 from February 27, and the low of 32.88 from August 8, the midpoint is exactly 38.19 which almost matches today's high. The 61.8% Fibonacci retracement is equal to (43.50 32.88) * .618 + 32.88 or 39.44. Therefore, additional upside is possible, but today's high must be watched closely.

If DBA begins to make a pattern of lower intraday highs over the next several trading days, while the U.S. dollar continues to decline to complete a reverse right shoulder, this would be a classic indication that the commodity downtrend will resume in full force as soon as the greenback begins to find support and forms the next phase in its uptrend.

On the other hand, if DBA continues to form a pattern of higher highs, then keep an eye on the 61.8% Fibonacci retracement level of 39.44. This may be broken by a marginal amount, and then a pattern of lower highs may ensue. Otherwise, if this level can be easily broken to the upside, followed by additional higher highs, then commodities will be enjoying an extended short squeeze which will continue for the near future.

Either way, DBA will give the most accurate signal of when the commodity downtrend will continue. The recent intense, coordinated rebound ensures that the downtrend must continue, and therefore it is only a question of when, not if."

Watch for more words from the "Hole" and for Lehman-related developments. Flash e-mail chatter crossed many a laptop about a Korean buyout of the firm (KDB). Monday will tell more. A second week of repairs/consolidation is almost an absolute must at this juncture. Show of hands, anyone?

Happy Trading. Pleasant Weekend.

Matt, what do you thing about DIG here?

Hussman went back into Gold 8% of his fund

what a chart, downhead racer, what's the driver behind this slide?

if you buy into his analysis, what the best pure way to play it?

first ever post, great site