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Admitting mistakes promptly is aligned with compounding.
1 November 2026
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Zero. Admitting mistakes promptly is aligned with compounding.
Listen to the market: controlling yourself is protecting yourself.
Behind price research lies the study of behavior or economics.
The end of state A does not naturally mean the beginning of state B.
The last week of October was a fairly turbulent week for most people. During the week, I received several emails from a few friends who are both mentors and peers (they are all outstanding traders in their respective fields or schools of thought), discussing risk-taking and drawdowns: only one of them suffered a relatively severe loss—and his main system relies on subjective mean reversion at the far left (value investing) and relative beauty contests at the far right (elastic fundamentals),and he is also among the people I have met who can be said to understand the details of bottom-up corporate fundamentals almost better than anyone.Aside from one friend who failed to control himself and mistakenly used a trend-following position to bet on a rebound, almost everyone else actually reached a new year-to-date high in their net asset value.(Without exception, they were all holding short positions, and without exception they had previously been holding long positions—understand this flexibility.)。
This also brings to mind a line from the opening section of our weekly newsletter last week, which seems quite relevant here:Certainty elevated to godlike status has actually become a poison today—and the more certain you are about something, the more likely you are to lose badly, because you simply cannot “admit you were wrong in time”.....
People may each have their own views, but I still want to use this opportunity to stress the importance of admitting you were wrong in time. Admitting you were wrong means that no matter the reason (you will most likely never know in your lifetime why certain things happen at certain times—the logic is the same as what we said earlier about contrarianism being a false proposition: in both cases, during a process of reasoning from cause to effect, people force an inference backward from effect to cause, while reasoning backward from effect to cause cannot produce the correct answer one hopes for), when reality tells us that we are wrong, then we are wrong.In the real world, there are no qualifiers like “the right wrong” or “the wrong right” from idealized debates. In reality, there are only the words “right” and “wrong” themselves: right is right, and wrong is wrong; if you refuse to admit you are wrong, then you must fight it out against an extremely powerful opponent—you might win, but only if you have the means to participate in the battle over pricing power (unlimited funds). Under conditions where you lack exceptional personal strength, fighting it out to the end usually means losing badly; and if you add emotional despair or panic, things will be even worse.
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Why isn’t admitting you are wrong something to fear? Because even if you are wrong and then wrong again, you can still admit it again in time. When facing lions and tigers, do you choose to shed your tail to survive, or let them eat most of your body? The answer depends on what exactly you are pursuing.
The purple box marks when Munger cut his Alibaba position. To this day, the price is still hovering around that level. Looking back, admitting he was wrong in time at least saved time; more importantly, at the time, no one could know whether the price would keep falling.
Admitting you are wrong in time is aligned with compounding.Even Buffett and Munger need to “admit they are wrong in time.” No one with the most unwavering conviction can deny that there is an element of gambling in it. Things may turn out well, but the worst-case path is also possible (you cannot be the protagonist of an anime forever), and the worst-case path is unacceptable for long-term investors—if your portfolio falls by 50%, then you need to double your capital to get back to where you started.Most importantly, this pressure spills over into your behavior, because seeking to double your money means you inevitably have to start accepting a lot of high volatility; and when you are wrong, continuing to act in a panicked, high-volatility manner is more likely to make things worse and worse.
Once a major drawdown occurs, you need an extremely high rate of return to get back to your initial breakeven point.
As long as you flexibly stay on the side of the winners, even an enemy that looks ferocious cannot really do you any harm.
You can express conviction through position sizing, but you must remain flexible about your direction based on what is objectively right or wrong.As Livermore said a hundred years ago: There is only one side of the market—not the bull side or the bear side, but the right side.
Who decides which side is the right side?
The market will tell you.
Abandon illusions and embrace reality in a world where the facts are visible.
Don't put yourself on the wrong side and thereby force yourself to make decisions that cannot possibly be truly outstanding.
Control drawdowns is the key of all keys to a compounding-oriented approach—the most important point of all.
Macro Trading Positioning
US10Y(Weekly and daily charts, as of 261101)
Four weeks ago, US10Y formed a Failed Breakout (FBO, failed breakout) on the weekly timeframe targeting the 2007 high; after confirmation three weeks ago, it formally triggered the Ariston Top signal (red arrow in the chart) and entered the daily downtrend channel of the Ariston Channel, shifting to a short position.
The decline continued to widen this week, and on the weekly timeframe price came close to a key level for bullish PT (where it found precise support). We have discussed the significance of this level in previous weekly notes:
On the weekly timeframe, the market remains in a bullish structure within an uptrend channel, and this uptrend channel is unlikely to be invalidated until the narrative around the global capital expenditure supercycle is itself rejected—in other words, a formal downtrend would mean that the global scramble for capital triggered by AI is being priced as having come to an end.This pricing needs to be validated by looking not only at U.S. Treasuries, but also at the performance of multiple key long-term bonds in global markets.
Overall, we are at a critical juncture where capital expenditure is being questioned. Many things may happen around this level, and the timing is also interesting, as only a few dozen hours remain before the midterm elections. Prices will return to the most appropriate level at the most appropriate time and wait. This is why I have such great respect for price: the more you study price itself, the more you see how effective this pricing is as the collective outcome of human behavior.
FR10Y(Weekly and daily charts, as of 261101)
“FR yields are in an uptrend channel, while US yields have already entered a downtrend channel. So the former continues to rise in sync with oil, while the latter falls in sync—but the cross-asset timing relationship remains effective, and volatility continues to expand.”
On the weekly timeframe, FR10Y reached the T3 target price, where a topping structure may form; meanwhile, the daily timeframe turned bearish during the week, and on Thursday price found precise support at the channel bottom. A formal widening of the decline will occur after price breaks below the lower boundary of the uptrend channel and shifts into a downtrend channel.
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TLT(Daily chart, as of 261101)
TLT (minute chart, as of 261101): a small-scale rectangle structure, with PT and T1 forming its upper and lower boundaries
TLT After we closed out part of the position at T1, a topping signal this week impeded further volatility expansion toward T2, while price stalled near 81.9;This is a process of the trend slowing down, which, combined with what was said earlier about the timing will become clearer, Whether this is a temporary end to the bullish move or it continues higher at T1, we will soon see the result.
Price always gets to the right place at the right time.
The PT for the remaining position is placed at the lower boundary of this formation’s smaller-timeframe rectangle. Stay flexible.
Narrative Trading Structure (as of 261101)
Financial Conditions&Precious Composite&Tech Composite&Crypto Composite (as of 261101) Real Financial Conditions (market pricing) overlaid with precious metals, technology, and alternative-asset composites
The bottoming of the Real Financial Conditions Index provided a relatively favorable financial-conditions backdrop for precious metals and global equities; at least from a liquidity perspective, the risk of a catastrophic crash has declined (this is the core reason the equal-weighted S&P index remains relatively intact).
Key Interest Rate Data: Top Movers (as of 261101)
Key Interest Rate Data: Top Movers (as of 261101)
II. Technology Trade Positioning
KOSPI(Daily chart, as of 261101)
KOSPI The hourly T3 target price at 5338.68 reversed precisely(see last week’s weekly report), and during the week completed its first daily bullish reversal structure since shorting in the 8 month. It is important to note that this is a weaker bullish reversal, located within a downtrend channel and still below the main cost cluster; ultimately, it may exit by way of a stop-loss.。
If you are unwilling to participate in every microstructure (which is not necessary, in fact), then you can treat this weak bullish reversal simply as a signal of shorts closing out. Most important is understanding the different risks that the same structure entails in different contexts, as noted at the beginning, Confidence can be expressed through position size, but your directional bias must remain flexible in the face of objective evidence of being right or wrong.Do not use trend-sized positions to bet on a weak rebound.
The same structure should be expressed differently in different contexts.
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The Hang Seng Index’s two rounds of short selling.Review it yourself.
“Complicated? Not really. It has been nearly two months since we drew the white horizontal line for the Hang Seng Index, and it has remained precisely below it (none of my lines are drawn arbitrarily; they are all carefully drawn. Some people’s lines are worthless, while some are worth a lot of money). During this period, those who moved around randomly based on various indicators, news, and intraday fluctuations have, apart from further increasing their account drawdowns, had little chance of achieving good results.Learn to act at the critical moment. The hard part is not moving around randomly. You listen to this person and that person, look around in every direction, and keep changing your position; all you get out of it is losing money. There is no need to look before the horizontal line breaks. Below the gold line is the bearish zone.”
Distinguish critical moments from ordinary ones.
The market’s main moves often occur within an extremely brief window. The rest of the time is spent building up energy for these short bursts of intense volatility, or digesting the gains and losses that follow them.Being able to stay in the market continuously is where you need flexibility in expressing your directional bias. Knowing when to take a large position and when to use a wide or tight stop is a matter of understanding volatility expansion and the risk-reward and win-rate characteristics determined by the context.This is why we keep discussing the points where volatility is expected to expand: this is where your main window for action should be.
SOXX(Daily chart, as of 261101)
The first round of short selling in U.S. semiconductor stocks was closed out during the week (triggering the previously planned PT),On Friday, the price broke down again and turned bearish (forming a failed rebound followed by a breakdown).SOXX is currently testing the 7.29 sell-off low. A break below it would trigger a volatility-expanding move lower, directly targeting a new round of T1. As a new structure in which the rebound has stalled, a bullish entry requires at least a break above the new structure’s SL, that is, the closing level of 10.28.
DRAM(Daily chart, as of 261101)
DRAM, the week’s shift from short to long was stopped out on Friday (swept intraday). This structure is worth remembering, so I’m still including the old chart of this long setup: setting aside the context, this was actually a fairly strong short-covering structure. But because it formed within a downtrend channel and failed to hold above the cost cluster, it ultimately ended in a failed bullish setup.。Use this chart to understand the importance of context and how to use it to guide position sizing.
A return to a bullish position, just like SOXX, also requires a break above the closing price on the short-covering day.
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For more, see 《ARI’s WEEKLY CHARTBOOK(TECH)》, including microstructure updates on all the subjects covered in TECH MONITOR.
Whether you take a bottom-up or top-down approach, or whether you trade technology stocks, is actually irrelevant, because the structures in the Chartbook are universal in nature. This is the essence of the Fractal Market hypothesis.Be sure to read this alongside the other material!!
STAR Market 50 (daily chart, as of 261101)
TECH MONITOR CN BASKETS (daily chart, as of 261101)
STAR 50, likewise, long is long and short is short. Since turning bearish, it has fallen by around 30%; the latest structure is shown in the chart. There is not much more to say about this, so please have a clear basis for your decisions to enter and exit, rather than trying to be clever.The trend extension is already quite pronounced, and the price may find support near T2.
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Why is T2 here? If you look at a longer time frame, you will find that this is in fact the key breakout level of the base that formed before the entire 25-year rally began：
of STAR 50 The trend extension is nearing the extension strength of 924 in 24; and it is already very close to the base breakout point at 1125
“Compared with making a lot of money all at once in certain places, controlling drawdowns should be the most fundamental goal for market participants. A strategy that can make a lot of money all at once can also lose a lot of money all at once; gains and losses always come from the same source. Focusing on the former makes it difficult to be both long and good (good, and good for the long run), whereas focusing on the latter can achieve this, because the latter (controlling drawdowns) is oriented toward compounding. The key to compounding is cutting losses short—protecting principal as much as possible to limit downside risk and letting profits run. For more on this, see Paul Tudor Jones's interviews. He is featured in the book recommended a couple of weeks ago, and you should also be able to find some of his earlier material on YouTube; it is very valuable.”
Since the mainland China technology basket panel turned bearish, the vast majority of -30% have been around 50%; bear this in mind As long as you have a clear basis for your decisions to enter and exit, they cannot hurt you.
Technology proxies: red means short, green means long, and gray means disagreement; the gold-edged dots are moving up and to the right (as of 261101)
III. Global Equity Positioning
ACWI(Daily chart, as of 261101)
“ACWI is in a descending channel within a top double-rectangle consolidation (see the purple box in the chart on the left). At the same time, attempts to make higher highs within the descending channel have been blocked by the Ariston Top top forecast. This is not a pretty structural setup, For equity bulls, the best course is actually not a bounce within the small rectangle (given the range is too narrow for positions to change hands sufficiently), but to look for a setup after support holds at the lower edge of the large rectangle—that is, around the late-July low.”
ACWI has broken below the small rectangle, and at the same time is nearing a key moment for the trend to develop. Against a global equity bear-market backdrop, watch whether it finds support at T1 or along the lower edge of the purple rectangle.
NIFTY(Daily chart, as of 261101)
NKD1!(Daily chart, as of 261101)
NIFTY, then turns bullish, facing cost-basis resistance at 50 days;A breakout would mean that the T1 target price is highly likely to be reached. You can also wait for confirmation before acting.
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“NKD, after our attempt to turn bearish, it has now expanded its range and fallen into the Ariston Channel downtrend. This Early short-selling is not behavior you should emulate. For everyone, it is better to wait for confirmation before acting, to avoid following in Livermore’s footsteps. I can act early because I strictly control position risk, although this itself is indeed not a good habit.”
NKD, Still holding short; if T1 is reached, I will take profits on part of the position.
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HSTECH (daily chart, as of 261101)
CAC40 (daily chart, as of 261101)
“Don’t jump the gun! Don’t jump the gun! The Hang Seng Tech Index showed a bottom forecast and momentum divergence two weeks ago, but its structure has remained bearish. This too is an anomaly. See Livermore’s discussion in How to Trade in Stocks of ‘situations where, after certain things happen, the market does not develop as expected’—you have to respect price action itself. Most losses that should have been avoided come from jumping the gun...”
The Hang Seng Tech Index remains in the process of developing a bearish trend; do not rush in before the market itself tells you the decline is over.
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The structure of CAC40 bears a strong resemblance to NIFTY, as you can see Both are in a mean-reversion process amid contracting volatility. Whether mean reversion after a decline can gather momentum and develop into an uptrend is a perilous leap; for this, the same validation method as for NIFTY can be used, followed by a measured adjustment to the position size once sufficient confirmation has been obtained, allowing for an excellent entry.
Core regions: red = bearish, green = bullish, gray = mixed; the gold-edged scatter points are moving up and to the right (as of 261101)
Four. Positioning in the U.S. equity market
SPX(Daily chart, as of 261101)
IWM(Daily chart, as of 261101)
“However, the week’s ‘new high’ came with momentum divergence. It is clear that this is not a healthy top... The unhealthy top is reflected not only in the internal structure of SPX, but also in the fact that, as the new high was made, IWM broke below the uptrend line drawn earlier during the week; short at the break. As noted in the previous weekly report, Small-cap performance is a key proxy for assessing recession risk，A break below it means that micro-level cracks are beginning to appear in the economic growth narrative. A further break below the previously forecast bottom at the Ariston Bottom would confirm the recession narrative。”
“SPX breaks below the ascending white line, manage long positions carefully against a backdrop of bearish index positioning”
Friday saw a gap lower at the open, followed by further declines. This is what happens below the white line, within a bearish structure and a descending channel. If confirmed next week, it would point to T1.
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IWM, with small caps—the key proxy for recession risk—having broken below the white line and continuing to slide lower. Momentum is currently in a dotting state, If the dotting state turns negative, it will become a key confirmation of the market’s pricing of economic growth and credit risk。
Friday’s close was right on the key cost area. I will short again if it breaks below.
Figure:《ARI's WEEKLY WRAP 260920》
MEME(Daily chart, as of 261101)
MAGS(Daily chart, as of 261101)
MEME; still short, with the take-profit level moved lower.
“The take-profit was triggered, so I closed the position and reversed as planned. The lower boundary of the channel is above 8.2; a break below here would sharply increase downside risk.”
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MAGS, the decline continued to deepen and reached the T1 target level on Friday. I took partial profits here and will continue moving the stop level lower.This is a pretty good example of divergence. Review it yourself; the divergence confirmation day effectively marked the high for this rally.
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XLU(Daily chart, as of 261101)
“Actually, XLU is also, to some extent, an instrument for betting on yields peaking (to be used from a long-short or pair-trade perspective)—it’s just that many people aren’t aware of this.”
XLU, after the second round of going long, there are now signs that the move is shifting from mean reversion during a decline to an emerging uptrend (see the yellow box indicated by the arrow in the chart).Review the weekly reports from the past few weeks yourself and use this case to understand 1/ bottom-prediction signals, 2/ confirmation of switching from short to long after a prediction signal appears, 3/ cross-validation through inter-asset relationships, 4/ pauses and renewed moves near key levels (Fib), and now also 5/ mean reversion during a decline and the emergence of a countertrend after using mean reversion as a springboard.
Attentive readers should have noticed that I added a red-and-green line above. I don’t normally include this myself (or, in fact, I don’t use most of the indicators on the chart when I trade; I show them here only to help you better understand what is happening behind my decisions). As your own market feel develops, you won’t need any of this.The reason I’m showing this is to help you understand the rhythm of price action and its two core states—trend development or mean reversion.。
A complete price cycle consists of four states: a developing downtrend, mean reversion within a downtrend, an uptrend, and mean reversion within an uptrend. You should now understand why the first round of long positions was closed out at Fib50: at that point, the mean-reversion phase of the downtrend was ending, and the end of that phase does not automatically bring about the next phase—that is, the start of an uptrend. This transition is unpredictable, because prices could turn down again from here (see this week’s SOXX and DRAM). This should also be considered alongside the CAC40 and NIFTY discussed above.You need to make these distinctions to understand what I mean by blocks! What exactly makes something one block after another?
These things can’t be explained on their own, because you wouldn’t understand them if I presented them abstractly. But you will encounter them in the live market, and you can only truly learn and understand what I mean by encountering them in actual trading. Then you’ll see why these things really do need to be learned and are useful.
A lot of people are impatient. They want to achieve everything at once, suddenly discover some kind of holy grail, or learn it all in a week or a month. But it’s not that I’m unwilling to share; this is the product of many years of my own experience, and of decades of experience from my teachers and their teachers.Without firsthand experience in actual trading, you will never understand most of it.
Trading is just like becoming a doctor, a lawyer, or entering any other profession. You wouldn’t expect to learn for a week and then operate on a patient, or study for a year and then appear in court. People who expect to become stock-market geniuses overnight have never seen the market as it really is. There are countless people many times smarter than you, who have put in tens or hundreds of times more time. Only those who know themselves, and who remain resolute after doing so, steadily move forward, build a solid foundation, and develop their own advantages can survive here over the long term. You must keep asking yourself why you should be able to make money: because of the black-box AI, or because of “luck”? I have never seen anyone achieve an outstanding career through those things.
When I say you have to rely on yourself, I mean you need to learn “how to learn”—to master the process of “how to learn” and “how to understand.”Once you’ve learned that, you’ll be able, after I’m gone, to explore these things on your own over the coming years and decades and build up a body of setups of your own.
This is where you will gain an edge.
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Rotation and baton-passing are reflected in the indexes by equal-weighted indexes outperforming.
SPXEW/SPX YTD (daily chart, as of 261101)
Regional Banks (daily chart, as of 261101): After mean reversion, price stalled in the cost area; holding above it could allow further gains.
S&P equal-weight outperformance continues. If you are following this rotation trend, you can review what happened in 2022 yourself.
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Russell Financial (daily chart, as of 261101): After mean reversion, price stalled in the cost area; holding above it could allow further gains.
U.S. session themes: red = bearish, green = bullish, gray = disagreement; the gold-edged dots are moving up and to the right (as of 261101).
U.S. session styles: red = bearish, green = bullish, gray = disagreement; the gold-edged dots are moving up and to the right (as of 261101).
Five. FX Trade Positioning
USDKRW(Daily chart, as of 261025)
USDKRW, the second round of shorting has ended. Momentum divergence has appeared here (you can view this alongside MAGS; it is the opposite of the MAGS logic). I tried going long on a pullback bar, with the main cost cluster below and a tight stop.
USDMXN, continues to make new highs.Understand that price can move on its own to produce a perfect trend. I draw my lines only at the most critical moments and in the most critical places.
Continue moving PT higher, to just below the lower edge of the small-scale rectangle structure above T3.
“As with USDKRW (see the various issues published over the past 2 months): if you think you can make money simply by drawing a line, that is an overly naive idea. A chart by itself gives you nothing. An outstanding trend that can fully unfold, and price movement that lets you make decisions with sound reasons to enter and exit, must be price movement validated by all three systems (fundamentals, price action, and cross-asset relative pricing and capital flows).”
Figure:《ARI’s WEEKLY WRAP 260927》
USDCAD(Daily chart, as of 261101)
USDCAD, continues to make new lows, This is also a good example of price action unfolding after a divergence; it can be viewed alongside MAGS.; review it yourself.
“Three things made the trend look less appealing here: 1/ the Ariston Top top forecast was triggered; 2/ the T1 target price was reached; 3/ price made a new high, but momentum was not mutually confirmed, resulting in divergence. I don’t like things that aren’t appealing, so I closed most of the position here, with the remainder closed passively by the trailing stop.”
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“The first round of the election takes place on 10 month 4 day, a possible second round is held on 10 month 25 day, and the fiscal policies that follow are key drivers of the exchange rate. In 2014 and 2022, USDBRL fell after the first round but fully reversed before the second; in 2018, the real was strongest on the Friday before the second round. So the first round can cause substantial exchange-rate volatility, but it may not last; the market can turn quickly, and we must be ready to turn as well, positioning ourselves on the side of the winners.”
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You need to have a plan so that you won’t panic when things happen.
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USDTWD(Daily chart, as of 261101)
USDCHF (daily chart, as of 261101)
An Ariston Top top forecast signal appeared at USDTWD, Watch for a potential momentum divergence structure here, Consider going short if price breaks below the white line.。
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USDCHF, consider going short if price breaks below the white line.
Core FX market: red indicates bearish, green bullish, and gray inconsistent; gold-edged scatter points moving up and to the right (as of 261101)
VI. Mainland positioning
CN Baskets 5D% (as of 261101)
Optical Chip Baskets (daily chart, as of 261101)Down 50% since turning bearish
Interested readers can subscribe during the Asian session (https://t.zsxq.com/NIGzs）找到完整内地篮子的交易结构细节，自上而下的内地200+个篮子的交易监控全量更新在《ARI’S WEEKLY CHARTBOOK（CN）》column.Use this manual to develop your own well-grounded entry and exit decisions, positioning yourself with the trend rather than against it.
Index structure updates are retained here.
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Shanghai-Shenzhen 300 inverse (daily chart, as of 261101)
Shanghai-Shenzhen 300 inverse; the Ariston Channel top forecast signal remains valid.
Shanghai Composite Index (daily chart, as of 261101)
Shenzhen Component Index (daily chart, as of 261101)
Both the Shanghai and Shenzhen indices are in a bearish structure within a downtrend channel. Since the Shanghai Composite entered the downtrend channel: -~30%; since entering the bearish structure: -~20%. There is not much more to say here; see the structure in the chart on the left.
“My portfolio is cross-market, which means I go wherever there are opportunities worth pursuing and don’t even look at places that aren’t worth it (that kind of effort is pointless).I firmly refuse to do the wrong things in the wrong places at the wrong times. I don’t go against the trend or try to stop a runaway train.: I won’t post much when the indices are in a downtrend channel, and you shouldn’t keep taking action either (it’s pointless and more likely to leave you losing more the harder you try;Most retail investors tend to act frequently in a downtrend channel after a rise, until they are exhausted, have lost nearly everything, and have no heart left for it. Then, when the market finally enters an uptrend channel, they become numb and fail—or are unable—to act. They wait until others have ridden another rise, then act recklessly during a decline when they shouldn’t, and so on...），We dance when the market dances and rest when the market rests. I always tell my traders that the best analogy is jet lag: if you’re out of sync, you stay out of sync, and that’s what makes it uncomfortable.Learn to act at the right time and sleep at the right time, and you’ll feel much better. Someone in Beijing living on New York time is bound to feel worse than someone in Beijing living on Beijing time. You need to adjust your body clock so it matches the market’s.”
CSI 1000 (daily chart, as of 261101)
CSI 500 (daily chart, as of 261101)
CSI 1000: unusual activity has been detected again; this could become a bottom, so keep an eye on it.
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CSI 500, with the detailed structure shown in the chart...
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However, note that all the indices remain in downtrends, which means a right-side entry is hard to expect at present; until they enter an uptrend and confirm one another, any move is a rebound rather than a reversal.
Red indicates a unanimous short position, green a unanimous long position, and gray a lack of consensus; the gold-edged dots are moving up and to the right (as of 261101).
Often, what you think is a bottom-up problem is basically a top-down one.Frequently trading against a poor backdrop naturally and inevitably leads to low win rates and low reward-to-risk ratios, regardless of what exactly you buy or which strategy you use. It makes no difference whether the holding is called A or B, because essentially they share the same risk exposure.
Have a clear basis for when to step back and when to act. Rest when it is time to rest, and act when it is time to act.
Seven. Positioning in Metals Trading
CMX Gold (daily chart, as of 261101)
Mainland China gold basket (daily chart, as of 261101)
“The pair trade is over; consensus has turned bearish.——Gold officially broke below the previous white uptrend line during the week, and unusual fund activity was detected on the confirmation bar...”
Gold’s decline extended as expected this week, after we turned the gold-silver pair trade into a consensus short trade last week—this is a natural consequence of a downtrend shifting to a bearish structure.
The T1 target price is near 3700, where the market stalled before the move expanded in 25. If the decline continues, support may not emerge until that level.
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The mainland China gold basket is also in a downtrend with a bearish structure. Since we turned bullish in 9 month, on the 2 day, it has fallen by approximately 30%. During this period, countless people tried to buy the dip in gold and silver miners, only to end up “buying all the way down and losing all the way.” You need to have a clear basis for when to step back and when to act, and heed the market’s own signals.Often, the basket’s movement in the stock market is smoother and clearer than that of the underlying commodity itself.
At the T1 target, one possibility is that miners will bottom before gold itself and form a trading range near T1. That is possible, but the market will also signal when it is ready to move higher, so there is no need to take the uncertain risk of further declines by trying to buy the dip ahead of time—act when it is truly time to act.
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CMX Silver (daily chart, as of 261101)
Gold-silver ratio (daily chart, as of 261101)
“As discussed last week, silver remains relatively weak versus gold. So even as gold’s structure shifts to favor the bulls, silver remains in bearish territory...The gold-silver ratio, an indicator of risk appetite for precious metals, remains under pressure and hovered near the bottom of its range at the close of trading this week. This is the key reason silver’s structure is weaker than gold’s.And without silver’s confirmation and emotional support, gold’s move is also unlikely to truly take off.To some extent, you could also say that gold’s bullish structure is supported by liquidity (see the macro positioning section of the weekly report). This is also why gold has outperformed silver, given its monetary properties.。”
Since we initiated our short, silver has fallen by more than ~25% and has continued to move within the descending channel, as expected.After turning bearish within the descending channel, this is the natural course of events.Meanwhile, the silver/gold ratio has continued to weaken as expected, alongside falling precious metal prices. As discussed previously, without confirmation and sentiment support from silver, it is difficult for gold to sustain a move.Pay attention to price structure, but also to cross-asset confirmation. This is key to macro trading.
Silver reached T1 here; we are taking profits on part of the position.
One other thing to note: the gold/silver ratio has reached the upper edge of the purple rectangle below, where the decline may stall (the smooth downward move may come to an end). This is also one reason for closing the pair trade. Keep an eye on it.
NMX Platinum (daily chart, as of 261101)
NMX Palladium (daily chart, as of 261101)
The thesis is unchanged.
The platinum and palladium shorts have also reached the T1 target; we are closing part of the positions. Since entering the shorts, the two metals have fallen by ~20% and 25%, respectively.
CMX Copper (daily chart, as of 261101)
COPX Copper miners (daily chart, as of 261101)
Copper: price continues to rise, while momentum continues to weaken. The top signal issued by our system at 26.09.22 still marks the highest point of this rally.
After closing the first short position during the week, we opened another short on Friday after price broke below the cost area.
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Some readers have pointed out that, when using the corresponding ETF to trade this copper top signal for 9.22, the structure of the miners as a proxy is still needed. So here is a brief update: note that the T1 target price for COPX has now been reached. Those holding shorts can take some profits here.
Eight. Alternative Asset Trade Positioning
Following guidance from regulators, this section may need to be suspended for a while.The decline continues, as would naturally be expected within a downtrend channel and a short-position structure. This week, we also shifted the pair trade to a unified short trade. You can review the rationale for the earlier pair trade and consider it alongside the gold-and-silver pairing to understand the commonality of structures across assets.
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Keep an eye on it.
Note: Please comply with the laws and regulations of your jurisdiction and make personal asset allocations only within the bounds of applicable rules. This content is intended only for users in certain overseas jurisdictions.
Nine. Soft Commodities
Agricultural Basket (daily chart, as of 261101)
Cocoa (daily chart, as of 261101)
The high from the first round of going long in the Agricultural Basket (see the red arrow on the chart) is still the highest price level. It has now entered a downtrend channel.
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Cocoa is nearing bullish SL, with the price hovering below the cost cluster, and has remained compressed since 9.21, which means that once the compression ends, volatility will expand sharply.A break below would turn the outlook bearish. However, the bulls may try to make another leg higher; if you want to participate with greater certainty, you can wait for the price to confirm a break below the low of the top range, though the safety cushion will be smaller.Ultimately, it is a matter of choice: every choice involves trade-offs. As uncertainty about something falls, the potential risk declines, and the potential return necessarily declines with it.。
The vast majority of agricultural commodities reached their peak highs and began moving steadily lower after we warned in 0830 that they were topping out!!
Coffee (daily chart, as of 261101)
Soybeans (daily chart, as of 261101)
Coffee: unrealized gains are growing; move SL to PT—a safe trade.
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Soybeans are similar: the decline is continuing and losses are deepening.The market has now shifted from a mean-reversion trade on the way up to a downtrend unfolding in the downward-migration phase.
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Raw sugar (daily chart, as of 261101)
Corn (daily chart, as of 261101)
“Sugar: take profits on the long position and switch to short.Momentum is reaching a crossover point, where volatility could potentially expand. Given the waning upside momentum, the expansion is more likely to be to the downside—place a tight stop-loss above Wednesday’s trading high.”
The second round of going long has ended. The decline accelerated during the week—this is a natural development after a short structure enters a downtrend channel.Unusual capital flows were detected behind the sell-off; one side may have been completely wiped out in this battle.It is currently in a supported pattern, A break below the 50-day moving average (the cost line that has continued to provide support since 美首次 turned Improving) would signal the complete failure of the bulls and usher in another round of accelerating losses—keep an eye on it.
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Corn: the decline has deepened further. Continue holding short, and move the take-profit level to above the upper edge of this newly formed minor consolidation rectangle.
“After entering the Ariston Channel downtrend, the losses continued to widen sharply, and it has now given back 50%+ of the gains since the low...
The decline was mainly because USDA announced higher-than-expected US supply, with unexpectedly high yield figures (US corn yield was raised by 2.7 bushels per acre from 9, the largest 9-to-10 yield increase since 2005. The 11-bushel-per-acre increase in Nebraska’s yield alone lifted the national yield by 1.2 bushels per acre and added 1.06 hundred million bushels to production.), along with higher beginning stocks and a larger harvest. This is clearly not the narrative the bulls were hoping for. It is also an example of news following price: many may already have known this when the market turned bearish at the top or when prices shifted from an uptrend to an Ariston downtrend. Price determines the news, not the other way around...”
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Wheat (daily chart, as of 261101)
Wheat: the decline continues to widen; keep moving the stop-loss lower. In fact, many agricultural commodities have shifted from an upward mean-reversion trade to a downtrend trade, and the point at which the two switched was exactly where we closed out the first round of shorts and began the second round.If you want to truly understand this transition, please go back and read the entire weekly letter again after finishing this section!Then come back and reread this passage from the 261018 weekly letter:You should never be afraid to re-enter, because this is how markets unfold. At any given moment, you cannot predict whether the transition will succeed—that is, whether the market will shift from mean reversion into the next developing trend. If you are afraid, the unfolding opportunity will pass you by.
“Corn and wheat are both cases where, after being forced to close out mid-trade because of market structure, we entered again. This is very important.
A common problem for most traders early on is that after a position in a particular direction is stopped out, they often become afraid to re-enter—but this is absolutely necessary, because Structure is objective. Your position and your profit or loss have nothing to do with the market. What you need to avoid is letting fear of failure keep you from being in the right place at the right time.。
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Missed the move? Just buy back in. In fact, there is no such thing as missing the move, as long as your decision was genuinely based on a reasoned process of entering and exiting. You just need to do one thing:
Execute decisively.”
LE (daily chart, as of 261101)
LE: After turning bearish, the price sold off rapidly and dropped straight to just above the lower boundary of the Ariston Channel uptrend. Outsiders may not know why the price is stopping here, but you can. A break below this level would mark the formal end of the uptrend. Next week will see intense competition between bulls and bears. We remain open to turning bullish again: if the price breaks above the high of the sell-off day, I will buy back in.
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Keep reminding yourself: “You don’t need to be afraid to re-enter; being in the right place matters more than anything else.
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Eggs weighted (daily chart, as of 261101)
Lithium carbonate weighted (daily chart, as of 261101)
Eggs: the T2 target price has been reached. Others may not know why the price is stalling here, but if you read WEEKLY CHARTBOOK, you can see why. This is the range formed by T2 and the bears’ PT, Note that T2 came first; only then did the structure you see here emerge, whether you call it a rectangle or a double bottom. In other words, the possibility of a stall here was already part of the plan when we went short several months ago.
Many people may criticize or mock us for putting it this way, thinking we are joking. Perhaps. But this is indeed how prices move. Whether you understand it or accept it, that is how it is.
What you call it is not that important
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For more mainland-listed products, see “ARI'S WEEKLY CHARTBOOK (COMMODITY)”; they are not repeated here, so be sure to use them in conjunction!
Ten. Oil and natural gas
BRN(Daily chart, as of 261101)
NG (daily chart, as of 261101)
USO (daily chart, as of 261101)
KOLD(Daily chart, as of 261101)
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