Betting against consensus

November 15, 2019

Mother Theresa was once asked, if she’d be joining a demonstration against war. She refused and stated, that she gladly would follow a rally that would be for peace. This based on the underlying principle, that being against something weakens us while being for something strengthens us. Typically, market play guiding principles do not align with intuitive behavior like that. Price reflecting the public’s opinion means for the investor only having an edge if betting against consensus. As much as rewards can be huge (high risk reward ratios), this results in often being wrong. Consequently one of the most important traits of a speculator is handling failure well. Something most of us do not get taught in our early upbringing. It is imperative to bet against consensus. The only true edge!

 

Monthly chart, silver/US Dollar 11/13/2019, “negative consensus” :

 

Silver in US Dollar, monthly chart as of November 13th 2019 b

 

The monthly chart above shows monthly consensus to be negative. Twice higher price levels got strongly rejected.

 

Gold, monthly chart, 11/14/2019, “trend intact”:

 

Gold in US Dollar, monthly chart as of November 13th 2019

 

Looking beyond the obvious, in this case to the sector leader gold, presents a more optimistic view. We only enjoyed two legs up yet (a,c) on the monthly time frame. Very modest retracements (b,d) indicate strength in the trend and assume a continuation.

 

Silver in US-Dollar, Betting against consensus, November 13th 2019, weekly chart, “sideways to down”:

 

Silver in US Dollar, weekly chart as of November 13th 2019

 

Dropping down a time frame to the weekly chart shows a sideways market at best. Again following emotions and instinct here, one most likely would feel hesitant if not bearish.

 

Betting against consensus, silver in US-Dollar monthly chart, November 13th 2019, “truth revealed”:

 

Silver in US Dollar, monthly chart as of November 13th 2019

 

By removing oneself from a crowd viewing perspective to the larger picture and its potential, opportunity might reveal itself in a vastly different manner. The silver market, while potentially building a substantial double-bottom, offers a significant risk reward ratio. Opportunity like this doesn’t come around often and as illustrated in the chart, this based on very acceptable risk for the long term speculator. We post entries and exits to such principle based trades live in our telegram channel. You can also find other principles like these in our glossary.

 

Typical human reactions to the basic human need of feeling certain and being right, is looking to the left and to the right of how others handle a situation. With market play stepping away from such intuitive behavior and rather creatively measuring opportunity versus risk costs in looking at the market from various angels pays the better dividend. As a contrarian one needs to live with setbacks and the acceptance of being wrong with ones opinion more often than not. When fading the crowd succeeds though, the rewards can be more than plentiful.

 

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All published information represents the opinion and analysis of Mr Korbinian Koller & his partners, based on data available to him, at the time of writing. Mr. Koller’s opinions are his own and are not a recommendation or an offer to buy or sell securities. Mr. Koller is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations. As trading and investing in any financial markets may involve serious risk of loss, Mr. Koller recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.

 

 

 

Although a qualified and experienced stock market analyst, Korbinian Koller is not a Registered Securities Advisor. Therefore Mr. Koller’s opinions on the market and stocks can only be construed as a solicitation to buy and sell securities when they are subject to the prior approval and endorsement of a Registered Securities Advisor operating in accordance with the appropriate regulations in your area of jurisdiction. Past results are not necessarily indicative of future results. The passing on and reproduction of this report, analysis or information within the membership area is only legal with a written permission of the author.

 

 

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