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Wednesday, August 10, 2016

FACTS VERSUS “THE NARRATIVE”


POLITICS & MARKETS: WHAT’S THE DIFFERENCE?

We live now in an age where nothing means anything anymore; language has been cheapened to the point where you can make it mean anything you want, anytime you want. We don’t just see this in the political arena, we see it now in markets as well.

For instance, take the stock indices; pick any of ‘em, it doesn’t make any difference which one, as they are all under the hypnotic umbrella of Central Bankers worldwide [most notably the Swiss National Bank]. The consistent meddling of desired outcomes for the financial elites mandates no volatility and no “upsetting the apple cart” going into the U.S. elections. Therefore, daily ranges have shrunk; intraday volatility has imploded, and stock indices remain upward to range bound for the foreseeable future. THE NARRATIVE MUST BE MAINTAINED AT ALL COSTS.

Which brings me always back to gold, because here the “narrative” almost always gets destroyed [ultimately] by the “truth”, and right now the truth is ugly and getting uglier by the day/week/month and year. The fact is global growth and productivity are plunging, money printing is rampant, Central Banks are in panic mode, the public everywhere is angry, and sooner or later gold is set to “explode” higher.

As we have seen over the last 10 years or so, the vast majority of the up moves in gold occur in Asia, as true money flows “West to East” for fiat, and the manipulators use New York and the U.S. session to sell and push the price lower; give them any excuse, real or manufactured [like Friday’s fairy tale jobs report] and they will sell gold into a frenzy. After all, they just print the money for margin anyway, so who really cares?

Which brings me to today’s action; as I said yesterday, you always have to keep in mind what Asia and early Europe has done for the day so far in terms of “trend” and be wary of the New York session in terms of continuing that trend. Coming in and turning on my screen, I see an approximate $15 range with price hovering about $3- $4 off the highs but far above the white horizontal daily line. I know 1 of 2 things is going to happen; 1) move slightly lower and then retest the highs, maybe making a new high by a few pennies to maybe a buck or two and then a sell off, or 2) a quick move up followed by a reversal sell off that picks up steam throughout the day. In any event, I’m going to be happy with my profit goal of $3 - $5 per Oz. because the range is already $15 and could quite possibly remain that way for the rest of the day.

What we ended up getting is scenario #1, and the algorithm captured a move up to the exhaustion line a few minutes after the start of New York trading. The chart is directly below.

A couple of things to note; 1) after the highs were hit on the exhaustion move [or spike, take your pick], the range is now a few pennies short of $17 for the day; at this point, you’re officially in the “danger zone” for continued new highs going forward from a probability standpoint, and 2) given #1, AND THE FACT THAT MY PROFIT GOAL WAS HIT [about $4 per Oz. on the trade and my goal is $3 - $5], why take another signal from the long side given the fact the news cycle isn’t supporting a daily range above $20? Maybe it happens, I dunno, but it is August [vacation time and trade desks are light] and probability theory says it isn’t in the “cards” at below a 50% chance of occurrence.

Now, in retrospect [20/20 in hindsight is a great technical indicator], the market has moved sharply lower after a large sell order has hit the market and taken us down to 2 lower exhaustion moves within an hour of the highs. Do I take the buy signals from this? Short Answer: NO. Why? Because the range of the day at approximately $17 tells us upside is limited and the market is still above the white horizontal line.

When we buy lower exhaustion hits on an expanding daily range above $13 per Oz. moving lower, and the white horizontal line is above the market, we do in fact have an above average probability of capturing the bottom [for the day or short term] and can expect a decent bounce off of that low IF there’s nothing in the financial news cycle that overrides buying [like an NFP report or interest rate decision]; that scenario isn’t present today, and so I don’t trade going forward today. “Hey, the probabilities simply aren’t there to risk money.”

Now that the market has moved equidistant from the high and low and is sitting on the fence, it’s anybody’s guess what happens from here today; as for me, who cares. There isn’t a cloud in the sky, the water is turquoise, the sand is pure white and the beach beckons with some very cold Corona’s with limes. I’m so outta here.

Have a great day everybody!
-vegas

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