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Thursday, August 25, 2016

THE MONEY TSUNAMI


LEARN TO SURF THIS WAVE OR GET CRUSHED BY IT




The genesis for today’s financial trading problems started way back in the late 80’s, and have escalated ever forward since then; having stood in the SP500 futures pit in October 1987, and watched the FEDS very first effort in the newly created “Plunge Protection Team”, whose sole purpose was to effectuate an outcome, I can tell you first hand what a “tsunami of money” looks like when CNTRL-P is behind it.



Fast forward to the start of 2012, when 2 things of note occurred; 1) Obumba is re-elected and therefore has a “free reign” ahead of him with no accountability to voters, and 2) a very coordinated effort by the world’s Central Banks [and their banker the BIS] to slam gold lower began in earnest; forget fundermentals, there ain’t none. The only thing that matters anymore is the "desired outcome".



Next, we hit January 2015 and the CHF debacle; where suddenly, the Swiss National Bank says, “Hey, remember that 1.20 peg to the Euro? Fugetaboutit, OK?” Tons of traders, brokerage houses, and banks got crushed within seconds, thank you very much Switzerland. But, and this is a very big but, the SNB is now free from throwing Swiss Francs at the useless EURUSD, and can now buy U.S. stocks instead! [Another desired outcome for the world’s financial elite.]

So, here we are today, and the market [gold, stocks, pick ‘em] is held hostage once again by useless, spineless, dufuss Pie Holes political hacks gathered up in Jackson Hole, Wyoming who will unleash words that mean nothing, and by doing so, set in motion the “tsunami of money” that will hit your trading screen within seconds of some FED Pie Hole’s inane remarks. And then within a few minutes … most likely crickets, as the markets await another “signal” from the scattered chicken bones spread on the road for our next clue from which direction the next money tsunami will come from. And on and on it goes … welcome to the new “normal”, where the only thing that matters is “desired outcomes”.


When I came in this morning and saw we had about a $4 range overnight in gold, I just wanted to rush that application to the bearded lady at the circus from yesterday; a nothing day in the cards, where maybe gold options expiration and [gulp!] a durable goods orders report at 08:30 New York time, might [and I say might] give us a goose lower for a buy signal, but I ain’t countin’ on it. And with the range so very low and tight, I’m not buying “waterfalls” lower on the M1 with a $7 or $8 range; probability wise it just isn’t a good enough bet over the long run because [under normal circumstances] most of the time that range will get expanded somehow some way lower in price, and I don’t want to get caught when that happens. Generally, I have to have at least $11 - $12 from the range before I start buying “waterfalls” lower when the market is below the daily white horizontal line.

So, let’s turn our attention to “waterfalls”; first, let’s look at what I don’t want to see, which is a “hanging man” candlestick chart formation on the waterfall at the middle or end of an M1 move. Directly below the definition.
Generally, on moves up they are called “hanging man” and are considered bearish for prices. After a sustained move down they are called “hammers” and are considered bullish for prices. On a “waterfall” after a sustained move, most often there is a re-test of the low and quite often a double bottom is put in before prices move higher. At or near the start of a move down, though, I consider them bearish for prices and that’s why I don’t buy them. Directly below is a daily candlestick in gold with the white arrows showing “hanging man” patterns.

 


Now, moving to the M1 from today, we get a “hanging man” pattern just after the start of the move down; this is not a “waterfall” I want to buy. Directly below the M1 from this morning.


Ok, so what is it I want to buy exactly on a waterfall when market price is below the white horizontal line; from yesterday’s 2nd exhaustion move, the M1 finishes the period on the low. Directly below is what I want to see, and when I get it, I buy.



Looking at today’s action, there wasn’t anything to do; range too small, below the white horizontal line all day and no large spikes [waterfalls] on the downside that justified a trade. I sit and wait for the Oracles at Jackson Hole to educate us with their stupidity brilliance tomorrow. Get ready for the “money tsunami” once ChairSatan Yellen starts to speak; and since it’s a Friday, you just know somebody is going to get caught the wrong way and panic. Until tomorrow …

Have a great day everybody!
-vegas
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