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Friday, September 2, 2016

STUPIDITY EXEMPLIFIED

WHEN “GREAT” TRADING MINDS THINK ALIKE



My heartfelt congratulations to the dumb ass large gold traders who took gold out on a $74 up-down-up-down-back up roller coaster date in 10 minutes; I’m sure your Mums would be proud. “Hey, I never, ever said they were smarter than you, just that they have more money to lose to play with and then ultimately do “stupid shit”.” And boy, did some people ever fit that category today or what?
It never ceases to amaze me, even after decades of trading, that traders/investors/pundits place any emphasis at all on the jobs numbers coming out of the Bureau of Unicorns & Fairy Tales the first Friday of each month; these numbers have been, are now, and will be in the future, nothing more than sugar & cinnamon laced piles of statistical bullshit designed to placate the public that “all is well”. And in the face of this bullshit, we got Obamacare health care premiums skyrocketing on the helpless middle class; we got the CEO of Family Dollar stores [not exactly “high end” shopping] telling us biz is awful because people are struggling; WalMart laying off 7,000 workers; Hanjin [one of the world’s largest shippers] declaring bankruptcy, and most telling the worker from WalMart [via Zero Hedge yesterday] talking about how a $27,000 a year desk job [read “Pudding Business” here folks] is “coveted” and that there is a long waiting list to get this kind of paper pushing back office gig. Seriously, WTF is wrong with this country when you got people thinking like this?
But, not to worry, cuz CNBC talking heads are already painting the rosy picture of “stocks are rallying” [cuz nothing says new all time highs are in the cards better than a world falling apart before your very lyin' eyes], and President Empty Suit will utter whatever inane comments about how his totalitarian regime is continuing the “recovery” from the evil Bush administration, blah blah yada yada, “stop, I’m getting fucking sick listening to all this propaganda bullshit!” Somewhere, Joseph Goebbels is smiling.
So natch, coming into this clusterfuck the first Friday of every month, the only sane thing to do is sit on the sidelines and watch big money literally kill themselves in seconds to the dealer & bullion bank community, which is only to happy to provide them the rope to hang themselves; this month being no exception. And after the stops on both sides of the market have been “cleaned out”, and by default of course fills given at the extremes, what happens next? 
Why of course, not a damn thing, as everybody looks around and says to themselves, “WTF just happened, and do I want to play anymore today?” And those of you that got your ass handed to you from this stupidity, you now got a 3 day weekend to digest it all sitting in a corner somewhere in a fetal position mumbling to yourself something along the lines of, “Never again am I going to get caught in this shit”, until 4 weeks from now it probably happens again. For the bullion banks & dealers, Christmas comes 12 times a year.
Ok, so after the “fun & games” of watching money destruction in seconds, we now got a market that rocketed through the exhaustion lines of RM=1 [not unusual on NFP days to be sure], and the only thing to do is wait until the market backs off from “profit taking” [whatever that means] and we get the plum line close to the yellow line [or below it], and then on the plum line slope change [up], make the trade to get long. Now, since the range is already blown out above $20, this first attempt from a retracement isn’t most likely [in fact probability wise is very low] to produce anything lasting in terms of a rally; so, I’m trading the trade like I would if we were below the daily white horizontal line. Below is today’s trade.


[Note: click mouse once anywhere on chart to enlarge]



Once I’m in this thing, I know we will get a move back up, the only questions are how much and how quick? More importantly, I also know that the probability is high for a quick move up, and when it’s over, it turns around with a vengeance and heads $0.50 - $1.50 lower within a couple of seconds; I can’t wait for a red M1 candlestick to be put in before I sell and liquidate because the risk is too great at these levels; if I do I will get a horrible fill from the dealer. Therefore, many times I will place a limit sell order where I want to get out. Here, in this trade, my opening long fill was at 1324.41, a few cents above the previous M1 after it had originally opened and been red, now had turned green and turned the plum slope line positive.
I’m not looking for anything gigantic here in terms of profit; we’ve already had that opportunity come and go, and that ship has sailed. What I’m looking for is anything above about $1.50 per Oz., while at the same time keeping a close eye on how fast we are moving up from the slope change. If the M1 wants to keep going up, fine, I’ll happily follow it up as far as it wants to go all the way to the exhaustion lines [please?], but the second it starts slowing that rate of increase, red flags go up the flagpole [specifically because of the +$20 range] and I know from experience I am a very short time period away from liquidating this trade.
The minute before I liquidated, price seems to be slowing some, with price hesitating between 1325.25 and 1325.55 “bid”. At the start of the next M1, price “popped” up to 1325.70 “bid”; I immediately placed my liquidation limit sell order at 1326.00. What I don’t want to see, is the market go 1326.05 bid, and the next millisecond the bid is 1325.78, and the next second it’s at 1325.50, and I hit liquidate and get filled at 1325.38 or some such shit like that. Been there, done that; that’s why I tell you, you have to sell on the way up to get the best price from the dealer or he/she/it will treat you like a Thai hooker [just to be clear – not that I would know or anything; I read a lot.]. It simply doesn’t matter what happens after you exit; 2 seconds later it could be 1326.60 “bid” and you got that shit eating grin on your face like you just made the dumbest trade ever, and then you blink your eyes and it’s 1325.70 “offered” on the way down. When it comes to gold, seconds definitely matter, and hindsight is not something that should be in your vocabulary.
And so, here we are, gold “Thelma & Lousie’d” off a cliff only to see the obligatory “melt up” seconds later [“Hey, what’s $20 per Oz. among friends, huh?”], a rather weak test of the melt up highs, and then everybody and their brother who got long looking for “only God knows” for a continuation of the price going up, only to see a dealer/bullion bank “Trump fence” [about a mile high and deep] being erected with sell orders coming into the market and “hey, you got screwed again!” with a move back down into the 13 teens.
I’m not one to argue with market price; that’s a “fool’s errand” for the likes of Gartman and the worthless pukes “talking heads” at CNBC. I am, though, surprised at the magnitude of the melt up in price just shy of 1330 from seconds earlier at 1307. Ok, the numbers missed by 30K; so what? Does 151K jobs mean the FED doesn’t raise rates? Still plenty of time [19 days] for the FED Pie Holes [and their sycophants – paging Steve Liesman] to give us “blah blah, yada yada” about “dot plots”, “rate normalization”, and other such horse shit, so you can be as confused as humanely possible come September 21 as to what they will do; hell, until they actually vote, they don’t even know what to do.
I still don’t think sub 1300 is “off the table”; all they have really done today is blown the shorts a new one – a very much short “crowded” trade just got a lot leaner with today’s action. The “melt up” notwithstanding, I just don’t see any kind of sustained rally going past 1330 -1338 before the FED meeting on September 21; plenty of time for the bullion banks & dealers to slowly chip away at today’s action and gear themselves up for the next leg down. In my mind, up and until 9/21, any move below 1310 and you have to be very, very careful about being long with a sell stop below; these asshats [LP’s/bullion banks] teamed up with the manipulators can shitcan this stuff $10 - $30 per Oz. in a heartbeat; we’ve seen this the last couple of weeks when 1330 got taken out, and also 1315. Your sell stop becomes a market order, and you’re gonna get filled at the bottom; expect anything else and you are delusional.
Before I finish and head to the beach [cold Corona with lime, cuz I need that vitamin C], one more thing I want to mention; WTI Crude Oil. Most likely in the next week to 10 days, I’ll have the manual and mq4 algorithm file ready for release. And while my main focus is on gold, I can “multitask” and am constantly watching WTI crude oil; the trade opportunities here are amazing. This is a market that very much is a “U.S.” based market, with [most of the time] most of the action between 08:00 – 14:00 New York time. If you want a market that gives you U.S. hours with the “most swings in the shortest time”, then you’ve got it with WTI crude oil.
A few things of note about this market; 1) price swings are “off the charts”; this is one crazy ass market, with weekly moves ± 15% [or more] on a consistent basis, 2) a dealer [LP’s] community that has finally got their act together and decided to offer CFD’s that make sense for brokerage house customers rather than simply be a vehicle for gouging retail chumps, and 3) futures volume [1,000 bbl = 1 contract] that consistently reaches almost 1,000,000 contracts per day; in other words, this is where the world’s big “hot money” is trading, and that means very solid liquidity in the CFD’s.
I can tell you now, the volatility algorithm in crude oil [Brent also, if you prefer, but IMHO WTI is the better trading instrument] will take your breath away; yea, it’s that good! Unlike the DAX30, and spot gold [XAUUSD], everything is different in crude oil; don’t assume you can take the parameters in gold and just plug them into crude oil, cuz if you do, you’ll get monkey hammered. It’s a market that’s got an entirely different personality, a much different dynamic, and more beholden to rumors and manipulation than any other market on the planet!
I’ll have much more on crude oil next week, with the 2 best places to trade it, the competitive cost structure, what it takes to “play” in terms of money, and why you should trade this market [long and short] if only being long gold [which is what the gold algorithm is all about] makes you nervous and/or you’re worried about being a “one trick pony” and need some diversification without getting involved in the FX casino, where [seriously] you might as well be playing roulette and getting the free buffet.
One of the places I recommend you trade WTI crude oil has no “rollover vig”, meaning during the week you can carry [through to the next day] positions with no monetary penalty; that means not only short term trading, but the 2nd volatility algorithm for WTI crude oil will also be for intermediate term traders. [I don’t ever recommend positions over the weekend in any market; however, during the business week, when markets in the CFD’s are closed for about an hour at the end of the New York day, and before Asia opens, usually [but not always] present little price risk for positions as long as 2 criteria are met; 1) the position is clearly profitable [at least 30 cents per bbl.], and 2) meaningless or NO vig on positions.] More on all of this next week.
For you Newbies out there, who are just discovering the website and are new to my work, this last month here on the new website, you have seen the power of the “-vegas GOLD VOLATILITY ALGORITHM”; if you go back and read the blog posts, download the algorithm files, and become familiar with the trading rules, please, ANYBODY PLEASE, show me where the algorithm leads you astray and doesn’t capture consistent profits from trading.
So, next week, I’ll take some time and expand on the WTI crude oil market. For now, it’s beach time; the dog is screamin’ for a beggin’ strip, and has his beach Frisbee in his mouth along with that look that says, “C’mon man, you’re F-ing killing me here – let’s go already!!” Until Monday …
Have a great weekend everybody!
-vegas

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