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Wednesday, September 28, 2016



The only good thing to say about today is that it’s almost over; other than that, what a waste of time. Just because this game is simple, doesn’t mean it’s easy; I keep saying this to people who seem to have to learn the “hard way” that patience & discipline are the critical keys [next to actually having the algorithm of course] to making money. When the trade isn’t there via the algorithm rules, leave it the hell alone.
I must say, though, with all the news about the troubled condition of one of Europe’s largest trading banks [Germany’s Deutsche Bank], aside from one small pop up in price a week ago Wednesday when the troubles first came to light, gold has not reacted very well at all in terms of price. So, this answers one of the questions I posted last week, which was “will commercial sellers erect the ‘bullion wall’ of sell orders going forward?” I think we got our answer, and with today’s late morning move down below 1320, once again the vaunted 1300 level starts to come into play again.
Perspective can often offer us a glimpse into things that might otherwise not be seen, and for a great many traders, especially those in the Pacific Rim from Japan to Australia, the technical indicator “Ichimoku Kinko Hyo” is very popular in anything related to “Yen” & also the precious metals.
Now, I’m not going to be giving a tutorial here in Ichimoku; if you want to know more about the parameters, history, and it’s uses, all you have to do is “google it” and you will have more info than you need to keep you busy for years. However, having said that, the specific “cloud formation” the indicator creates is pretty damn good on a longer term chart at nailing support and/or resistance.
Directly below are 2 daily candlestick charts in XAUUSD with the Ichimoku indicator with the cloud formation overlay only; I’ve stripped out the other parts of the indicator because I find them less than useless. I have used 9, 26, 52 as the daily parameters for creating the cloud specifically because they are the most widely used parameters among traders. If this is in fact the case, then traders should buy/sell around the cloud and thus support/resistance becomes a self fulfilling prophecy.
Just as a side note, I don’t particularly find this indicator to be reliable for short term trading, like what we do with the gold volatility algorithm; it’s much better with longer term trading, and in fact, when I introduce my intermediate term volatility algorithm [sometime here soon] for crude oil [and by default some other markets to be named later as well], the ichimoku cloud formation will play a role. So, for those of you who want longer term trading buy/sell signals, you’ll get them!


As you can see from the second chart, from yesterday it is only the second time since Nov. 2015 that gold has broken below the bottom of the cloud formation on the daily candlestick chart. So, unless this foray into “bearish territory” only lasts a day or two, you can expect an assault on 1300, and I’m telling you again, if/when it goes it will be ugly as hell if you’re long with a “protective” [hahaha] sell stop below. Anything below 1315, and especially 1310, if the support at 1300 gives way, it 1) won’t be orderly, and 2) your sell stop will get filled at the bottom of the spike down. So, while you “think” you’re risking $3 or so with a stop on a long position, in actuality you’re risking $20+. The upshot here is this: anything below 1315 in the days ahead, and you leave this market alone.
Obviously, I’ll have more on the intermediate term trading volatility algorithm later; for now, I wanted to give you some “perspective” on gold that doesn’t exactly look good at the moment. And I must say, just from a trader viewpoint, I haven’t felt good about being long gold very much this last month or two; I’ll make the algo trades obviously, but since Brexit and the days immediately following it, it very much feels to me like I’m banging my head against the wall going up against commercial dealers, and that’s why I have been pretty quick on the trigger liquidating long positions.
From where I sit right now, though, it’s going to take another Lehman Bros. moment from Europe and/or Japan, or a major sell off in the SP500 to get gold going significantly on the upside; subtract that out of the price equation for whatever reasons, and with yet again the FED on the November/December horizon with potential rate hikes, somebody tell me how gold vaults above the “bullion wall” of commercial sellers starting from the 1340’s all the way to the 1370’s? Don’t get me wrong, I’d love to see it, but even the idiots in the Pacific Rim have stopped buying gold out of the gate each day, and daily ranges have remained very tight with little interest.
All in all, a “messy” trade where you absolutely must follow algorithm rules to make money; I’ll say it again, “patience & discipline are your greatest allies in making ‘escape to success’ a reality”. In other words, don’t do stupid shit [“and yes, I know who you are!”].
And, of course, it’s that time of day again; “Master, is it time? … Yessssssss!!” Got the Vitamin C on ice, the dog is going ballistic with joy, and I got one foot out the door to the beach as I write. What can I say, it’s not easy being me. I’m soooooo outta here … until tomorrow.
Have a great day everybody!

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