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Monday, October 3, 2016


“When I told him, he was downright giddy!”

First, the gold market today … [crickets] … Ok, that pretty much sums up this China/South Korea/Germany Holiday, where we saw overnight action completely abysmal, and that has carried over into New York where very little [about $4 as I write] action has occurred. However, this type of market action is a perfect setup for market manipulation lower, where at some point some “customer” will dump 10,000 – 20,000 futures contracts at the market and slam the crap out of this stuff. Whether it happens tomorrow or not is not the point; point is this is the market “setup”.
And so here we are again hanging around the 1310 -1315 area, where it appears there is support below the market. Gold has been down for 7 days in a row [Sunday included], and I’m sure there are some “bargain hunters” looking to try and pick the bottom for a bounce. But as most all of you know, when SHTF and gold gaps lower, if you’re long, there isn’t a trading God you can pray to for help with your sell stop getting filled at the low.
Last week, I got notification from ASSETS FX that they were changing their stock indices CFD’s from the Black Pearl liquidity provider to somebody else; today is the first day of the “new” stock indices CFD’s. I’ve been telling them for months to dump Black Pearl; spreads are way too high and slippage is too great to make them anything but losers to trade, especially in the DOW30 and the DAX30. I told them nobody is going to trade them and get “ripped off” and that the cost of doing business MATTERS to retail specs. In other words, we aren’t all a bunch of rubes out here just sittin’ around waiting for some bank to give us a market no matter the cost.
And as I have preached for years with people, the only thing brokerage houses and liquidity providers understand is money; and if you stop trading things that are too costly, they will eventually notice the drop off in business and 1) have some corporate meetings, 2) decide they should get more competitive, and finally 3) offer markets that make good business sense for customers.
Well, today is that day at ASSETS FX as far as stock indices are concerned; the DOW30 CFD has a spread of 1.4 index points; the SP500 has a 0.4 index point spread; the DAX30 has an approximate 0.7 – 1.0 index point spread; and one of my all time favorite indices the FTSE MIB40 Italy [yes, they brought it back] has a spread of 12 index points. There are other indices also, but they all have no round turn commissions, so the spread is the “net” cost to trade or cost of doing business.
All of the stock indices are notional based at 1 * the index, so for example, the DOW30 has ± $1 per 1 index point change per 1 lot CFD. The DAX30 would be 1 * the index * EURUSD rate because the index is priced in Euros.
Now, a few things of note here that are important; 1) how long will the “new” LP keep conditions like they are today?, 2) is there a “bait & switch” operation on the part of the LP to get us hooked on very low spreads only to see the switch sometime later?, and 3) what kind of slippage are we looking at here? After a week or two, I’ll be able to answer these questions.
So, in essence, on its face we have a “game changer” here with the DOW30 as far as I’m concerned; as some clients already know, I’ve been working on a volatility algorithm for the U.S. stock indices [SP500 & DOW30] for a few months; while the “net” cost at LMFX is 4 index points for the DOW30 and is acceptable [I give it a grade of “C”], cutting this to 1.4 index points makes it “A- / B+”, and if the slippage is minimal, with a daily range easily [on average] over 120 index points per day, this becomes a very tradable market to make money.
I’m probably 2 weeks out from releasing the DOW30 & SP500 volatility algorithms; I’ve got some work to do with specific examples and in making the manual easy to understand and implement. They will be here, ready for you, before you know it.
I’ll have more on all of this tomorrow … right now, I got a serious case of “need to be on the beach”; with nothing going on in gold, Holiday in Europe, it feels/acts/smells like a nothing day with no reason to hang around staring at a computer screen. I’m soooooo outta here.
Have a great day everybody!

UPDATE: The stock indices at ASSETS FX can all be traded with volumes of 0.1 lots, not just volumes in increments of 1.0 lots. What this means, of course, is that 1 index point price changes are ± $0.10 per 0.10 lots. So, if you were worried these “new” indices would be too pricey for your account, worry no more.

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