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Thursday, December 15, 2016


“Where traders who trade on opinions end up!”

Well, that escalated quickly didn’t it? Although I haven’t seen any Tweets from our new President, the Fed’s decision to raise the “dot plot” of interest rate increases in 2017 from 2 rate hikes to 3, set off a firestorm in gold and USDJPY as they both “Thelma & Louise’d” off a cliff. Both got hit hard, with gold dropping into the 1130’s and USDJPY went “to the moon Alice” almost hitting 118 in early Asia; 24 hours earlier it’s in the 114’s, so you can assume Mrs. Watanabe needs another check to clear.

Stock indices didn’t do much right after the report, although they tried to climb before the sellers showed up for some … are you ready for it … some CNBC talk here from the chattering heads … some “profit taking”. [“Ahhh, let me write that down so I can remember it for later it’s so valuable.”]

I must admit, I’m a little surprised the Fed came out a little more hawkish than consensus; you’d think after the embarrassment of last year at this time when they predicted 5 – 6 rate hikes for 2016, that they would learn that credibility once squandered is tough to get back. Now that they have “spilled the beans” and the world knows their stupidity for 2017, my trader analysis from yesterday + $1 = a coffee at McDonalds. It’s a glorious world isn’t it? And now you know why I’m a trader and not an analyst; acting on opinions and analysis before the facts are known from market moving events is akin to playing slots in Las Vegas and expecting to go home rich. In other words:

Following the algorithm always keeps you on the right side of things and makes sure your donkey isn’t out in deep water where it isn’t supposed to ever be. And now that I’m 0 for 3 in analysis from yesterday, let me give you my “secret” powerball numbers that “can’t miss”!

One disturbing development from yesterday is the reaction of gold to the Fed; you’d think 10 YR Treasuries are at 6% given the carnage we’ve seen in this market the last … what? … how about 6 weeks for starters. Given how many trader’s have been literally taken out and their accounts metaphorically “shot in the head” trying to pick a bottom, should tell you 2 things; 1) nothing is too low that it can’t go lower still, and 2) we may very well be witnessing the start of what I would call the “Reagan Gold Redux”; a rapidly falling price to lower levels and then nothing for years.

Of course, it’s too early to say for sure; a lot can/will happen that will shake things up, but 2 inescapable facts emerge from the great debacle in gold we are seeing now; 1) way too many retail specs got crushed in gold and won’t be back anytime soon, thus leaving order flow diminished, and 2) unless interest rates go on a different “dot plot” down the road, there is no reason for the bullion banks to take down their collective “bullion wall” of selling and for gold to see any rally of substance. 2017 just might be a very, very long year for the gold market.

And as good as gold is when it is trading with $17- $20+ ranges, approximate “net” trading costs of about $0.24 [about a tick and a half off from the futures market], decent liquidity for small trades, and not much slippage when bought or sold properly, it can’t hold a candle to USDJPY. In fact, no market on the MT4 even comes close to the advantages offered the retail spec trader. As I have stated before, what you can get today in MT4 trading from either ASSETS FX or LMFX is CHEAPER than USDJPY trading that cost $500,000+ in the 1980’s & 90’s for an exchange membership that put you in the pit in Chicago.

I don’t want you to get the impression, or try and read “between the lines” and think that I am abandoning gold as a trade; I’m not. But I’m not blind either, and I can clearly see that USDJPY is a far superior trade right now in so many ways I could almost write a book about it; yesterday being a perfect example.

For the sake of brevity, and to prove my point, I’ll just give you one example; the spread. ASSETS FX “net” trading cost [bid/offer spread of about 0.6 PIPS + RT commission of $6 per 100,000 traded = 1.2 PIPS]; LMFX “net” trading cost [bid/offer spread of 1.4 PIPS + RT commission of $0 = 1.4 PIPS]. You’re looking at right around a 100% difference in trading costs with USDJPY versus spot gold; add to that much deeper liquidity, and better intraday volatility, and it isn’t even close.

The USDJPY tutorial will be finished this weekend and will be up sometime on Sunday; I’m adding some new material I think is important. Starting with Monday’s trading, I’ll be highlighting USDJPY rather than XAUUSD up and until gold makes a comeback. Who knows, it could be a month, a year, or like the early 80’s to about 2002, 20 years. One thing I know for sure; I’m not going to sit around and miss superior trading opportunities in the world’s largest spot market while gold piddles around and doesn’t do anything of substance with small ranges [except when it gets monkey hammered lower on gaps]. Been there … seen that … ain’t interested in that. I’ve seen first hand, back in my pit trading days, what happens when markets go dead, and trading money switches to another asset class; it ain’t pretty folks, and the traders that stay beat themselves up every day they remain cuz they aren’t making any money. “I’m a professional trader for one reason, and one reason only … TO MAKE MONEY! … I’m not here to confess my love for gold or any other market … you know the drill; I’ll trade dirt futures if the conditions are right … I want the cheapest costs, highest liquidity, best above average intraday volatility, consistent with algorithm profits … and right now that ain’t gold but USDJPY.

Once I get the USDJPY tutorial up, I’ll finish the stock indices manual and then over the Christmas & New Years Holidays I’ll get the exhaustion charts for gold, DOW30, & USDJPY up and archived for your viewing pleasure and research. As 2017 starts, all the archived charts and manuals [plus appropriate tutorials] will be up and posted and we will be ready for anything that happens during the year. I got a busy next couple of weeks.

Have a great day everybody!

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