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Friday, March 31, 2017


“Ignoring the questions doesn’t make them go away.”

Another day, another BS overnight session that saw more interest in temperature fluctuations in Butte, Montana than in gold; from where the Comex closed USDJPY rallied 60 PIPS, and gold yawned its way to maybe a $2 break if you caught it right before recovering back to the Comex close. So here we sit yet again, 8th day in a row HVALUES coming out of the Asian & European sessions below $5 per Oz. Right here before the New York open gold has an HVALUE of a mighty $4.05, and is less than $1 off the closing price last night; the last 7 hours a complete range of $2.18 from high bid to low bid price; “seriously man, what’s wrong with you”? Why do I have this feeling in my stomach that today is going to be an insult to the word “dead”?

The Asian Chuckleheads did their part last night, lightly selling from the open on Yen weakness but we’re only talking about a $3 decline in price at the worst, hardly a barometer of sentiment you want to heavily rely on; still, whatever they do most often the New York bullion banks “undo” hours later, so it would not be unusual to see higher prices in the U.S. session at some point. “But Toto, we’re not in Kansas anymore … so keep your eyes and ears open … cuz anything can happen”.

There isn’t any way to sugarcoat what’s happening to financial markets; not just gold, but every financial market since the start of 2015. They’ve taken turns going from active, vibrant markets to slowing down ..,. then to barely breathing and on life support … and now to some of them completely dead in the water floating corpses … followed by bat excrement hyper volatility that explodes trader’s capital and accounts to mere bits & pieces … then crickets, rinse & repeat. Take any market you want to name and just look at it; this is what has/is happening. This isn’t by accident nor is it some kind of anomaly; to be brutally honest, the world’s central banks are attempting to destroy volatility, and in the process dictate preferential outcomes that serve their purposes.

So, the $64,000 questions that beg to be asked are simply this: “did the start of 2015 with the CHF debacle [EURCHF unpeg from 1.20] mark the starting point of an entirely new era of trading? One where, going forward volatility is the outlier, and stagnant low range days the norm? Where selling the new 2nd,  3rd, or 4th new high of the day or buying the 2nd, 3rd, or 4th new low of the day is the “ticket” to consistently profiting every day by buying/selling the imminent rebound in price that is coming?

This isn’t simply a paradigm shift in the ordinary sense of the definition; what I’m asking is, “is this a seismic structural shift in the way markets ARE GOING TO BE ALLOWED TO OPERATE by their overlord masters the central banks and by default their partners in crime the bullion banks & LP’s”? Cuz the way things are trading these days, when watching markets under these guidelines, all of a sudden things start making complete sense. “We’ve had approximately 35 – 40 years of wonderfully volatile commodity & financial markets; can I stand here today and say this is the norm for all time going forward? What if we have entered a point in human history where all markets go quiet for 10 – 100 years; where volatility is the exception and not the rule; where $6 - $10 ranges per day in gold are “it”, with the number of days exceeding $15-$20 a handful over the course of years; what the hell does everybody do then when your algorithm is screaming for volatility”?

I remember years ago when I first arrived on the trading scene, just as commodity trading was entering its “heyday”; the first gold & currency pits had some traders who just a few short years earlier had been trading eggs & butter; they had a very tough time adapting to the volatility in the currencies, and would tell me about “the good old days” back in the egg pit, where things were “normal” and a guy could make a good living … now in currencies … yikes what a difference.

I’ve said before on these blog posts, living through history ain’t the same as reading about it; very few people see the changes. Has trading from a structural standpoint changed? Am I now the “anti egg” guy, looking for volatility where there isn’t any, and wondering where the hell its gone to and not being able to recognize that the structural platform and backbone of trading [namely, volatility] in the “modern era” is over and there’s a new Sheriff in town?

It’s still early in the game, but I can categorically state I do not like what I’m seeing in the trading universe regards volatility; it’s not entirely gone, but it’s been severely crippled from days past, and while occasionally it gets to come out and play, these last 2 years it’s been the exception and not the rule. Something is not right in “traderland”.

Ok, turning to today’s gold trade … well Chuckleheads, on the FED Pie Hole Dudley comments you got your buy stops clicked off [again] from earlier sells … HVALUE still right around $4 … once again Pols and/or FED Pie Holes responsible for movement in markets, with once again no follow through after stops are hit off … same old shit, different day with the “good cop bad cop” routine with interest rates and the FED’s desire to manage outcomes all visible for everyone to see … and I’m wondering can gold recover and return to its normal behavior, or is what we are seeing now the new “normal” behavior going forward?

As I stated yesterday, this isn’t just specific to gold, this is happening to all markets including USDJPY, and when you add everything up, new lows aren’t making for further new lows and new highs aren’t trailblazing the path for more new highs where HVALUES and daily ranges are expanding to anywhere near the levels normally seen these many years; and so, unless you are gonna put your head in the sand and pretend everything is “A-Ok”, it begs the questions I’m asking, cuz clearly something is wrong with these markets using standard algorithm parameters.

It’s Noon in New York, and gold providing tortuous entertainment watching it struggle to make new highs by pennies and then watching it get clobbered lower as stuck longs on the pennies upside breakouts get caught and then liquidate on any USDJPY rally over 1 PIP… rinse & repeat how many times now? … and still has an HVALUE of $4.05 and not feeling from the struggling action like it wants to expand that anytime soon. From just literally pennies off the high of the day, now 14 of the last 16 minutes the M1 is down on a 5 PIP USDJPY rally; if you’re long, good luck cuz normal intraday volatility is on vacation and nobody has seen nor heard from him in a while and the bullion dealers are in firm control once again.

Again today, it’s PIE HOLES & politics running things … look at the SP500 here at Noon ESDT; it’s got an 8 index point range and the market at present is about 2 index points off the high, with the index at approximately 2371; when this index was at 1071 10 years ago, the market had 15 – 20 index point ranges EVERY DAY, UP & DOWN. Now of course, that’s not permitted as some financial elite might get his “big girl” panties bunched up and lose some money to those “trader types” who trade markets and pick him off … when you extinguish volatility, this problem for the most part goes away, and now the person “squirming” every day is the SP500 trader, cuz he knows he’s only got 1 shot at making money this day, and he better make it count cuz if he’s wrong the day is over and he’s out money … and how the hell do you make a living flipping a coin? In a nutshell, this is the problem with the stock indices.

Moving over to USDJPY, and really the entire spectrum of the FX crosses and other Dollar pairs as well, the Yen is a special case because it has become its own asset class; however, there are structural problems here as well. To name just a few, 1) liquidity vacuums, 2) stop hunts both buy and sell, 3) slippage, and 4) since 2015 a significant slowdown in volumes across the world some 30%+. Add it all up, and you might as well be trading gold the way you’re gonna get treated.

Gold does have one major advantage over the entire FX arena, though; there is always demand for it, and will always attract buyers at some point. Meaning, off of any exhaustion line or SDEV low it can be bought for profit of usually $2 - $3 within a few minutes; on the upside, unless the “bullion wall” dealers are suddenly going to allow this stuff to freely appreciate [not on your life], and unless there is over riding news to substantiate a good gold move up [i.e. sustained buying all day], the dealers will be up at the high selling you all you want.

Outside of the few minutes ± Dudley’s comments this morning, gold hasn’t moved but about $2 & small change… some market huh? … sitting here waiting for volatility is like going out into a prairie and trying to catch butterflies with my hands … the results about the same. And while dealers in FX are as bad as they are in gold, I’d have to give the edge to the bullion dealers for being the worst on the planet … their penchant for screwing their clients and running stops are legendary within the biz … which leads me to my final $64,000 question; “with hedge funds, FX funds, and a retail public that’s been getting ‘wasted’ these last 2 years and as a collective whole has been decimated with losses [especially in gold, EURUSD short positions & the short SP500 calls], who have been the prime beneficiaries of this ‘transfer of wealth’ with non existent volatility [except briefly, to suck more people into the matrix from Brexit, US elections, a flash crash, and the Greece Crisis]”? ANSWER: “bullion dealers, bank LP’s, and bank dealing desks”.

And to put it all in perspective, as if right on cue from central casting, here a few minutes before 1 PM, gold spikes up, makes a new high, takes the HVALUE to $6.94, and blows out the last remaining short from this morning with most likely a fill at or very near the high … and then what? A new move higher? Continued expansion of the daily range? How about the following directly below.

As clear a case I can ever be able to show you of “let’s clean out the buy stops” and call it a day. Not a damn thing behind this bloodletting except regrets. And if you bought this, I don’t have a clue what comes next except it most likely involves a loss of some kind. This is a perfect example of what I’ve been talking about. We’re about 50 minutes from the Comex close, there is no volume and no trade to speak of; whoever it was that pulled the trigger to new highs about 45 minutes ago isn’t feeling too well, and if you’re still long this stuff you have to be thinking what if this guy comes back and liquidates that buy stop? If that happens, it won’t be a pretty picture at all going into the close.

It’s the end of the month & the end of the quarter today; good riddance to rubbish. Over the weekend I plan on doing a ton of statistical work [mostly from the risk side] on gold and taking an entirely fresh approach and see where it takes me; I’m not ready to “chuck it all” into the trash or anything like that, but I would be less than honest with all of you if I said this type of trading activity we’ve been seeing lately doesn’t concern me; it very much concerns me cuz there is a very big part of me that says “volatility” as a structural construct for trading is over for the foreseeable future. Oh, to be sure, there will be days when news flow will provide the necessary fuel to fan the flames, but overall it might just be finished. If my trading instincts are right, then I need to get with the proverbial program and adjust accordingly.

I have been professionally trading a long time; I’ve seen what I thought was just about everything there is to see; when President Trump was elected, I thought, “well, just wait until he takes office and we get into February & March, we’ll see volatility explode through the roof”! Instead … total crickets most days! None of this makes any sense, and that tells me that serious structural changes are afoot; nobody is going to send us an email and tell us what the deal is; why would they, they want to profit off of our ignorance.

Avoiding risk has always been my top priority as a trader from day one in the biz, and now more than ever markets present us with risk challenges daily, especially in gold. With few exceptions, though, when you “think & trade” like a bullion dealer, you will be profitable in your trading rather easily. The version 3 algorithm incorporates some dealer concepts, but the structural nature of the algorithm requires above average volatility; what if we don’t consistently get it? Then what? And that’s where I’m at right now.

I can tell you “flat out”, I’m not gonna sit here day after day waiting for gold [or any other market for that matter] to get its donkey in gear; hell, we could be waiting a very long time. No, I’ll simply make the necessary adjustments and move forward; look for those adjustments as we start trading next week.

Here we are at the Comex close, and truth be told, this has been one of the worst “action” weeks I can ever remember; all told we’re about $4 from last Friday’s close, and outside of a couple of HR1 candles, not a damn thing happened trading wise. Today’s $5 “necessary to trade” HVALUE only got breeched around 1 PM, about 90 minutes from the close; still, on the retracement no valid buy signal to get long, so no activity for today. Even if we had gotten one, the subsequent rebound has only gone about $1 max, so not much there late on a Friday.

One final note: here’s that “pretty picture” of the close when your buy stop attempting to “muscle” the market doesn’t work on a Friday directly below.

PAMM/MAM Spreadsheet directly below.

Beach beckons … I’m outta here … until Monday mi amigos.

Have a great weekend everybody!

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