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Wednesday, March 22, 2017


“Timeless trading wisdom from the Duke!”

When it comes down to cold, brass tacks very few statistical measurements you ever make in financial trading will ever be as good as the one I’m going to give you now; “when the price of gold is over $1,000 per Oz., and the HVALUE for the day is greater than $5 per Oz., there is a slightly better than 80% probability the market will not reverse and the HVALUE becoming a new LVALUE later in the day”.

And the fact is, when gold trades inside this “magic” $5 HVALUE zone for hours on end, anything usually happens; you get reversals, double reversals, sometimes triple reversals; new highs/lows for the day by 10 – 30 cents per Oz., and then it’s time to go ramping & spiking the other way to the other end. It simply matters little how you want to measure this mess; “it’s random market noise while the market figures out which way it wants to go today. It can be slow, it can be fast; in the final analysis it simply has a very high probability of losing you money cuz price isn’t really moving anywhere. Sometimes you can scalp inside this and do alright, sometimes you can’t it’s so choppy; point is you have no statistical advantage at all in getting involved in this”.

Ok, that’s an easy concept to grasp and will keep your donkey out of trading trouble; what about now when the HVALUE IS GREATER THAN $5? Here, we have the 50% retracement level of the day which should hold; if it doesn’t, that’s the first big “red flag” that maybe … maybe we are looking at one of those slightly less than 20% reversal days. And usually, if we do in fact get a reversal, it will have some power cleaning out stops and taking gold up/down for at least a few bucks.

The very best reversals come from the following setup; 1) Asia goes in direction “A”, 2) when New York opens there is either very little counter force to that direction and/or it starts going with the direction of the earlier Asian session, 3) at some point it reverses and passes the 50% threshold retracement level on the correction side, and 4) pushes through in mid morning or early afternoon New York trading to Direction “B” new highs/lows of the day.

Cuz there’s very few things that are almost perfect indicators of short term trend better than the clowns in Asia being wrong when it comes to trading; let’s face facts shall we? The New York banks play Asian traders like violins. That’s not to say that every once in a “blue moon” that they all can’t “Rodney King” this thing and get along for a few minutes; sure, it happens occasionally. But the vast majority of the time the New York bullion dealer banks “undo” whatever it is that Asia did hours earlier, and it sets up for some wonderful reversal relationships [at some point in the New York day] if you can keep this in mind going forward. Some of the most powerful reversals you will ever see will come out of this scenario, and I plan to be there for all of them going forward.

I thought coming into today that we could either get another strong rally to test the 1260 area if Asia could go lower last night, or go lower into the 1230’s if Asia rallied this stuff; I really didn’t think that at Noon New York time I’d be looking at an HVALUE in gold of $4.74, with a market drifting up/down with every tick in the SP500 which since yesterday it started correlating [SP500 down, gold up and vice versa].

Bottom line for today’s post is this: gold couldn’t get out of its own way today to make it tradable, so I naturally left it alone to fart around aimlessly and let others get “chopped up”. I’ve made a command decision to stick with gold and let the others [USDJPY, EURAUD, SP500, etc.] do whatever they want to do; some days they correlate with gold, some days they don’t. Some days USDJPY has the action and gold sits still and vice versa; if you let it, this stuff can drive you nuts. What I do know is that I’ve left some good gold trading days “on the table” trying to dance with the other girls, that in the end only disappoint.

Gold has 1) the best definable hours for active trading, 2) best signal generation in the version 3 algorithm with highest statistical significance, 3) we have the best spread and RT commission structure in the world to trade [nobody beats Turnkey in gold; nobody], 4) except for one day back in February when I was using the version 2 algorithm and peeing all over myself [which was subsequently fixed and corrected by the LP] an LP that so far has filled me right at the market with little if any slippage I can detect, and 5) while it’s kind of an “intangible”, nonetheless we are historically speaking in the “low period” of gold where the gold VIX is at the very low end of 40+ years of trading; even in the late 1980’s and 1990’s when gold didn’t do “Mr. Jack Squat” it barely was only worse than now on occasion volatility wise. So, while we occasionally might have some slow days now and then, there is a lot to be said for sticking with our favorite pet yellow rock.

In my entire trading career, I have always tried to equate periods of low profits or small losses with exchanging money for information; i.e. gaining valuable insight into a market or group of markets that is in fact more valuable than a few Dollars. Our first few weeks in the PAMM/MAM have been along these lines, and yes I have felt “the exchange” has been worth it. But as I said the other day, I got all the information I need to know going forward; and let’s face it shall we, if gold “dies on the vine” and refuses to move, what’s going to move? Yen? SP500? While occasionally they are moving, they aren’t the answer either, as they have shown recently by not doing a damn thing for days on end. My point is, if gold dies they all die, so what’s the difference?

And here with 40 minutes before the Comex close [1:30 Chicago time], they finally bust the HVALUE to above $5 and make a new high; big whoop. Quite frankly, at this late hour any move you make to “buy” this break out will more than likely have you liquidating at a loss, cuz there is not time to recover anything with less than 40 minutes to go; and then things get “thin” with the spread increasing and rollover looming. No thanks. No matter what happens, I can tell you it’s going to be “tough sledding” between 1250 – 1265, what with the “bullion wall” from dealers and the fact we are now up $55, 7 days in a row.

So, nothing to do today with an uncooperative market that hits its threshold HVALUE with 40 minutes to go; beach beckons … I’m outta here … until tomorrow.

PAMM/MAM spreadsheet directly below.

Have a great day everybody!


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