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Thursday, October 18, 2018

DID ANOTHER CORRELATION TRADE JUST GO SPLAT!

“In the office of the guy in charge of the Yuan/Gold peg!”

It ain’t easy being a central planner … take for instance the poor schlub in 
charge of the Yuan/gold peg these last couple of days … “you want job security 
inside ChiCom HQ? … well, this is starting to look like something is going terribly 
wrong … and it’s being noticed by more than me”. Directly below, the link early 
today from ZH.

chart-says-yes

As the article points out, there’s plenty of reasons inside China to explain the 
problem … however, I would just note, that in a multi trillion dollar world, it 
takes more than a few Yuan to throw at a problem and then pretend it’s 
“fixed” … if the fix is artificial, eventually it collapses cuz it can’t be afforded 
or maintained by the Elites running things … and the ChiComs aren’t gonna 
get fleeced by the citizenry by handing out cheap gold Pandas via a 
depreciating Yuan. As I have stated often in the past, “correlations between 
markets are wonderful to observe and keep your eye on, but trading off of them 
is very dangerous, simply cuz nobody sends you an email when it decides to 
“un-correlate” and go its own way … and in the process, you get clubbed like a 
baby seal at a Japanese whale hunt”! In this particular case, it shows the 
strength and resiliency of our favorite pet yellow rock, even with diehard 
Communists, who aren’t gonna part with any of it to maintain a fiat currency 
that has to be depreciated to deal with the trade war with the U.S. 

On a side note, check this article out from ZH I saw very early this morning 
on 9/11 & gold … like all things 9/11, there are more mysteries than answers; 
unfortunately, not sure what to believe anymore given the track record of our 
government. Link below.


Turning to today’s gold market … another in a string of consecutive  
“shitshows”, going back 8 trading days … this is the 8th day in a row, NY 
metals dealers have not attempted ONCE a test or break of the low of the day 
set earlier by either the “Chuckleheads” in Asia, or in early European trading 
… every frickin’ day it’s buyers getting stuck long, and then puking within 
seconds, that the bullion banks then buy into … by my guesstimate, we’ve 
spent 85% of the last week’s trading going up, and 15% going down, and the 
market is within a few dollars per Oz. of where it closed on the big up day last 
Thursday … at some point real soon, this shit is gonna end … “cuz unless 
specs can take out 1230 with conviction, dealers will wait it out, and it will lead 
to a large down move, probably to the 1210 area or lower … we need a lower low 
test, and we aren’t gettin’ one … that sends up warning flags for me”.

Today sees USDCNH “yawn, who gives a frick”? … in its place on the 
correlation trading ranch, is the SP500, which somebody at Squid & JPM 
forgot to email me and let me know about … “those dastardly scumbag 
LP banks”! [snark] And while equities worldwide go “yo-yo banzai” with large 
ranges, gold still is relatively muted … the selling up top is relentless and deep 
above 1230, and unless the SP500 breaks through 2700 on the downside and 
goes “crapola” all over itself in a selling frenzy, it’s tough to see how longs in 
gold can position themselves to make money without getting shaken out on 
sell stops, “when the dealers go a huntin! … which as day follows night they 
surely will do here shortly”.

Outside of last Thursday, which saw the biggest range day in over 2 ½ years, 
the problem with these tight ranges, comes down to a random variable 
function inside the “Flying Wedge of Death” [FWD] … in short, without all 
the math gobbly gook, it doesn’t take much either way, in terms of price 
change, to get traders on the wrong side “spooked”, and thinkin’ of 
liquidation … that invites tight stops on both sides, which the bullion dealers 
manipulate to their advantage … at some point, the pressure of the “coiled 
spring” breaks wide open, and the market moves short term … but as we have 
seen today, even with an upside breakout above the day’s earlier high around 
1226.27 [spot], it couldn’t even go much more than $3 and change … “you 
might look at the M1 and see a rally … I look at that same chart and see one 
hulluva lot of selling to absorb all the buying … there’s nothing smooth about 
that late morning rally up to 1230 … and now what? … and what took 
approximately 75 minutes to accomplish, took 3 minutes to undo half of it … so, 
if the SP500 is finished with the “Thelma & Louise” act today, where do 
remaining longs go in gold”? Put bluntly, this is the scourge of the FWD! … it 
gets traders long near the top and short near the bottom and then viciously 
changes course quickly.

It’s PM now in New York, and the gold rally “mojo” is gone … price hanging 
around the old high in the 1226’s … check that, now in the 1225’s … another 
rally bump that goes nowhere, and heads right into the “Great Bullion Wall of 
Selling”, that for now ranges between 1229 - 1233 [spot] … “and I’m just 
tellin’ ya, in all the years and decades I’ve traded gold, both in the old pits and 
now online electronically, if you buy rallies and/or sell breaks, they’re gonna 
carry you out toes up … you simply cannot give a shit about price, and then chase 
it like a dog chases a speeding car … when the car catches up to you? … well, 
you know the rest”.
  
Only one algo signal trade today … PAMM up a couple bucks shy of 0.1%.

Until that small breakout late morning, no signals at all, and on top of that, 
intraday volatility very small … algorithm did an excellent job with the buy 
signal, and the fills were good … can’t complain there at all … after that, just 
“bump & grind” lower with the occasional spikes, both up/down, that go 
nowhere.

Again today, Mrs. Wantanabe & Gal Pals giving money away … their sells 
early sees them panic late, and for 8 days in a row, New York starts very near 
the high of the day no matter the daily range … as I’ve said before, to get very 
good New York up days, you almost always have to have Asia & Europe try 
and take it lower, and whatever the low is, have it tested in early New York 
trading … when those “tests” fail, it sets off short covering that can be quick 
& vicious in scope … not always, but many times … I’m hoping tomorrow 
sees a test of overnight lows, and the algorithm will take if from there.

Another “grind” kind of day, and the gold algorithm calling the move up “spot 
on” … we’ll see what tomorrow brings … I’m outta here … until tomorrow mi 
amigos … Onward & Upward!!

PAMM Spreadsheet directly below.

click to enlarge

Have a great day everybody!!

-vegas

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