Category Archives: Gold Futures (GC)

Johnny Cash

Johnny CashI have no explanation for it. Johnny Cash sings in my head. I don’t think his last name has anything to do with it, but I can’t entirely exclude the possibility.

Driving back to Paris on Sunday, I hear The Caretaker on FIP. Last night a friend in New Jersey tells me he’s coincidentally been on a Johnny Cash hokey-sentimental-reunion-tour, pulling out vinyl.

Maybe it’s the classic lines: The beer I had for breakfast wasn’t bad so I had another for dessert, or the holiday arriving, and A Johnny Cash Christmas subliminally starts to leak back into my consciousness.

I’m off track, and that, thanks to Grant Williams, who is growing increasingly frustrated with the state of the Gold Market. Aren’t we all?

His latest TTMYGH is as good as most, even if you’re tired with his fixation on Gold, you’ll learn something from his (what’s the adjective?) latest newsletter. He deconstructs Gold Price fixing. There is little doubt that 2 times per day in London a mini-cartel, with no legal constraints around their ability to trade or share trades, profits handsomely from their insight into forward prices. No manipulation there… He draws a common sense parallel with the London Gold Pool failure in 1967. Worth the read, again.

Besides Johnny Cash and Grant Williams, I’m intrigued today by the weakness in the S&P index. We’re all looking for signs of a top, might this be it? The VIX is creeping upward, and we see crowded Long Nikkei/Short Yen bets. What would a reversal confirmation look like, in a market that’s been climbing for years?

The chart mavens are calling in sick.

Missed Gold Trade of the Day

It’s always good to go back and review your trades, so I hear… This is the trade I thought about, lines drawn, etc. but didn’t pull the trigger on. The RSI was indifferent, telling me nothing at all. When that happens, I sometimes go get a coffee, walk the dog or turn to other contracts. I could have setup buy orders on what eventually turned into a nice breakout. This was staring me in the face and I missed it. C’est la vie…

Have a good weekend.

Gold Chart

Bragging Rights

Semifinals, then buried…  I made one trade that I was proud of and several that I should have avoided. These were my first round trades:

CL BOT 1 105.63 11:07:58 20130920 NYMEX
CL SLD 1 105.54 11:12:10 20130920 NYMEX
CL SLD 1 105.5 11:21:51 20130920 NYMEX
CL BOT 1 105.49 11:30:18 20130920 NYMEX
GC SLD 1 1357 11:44:20 20130920 NYMEX
GC SLD 1 1358 11:46:04 20130920 NYMEX
GC BOT 1 1352.4 12:00:05 20130920 NYMEX
GC BOT 1 1351.4 12:01:00 20130920 NYMEX

I was looking for a breakout based on the support lines, and when the second candle couldn’t get past my support, it was a good signal to sell/reinforce the short. Could have gone the other way, of course, but the RSI was falling, and I was sitting in front of 200 people. The trade felt right, and when I heard one of the other contestants chase/scalp the momentum, I knew it was a good trade.

The Chart for the good trade(s) looked like this:

Gold Chart

So… Next the bad trades.

These were nearly all bad, my second round trades, under presssssuuuurre!

CL BOT 1 105.37 14:32:57 20130920 NYMEX
CL SLD 1 105.38 14:36:32 20130920 NYMEX
CL BOT 1 105.48 14:38:07 20130920 NYMEX
CL BOT 1 105.4 14:39:40 20130920 NYMEX
CL SLD 1 105.25 14:47:50 20130920 NYMEX
CL SLD 1 105.21 14:47:50 20130920 NYMEX
ES BOT 1 1715 15:01:40 20130920 GLOBEX
CL BOT 1 105.42 15:07:31 20130920 NYMEX
CL SLD 1 105.44 15:07:51 20130920 NYMEX
ES BOT 1 1713 15:18:57 20130920 GLOBEX
ES SLD 1 1711.75 15:21:53 20130920 GLOBEX
ES SLD 1 1711.75 15:21:53 20130920 GLOBEX
GC BOT 1 1338 15:28:46 20130920 NYMEX
GC SLD 1 1338.2 15:29:30 20130920 NYMEX
CL SLD 1 105.07 15:34:40 20130920 NYMEX
CL SLD 1 105.06 15:35:43 20130920 NYMEX
CL BOT 1 105.09 15:37:12 20130920 NYMEX
CL BOT 1 105.18 15:37:43 20130920 NYMEX
GC BOT 3 1338.7 15:51:56 20130920 NYMEX
GC SLD 2 1337.9 15:58:24 20130920 NYMEX
GC SLD 1 1337.8 15:58:24 20130920 NYMEX

Just seeing the number of trades you could tell I was chasing. I’m sitting up there with 3 other guys who know how to scalp very well. And I’m thinking, shit… Look at this churn, look at this churn.

Videos of the first round are on youtube. (here and here)

Shifting Fed

Now we can explain why bad news is good and good is bad.

This morning the claims numbers missed slightly and the ES is rallying. Personal income rises, and spending falls. Ok. The logic apparently is: if the economy slows or stays flat, The Fed continues buying. A stock market methadone drip. This is now the only factor of any import, left for investors. How much have central bankers primed the system? (source: FT):

  • $12 trillion of financial asset purchases by the big 5 central banks
  • 520 central bank rate cuts
  • $33 trillion of fiscal and monetary stimulus according to the BIS1 (an amount equivalent to (46% of the world economy)
  • The lowest US government bond yields in 220 years
  • 50% (or $20tn) of global government bond market cap trading with a yield below 1%

The effect withdrawl will have on the EMs or Europe, is unclear. And yet I have gold in the back of my mind… Gold remains the outcast, only recently she was the prom queen. What to make of the paper selling in gold?

S&P-Gold Chart

All of last weeks worry was unwarranted. Really? That was quick. Is the VIX buying it? She can’t decide what to wear to the prom and gold is not in fashion.

VIX Chart

So when will QE end, slow, stop or be spun into such schizophrenic confusion that rehab is the only option? Never? I find that hard to believe. When the economy starts working on its own? That’s vague. Maybe they can take it in 12 steps. Friends of Ben.

The risks of shock to the equity euphoria are huge. Being long here feels dicey to me, but based on the charts it looks smart. We met one of my pull-back targets, but I personally traded it poorly. I was expecting more time to pass, end of July was my target time horizon. Here’s the chart and my logic is here.

S&P500 Chart

Leaving aside the BOJ, ECB, and Fed, the most confusing action for me is gold.  Is it not a safe haven investment after-all? Have we been mislead? Where’s the simple reasoning that gold will protect against inflation? Is that no longer a major risk? Check out the gold chart. Ugly.

Gold ChartGood Trading.

 

The Divergences Screaming, Hello?!

Rambling about nothing is better than proclaiming some truth based on limited information.

And as we know, we know very little when it comes to predicting market moves. Just this morning, for example, terrible numbers hit the tape and the S&P continues oozing skyward. Good is Good, Bad is Good, the Fed is Good, indefference is even good. Until it isn’t.

So I thought I’d ramble about a few divergences which have me perplexed.

The first jumped out at me yesterday while the VIX was climbing on momentum WITH the S&P. Technically that happens but it was screaming  “look at me” yesterday. Options in general and puts in particular were getting bid up while the market was climbing. Fear of a rising market?

VIX ES DIVERGENCE

The second has been obvious all year, but it’s worth thinking about. The Gold Story – some would call it the Apple Story…

If you take the premise that gold is a hedge against inflation, gold isn’t worried, atleast paper gold isn’t. That surprises me, because there’s another argument: easy money from the central bank leads to inflation. This argument seems on firmer footing, every central bank in the world is printing. Yet it’s the divergence which has me looking for a trade.

ES GC Divergence

Here are some other good divergences, credit/macro/vix/10yr, labeled ‘just plain silly‘ from ZH.

 

EUR-USD Chart

Something Is Always Parabolic

Gold's Parabolic Fall

The surprise yesterday was gold. We’re always looking for congruence within the paradigms we’ve learned to believe in. I had heard somewhere gold was a safe haven play. During periods of fear or worry, in theory, we should see gold rise while money moves away from risky assets (like the S&P).

That didn’t happen yesterday.

We’ve been told over and over gold is a safe asset, real money. Those rules are too simplistic and after getting burned a few times we start doubting our basic notions. And the press doesn’t bother with details. If gold is up they’ll say “The Fed” and if gold is down, “Cyprus”. In reality information we never see is what drives these markets. In the case of gold it might be sovereigns buying (or selling), Fed fear, short covering, muppet trading, shenanigans in a dark pool, an Asian holiday, or a sublime combination. Traders scramble for an explanation, they scramble to mount another paradigm, to justify tomorrows trade. I do it, you do it, that’s the game.  The game gets easier though when you accept that you’re basing a decision on incomplete, simplistic, and probably false, information. I can tell you categorically, whatever your model is, it’s wrong. In all cases, even Goldman Sachs, a Central Bank, or a sneaky congressman will eventually find his assumptions, wrong. Continue reading

Hmm ohh, one of those days

There are a few moves which don’t make much sense to me today, but after the run-up we’ve had a -0.5% doesn’t seem that painful.

The first wild swing which jumps out at me, is gold; but its true for silver and commodities in general today. How do I make sense of a 4% drop in gold? Trading was even halted for 10 seconds! One explanation might be that banks holding JGB have capital requirement issues, the recent volatility might be sending sellers to the gold teller. Goldman’s prediction of gold at 1200 didn’t help, but that’s been out there for a few days. Or it might be that Cyprus is coming under pressure to sell gold for it’s bailout, this I doubt is having any impact. $400 million sold into the market slowly couldn’t account for the slide we’ve seen.

Gold and 10 Year Bond Futures

And the 10yr bond futures are climbing, what’s up with that? It’s just rising, hanging out on an upswing. Something looks fishy to me. The VIX is effectively flat. So what’s going on here? JPG players are selling gold to buy the US 10 yr and option players don’t see much downside risk in the S&P? What about the weak sentiment numbers and lousy retail sales numbers? There’s a fair amount of risk out there.

Today is one of those, ‘hmm, ohhh’ days. My only expectation is that we’ll touch the 61.8% fib (1542 – 1592) on the S&P by close, but being one of those days… Who could say? Maybe she’ll ride into the close on the 76% which is where she’s at presently.