Loading ...This is why I totally despise this market environment; it not a real, free-flowing interaction between bulls and bears. While the day-to-day volatility is mere scenery to be used during the various acts within the trading-day play, the ending is unambiguous; it is pre-determined by the price managers and therefore without any hint of randomness. Furthermore, the longer it is allowed to continue, the greater the degree of moral hazard and the more precipitous the outcome when the curtain finally falls.
As you can see in the gold chart, everything on the surface appears tilted to the downside and it is my feeling that the set-up is one where the DUST and selected put options on the physical metals stand a superior chance of creating additional alpha rather than simply buying and holding those same metals and/or producers (or ETF’s). However, the thing I have to keep in mind is that in the absense of any regulatory monitoring, the bullion banks could run a screen play against a bearish set-up in order to create the kind of upside volume into which they could reload some of the 33,204 net shorts that they covered last week. So, RSI, the moving averages, trendlines, and the MACD/Histogram combo are merely rumination, a condition where these superficial negatives continue to replay themselves over and over again for no apparent reason other than the confirmation of recency bias dominating one’s actions.
For the record, I am trading from the short side of the metals via DUST:US and selected puts on the GLD. The position sizes are about a quarter of what I usually roll but rudderless ships are dangerous to follow and in the vernacular so commonly heard in the pork-belly pit, “Never short a dull market.”. What I mean by this is that I fully expect an intervention at any moment, especially if stocks begin to retrace their astounding move off the Christmas Eve lows but even more dangerous would be a shortlived downside gap in gold followed by enormous short-covering by the Commercials just as the Large Speculators assess and react to those conditions exactly identical to the ones you see in this chart and ramp up THEIR shorts at the same time.
How many times have we seen this type of whipsaw behaviour over the years? Far, far too many times have I donated discretionary capital to the Church of JP Morgan after which I curse, them first, me second and vow to never be fooled again? When the bullion bank behemoths are lurking (as they are now), I keep positions smaller, stops tight, and stress-relief paraphenalia nearby. One must be prepared at every turn, you know.