HIDE THE CHILDREN

                                       Long, Wrong & Gone

XAUUSD

One thing you can always say about the metals; when they decide to correct they don’t mess around. Ya think they caught a few longs going into the weekend?

Hopefully, today’s almost $40 / oz. range can manifest itself in higher intra day volatility going into next week and beyond. We’ll see how that goes.

For now, what can you say about the price action today except it was ugly on the downside.

We came into the day in “buy mode”, but because of the NFP report at 7:30 AM [Chicago time], nothing really mattered pre-report. As is typical with the “lottery” mentality, we quickly hit both new highs and new lows within 15 minutes of release.

To say that profit taking took over would be a gigantic understatement. Nobody it seems, wanted to go into the weekend long.

We got our first algorithm buy signal at the 9:15 AM [Chicago time] candlestick. Because prices had moved rather rapidly off the bottom, it was almost impossible to get long at an acceptable price. I therefore did 2 important things: 1) I cut my trade size, and 2) I waited for the first correction to get long.

The dilemma you face in buying the first quick bounce is that if you get in at a bad price, your stop needs to be necessarily wide. The second problem is that when the correction resumes, how deep is it going to go: does it hit a new low, or test the low before a nice short covering rally commences. This is why you cut your trade size: to give yourself some flexibility if it makes another new low.

I finally got long at 1739.76 with a stop at 1734.90. I got out at 1741.24 for a gain of $1.48 / oz.

A number of things to consider: 1) it’s Friday and it’s getting late in the day, 2) gold is down over $20 / oz and it doesn’t look like any kind of reversal is going to take place, 3) I’m up for the day at my minimum goal amount, and 4) I’m trying to buy into a selling frenzy.

Time to call it a day.

 AUDUSD

Who said AUD always correlates positively with gold?

Up, up and away to new highs. A nice steady gain throughout the day with only minor corrections along the way. I was looking to get long AUD, but it never corrected enough to give an algorithm buy signal.

Next week the Central Bank of Australia [RBA] meets for an interest rate decision regarding short term rates. A 25 bps [basis points] cut in rates is expected and baked into the market.

AUD feels like it’s on its way to 1.10 and setting a new record against the dollar. It’s been a very long time seeing gold down $40 / oz. and AUD up 100 pips.

We’ll pick things up again next week. Have a great Super Bowl weekend everyone!

-vegas