A VERY DELICATE TRADE

                          I Wonder If This Guy Ever Trades Gold?

First Crude.

Sure, crude put in its 200 tick range today [215 to be exact], but it was also disappointing when you consider what gold did. It had a reversal day also, but after hitting a new high, it stalled at the 108 / bbl area before breaking. Looks like this market is firmly stuck between 104 and 108.

OK, now gold.

Like I said on my other post, the algorithm did pretty well. I simply can’t make the signals faster without raising significantly the number of false positives that it would generate; and that would be a big problem going forward.

I bought [very light volume] a retracement and made incremental gains; not what I wanted, but what I had to accept considering the circumstances of the day. I’m not going to buy a market that is screaming up; I’ll wait and buy the retracement. Like the 2 previous days, at the end of the day, gold spikes to the high before backing off a little to the 1711 area.

Now that NFP Friday is over, we can get back to normal trading starting Sunday night. The real question on Monday is whether the market can stay above 1700, or if it gives up something more significant. How much will the “Lemmings in Asia” [LIA] juice this stuff Sunday night, or do they take profits first?  With the market now firmly in “buy mode”, an early break of $4 - $7 would be most welcome. We’ll see.

With the ranges we are seeing, I’m looking forward to next week.

Have a good weekend everyone.

-vegas

THE POINTLESS TRADE

                                   Sums Up Today Pretty Well

First Crude.

“Oyyyyy.”

A double reversal day with a 135 tick range? Yup. What makes this a trading disaster is the fact that each high and low [when penetrated] extended the range by no more than a few ticks. If you got caught the wrong way, you had no chance of making the money back. If you traded this today, I’m betting you wish you had the “pointless button”.

I could tell from the trading action to stay away and that’s what I did. Pointless.

Now gold.

I was kind of surprised to see gold extend itself all the way to the 1703 level in the European session. Shows the extent of shorting that took place below 1785 earlier in the week Every time they took it higher in Europe, I kept wondering to myself, “OK, what are you leaving for the U.S. session?” [Hint: nothing.]

The algorithm never generated a fresh buy signal from the Asia open until the U.S. session. Europe was a straight up grind for about 7 to 8 hours. Now, the reason I didn’t take the U.S. session signal was because I thought the market had nowhere to go. Meaning, we were very likely as we headed deeper into the U.S. day that conditions would be very choppy. Remember, tonight we have Greek event risk and tomorrow we have NFP; exactly where is the buying, or even the selling, going to come from to generate additional range?

I was pretty much right on target until after 2 P.M. when, like yesterday, somebody panicked and shoved the market into buy stops that the dealer community faded with reckless abandon.

As I stated on my other post, the lemmings in Asia tonight will probably extend the shorts pain by seeing what is up at the 1710 – 1715 area. Why should tonight be any different?

The good news is that I have decided to initiate new gold positions based on the algorithm. Conditions are getting back to normal, ranges are being extended [for the most part], and the spikes/drops candlesticks are settling back to almost normal.

While we might see some sporadic bursts of unusual activity, I’m going to adjust my volumes to balance this type of risk event. So, after about 3-4 weeks of horrific trading conditions for the algorithm, we are back to normal from my perspective.

You just never know how long these types of conditions will prevail in the marketplace. The last time things got this wacky [like the last 4 weeks] for the algorithm was in the financial crisis of October 2008. It too lasted about 3-4 weeks. Before that, there was a period in 2005 for about 7 weeks that presented problems for the algorithm.

Back then I became very careful and conserved capital too. What good does it do to lose?

Usually, the market gives us a day or two every few months; but as history shows, there are times when it extends for weeks, months, or years at a time.

One of the reasons I traded S&P500 futures for most of the 1980’s, currencies and crude in the 1990’s, was the fact that gold basically died starting in 1982. What nobody knew of course, at the time, was that gold would be basically dead for about 20 years. So, nobody knows until it’s over, but it appears to me things are getting back to normal.

Crude presented no opportunities today, and gold really had only one signal [around 10 A.M.]. So, while I didn’t trade today, things return to normal tomorrow in gold.

Be careful tomorrow grasshopper.

-vegas

WEASEL TRADING

                                            Yea, Like Dealers

Watching gold and oil over the night and today, it never ceases to amaze me the depths to which dealers literally screw the trading public; most notably the erratic changes in bids and offers while they make you wait for a fill. What good is a 30 cent spread in gold if the slippage is always 30 – 50 cents?

“No, I don’t want any cookies; you’re a weasel!!”

I still think before we get a good rally in either oil or gold, Asia has to sell off at least for one night. It doesn’t have to be complete capitulation, just some selling so we go into Europe on or near the low.

Like other days, I have also been waiting for crude to fill the daily chart gap at 103.88. If gold would have had any weakness in the U.S. session, the market may have gone for it. As it was, crude had a mild reversal off the low and started higher pretty quickly.

I was able to get long a small crude position, but I’m not buying [in volume] a market that goes straight up. Turns out that rally, along with gold, was a QE3 rumor from the Fed via the Wall Street Journal. “Great, I need a rumor to make money.”

As long as you know the weasels are there, and can deal with them, you’ll be OK. Just don’t ever forget they NEVER leave.

Have a good day everyone.

-vegas

STAYING OUT OF TROUBLE [AGAIN]

                                      Or, You Can Trade Gold

I stayed out of gold today for 2 big reasons: 1) the distance needed to place a stop was too great, even if you lowered your volume, and 2) the waterfall effect.

I addressed the first in my other post. The “waterfall effect” is when markets are moving down so fast a chart looks like Niagra Falls. If you sell it, the snap back can, and often is, very vicious and will most certainly stop you out or make you sweat steel. If you buy it, you risk trying to catch “falling knives” from an airplane. Sure, every once in a while you get it right and make a few bucks; the flip side is that when the knife gets within a few feet of you it’s too late to do anything about it if it is going into your head.

I don’t particularly like sitting on my hands all day, but I really hate losing money.

I was surprised crude oil didn’t go down more as gold bottomed. I was ready to buy into the gap below 104.00, but we never got there.

Since I started to trade crude 7 business days ago, the amount of time on the upside is about 2 hours; the rest going down, sometimes violently. Outside of the day when the Saudi oil pipeline blew up and crude skyrocketed 200 ticks in a couple of minutes, it has been a very tough long trade.

As gold finds support somewhere around its current price, I expect to get a very nice up day in crude; I plan on being there for it.

Have a good day everyone.

-vegas

A DEALERS MARKET

                                       He Does Have A Point

What can you say about the markets today? Is the entire world gearing up for college b-ball March Madness?

I took a couple of signals from the algorithm in gold today; stopped out on one, while the other made it back plus a few pennies [literally]. I still think we need to see 2 things before gold can put in a good rally.

The first is an Asian session sell-off. This market session rallies practically every single night; when they throw in the towel we are probably at the bottom.

The second thing is no large rallies until the shorts are trapped in the U.S. session and the market starts to climb in earnest after 11 AM and into the close. When we see these two things, I think the bottom is in [whenever that is; tonight, next week?].

Meanwhile in crude.

Ughhhhhhhhhhhhhhh!!

Not much more you can say; just a big bucket of slop. Tight range, traded to high and low and stuck up near the high for hours with no U.S. session range. YUCK. Hey, sometimes it happens.

Have a good day everyone.

-vegas