Gold at $1268, Now What?- Analysis
Posted by Vince Lanci on July 28, 2017 3:42 pm
Tags: B+, Bollinger Bands, Commodity markets, Crude, Crude Oil, Economic history of the Netherlands, Economy, Finance, Financial markets, Futures contract, MONEY, Natural Gas, Order, Share trading, Short, stock market, Technical Analysis, Volatility
Categories: B+ Bollinger Bands Commodity markets Crude Crude Oil Economic history of the Netherlands Economy Finance Financial markets Futures contract money Natural Gas Order Share trading Short stock market Technical Analysis Volatility
IF-THEN: Short Term Action
About: Moor Analytics publishes 2 reports daily for Gold, Crude Oil, and Natural Gas. Each report analyzes market activity that day and in context of the bigger picture. His Energy work is especially important for spread and seasonality traders. We are subscribers, and have Michael on our speed dial for quotes and comments on big moves and points of inflection like we feel the market is entering today. Here is what he shared today with us, as we got stopped into our Gold position of long above $1259. Our comments in italics
- IF Gold stays above $1261, THEN look for a run to 1270 and THEN 1283
- IF Gold goes back below $1261 THEN prepare for a bear leg to start as longs begin to liquidate that could drive Gold down to $1254 which is a buy level. But below $1249 is a level to get short
Note: We are taking #2 above very seriously. Our personal approach is, as you will see below, biased longs who let profits run.
Every number is a level to decide. One could short at $1270 and reverse above it. A long could take some profits at 1270.. and so on. One must decide loss tolerances and slippage according to their own bankroll and execution style. Every number that is support, becomes resistance once pierced. Numbers in Aug futures today
SKG Position: VBS short term trade Right NOW
Live Interactive Chart HERE
- Long above $1259 (filled at $1260) looking for $10.00 in 2 days = $1270 target
- Stop-loss at $1257 – making the risk reward 3 to 1 per our VBS system
- Do not take the trade home if settles Out of the money. So if settles under our buy level but not stopped out, we exit. This is a device we implemented and improved upon specifically to protect against thinly traded overnight spoofers who would most certainly stop us out
- If target reached sell half of position and trail the stop up to $1265 on the rest with the next target as $1283
N.B.- One thing that is apparent in this approach, often times the VBS will call that last frothy run higher and then the violent reversal lower. It worked very well as option longs hedging gamma. But that was because we knew if the rally continued, we’d have more futures to sell.
Using just futures, It just breaks our heart selling for a profit and having the market continue running without that gamma. So we leave a tail on in the form of a partial position.
Reversal on Stop – Out: What we should be doing per the VBS trade is selling longs at $1257 and getting short there. This is consistent with Moor’s approach… We just can’t do it yet..
Bull and Bear Macro Trends (excerpt)
via Moor Analytics
all numbers approximate – SKG
- Ground Zero: Bear Move from $1911 down in 2011
- Bull Correction: the rally from $1047 to $1374 in 2015
- Bear Correction: sell off from $1374 to $1124 in 2016
- Bull/Bear Corrections since then are more recent and thus shorter term.
If you have interest in learning about Moor Analytics Reports and seeing a full sample (older) report
Confessions of a Gold Bug: Right But Poor
We have been so right on this market and so wrong on trading it too many times. The adage, “I’d Rather Be Rich Than Right” haunts us constantly as macro analysts and micro risk managers. For us, making money is easy. Keeping it is hard. Such is the nature of “parlayers”, and traders that fall in love with their trades.
But we’ve made many good calls and given very good risk reward scenarios based on our own momentum volatility indicators here. Our VBS system is constantly given us 3 to 1 risk rewards in may markets. But it is not by nature a directional indicator. And that makes it hard for us to reverse when we are wrong directionally.
The issue with momentum trades like the one we have on now is, when the market penetrates below them, you must be fearless and get short. That is not our strong suit. We get stopped out, and wait for the next buy level usually due to our macro bias. Meanwhile as we have said here many times, the market itself is biased to be short due to market structure and manipulation. So what is wrong with us?
Here is why we are biased bulls. We have made large profits on big moves in 1994 Silver, 1997 Silver, 1999 Gold, the Silver spread squeeze, and various Gold rallies due to events. And we loved it. The short side manipulators were crushed, the idiotic producers who listened to the banks were crushed, and sometimes our head ot head competitors were crushed. Those were times when we saw a flicker of fear in the eyes of the powers that be. And that is the lesson.
A Hard Learned Lesson
The lesson of this must be learned and relearned every time we put a trade on. At our worst, one time after a 7 figure day in energy one of us turned to a colleague and said “Now I’m bullet-proof”.. That was a Gartman Moment.
Four weeks later every dollar made was lost, and then we went negative. And that was graduation for us.
We book profits now. But one bias lingers. The top down approach using macro analysis to create micro trades is prone to leave the “swing trades” or short trades on the table.
Pissing Away Profits Waiting for the Buy Signal
As of right now we are trading long above $1259 based on our previous call of that level being a momentum accelerator. This does not mean it must go up. It does however mean that it will move quickly away form the area in short order. So we are long with a stop below $1259
How much money have we left on the table being married to our macro opinions? How many times did we leave profits on the table only to give them back. How many times did we ignore our own analysis? Example: Be long above $1260 is by its very implication a call to be short BELOW 1260.
This is a lesson for everyone willing to listen. Those successes have created a bias. And that bias makes it hard for us to play short even when the numbers tell us to be. For us trading Gold flat is almost like being short.
What we are saying is, look at Moor’s Analysis. It is perfect for people with biases. IF we stay above $1260 that is good. But if we go back below THEN don’t be afraid to be short. And the lesson here is, always have agnostic like Michael in your analysis. This type of work is the psychotherapy for our chronic Bull disease.