News is out that the Greeks are balking at having their debt issues “solved” by the meetings last week in Brussels. You just had to know that when you have more than one or two people crafting a solution, you end up with a mess. And that is what this is, pure and simple. A mess.
Gold?? wasn’t that supposed to be the currency of safety, in case the “fiat money US Dollar” went out of fashion? Seriously, all those Gold bugs who have been squealing for the past 6 months on AM radio… What do you have to say for yourself today? The crisis in Europe worsens and Gold loses 36 bucks an ounce. Its dropped 73 bucks in three days. As a percentage loss?? 4% in three days of its value. Gold is 233 dollars off its all time high at 1923 which ticked off on September 6th. So in two months, Gold lost 12%.
Now granted, between the November 08 lows gold rallied from 800 dollars an ounce up to 1923. You can’t argue with more than a double return.
My point is this.. In the past year, we have heard more and more bullish fervor about gold in the general media? Why not? It more than doubled in 2 years.. The fault with this logic is that people like to buy high and then sell higher. That’s a strategy that can work.
However, my opinion is, that if you are buying something because your butcher, doctor or dentist suggested it to you, that should be a warning sign.
Gold bugs had long been a staple for the religious right and the super conservative crowd. Its always been a good idea to have at least 10% of your investments in gold, as a hedge. However, betting that gold is a natural hedge against long stock positions, is a spread that worked well until it didn’t. It isn’t working now. If people have this spread on thinking that they are doing some sophisticated arbitrage that they can brag to their family about at holiday dinners.
The fact is, however, that that spread, which LOGICALLY you think should work beautifully, is now causing a blood letting on both sides. Instead of having the two balance each other out, you have two equally risky bets on. Not a good position to find yourself.
Bottom line, Gold is in an uptrend. That is true if you look at the charts. But we are also one month removed from record highs. Most people are long for the wrong reasons. These weak longs are going to have to be squeezed out. That’s what markets do. If gold breaks to 1577-1540, that will be the range to look at putting on fresh new longs. Right now we are trading at 1700.
As of this writing, it seems as if the Greek politicians are going to let the mob rule. In other words, they are going to put the austerity referendum to their people.
That way, when the country collapses, the politicians can have cover by saying “Oh, but it was the will of the people.”. We are shaping up for some more insanely volatile trade.
For Dow Futures: Support on this sell off comes in at 11,506 and then 11,282. 11,282 would be a 50% retracement of the 1900 point rally we just had in the past 3 weeks.
October saw the best one month performance since 1974 in the Dow. Why couldn’t we have a horrendous correction to punish all the longs who jumped back in trying to catch the wave higher?
Be smart. Use your stops. An opinion is only worth while if it makes you money. Remember, trading successfully is bout making money period. If you have a need to be “right” all the time in your analysis, you won’t last very long. 1) have an opinion 2) manage that opinion 3) Trading is a business to make money. If you are doing it so you have something to brag about to your dentist or to your in-laws at Thanksgiving dinner;.. you’re on the road to the house of pain, and the gas pedal is flat on the floor.
CER