There’s a decent triangle formation in Dec Gold. However, its dicey on the bottom. If you look at the trend line, a lot of technical traders got chopped up and head-faked with the settlement below that trend line. News flash. Technical trend lines don’t Always Work… That doesn’t mean they have no value, They simply give you milestones to step in and trade. Managing the trade after wards is the real key.
Wednesday a lot of technical traders sold gold against that trend line when we settled below it. Low an behold, we scream higher and chase those shorts out.
I have noticed (and I am sure you have too if you’ve been trading gold) that the hft guys are at play in this market. We’ve seen some violent moves, when big orders hit an illiquid market. It makes catching moves more difficult. The solution is to trade smaller and widen you stops. Also, when you have a winner, you CAN NOT let it turn into a loser. Follow those two disciplines and you might be ok. But realize , this is not an easy thing to do repeatedly over time. Manage your risk. Be selective in your trades. If you do not, you will die a death of a thousand cuts trying to play against hft traders.
That being said, look at the chart below. I would be trading against those two longer -term trend lines, looking for an impressive move higher or lower as we move towards the apex, which points towards the beginning of next year. For the next 8 weeks, this triangle will probably define December Gold’s trading range.
Moving on to the beans: SF had a 75 cent rally in 5 days. Today we pulled back to the 1/2 way point. I like buying here for a technical trade. Beans are over sold. Could they go lower? yup. So use your sell stops. Its just a counter trend buy.
finally on the Dow Index and S&P index. I can’t see any reason to fade this trend higher.
Til the end of the year money mangers who are long are going to add. Those that held too much cash are going to be adding to stock which have been winners. Remember those guys get paid to buy stocks. That’s in their job description. They are running equity funds, not hedge funds. That big money is going to have to keep buying stocks. I can’t tell you how many friends or clients are talking about the “wonderful profits” they have enjoyed in the Stock Market this year. That psychology is just getting started. Its certainly not as bad as it was back in 2000 with the Dot Com bubble. I can remember riding the train home , listening to construction guys and electricians working jobs in Chicago (making good $$ back then) talking about what stocks they liked.
We’re certainly not there yet, but there has been a general move towards people looking at “long term investing again”. Sadly, a lot of those folks looked like panicky traders back in 2009 and 2010 when the Dow was at 6500 and the S&P traded at 666.
Just food for thought.
If you are long stocks, the only strategy I like is having put options up under this market. When the correction comes (And it WILL) no one will get a heads up email 3 days before. I guarantee it.
with the Dow at 16000.. A 10% correction takes us down 1,600 pts. … A 20 % correction is 3,200 pts.
Why not spend $$ on puts to protect against that?
Worse case you lose the premium on your puts, and your stock portfolio continues to rally.
If you have puts on when the correction comes, they will be your insurance policy, paying off handsomely and it will make it easier to hang on to your stocks and not feel the need to panic.
Have a great weekend.
CER