Originally published by Chamber of Merchants
What a dramatic title for this report , ” Chaos “.
But chaos is only chaos from the perspective of those who were unprepared. If you expect it, it’s called Volatility.
Imagine a market without volatility: there would be no swings in price, no opportunity for profit, simply because everyone would agree on all prices at all times. Additionally, a market without volatility implies that everyone has access to the same information. That means we all base all our investments on the same conclusions. A market that has no volatility implies that no one is really making any profit in the short run. In the same breath, no one is incurring a loss in the short run.
It may seem like this sometimes when we read reports of the market making higher highs, and everyone is on the same train going in the same direction: up.
This is not reality. A Merchant looks deeper into the global stage and focuses on the horizon.
“There where fleeting silhouettes appear,
Where hearts are lured and caused to endear,
Where dust blows across as fortunes are made,
The whispers linger of songs once obeyed,
In the mists of doubt, darkness and fear,
Where lights are dim and danger is near,
On the horizon we peer deeper into the depth,
Looking past days that others forget,
Where chaos destroys and creates in the shadows,
Where children don’t tread in fear of unknown meadows,
Ever closer the Merchant wanders,
To reap what is sown in the horizon of wonders.”
Summary
Friday marked a date of strange events that threw the markets into different directions.
The last hour of ASX trading looked bleak for almost all sectors. The stock market was down, seeing huge volumes of funds being withdrawn. The miners in my portfolio, in small volumes, were being sold lower and lower.
Then, out of the blue, the last 30 minutes gave way to a sudden and strong buy in the ASX All Ordinaries Gold.
ASX All Ordinaries Gold
That’s odd. Right?
Continuing through the day we saw uncertainty in the markets and then the USA economic indicators were revealed.
We had the amazing, the stellar, the awe inspiring GDP from the USA. 2.9% against the expected 2.5% and better than last quarter’s 1.4%. (keep in mind this will definitely be revised down in the next quarter as its based on a set of convenient assumptions for which the actual figures are not yet available).
This sent the Dollar …almost nowhere while immediately Gold plunged from $1269 to $1265, $1263…$1263…$1263…$1263.
The most unnatural price action I’ve seen in a long time.
The Gold price should have at least dropped down to $1250 or lower, given the increased probability of a rate hike.
Yet, there were large, open hands that grabbed up every short sell, every stop loss, every panic sale possible and $1263 remained unbroken. In fact, shortly afterwards gold shot up to $1274 as short sellers depleted and closed their positions. It could be that with the market taking the Fed more seriously on the rate hike bet, that the stock crashes of January are coming back to memory, making the leap for gold all the easier. (I think Gold’s strength was planned a long time ago. It’s not a reaction or response. Banks made a heck of a lot of money just 10 years ago. I think they’re ready for seconds.)
In fact, Gold hit $1283.65 last night. It’s not in the Chamber of Merchants video because… I fell at asleep at the screen.
Yes, Patrons: Merchants, amazingly, also need sleep. I’m human, just like you. After a long day and dedicating my late night hours to your insight and education, I drifted into slumber at the keyboard and awoke to this: Gold had reached $1283:
Simultaneously the Dollar sold off:
The reason?
Hillary, Hillary, Hillary (or so we believe)
An exogenous factor involving the FBI, Hillary and her emails.
Three hours before the close of trading, the FBI reported that it is re-opening the investigation into Hillary Clinton based on new evidence.
(Suspicious timing, 11 day’s till the election…but perhaps throwing her under the bus was the plan all along? Sure makes the markets more volatile).
The market was previously very secure with a Clinton lead in the polls and did not react well to the revelation that the Democratic Nominee was again under investigation:
One can see that the PPT came to the rescue. But from the previous Dollar graph one can see funds exiting the Dollar.
In my previous post I mentioned that the market will go upside down. We’re about to see that go down when Asia and Europe markets open and have the opportunity to move their capital around. It will be a risk-off situation I expect, with the Yen, Gold and Euro experiencing a surge.
Blaming Hillary too basic for you?
I agree. Gold was capped at $1263 and $1275 before the news broke. When it did it made it to $1280+ then pulled back again to $1275. The Powers that be have a different timing for the direction of Gold.
Big Picture for a Gold Bull Market
If $1246 was the lowest for the year then there will be “scenarios” unfolding which I believe will lead to the following 3 possible paths for the price of Gold:
Subdued Bull
Aggressive Gold Bull
Parabolic Gold Bull
Why three paths?
Because Smart money was so smart that it’s impossible to predict which channel will be followed. It may even a combination of all 3. You might think your selling at the top of the subdued bull channel, then the price shoots further to the parabolic channel. It’s going to be a bumpy right and not easy to trade. We’ll need more indicators, a geopolitical outlook and a Merchant’s outlook to navigate.
On the other hand, one can hold for the next 4 years and still make an absolute fortune on any of these gold channels.
Let’s check the long term Cloud Balance Chart for Gold:
16 Year Cloud Balance Chart Gold
Conclusion
To me, it’s official. There is no free market at the moment with regard to currencies, stock markets or gold. Does that mean we can’t position and profit? Of course not.
A Merchant needs to overcome his/her own weaknesses and lack of perspective. It’s not you vs the market, it’s you vs you.
A Merchant keeps a higher level of thinking built upon the foundation of the bigger picture.
Think about it: I know of many investors that sold this week because of the dip in their Gold share prices. But hang on: We’re $30 higher now than the $1246 low. So why sell now? Ah. Emotions. Then maybe the market isn’t for you. But if you believe you can overcome yourself, then you would realise that Gold appears to be having a sneaky rally. Check out that post.
We were at the $1240’s in Gold, then the $1250’s, then $1260’s, now the $1270’s… Yet I still see many traders waiting for the signal for a clear entry. Maybe that signal will be when we’re at $1320 heading into $1350? Perhaps. Each to his own.
However, a Merchant buys at a suitable buffered level and stays focused on what the price will likely be.
Trying to time a perfect entry most of the time just caused me frustration and anguish. Drawdowns I can handle. But suffering from analysis paralysis is a good way to not make any money.
For me, I’m sitting tight with no intention of an exit until we hit $1370-$1400+ in gold. This should be within the next 1-2 months if the charts can be followed. I am keen on seeing the reaction across Australasia: Expect Red due to the increased uncertainty of a Trump victory (trump hates the TPP trade agreement which Asia really desires.)
Remember, expect volatility and you’ll avoid chaos.
That’s it.
I’m going to catch up on some sleep or watch Netflix (NASDAQ:NFLX). I’ll decide when I get to the lounge.
Thank you all for the continued support.