OCTOBER 1992

                                                All Aboard

We are fast approaching a moment in Forex trading that can only be described with history.

As we enter my hot tub time machine, I’m setting the dial for October 1992. Let’s review the facts shall we? The British Pound [GBPUSD] is north of 2.00; George Soros is long D-Marks and short the Pound in such large quantities that the Bank of England makes a request to him to stop shorting their currency.

When the Brits decide they don’t want to be a part of the EU, the Pound plunges; 3 days later it’s trading at 1.40. Up until now, this is the moment in history that can best be described as a “nuclear moment” for major currency pairs; a 60 handle drop worth $60,000 on a 1 lot.

Of course, we now know that George had inside information from the Chancellor of the Exchequer that Britain had absolutely no intention of joining the EU currency, but in Forex trading the only rule is there are no rules. A cool $6 billion in profits; but I digress…

We all know politicians lie; yesterday I read over at Zero Hedge how the police in Greece are urging people to leave their money in Greek banks and not to participate in a classic run on said banks. After all, it’s a safety issue don’t-cha-know? [Excuse me I have to puke … OK, better now.]

Everybody should know what this means; collapse is imminent. Sometime, over the next 10 weekends, Greece will get kicked out leave the EURUSD; it will happen over a weekend. You wake up Monday morning and there is a new reality from Sunday night. So, which weekend and what exit scenario?

Our pals over at MS are telling muppets clients that it could get as ugly as 0.80 on the Euro under 1 of 4 scenarios they envision for the Greek exit [Grexit]. That, my dear readers, would be an approximate 45 handle haircut, and eclipse that long forgotten Pound episode from ’92 [forgotten except by those who lived it]. Fortunes made, fortunes lost.

So where does this leave gold?

I have a very hard time, after seeing the Euro slaughtered along with equity markets, seeing gold rally into this. I don’t know how the smartest-guys-in-the-room stop a deflationary collapse like this. Sure, the policy response will be to print untold trillions, thus setting the stage for the eventual hyper-inflation collapse, but the initial knee-jerk reaction is likely to be many dollars / oz. to the downside.

And every Sunday afternoon, when Forex reopens in New Zealand from the weekend, do we get any relief rally when we come to find out this wasn’t the weekend for Grexit? How many weekends do you go home short, only to find out you got sandbagged again, and get to buy it higher on the open? Nothing is a slam dunk here.

But what if everybody is wrong here on the catastrophe? If they happen to get it right, and kick Greece out the right way, wouldn’t that be uber-bullish for the Euro? How about a 10 handle higher open with the Gypsy’s out of the way? What would a $100 / oz higher open in gold do to your juices? Let me repeat: nothing is a slam dunk here; nothing.

But whatever weekend it occurs, and the inevitable rioting and chaos that follow, and you’re sitting comfortably in your easy chair, just remember this: you are looking at the future of Amerika.

“Thank you politicians.”

Meanwhile …. It’s the weekend and we need a chuckle. Without further ado …

 Have a good weekend everyone.

-vegas

QE WHERE ARE YOU?

                                      Gold Trading Directions

Just a friendly reminder from our pals at JPM that the rock needs to be rolled up the hill one more time; in a research note today they are now predicting more QE from the ECB at the June and July monetary meetings with a cut in rates in September.

So, after a $40 rally off the lows, muppets clients now have an official reason to buy gold at today’s highs near 1577. Maybe some day the public wakes up, but I doubt it; after all, these are the smartest guys in the room remember? That the market will undoubtedly back off from here on “profit taking” [thank you CNBC money honeys] isn’t anything to worry about. Neither is the probable fact your investment adviser sold the market aggressively in the 1575-ish area while you were buying.

“Hey man, it’s just a coincidence.”

So, we now have QE baked into the gold cake not only from the Fed, but now from the ECB as well. Super; when they don’t deliver what then? Who is left to buy? Even if they deliver, if we are still in this price area of 1550 – 1600, who is going to take the lead and take on the Central Planners above 1630?

One thing I am fairly certain of is the desire, on the part of Chalky Soetero and his pals, to keep gold out of the news as election season heats up by the day and week. No way do they want the sheeple people of Amerika to wonder why gold is rising? They might get ideas.

On  the currency front, if it’s daylight in Europe, some politician is lying and desperately trying to convince someone, anyone, that Plan G will work [even though the trial balloons of Plan A-F were dismal in approach and can’t work]. We will get fireworks on the upside as over leveraged shorts will bail in a panic [like today for instance] but the big money knows Europe and the EURUSD are toast.

It isn’t a question of if, it’s only a matter of when; what weekend do they announce Greece is gone out of the Euro? Come every Sunday afternoon from here on out, every money manager on the planet will be glued to the screen to see what’s happening at the open in New Zealand.

And lest you think it’s only Greece, the fellas in Spain and Italy will be watching very closely to evaluate their exit options as well. Forget the politicos; if there lips are moving they are lying.

Have a good day everyone.

-vegas

WHEN GOOD NEWS IS TERRIBLE

                                         Take Notice Markets

All it took was a fantasy land slightly better housing number and you could here the QE3 air come out of the market balloon. Perceptions are everything; that and the fact Europe becomes more desperate and broken every day.

Catching a falling knife is always difficult and most retail specs can expect very bloody fingers for their efforts; the action below 1545 in gold was just brutal in terms of price change. So, here we are at the 1530 -1540 area as I write; remember 1599 Mrs. Watanabe? You know, rock up the hill, buy the dip sell the rip? I’m wondering where the remaining longs have their collective stops: 1520, 1500 maybe?

Any day the market is open seems like a good day to sell EURUSD. The root of the problem in Europe is that every politician over there has squandered their collective credibility over the last year and a half by bold-faced lying about the problem.

In a nutshell: when you loan money to deadbeats, don’t expect it back – EVER!

“I give you extra 1% - how that sound German swine?”

“Sure, here’s another €5 billion Euro’s.”

Every day they send out somebody to boldly lie where no man has gone before. How many times have one of them said everything is OK? If I had a nickel each time over the last 18 months, I could give the money to Greece and the problem would be solved!

Really, the whole point in having the Euro slime talk is to buy time and start short covering rallies that the big money can sell. With record shorts in the EURUSD [about 22 billion notational] all it takes is a small spark anywhere near the close and we start rallying like a dry Christmas tree on fire.

It will be interesting to see if gold can hold 1500. If it can’t I think it’s going to be an ugly, ugly affair going forward. I’m just going to throw this idea out there for you perma-bulls in gold to ponder. What if the gold market is factoring in a Romney win over Chalky Soetero and both houses of Congress are Republican? What if they slash taxes, let loose the energy industry, and balance the budget? Up until now, gold has been up 11 straight years; if that scenario plays out gold ain’t gonna be anywhere near 1500.

Have a good day everyone.

-vegas

MICROSECOND TRADING: TUESDAY EDITION

                                         Out In Force Today

Another day where the Central Planners were out in force in the gold market. Not content to gobsmack it down $20 in Asia and early Europe, the rock got rolled back up the hill for another move down.

The problem with piggy-backing them is that they care not about profits/losses; they only care about getting the price down. If they are $10 or $20 [or even more] early they don’t care; you and I should.

Since last week you have to be blind and/or stupid not to be able to see them in the market above 1580. It slowly climbs and then BOOOOOOM! Down $2 or more in a second or two; climb again rinse and repeat. Cover under 1580 and start fresh again.

“Errr, we only represent customers and do no proprietary trading”

“Yea, sure; by the way is my check in the mail?”

Gold continues to be plagued by extremely sharp moves both up and down in a fraction of a second. You get yourself on the wrong side of one of these, and it isn’t a very easy task to then try and make it back. What goes out of your pocket in a heartbeat might take many hours or even days to get back, and that’s if you are lucky.

This is what I call a lack of “trader volatility”; multiple trend moves within the same day in the same direction. Without it you have almost no chance of making losses back during the day if you get on the wrong side of a trade. What we get now are micro-bursts; gold pops up $5 in 3 seconds, spends the next 3 hours going up $2, and then drops $6 in 10 minutes. Very tough trading scenario.

Still, I think what will drive the market until the next Fed meeting [and Greek elections] will be one of perceptions about QE3; will they or won’t they? Thing is, this is about there last chance to do anything before the election and make it count [if it works, which is a big if]. So, the market is particularly interested to see what Weimar Ben has up his sleeve.

Any thoughts the Cntrl-P button isn’t pushed and it won’t be a pretty picture for gold.

Have a good day everyone.

-vegas

STOP HUNT MONDAY

                              Some Days You Feel Like The Fox

Ever since gold rallied above 1580 the other day, the “nibble nibble BOOM!” orders from the Central Planners have been hot and heavy. The manipulations can especially be seen in the last 30-60 seconds of most 5M candlesticks; only somebody who could care less about price would consistently allow Blythe and her crew to butcher their orders in this way.

I don’t think I can ever remember another time when price, from second to second, has been so chaotic and disjointed in gold. Watching prices, you have no idea if the next second is going to quote a bid anywhere near where it was a second earlier. What looks good one second literally stinks the next.

“Run little fox, run!”

Overnight, as if on cue, the “Lemmings in Asia” took the market up to the 1599 level. I guess when you sell it from 1560 all the way down to 1528 the previous 2 days, 1599 looks like a bargain buy.

“Mrs. Wantanabe, please go find a job will ya?”

Over in the currency arena, we got the “Flying Wedge of Death” going on in some of the majors, particularly EURUSD. We got record short positions in the Euro, so until some of these weak hands get shaken out, the market is subject to quick, sharp, and vicious short covering rallies, especially in the off hours and near the European close [9:30 A.M. – 10;30 A.M. Chicago time].

After the $140 sell off [1670 – 1530] in gold, we’ve now rallied back half-way to just in front of 1600. I would expect a few attempts at 1600, but ultimately I think the market needs to step back and do some backing and filling below 1580 before it can really go higher.

Ultimately, it’s going to be the Fed June Meeting that holds the short-term key for gold prices. If Weimar Ben throws cold water on further QE, price action is going to get ugly quick. Until then, prices probably will be contained in the 1550 – 1610 area; price will move on perceptions of change in the QE dynamic.

Really, what choice do they have but to print?

Have a good day everyone.

-vegas

SPECIAL ANNOUNCEMENT

                               Somehow We Always Knew This

I have decided to make a few cosmetic changes to the website, and to announce that I will no longer be making available to the public my algorithm. I have made some recent updates and revisions that I think add significant value to timing moves in the marketplace. It’s as simple as this: I don’t want others front-running me or stepping in front of me anticipating moves and skewing the price. From here on out, only my PAMM clients get to take advantage of the algorithm.

In addition, I’ll be introducing Twitter and some podcasting in the next few weeks. My new twitter handle is @vegasxau [and you can follow now if you wish] and I’ll be sending out through the day and night interesting things I see that either are trading related or something I think my subscribers will interested in; I’m hoping to have a lot of fun with it.

I’ll also be releasing some MP3 podcasts probably twice per week; once on Wednesday and once over the weekend. People always tell me they would rather listen to me talk about markets than read about markets; OK, I’m game and soon I’ll be doing this as well. And again, if we can’t have some fun with this what’s the point?

As always, my hope is to have some fun and also deliver some value to your trading. Questions and comments are always welcome.

-vegas

ROLL ROCK UP HILL REDUX

                                       Attention Gold Buyers

I’ve had this nightmare dream before; I’m driving along and everything’s fine and then out-of-the-blue the rocks come falling down crushing my car and me inside. You wake up and realize it ain’t happenin’, but nonetheless for a few seconds it’s a little disturbing.

How many times have we seen this scenario: sharp rally, crush shorts, turn common tech indicators bullish, get public long [again] at or near the top within 100 hours?

As the world falls apart and specifically Europe implodes, the smartest people in the room have just bet, in the last 48 hours, that Weimar Ben will hit the Cntrl-P button over at the Mariner Eccles building and start QE3 in June. If we don’t get it, a whole lot of people are gonna be trapped inside my dream.

I’m going to go out on the proverbial prediction limb here.

I think we have seen the low in gold up and until the Fed meeting in June. I can see about 1550-1557 on the low side and maybe 1610-1625 on the upside until then. But here’s the rub; if we don’t get QE3 from the Fed in June, and 1530 -1525 subsequently gets taken out, we are headed for a major debacle in price on the downside. And with that comes many months of price congestion and basing before gold can ever hope to go higher.

Around the 1580 level and higher today I have seen the “nibble nibble BOOM!!” phenomena from the Central Planners. There’s no doubt in my mind they were heavy handed in the market today. What do you suppose that means?

While the entire world goes ga-ga over the FaceBook IPO today [expecially California State Tax Apparatchiks], Greece is toast, Spain implodes, and European GDP is falling rapidly. Granted we needed some kind of rally because so many people have piled into the short side of gold.

[Here’s a thought; what if FaceBook opens higher and closes lower? What happens then?]

But remember this: in a bear market [not just gold but any market] the rallies are killer – they come out of nowhere and they are vicious – and they convince a whole lot of traders that the trend has just changed and now we can pile into the long side of the trade. If you look at a daily chart of gold this is the type of action we have seen since 1800.

Ultimately, after the stupid money has piled into the wrong side, price rolls over and we get the rinse & repeat cycle we have seen ad infinitum nauseum  since last Fall; buy the rally get stopped out [pick number of days here ___ ] later.

You can rationalize a lot of things, but you can’t ignore the math; Europe is complete toast and the U.S. [add Japan too] is next. Stocks are so overvalued, pumped up via the Fed to get Chalky Soetero reelected, and give the illusion that things are just fine.

We have started to see stocks roll over world-wide; practically every major stock index is lower on the year. When the complete “risk off” comes, just remember gold isn’t immune.

Meanwhile … Chuckle of the day before the weekend.

Have a good weekend everyone.

-vegas

Update 3:15PM Chicago Time

In case you were wondering why I have Friday rules, I present EURUSD as prima facie evidence of what the Central Planners can do when conditions are thin and stops are on the plate. At 2:00 P.M. we had a melt up stop hunt in the EURUSD of about 60 pips within a few minutes on zero news.

Whatever can make your weekend can destroy your weekend. I wonder how many Euro traders are crying in beer as I write; only it won’t just last a few minutes, it will be there all weekend into the open on Sunday night. Been there done that once in 1980; ain’t ever happened since.

Sometimes it may seem to those who are new to trading and creating wealth that my methods can be restrictive and that I may miss some profit opportunities for no apparent reason. Lesson #1; first do no harm, then make money. I rest my case.

The Dow 30 closed near the lows of the day as FaceBook closed at $38. Another pump and dump scam Ma & Pa Kettle will eventually lose money.

Over the weekend [probably Sunday] I’ll have a special post. Tune in for details.