Friday, January 20, 2012


                              78’s From A Galaxy Far, Far Away

When I was a kid growing up in the 1960’s, about the only home entertainment was the stereo hi-fi [conveniently located in the TV console which weighed about a thousand pounds]. While pop culture revolved around the 45 RPM vinyl record, many older adults, and of course my parents, would have enough money to buy the 78 RPM albums.

For snickers and giggles, my friends and I would change the speeds of the hi-fi [when the old fogies weren’t home of course] so that the sounds would produce some wacky voices. We’d all laugh ourselves silly and tried to replicate their voices while we raided the frig for leftover goodies.

Of course, if you got caught by the old folks, they would whomp your backside and kick you out of the house so fast they coulda been ticketed for speeding.

One of my best friends growing up had parents who were considered “rich”, and in their house they had a Zenith color 27 inch TV with a hi-fi built into the console in cherry wood. Since it was sooooo “high-tech” at the time, it had a knob on the high-fi that allowed you to set the RPM’s for the records. So we would play 78 RPM albums at 97, or 50, maybe 70, and try and guess where the setting was.

                              You Darlings Want Some Cookies?

My friends Mom didn’t care we did this as long as we used his albums and not theirs, so we would play on this thing while his mom played the part of June Cleaver. Guess whose house we played at a lot?

With a lot more than snickers and giggles at stake today, traders face the same “game” when they assess volatility. At what point do you say it has changed? Where do you draw the line? Where are the DIP’s [discrete information packets]? In many respects, it is as subtle a process as guessing what RPM an album is playing at. Sure, when it sounds perfect you know it’s at 78, but can you tell me the RPM when Perry Como sounds like a slobbering drunk or a hyped up meth addict?

I bring up volatility a lot because it is far more important than most people realize. This silent killer is responsible for more account erosion than is widely recognized by the retail trading public. Why do you think the “big guys” can take advantage of the public over and over again, year after year?

Often times, the perception of change in gold [or other markets as well] volatility makes the market move. Of course, these perceptions are what make markets; not everybody has the same perception or expectations as the next trader. 

I have stressed many times the importance of keeping your eye on the daily range as an important indicator of volatility. I used to tell other traders in the pit that if you consistently gave me the days range [not prices] I would have all the money in the world within 2 months. This still holds true today.

So, when gold [or any other market] starts to “bang the drum”, give a good listen to where it’s at and what it is saying.

Today’s Action & Weekly wrap Up

Just a reminder, this is the last market day this section will appear on the website. All trades, with real prices, will be covered on my companion website which will be up and running sometime Sunday night. Look for a new link then.

We came into today’s action in “neutral mode”.

One of the things I really enjoy about having trading relationships with my algorithm traders is that they email me often and ask a gazillion questions. But not every day is it a one-way street, and yesterday many of you emailed me and said we weren’t in “buy mode” but in “neutral mode”. Guess what? They were right.

The confusion on my part came from answering a question on a hypothetical situation from an algo trader that I internally transferred into my head as the real deal. Now, it’s not that big of a deal since no matter what side of the trade you decide to take while in “neutral mode” [buy/sell] the worst you stand is a 50-50 split in the probability distribution for profitability. So, it’s not like I put myself behind the proverbial 8-ball looking for trouble.

Thanks go out to all of you that emailed me to let me know of “my mistake”. When I screw up, I will always be the first to admit it and give credit to those who brought me back to reality.

                        Jack Says, “Hey vegas, Where’s My Steak”?

The fact that I’m fighting a truly nasty bout of flu for the last 2 days really has nothing to do with it. I mean, it’s normal to see double and hear the dog talking to you in Spanish and wanting to know when the grilled steaks will be ready – right?

So, we came into today in “neutral mode”, looking for some volatility in todays trading to get the algorithm back into buy or sell mode. As I write this, the window for trading and initiating new positions is rapidly closing, so it is prudent to call it a week and go home. 

Besides, Jack is hungry and wants grilled steaks!

So, $ 0.00 / oz. gain for the day.

Weekly Wrap Up
Thursday                    $ 4.24
Friday                        $ 0.00

Total                          $ 4.24 / oz

Have a great weekend everyone!!


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