Tuesday, February 21, 2012


                             Sometimes It’s Not What You Think

I’m concerned about the way gold is trading. What we are seeing now, in the marketplace, is not normal trading behavior. There are cracks in the process of trading.

On the surface, everything seems relatively normal; aside from yesterdays Holiday range, volatility in the daily range is only slightly lower than it was in Q3 and Q4 2011. What is radically different is how these daily ranges are being made.

Again today, we have 4 5M candlesticks that represent about 50% of the days range; including the let’s-go-$7-in-3-seconds candlestick at the 7:20 AM U.S. open. This type of trading activity actually withdraws liquidity from the marketplace, as market players then choose to “not play”.

What can help you can most certainly hurt you depending on the day. Gone so far in 2012 is the ebb and flow of a normal marketplace. And make no mistake about it: this is not something that is in your favor as a retail trader.

How long does this last?

I have no idea, but I do know this: be extra careful in how you approach and trade gold. This compression in intra day volatility, despite the spikes/drops, is having an adverse affect on the algorithm signals. This compression, then price explosion, followed by nothing makes following signals very difficult. The algorithm depends on normal ebb and flow with normal [or above normal] intra day volatility to be effective. So far in February, we aren’t seeing this.

I have much more on today’s trade at the PAMM webpage
[ ] posted between 2 PM and 4 PM Chicago time.

Have a good day everyone.


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