Wednesday, February 15, 2012


                                    Houston, We Got A Problem

 Did you realize that 80% of today’s gold range came on 3 five minute candlesticks spaced apart by 45 minutes to an hour? If gold were a person it would be making an appointment for stress counseling.

Again, like most days in February, the Asian session is completely dead, followed by a slow, lethargic European opening. By the time we get half way or better through the day, we are stuck with something around $8 - $11 daily range with no hint of what is to come.

Then, somebody panics, and we are off to the races in a spike [or drop] that convinces you we got a huge move ahead of us; errrrr, not so fast.

As I have written before, this is classic low volatility trading. Gold is behaving as if it doesn’t know who or what it is. It’s trying very hard to find a trend, it’s just not doing a very good job of it.

The algorithm will not do very well in guiding your trading when ranges are this tight and the market makes most of its daily move in a couple of candlesticks. In order to make the most of this kind of trading, you have to go in an entirely different direction; one that happens about 6% of all trading days.

You have to give up something in order to get a high return; we give up low volatility. Let’s hope gold finds itself and the shrink can help him interpret the manual and land the plane.

Have a good day everyone.


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