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

@EUROPEFAIL

                         What He Sees & Hears Would Shock You

Back in the day before electronic trading, when trading pits were all the rage and people jammed the exchange gallery all day long to watch us act like chimps in heat, the things that really mattered were often ignored and unseen by most traders. It’s what we don’t know that is our biggest problem.

Greece is in the Euro; Greece is leaving the Euro. Greece has money; Greece has no money. Europe is doomed; Europe will survive and later prosper. Banks are bankrupt and doomed to close; we need banks to facilitate commerce. Guess what? It doesn’t matter.

“Only the fly knows what’s really going on, and he ain’t sayin’.”

Buying/selling based on news flow will put you in the padded room quicker than being a chaperone in a room full of teenage girls. The same news that takes [pick your market] up, two weeks later takes it down. You tune in to your favorite “Money Honey” on CNBC or Bloomberg to get the low down on what’s going on and all you get are shills talking their position.

There are bull markets and then there are bear markets. Right now, gold is in a bear market. Sorry if that offends you if you are a “gold bug”, but it simply is the truth. Maybe tomorrow it starts the next leg up, or maybe it takes another 5 years to get back over 1800. I dunno and neither does anybody else.

The best simple advice, as a trader, I can give somebody who wants to trade can be summed up in what I read yesterday on Zero Hedge [in mother approved language of course]: “If you are going to buy the dip, you better be willing to sell the rip.”

Masters of the Universe, hedge fund traders and managers, and large spec retail accounts often mistake their opinions as market facts; next thing you know they are OOB [out of business]. Price means nothing; volatility means everything.

All that matters is the flow of money into and out of a market. You have to be early to every move to get the prices you want getting in, and you have to be willing to leave money on the table on the way out; volatility will hopefully take care of the rest. Reaching for that last dime will kill you.

In bull markets, it is the sudden drops that keep you from getting long; in bear markets it’s the explosive rallies that hurt your short positions by forcing you out. I can give you 5 reasons gold has to go higher; once you absorb this I can give you 5 reasons gold has to go lower. What do you do now?

Understanding money flows makes trading simple; I said simple, not easy.

Have a good day everyone.

-vegas

CHANGE YOUR HEART = CHANGE YOUR LIFE

                                            A Traders Heart

Any trader that says he has never had a losing trade is a liar. Pure. Simple. End. Of. Story.

Especially for newer traders, with any loss comes that sinking feeling of failure. It’s personal and you flat out failed. Is it just the loss of money, or is there more to this equation?

                   Gold Went Lower Because Of My Long Position

Insecurity!

There, I said it for you to ponder and deny. All those feelings and emotions that come welling up after a loss come from insecurity. From yesterday’s post, I mentioned “Clarity of Purpose”. Well champ, you don’t have it.

No matter what it was that got you to make the trade, your heart wasn’t in it. There was no “Clarity of Purpose” to the trade. Now that it is over, and the loss booked, you beat yourself up because you feel like a chump.

                                 Because It’s Important To You

If you are going to trade, you need a plan; and no, watching CNBC and waiting for some pundit to make a recommendation is NOT a plan.

You need a change of heart. You need to believe in something and stick with it. The question always is and always will be, can you do it? Can you follow a plan and stick with it?

It took me a long time to develop “The Vegas BFSG Algorithm”. There were so many things I had to figure out. I started out with the broadest concepts and then worked lower from this hierarchy. I hit roadblock after roadblock and many times initially thought it was unsolvable.

There were thousands of hours of research and logic experiments followed by the inevitable “what if” questions that always are present. For months, I spent every waking moment off the trading floor putting the pieces together.

While the effort in putting the algorithm together was immense, the real effort came when I was finished and ready to trade it!

It took me 3 MONTHS looking at it every day to finally follow it. I would get a buy signal, and my guts were screaming, “BUY? Ohhhh boy, I don’t know about that! You see, my heart wasn’t in it. I didn’t really believe it.

                                                 Just Do It

When I let my pride go by the wayside and gave upTHINKING and CHANGED MY HEART TO JUST FOLLOW IT, MY LIFE CHANGED.

Change your heart and you change your financial future.

Today’s Action & Wrap Up

We came into today’s gold market action in “neutral mode”. Meaning we are sitting on our hands and doing nothing until we get a signal. And by looking at the overnight action in Asia and in Europe, it’s nothing but chop-chop with no real market activity anywhere. Now, how “smart” is the algo to keep you out of this?

With only a couple of hours to go for the day to initiate a new position, and the algo looking decidedly in neutral, we are taking no trades for the day and will await the next signal. So, $ 0.00 / oz. for the day.

Have a good day everyone.

-vegas

INFORMATION THEORY & TRADING: YOUR GUIDE TO WEALTH

                                   When Information Goes Bad

Markets are about information. We get bombarded every business day with millions of bits of information; almost all of it is useless. If you watch CNBC or Bloomberg every day looking for that tidbit of info that is going to make you money, then you are the chump at the poker table.

                         Bert Schools vegas on Information Theory

                         “Hey kid, follow me.”

When I had let it be known to the head huckster, aka the branch manager, that I wasn’t going to be doing stocks any longer, and that commodities were my future, he moved my desk over next to Bert. I’m in the fortress city!!

At the time, I knew that Bert was extremely bullish on lumber prices, but what I didn’t know was that he and his managed accounts were long about 700 contracts of lumber futures that he had accumulated over the previous 7 or 8 days.

When I came into the office that day, things were already buzzing. He pulled me aside and said, “Watch and learn today kid.” I knew this was code for shut up, and keep your eyes and ears open.

Lumber opened limit up. At this point, Bert and the boys were up about $5 million. Somebody yells across the bullpen at Bert, and he raises his hand to stop, as if to say, “Ain’t got time now, go away.”

There are about 10 people around our desks, not moving or saying anything. Bert is staring at his quote machine intently. He screams for the order clerk to come to his desk. She gets there to hear him say to her, “Sell 100 FOK [fill entire order or kill it] at limit up, when I tell you to.” She fills out the order ticket and starts to walk away. Bert stops her and says, “Get an order ticket ready to sell 700 at the market.” She fills that one out also and walks away.

I’m sitting there stunned. Stuff is limit up man, what are you doing, I’m saying to myself? Prices obviously got a long way to go on the upside before this move is over.

Half an hour goes by; then an hour. Bert looks like a statute standing at his desk, eyes intently staring, first at the commodities tape, then at his quote machine. Suddenly he shouts to the commodities clerk, “Put the FOK order in!” She yells back about 10 seconds later, “OK, it’s in!”

About 20 seconds later she yells back to him, “ENTIRE ORDER NOT FILLED, IT’S KILLED!”

                   ATTENTION LUMBER PIT TRADERS:

                   IF YOU DON’T KNOW BERT, YOU SOON WILL

Bert immediately runs from his desk to the commodities clerk’s order desk, yelling as he goes, “SELL 700 AT THE MARKET NOW! NOW! GO, DO IT NOW!”

I see this, and I’m about to wet myself. I’m looking at him and the commodities tape; back and forth. Lumber stays limit up and then starts to back off about $2 maybe $ 1.50 and then goes back up to limit up. Bert sees this and starts to giggle. He knows.

Bert goes back to his desk, sits down, and asks me to get him a cup of coffee. “Sure man, anything you want.” He’s relaxed now. About 10 minutes later he gets his fills from the floor, and adding up everything, he and his buds are up about $5.1 million.

ONE HOUR LATER, LUMBER IS LOCKED LIMIT DOWN!!

I still can’t adequately describe, all these succeeding years later, the emotions that ran through me watching this unfold on that day. I remember asking him how he knew, and what his response was. “Conference room, tomorrow morning 8:00 AM. Explain what I did and why I did it. You got the rest of the day to figure it out. Isn’t that hard really. Gotta go now. Don’t be late!” He then walks out of the office.

I sit there the rest of the day, and into the night. When I get home I can’t sleep. I’m putting the pieces together, retracing things that I saw and heard. Slowly, over the hours I get it.

I get in the next morning, and Bert is sitting there waiting for me and he says, “So, what ya got for me?”

“Bert, how many more FOK orders were you willing to put in if that first one had gotten filled all at limit up?”

Bert smiles, takes a couple of seconds and then responds, “You got it kid. Now, let’s go trade the day.”

Bert knew the limit up opening was exhaustion. He used the first FOK order as bait. He wanted to see if it was filled. By not getting it filled, he knew the limit up was weak. This info told him he had to act fast to be the first to start selling before everybody else figured it out. That first break off of limit up was his order. When it went back up, he knew from that first FOK that got killed that it would not last long at the limit up price. Essentially, those fills were the last ones to the party and were now going to be trapped at the highs.

Welcome to the PhD. Program in trading.

INFORMATION THEORY = ACTION + INFORMATION +MORE ACTION = MONEY IN THE BANK. Class dismissed.

                              It's All Coded In For You To Profit

“The Vegas BFSG Algorithm” has 8 specific pieces of information theory coded into it IN REAL TIME. Is it infallible? Of course not; absolutely nothing is. The edge is in the probability distribution of being at or near the high or low of the move and therefore getting good prices and fills and booking profits. I don’t care about buying the low and selling the high. What I care about is when I’m long it goes up AND I GET OUT NEAR THE END OF THE MOVE, and when I am short it goes down AND I GET OUT NEAR THE END OF THE MOVE. Period. End. Of. Story.

Today’s Price Action

We entered today’s trading action in “buy mode” from the algorithm. At 1:15 AM [Chicago time] we got a buy signal at around 1707. A couple of hours later we got a confirmation sell at 1716. Net gain for the day of $ 9.00 / oz.

Ka-Ching!

As a side note, there was a fantastic move in US crude oil today and the algo picked it up perfectly. To those of you trading crude, congrats!

Have a good day everybody,

-vegas