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

MRS. WANTANABE PLEASE STOP TRADING

                                          Is She Hurting You?

And while she is blowing up the Japanese bond market, she ain’t exactly doing gold any favors either. Somebody at the Central Planning prop desk over at JPM has obviously forgotten to email me and let me know she is back in the market.

“Mrs. who?”

[For your personal education and amusement I introduce you to her famed exploits.]

 http://online.wsj.com/article/SB10001424052970204422404576594493550582376.html

http://ftalphaville.ft.com/blog/2011/10/27/713866/but-what-does-mrs-watanabe-think/

She hasn’t been this active since she got caught on the wrong side of the GBPJPY carry trade in 2008 [June 2008 GBPJPY about 215.00 – January 2009 GBPJPY about 120.00] and took a 40% + haircut on a ‘sure thing”.

Amazing how many sure things ain’t that sure.

Think back a second to the Asian trading session following the “Leap Year Massacre” in gold on February 29; which in about 4 hours gold tacked on about $40 / oz. in price [1685 to 1725] on a straight up bargain of a lifetime massive demand spike from Asia.

They should have used my advice from yesterday: “If you are gonna buy the dip, you better be willing to sell the rip.” Sadly, no can do and/or no wanna do. Why sell it higher when you can easily sell it lower later?

Subsequent sessions since then have seen gold stage some pretty good 2 and 3 day rallies, only to be crushed by the Central Planners. Undaunted, Mrs. Wantanabe bravely kept buying. Interesting thing happened though the third time gold came back to the 1630 area from loftier heights; Mrs. Wantanabe and her pals [affectionately dubbed the “Lemmings in Asia” by yours truly] started selling, and selling, and selling some more.

Which brings us to the present day $140 haircut ain’t-this-fun-waterfall in gold. Not interested in seeing the mistakes of the past repeated, most notably the above mentioned carry trade and multiple trading debacles in Spanish and Irish bonds, they simply are doing what every trader at some point has to do: puke.

                             Bullwinkle J. Moose Shows The Way

“Hey Rocky, watch me pull a rabbit out of my hat. Button up my sleeve ...”

We all know how that turns out.

Have a good day everyone.

-vegas

BUYERS ON STRIKE

                           That’s Right; We Ain’t Buyin’ Nuttin’

I know it’s hard, but imagine this for a moment; Greece is totally out of money! They got about € 1.98 in the bank [if it’s still open]. I mean, who could have seen this coming?

Tomorrow sees a Greek bond auction, and if this somehow gets undersubscribed and they can’t raise the necessary scratch to pay the bills, I’m sure all the public sector union thugs employees not getting paid, the 40 year old philosophy students not getting their University tuition, and the pensioners who see their monthly checks slashed,  won’t be a problem. Peace and love in Syntagma Square.

So, the only thing left to do in Europe is sell gold. Even the “Lemmings in Asia” have caught on to the scam game. Yes, Mrs. Watanabe and all her pals, who have been accumulating gold from the 1800’s, 1700’s, and 1600’s, are now bailing in the mid 1500’s. As predictable as they were going up, they don’t disappoint on the way down either; only, on the way down it happens a lot faster.

Not to be outdone, that stellar Wall Street firm Morgan Stanley is telling muppets clients today that gold is still a buy and that the future looks bright for the “barbarous relic”. Seems their prop desk has more proprietary selling to do.

We’re due here, in just about everything financial and especially gold, for a smart 2 or 3 day rally that takes prices back up some. Whenever it finally does happen, look for the rally to start sometime after the Crimex Comex closes for the day. After all, the dealers and Central Planners have to shove the rock back up the hill, in the least volatile time of the trading day, to get everybody else to buy it in “prime time”. Rinse and repeat.

Meanwhile, at JPM …….

                                             Ina Drew Is Gone

Somebody had to fall on the”It’s-my-fault-the-firm-lost-2-large-on-the-trade” sword; making a paltry $15 million per year I’m thinkin’ soup kitchen isn’t in her future. Perhaps there is a good job in Chalky Soetero’s administration somewhere; Treasury Department would be appropriate.

Have a good day everyone.

-vegas

A LINE IN THE SAND

                              I Bet He Loves To Trade Gold Too

It takes a brave soul to be long gold these days; you got the “Lemmings in Asia” throwing in the proverbial towel, a disintegrating Europe that sells everything, and of course the ever present Central Planners along with the JPM prop desk.

However, Vampire Squid [GS] is telling their Muppets that this is the time to buy gold.

[ http://www.zerohedge.com/news/goldman-sees-%E2%80%9Ccurrency-last-resort%E2%80%9D-15-1840oz-6-months]

Here’s my question: Is the recommendation for real, in order to really enrich clients, or is it a ploy to be on the sell side when the Muppets take their advice? Based on past history you would be better off running quickly from The Squid.

But has anything really changed to warrant a lower price in gold sub $1600? Me thinks not. As hard as it might be to get gold back over $1800, it might be even more difficult to get it lower than the $1550 area. Governments all over the world have the printing presses going full tilt, debasing currency on a monthly basis that 5 years ago you would have thought literally impossible.

I think you have to give gold the benefit of the doubt [buy breaks and be long sub $1600], up until the time it breaks [if it ever does] the $1550 area. It may be a tough hold, but fiat creation is everywhere and not going away. Anybody that thinks Europe or the U.S. will opt for “austerity” is nuts: they will print money until the revolution forces a change.

A definitive break of this area [by more than $10 or $20] and I think gold has some real problems going forward; not the least of which would be it would be lower on the year. What would real panic selling look like? You’ll find out if it goes lower on the year.

Have a good day everyone.

-vegas

HEY EUROPE SHUT UP

                                              Trader Manual

It seems like every day Europe sells everything in sight, then when they close at about 9:30 A.M. [Chicago time], as if somebody shuts the lights off, markets turn on a dime and rally like crazy into the close. Rinse and repeat almost every day.

It’s frustrating dealing with these European bozos on a constant basis. They skew gold, the currency pairs, and equity and bond markets; close them down and markets trade on a more normal basis. Why should today be any different?

I thought the “Lemmings in Asia” were a pain; they’re nothing compared to the unbridled selling of everything with a $ sign on it just so they can keep their bankrupt banks alive for another day.

If I could round up every politician, I’d line them all up against the wall and ………

Today we find out from the politicos that Greece has no money and maybe they shouldn’t get any more; gee, ya think? And Spain nationalized some banks; yea, that will solve the problems. Of course, this hammered gold and the currency pairs, and within minutes we were sharply higher. Seems somebody had to get the final sell stops below the market.

Go ahead, call me cynical, but the outright blatant manipulation going on is shocking to me. Sure, I have seen a lot of things in my trading career going back into the late 70’s, but I haven’t seen anything like this. It’s breathtaking and disturbing at the same time.

Have a good day everyone.

-vegas

MANIPULATION THEORY: PART I

                                          A Stain On Trading 

“Gosh vegas, is there really manipulation going on?”

For those of you still in denial, there isn’t anything I can do for you; you probably still believe in the tooth fairy.

I mentioned in an earlier post some of the hallmarks of successful manipulation. I’m going to address the 3^rd issue first: make sure the manipulation counts.

Aside from the front-running at the JPM proprietary trading desk [prop desk], which is another story for another day, you need a financial firm that can handle the orders and give you cover. What better firm than JPM, which continues unabated every single day violating CFTC position limits and is defendant in a number of Federal lawsuits alleging manipulation?

“Hey, you play ball, we make all these other problems go away; sound good to you guys?”

Ok, you now got the quid pro quo that allows you total access to the financial markets without revealing your identity. We let you front-run; we get anonymity.

“So sorry, we don’t comment on customer activity.”

Next on the list are the “wink wink nod nod” conversations and communications that don’t exist. This allows the front-running to be successful on JPM’s part because they trade in front of the orders and use the size of the manipulators orders to their advantage.

“C’mon man, there’s gotta be something in this for us?”

Besides that, they are privy to when the large sell orders are going to hit the market, so they can position themselves to cover short positions on the way down for their own account. This is borne out by CFTC COT data which shows “commercials” as the biggest buyers on big down days.

Gosh Mr. Regulator, it wasn’t us. Why, we were buying all day long. Anything else we can do to help?”

So, in effect they execute one order and the market does the rest. They get all the chartists and traders rushing in their orders to take advantage of the “new direction”, only they have been had. This explains why the “Lemmings in Asia” [LIA] have disappeared in the last 4 to 6 weeks; they’ve wised up. They now wait and buy the breaks.

Ask yourself this question: why do practically all of the big spikes and drops happen in the U.S. trading session? Easy peezee when you get what’s going on day to day.

This is the new paradigm for gold trading; manipulation on a scale that, up until now, is unprecedented. Get used to it, it’s only going to get worse and more blatant; all in the interests of national security or some such pap they will spin.

Why should you, as a trader, be allowed to profit off the government and their stupidity? I can see the puppets in the media spinning this already. Why not, Chalky Soetero has already declared war on oil traders?

I revised the algorithm to take advantage of these manipulations; it’s available free of charge for traders at the “Get It For Free” at the link.

Have a good day everyone.

-vegas

JUST ANOTHER MANIC MONDAY

                         Sometimes Things Aren’t What They Seem

News out of Europe over the weekend means just one thing; economic conditions, despite all the happy talk amongst the politicians, are deteriorating rapidly. Seems the spin among the elite isn’t quite the view the bond and equity markets share.

So of course, this all carries over into gold trading; only not quite what you would expect. Asia opened very quite and remained that way into the European session open. In about 32 hours of trading we still had about an $8 range. That all changed as Europe opened and gold went down $7 in 3 minutes [1640 to 1633].

“Wake up everybody!”

My first question is what happened to the “Lemmings in Asia”?

“You know guys, disappearing like this every day is as annoying as it was when you bid it up every day. Geeeeeeeeeesh, get some consistency will ya?”

Of course, it wouldn’t be a normal day if the Central Planners weren’t in the market. After all, who besides them would sell 300,000 oz. of gold at the market through JPM on a consistent basis and keep doing it?

But there are crosscurrents as well that are hurting gold: most notably forced sales by financial institutions that need cash to meet margin calls on their sovereign European debt. You can only carry toxic [name your favorite European destitute government here] debt for so long before you have to sell something to carry it with leveraged margin.

Gold goes from manic state to recovery state in a matter of seconds; rinse and repeat and you have a pretty good synopsis of the last 7 days of trading. Going forward, things are just gonna get crazier as the Fed releases minutes of their Tuesday/Wednesday meeting on Wednesday afternoon.

With stocks crapping out and breaking some widely viewed moving averages [most notably the 50 day simple MA], US bonds yielding record lows, and Spanish 10 year debt at or over 6% yield, the trade is begging for QE 3 from Weimar Ben on Wednesday. If we don’t get it, or get some hint of it to come, 1600 looks like it could get tested.

Make no mistake; the Fed has no choice but to print more money. Forget the spin and realize if they take away the party punch the equity markets are going to melt down in an election year.

“Yea, like that is going to happen.”

At some point here, sooner rather than later, gold is going to explode to the upside and the Central Planners will have nobody to blame but themselves. Even they will eventually run out of money and find themselves the “chump” at the poker table.

Have a good day everyone.

-vegas

THE GIG IS UP

                                           This IS Important

Sooner or later the beans had to be spilled. I mean, you can’t keep this stuff a secret forever can you?

I am referring of course to the blatant manipulation of gold led by the U.S. Government and their lapdog institutional hacks JP Morgan [JPM] & HSBC [HongKong & Shanghai Banking Corp].

Two excellent articles, yesterday and today, over at www.zerohedge.com prove my point. Below are the two links in case you missed them:

http://www.zerohedge.com/news/chris-martenson-explains-how-gold-manipulated-and-why-thats-okay#comment-2298764

http://www.zerohedge.com/news/paul-mylchreest-presents-various-visual-case-studies-gold-price-manipulation

Although I have known for years, and have witnessed first hand in the gold trading pit, the blatant manipulation of prices, I didn’t really know exactly the extent of the numbers.

In a nutshell, gold has risen approximately 590% in the last 11 years; if you had simply bought gold at the U.S. open and closed your position at the U.S. close of trading you would have lost 70% over this 11 year period.

In this same 11 period, if you had been long from the Asian open through the European session until the U.S. open AND then gotten short from the U.S. open until the close where you liquidated the short position, you would be up over 5,000% !!

How many of you knew this?

For me, it perfectly explains the “Lemmings in Asia” phenomena, and why my algorithm works so well the vast majority of the time gold rises. I will be the first to tell you, and I have said this in the algorithm manual, that my algorithm has a very definite long bias.

I get emails all the time asking me why I start trading gold at about 11 PM or Midnight [Chicago time]. This time is about half way through the Asian session and goes from there. And this data also helps explain why so many of the algorithm profits come in the early AM hours of the U.S. time zones.

The second document talks about the algorithms the government uses to initiate their manipulation. Fascinating stuff and I highly recommend you read both documents closely.

Both JPM & HSBC have historically held extremely large short positions in both silver and gold futures and options. They both regularly exceed speculative position limits established by the CFTC [that everybody else has to respect] but nothing is ever done about it. The end justifies the means when you are doing God’s work.

Have a good day everyone.

-vegas

THE WEASELS ARE IN CHARGE

                                   Add Dealers & Hedge Funds

If you have enough money, or more importantly can borrow any amount  you want from  the Fed at close to 0%, then you have not only the initiative but the means to shove markets wherever you want them.

At times you get caught the wrong way and get stung a little, but overall it’s a game that makes amounts of money an ordinary person would find unbelievable.

“Errr that shiny finance degree don’t mean crap here kid.”

“Sir, do you want me to do some kind of fundamental analysis on industrial demand and mine production?”

“What?? Hell no, we wouldn’t even know where to start. Sit back Jr. and watch me shove a pile of money into some stops!!”

“What’s a stop?”

And there you have it; in a nutshell that is the state of gold trading today.

Granted, there are the “Lemmings in Asia” who will buy every night of every day because they are super gold bugs, but for us traders the dealers, hedge funds, and banks are our greatest impediments to accumulating wealth.

The scam is easy to understand; you simply throw money at a market enough for it to move until you get it at a place where you reverse course. Rinse & repeat; count the money and pay bonuses.

The problem the gold market poses for a trader today is that you have no reference points for risk management. Since the melt-up on January 25, 2012, gold has lost its bearings as far as range and stop placement is concerned.

Add to this the continued criminal behavior of dealers, who jack spreads literally instantaneously and huge slippage if your order isn’t done right, and you have a trading scenario where nothing you use to gauge the market will make sense.

Elevator up; out the window on the way down. If your stop gets hit on the way so much the better. Having fun yet?

And what do you suppose the main purpose of Centrally Planned gold trading is?

Why of course it is to punish you for having the audacity of questioning the power elite by trying to take advantage of their disastrous monetary and fiscal policies.

And what better way to punish you than by having dozens of spikes/drops, $10 / oz. moves in 5 – 10 minutes, stop hunts, and reversals?

Most retail traders are like fish in a lake; bait the hook and throw it in the water and they will bite!

I’m not happy about these market conditions at the moment, but I know how to deal with it effectively. Have a plan, pick your spot [or spots], lower your volume to give you more flexibility, don’t place your stop where everybody else does, make your trade a “free trade” when available, and lastly at the very first sign of price reversal click the button and take the money.

Make them pay you, not the other way around.

Have a good weekend everyone.

-vegas

THE FLYING WEDGE OF DEATH

                            Kinda Like Trading Sometimes Isn’t It?

Over the last several weeks, I have either mentioned directly or indirectly the single biggest killer of trading accounts since stone-age Neanderthals traded Wooly Mammoth bones. I am of course referring to what I affectionately call “The Flying Wedge of Death.” [FWD]

Every single trading day of my life, since I started trading professionally back in the day, starts with a worry that today may be the day the FWD shows up and pays a visit. I have seen more traders destroyed by this than any other single market event.

Lately, meaning the last couple of months, the FWD has shown up more than usual, and so today I have decided to spell it out in more detail.

Below is today’s 5M candlestick of spot gold from about 1 A.M. to 11 A.M. [Chicago time]. The highlighted blue squares are new highs or new lows [or test of the low] for the approximate 10 hour period. The red trend line on either side forms “The Flying Wedge of Death.”

What makes this type of trading so hard, is the fact that you have two competing camps [bulls and bears] slugging it out via prices, and neither one is winning. You get caught up in this, and don’t recognize it for what it is, you run the very high risk of constantly losing trades and in the process watching your stops get hit and then reversing smartly.

You have a profit for about 10 seconds, and then the market reverses swiftly and goes to your stop. Having cleared out stops, and becoming convinced the market is now headed the other way, you flip from buy to sell [or vice versa] and within 15 – 30 minutes you get hit again. Rinse and repeat, and now you have real losses that have clocked your account by anywhere from 20% - 50%. Having fun yet?

So, how can we steer clear of this type of trading? What conditions exist that allow this type of trading?

Well, one never knows with 100% certainty, but my radar went up with the late after hours rally yesterday. Add to that the usual ‘Lemmings in Asia” a few hours later, and you just had a stealth rally of about $15 during the lightest volume part of the day.

What it means is that when the “meaty” part of the day commences [Hint: Europe & U.S. sessions] you’re going to have traders on both sides of the market who can’t wait to “take advantage” of their particular bullish or bearish view of the market. Welcome to “The Flying Wedge of Death”, where neither new highs or new lows will have any follow through and will swiftly reverse course to the middle range.

Of course, it is easy in hindsight to see this; not so easy as it unfolds in real time. When it ends, and one of the camps throws in the towel, you get what happened between 11:30 A.M. and 1:00 P.M.; a $20 straight up rally.

If you got chopped up in the FWD, you needed the $20 rally in 90 minutes to make back the money you lost in the previous 10 hours. No thanks.

If I were to place the algorithm over the above chart, extremely rapid price changes basically negate the effectiveness of the signals. In the 10 hour chart above, gold had 11 5m candlestick bars $3 or greater with only an approximate $12 range AT ITS WIDEST!

Given the above conditions, waiting for signals is not the way to go; you have to bale at the slightest hint of a price correction. Remember, you have the dealer spread to deal with along with slippage when they don’t really want to take the other side.

There were plenty of days on the trading floor where it felt like you couldn’t get an uptick to save your life. The market closed for the day and you would go home thinking gold was toast. You walk in the next day and it’s called $15 higher on the open, and you want to go out and stand blindfolded on the Eisenhower Expressway.

It happens, and what you have to do is not take it personally or think some higher life force sitting in the nearest galaxy is getting a big chuckle.

Going forward, given the fact the market is putting in moves in off hours, I may trade these hours. The downside of course is that you might be in a position for hours at a time if things slow down. If it happens, just deal with it.

I hope this helps some of you and that no matter if you use my algorithm or not, you can keep an eye out for this particular type of trouble.

Have a good day everyone.

-vegas

ANOTHER DAY TO REMEMBER

                                        Gold Did What Today?

It’s been a very long time since gold put in a reversal day after putting in a $30 / oz. range. “Ohhhhh, the humanity!”

This is of course the most despised day of the month. Not only do we have to put up with government lies regarding employment, we also got a shortened trading day. Besides the LIA’s [Lemmings in Asia] we put up with every day, now we got cross currents of a Friday to boot. Did I ever mention just how much I hate NFP Friday?

The algorithm actually gave a good buy signal on the move back up at 1685-1686. The problem is that this is about $10 off the low. After the buy signal, gold broke about $5 before starting a monstrous rally.

Those of you that have the algorithm know that it is pretty responsive on a short term basis. Using a 5M candlestick, the most responsive buy signals [when conditions are right] happen, the vast majority of the time, within $2 - $4 of the most current low [or the day’s low]. The other buy signal usually happens within $3 - $6 of the most current low [or the day’s low].

Conditions were right for the fastest buy signal and it was $10 off the low. When the other buy signal happened the market price was about $17 off the low. Considering we already had a $30 / oz. range in the books, if I buy it, where do I put my stop?

If I put the stop $15 under my buy, if it gets hit, now what do I do? The fact is it’s a Friday in the U.S. session and I now have a $15 / oz. loss; how do I make this back?

Sure, in hindsight, it’s easy to say just get long. But for every one day like this there are 9999 where you would be kicking yourself in the head. Remember, it’s a probability distribution you should care about..

Yea, I eventually got long and made a couple of bucks after a small retracement, but what I am most happy about today is 2 things; 1) the algorithm performed well, which is why I am back to normal trading Sunday night, and 2) another NFP day is over.

Have a good weekend everyone.

-vegas