Morning Gold Fix: September 2
Submitted courtesy of www.fmxconnect.com
This May Be the only chart that matters for Gold 2 Weeks From Now.
opening in Gold was suspicious, as it tracked stocks for a while. Seems
like the Risk-On crowd thought Gold was a “risk” asset, not a safety
asset. Oops, they were wrong. Bonds got hammered so maybe it was the
inflationistas out in force buying the beginning of the new Weimar
republic monetary system (free wheelbarrow with every 1 Milliard Marks).
Oops that didn’t work either. Smells a little toppy here, might be a
good play to short with a stop out on a gap higher. Or sell a rally as
it comes back into yesterday’s range. I’d buy calls if bullish, futures
seem prone to liquidity gaps.
Right now we are sitting on the
sidelines directionally. Yesterdays’ option activity corroborated
evidence of a transition point. Vol came in screaming bid like blow-off
tops often do, and then collapsed much more than it should have in the
sell-off. If you must trade, buying a gap higher and reversing on a
filled gap seems better than buying dips at this moment. Following that
thesis, buy it now(1250.50 currently), and get out if we go below
yesterday’s low for a trade. Or just sell it short on a piercing of
yesterday’s low for the bear side. Expect to be chopped up. Which brings
me to the Bollinger Band chart above: It says DO NOTHING yet, but a
storm is coming.
We have mentioned Bollinger Band use before in
predicting volatility. Volatility signals are much more reliable
indicators than directional signals. This is in part due to the lack of
noise in the signals generated. Less people playing this way, means less
noise. So, while it is still a lagging indicator, false signals are
extremely rare. The chart above is a set up for a volatile, yet trending
You can see the Bollinger band oscillations are pretty
reliable. I use this as part of a proprietary system for gamma hedging
and Vol trading. But it can be used in part for generating excellent
risk reward directional plays.
What you want to see is the top and bottom bands widen in opposite directions
for a signal to hit. This is your expanding volatility. Then pick a
direction by entering in whatever slope the mid line is pointed (up for
bull, down for bear). Then use the mid-line as your trailing stop out,
or if you prefer, the other side of the Band. Reversals are fine too.
Extended periods of low volatility and tight bands happen, but you won’t
be trading those so who cares?
Look for the bands to pinch a
little more this week if we don’t make new highs and then next week we
could be off to the races. If we make new highs this week, the bands
will begin to widen, but make sure the lower band is moving away from
the upper one.
But which way to play?
higher, Daily says to be careful. We have no opinion until the Bands
widen, then we will go with the flow. If losses occur, stops are tight
in the beginning. We are always on the lookout for “first way, wrong
way” moves. If profits occur, stops will trail. Stay tuned.
The Bullish Case:
h/t FX Options Ltd.
The Bearish Case:
-Vince Lanci email@example.com
(Elizabeth Thawne is on Vacation)