Capturing Gold’s Explosion
It’s ideal to be in markets that make large, explosive
moves but who really knows when they will occur? While no individual knows for
sure what’s going to happen, markets do exhibit a characteristic that can tip
you off before big moves occur. This characteristic is volatility mean
reversion. All this means is that if markets make a series of narrow-range
days, there is an increased likelihood that they will make a larger-than-normal,
volatile move to compensate and return to the average true range.Â
TradingMarkets screens for volatility differentials to
help you identify potentially explosive markets. Today
August gold
(
GCQ1 |
Quote |
Chart |
News |
PowerRating) registered on the 6/100 Low Volatility
List. This list brings up those markets where the six-day volatility drops
below one-half of the 100-day historic volatility. Bear in mind that this
indicator does not imply a directional bias, only that a larger-than-normal move
is looming.Â
August gold rallied to close 7 higher at 274.3. Some
traders see that as reflecting the strength of the Australian dollar, the world’s third-largest producer of gold.Â
In the financials, a technology error at the New York
Stock Exchange halted trading of stocks. Chicago exchanges halted trading of Dow
and S&P futures and put a negative over the market’s head. Still, four down
pointing indications from the
Market
Bias Indicators Page gave a strong suggestion that index futures could
decline.