Here’s The Plan For Gold Now
First, thanks for your
patience over the last few days. The commentaries have been short and
sporadic as a result of me fighting off one nasty viral infection. I am glad to
report that I have turned the corner and will be back in full swing over the
next few days. That being said, let’s get right to the markets.
While I have no actual experience of yesterday’s
price action due to my being laid up, the charts continue to tell the same
story: one, maybe two decent continuation moves, mainly in the morning, followed
by a long period of sideways consolidation. What is causing this? It is
certainly very odd given the abundance of news, but perhaps that is the cause,
too much news, not enough answers. I dunno, and frankly it does not really
matter. The question is what can we do? For me, the only solution, in terms of
consistency, has been the gold stocks. Even during the morning moves, trading
non-gold stocks seems more like flipping a coin that a trade with an edge.
Ultimately, this focus on gold stocks make sense, it is one of my long time
beliefs as a professional trader, focus on one, maybe two stocks and trade them
till your fingers bleed. This time is certainly worthy of that advice.
Gold clearly broke out to an
almost seven year high, closing at the high today, while gold shares remain
stronger than gold. The HUI and XAU gold share indexes closed at six year highs
today.
Just like the ’90s when there was a mantra behind
tech stocks, a story if you will, it is where everyone was hanging out. The
result, liquidity and range, a trader’s best friend. So while it may be too
soon to proclaim a chip-like mentality in gold stocks, it is beginning to feel
that way, and my trading results are beginning to bare that evidence. It is
safe to say that for the most part the rally in gold has gone mostly unnoticed
by the public at large. This is good news, if and when the public notices,
trading in gold shares should, and I emphasize should, become even more fluid.
For now, stake your claim and get very familiar with how a handful of these
issues trade; you want every edge now, and even more so when the “dumb” money
shows up.
Do I have visions of late 1999 type trading in
gold stocks at some point? Yep. I may be dead wrong, but in the meantime, that
is my story and I am sticking to it. The only thing that matters is the P&L, if
that is where I am making it, then that is where I will camp out.
Turning to FX, after the huge run in the
USD/JPY ($/Yen) over the weekend the FX
markets have settled down quite a bit, so no new thoughts at this point.
However, it seems likely that some reversion in the Yen is likely. Call options
in the Yen got very pumped up on Monday allowing many to sell some very rich
premium. So, like a rubber band stretched too far that typically snaps back,
the daily chart of the Yen shows similar characteristics. That being said, it
is a speculative trade but with a tight stop may be reasonable.
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As always, feel free to send me your comments and
questions.