Posts filed under “Trading”

Gold Can’t Find a Bid

This was the week Greece inched closest to chaos, as a bank holiday and a technical default caused markets around the world to erupt in turmoil. They recovered somewhat Tuesday, and futures looked stronger Wednesday morning, but on Monday, the NASDAQ Composite Index lost 2.4 percent, the Standard & Poor’s 500 Index lost 2.09 percent and the Dow Jones Industrial Average fell 1.95 percent. Volatility exploded, as the Chicago Board Options Exchange Volatility Index surged 35 percent, its biggest increase in two years, to 18.85.

One would imagine that such a scenario might be constructive for gold. It has been called the best measure of fear, the only real currency, a refuge for those who plan for panic. So how is it doing these days? Spot prices were soft on Monday, despite the wild volatility in equities, drifting down a few bucks from about $1,180 an ounce to about $1,176. They fell a few dollars more yesterday, and are soft Wednesday.

I thought gold was an investor’s best friend during Armageddon.

I have kidded the goldbugs over the years, but the muted response to the latest crisis is surprising, even to a precious metal skeptic. Gold simply can’t find a bid.

This isn’t the sort of response we have come to expect from the “catastrophe metal.” Earlier this month, gold spiked to $1,202, from $1,172, raising hopes of a turnaround. The gold mavens began to dream of a new technical setup, perhaps even a resurrection of the currently deceased trend. There were renewed whispers about $5,000 price targets.

And then … nothing.

I have been writing critically about gold since it peaked in 2011. Its story has become an object lesson in how to manage your positions without letting emotion get the better of you.

Why is gold no longer responding to global catastrophes? Nobody knows for sure, but a few different theories might help to explain its behavior in the most recent crisis:

1) The old narrative has failed. Without a new and improved rationale, buyers aren’t motivated to accumulate more gold.

2) The U.S. economy has slowly improved, and much of the rest of the world is healing, too.

3) Other asset classes have been far more productive and rewarding investments in the last five years.

The failure of the classic gold narrative, recounted in great detail last year, is one explanation. The storyline was essentially a clever sales pitch filled with specific frightening details — the Fed was going to cause hyperinflation, the dollar would collapse, and so on. All of this proved to be false.

Further reducing enthusiasm for gold is the gradual improvement of the U.S. economy. Despite forecasts of imminent collapse, the major economic data — including employment, wages, spending, housing, autos and consumer sentiment — have all trended higher over the last five years. Tales of an impending depression were greatly exaggerated.

Then there are other asset classes. U.S stocks are up 167 percent over the last 5 years. China’s stock market, despite the recent 20 percent drop, is still up almost 10 percent for the year, and it has been on fire the last 2 years.

Each of these is a possible explanation for the lack of response to the Greek crisis. Perhaps a default to the International Monetary Fund is no big deal, and gold has no reason to rally.

Regardless, gold seems to going nowhere fast. Feel free to send me an e-mail explaining how wrong and stupid I am. I have an archive of all the messages warning me that gold would teach me a lesson in humility. “You’ll see” these e-mails smugly assure me, “your comeuppance will be here any day now.” My plan was to respond to each on its fifth-year anniversary with a chart showing the performance of gold versus all other asset classes and the details of how much money has been lost.

What once seemed like a snarky and amusing idea just looks cruel today.

Gold teaches the careful observer many lessons — about narratives, emotion, managing positions, leverage, one-way, can’t miss trades, the efficiency of markets, and story-tellers with product for sale. This is why you should never ever drink the Kool-Aid.

Astute traders ignore these lessons at their own risk.

 

Originally published as: Gold Shrugs Off Armageddon

 

 

Category: Gold & Precious Metals, Really, really bad calls, Trading

Looking for for Volatility in All the Wrong Places

Where has all the stock market volatility gone? U.S. equities have been surprisingly quite the past three years. There hasn’t been a one-day change of 2 percent or more in the Standard & Poor’s 500 Index since December, Bloomberg News reported. Data compiled by Bloomberg and Deutsche Bank AG note that this is the longest such streak…Read More

Category: Data Analysis, Fixed Income/Interest Rates, Markets, Trading

Futures: New Layout at Bloomberg

I really like the clean web layout for Bloomberg Futures (free):   click for updated futures    

Category: Trading, Web/Tech

Flash Crash a Perfect Storm for Markets

Great couple of graphics from the WSJ this AM. This is the simple version, a short explanatory overlaid on a graph:   Perfect Storm click for ginormous graphic Source: WSJ   The interactive version is far richer and more details as tot he minute by minute set up: Flash Crash’ a Perfect Storm for Markets click…Read More

Category: Markets, Really, really bad calls, Trading

Margin Debt Hits an All-Time High . . . So What?

Every now and again, a way of looking at markets suddenly gains traction. Data gets assembled, analyzed, reviewed. Eventually, it becomes the basis of traders’ decision-making process. It even can become part of Wall Street lore. The problem that arises all too often is that this approach is statistically bogus. The data gets cherry picked;…Read More

Category: Analysts, Really, really bad calls, Technical Analysis, Trading

How Spoofing Works

Source: WSJ

Category: Markets, Regulation, Technology, Trading

The Market Rhythm Deciphered

Source: @Trader_Dante

Category: Cycles, Humor, Psychology, Trading

Spoofing & the Flash Crash

Earlier this week a trader was arrested in London and accused of “spoofing.” What’s spoofing and what does it have to do 2010 flash crash? Bloomberg View’s Matt Levine explains

How ‘Spoofing’ Might Have Crashed the Market

Read More

Category: Legal, Trading, Video

Nikkei Dow > 20,000

Great discussion from my pal Peter Boockvar of the Lindsey Group on Japan: The Nikkei closed above 20,000 for the first time since April 2000. Optimism for corporate profitability, higher ROE’s, better corporate governance and a greater focus on satisfying shareholders, along with QE and a weak yen continues to drive performance that will likely…Read More

Category: Markets, Trading

Survey Says…

Joseph Saluzzi (jsaluzzi-at-ThemisTrading.com) and Sal L. Arnuk (sarnuk-at-ThemisTrading.com) are co-heads of the equity trading desk at Themis Trading LLC (www.themistrading.com), an independent, no conflict agency brokerage firm specializing in trading listed and OTC equities for institutions. Prior to founding Themis, Sal and Joe worked for more than 10 years at Instinet Corporation, pioneers in the…Read More

Category: Markets, Regulation, Think Tank, Trading