Chop Fest: Postmarket Update

I’m seeing so many people out there try and pick direction right now and they are all getting chopped up.  The market is consolidating its gains over time as opposed to price, that is the most important thing you need to know.  We continue to find support above 104 on the SPY which represents a large level going back to late August.  All of the major moving averages continue in their uptrend as the market moves sideways.  Try and stay short for more than an hour, I dare you, see how that feels, I promise you will have a bag of ice on your nuts if you are stubborn enough to go against that advice.

I called the move in crude last night as it was oversold and due for a bounce.  My system of trading is not meant for taking advantage of those opportunities, but understanding the structure of any market never hurts.  I will now look to get short crude below last Thursday’s low which is 65.50 on the November CL_F contract.  I will use USO as my trading vehicle though.  The same goes for gasoline, I’ll get short there as well on a break.  And remember, I’ll be just as quick to get long crude and car juice above their yearly highs, or lower if we continue trading in this range for a longer period of time.

Gold had a monster day as traders took the US Dollar out back to the woodshed.  The primary culprits were the CAD and AUD as crude and gold gave them a boost respectively.  It seems that gold has found a base once again, this time in between the June and August tops around 985.  I honestly expected a further pull back to around 975 if not even 950.  I won’t complain as I am currently long gold, but have missed a precious opportunity to get long silver that I fear I won’t get back.  It seems that silver has based out at 15.75, I was looking for 15.25, such is life.

Go and take a look at your EURUSD and Gold (GC_F) charts a second.  Notice that they are almost identical over the past 3 months.  I believe that gold is headed for 1300 within the next 9 months, but here is my question tonight.  Is it going to take a monumental failure in the USDX to get gold there, or are we on the cusp of seeing a break in the negative dollar strong gold correlation?  One of the ways this may happen is if we see the “fear trade” put back on by investors.  The fear trade says sell equities, corporate bonds, and commodities, but buy the dollar and gold as the safe havens.  I won’t get into the inflation vs. deflation debate tonight, but if we are going to see 1300 dollar gold, I see this as one of only two options.  Either the dollar dies, or the fear trade is put back on.  If you have a third reasonable scenario pray do tell, I’m all ears.  I will continue to operate with an open mind, meanwhile keeping the underlying belief that the weekly gold chart says 1300.

The solars continue to look bearish, if crude and nat gas can’t get their act together and puke at some point over the next month the solars are going to get slaughtered.  The fundamental story for them just isn’t there yet, and the technicals are bearing that out.  The market has done its job well in this industry as prices for solar wafers have come down so much in the past few years that these companies are racing each other to the floor.  Honestly, I love it, this is how progress is made in the free market, and this is how we will wean ourselves off of fossil fuels in the decades to come.  But right now there is a glut of supply and not enough distribution power or capital to build the huge solar plants out in the desert that we need.  Unfortunately if crude pukes it will only stall this process further, a sad reality.  LDK is my favorite short in the solar space for now, I’m stalking an entry below 8.40.

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