"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Friday, November 23, 2012

Gold Clears Chart Resistance in Light Volume Holiday Trade

Gold has breached overhead chart resistance centered near the $1740 level in extremely light holiday trade. One thing to keep in mind about this is that pit locals are notorious for using these ultra thin trading conditions to go hunting for upside or downside stops. Since there is not the depth of liquidity that is normally present in the market, resistance to their hunting party efforts is minimal.

What this means for chart watchers is that one has to take the price movements with a bit of healthy skepticism. If the move is for real, it will hold on the resumption of trade during the next trading period. In our example - gold will need to remain above its breakout level of $1740 during both Sunday evening trade in Asia and during Monday trade here in the US.

The same goes for silver.

For today, the money flow is to the upside. All it takes is one or two hedge funds to start playing games and the locals, reading the direction of the money flow, enter the fray. The victims in this perfectly legal game of theft, are those who have foolishly placed stop loss orders and forgotten to cancel them during the holiday trade.

Lesson for traders - unless you plan on trading during these thin trading condition periods, get out of your positions before the holiday and wait for the return of the full week worth's of trading to re-enter. You might miss a move while you are enjoying some vacation but at least you will have the satisfaction of not enriching the pit locals.

It is the same for the S&P 500 which is witnessing a huge short squeeze. Thin trading conditions are allowing the locals to play.

This is where many of these guys make their annual incomes....


  1. That is one way to interpret it - the other is, that, as in the previous years, thin trading conditions are used by goverment agents/ppt to push equities higher. Within a week or two the sentiment has changed - and the new trend is finally feeding itsself.

    Today with Hungary downtrade and no outcome in EU budget talks - and what did it to the Euro?
    Same was a few days earlier when the France downgrade did nothing at all to the Euro.

    And still the Euro rallies - tells you that this move still has a long way to go.

    My guess is, that this - below the surface - is yen-wekaness driven.

    Checkout the monthlies for some yen-crosses like EURJPY or AUDJPY or even checkout USDJPY ... start 1980 - and you get an idea of what I'm talking about. Sell the yen for whatever you can get. As - in my opinion - the yen is finally eventually going to change it's main trend. Eventually a once in a life time opportunity.
    If your broker - at the end of the trade 2014/2015 - is still alive and not victim to the next - absolutely devasting - currency crisis.

  2. Great post as usual Dan. Thanks for the insight into today's action.

  3. read more
    Thanks for sharing this information its really nice.


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