The Lunatic Fringe - Trading talk.

Zed · Oct 21, 2014

I've edited the first post just in case anyone is mad enough to read this lot!
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27/03/2020

Just a note for anyone reading the thread that doesn't know me. I think that its a small group and most do know me, but regardless...

1. Australian based, as such I trade our local markets for fun and profit... it is all I do.
2. I believe that success in the markets is mostly due to back office 'risk management'
3. I'm not trying to be Mr. Perfect and pick every trade correctly. I don't care what your system is if you bat over 70% you'd be richer than god if you manage risk well.
4. IMO Anyone claiming a really high win rate is most probably a liar. I'm probably closer to the 50% mark, mebe 60%.
5. I trade mid to long term - it suits my lifestyle, temperament and market access.

Given I believe that risk management is key to success making short term calls on specific stocks when there is a chance people reading will trade on it isn't such a good thing to do. IMO you must own the risk and the process while understanding your trading temperament before placing your money in the market. When you take full responsibility for that then you might be ready to trade. Following anyone's calls blindly is a path to failure, I'm not going to try to temp anyone down that path. I do what I do win/lose/draw, so long as it is just impacting me my conscience is clear.

So..... from me you will get broader background stuff on the things that effect gold and silver. That's the overlap in interest here, I will point out what I see and believe but I'm not going to make open/close trading calls. That is up to you. Sure I will do some basic T/A stuff, price projections etc on Gold, Silver, USD, the ratio and mebe bonds but that isn't my trading system and that isn't always reflective of what I do. Never forget that I am trading in AUD on Australian markets and that the world looks different through that lens.

I'm not here for dick measuring or a pissing contest so if we head off down that track I will exit stage left.

All that said I think that this last few weeks has most probably kicked off a depression. I wish you all well and I'd suggest extreme caution in all dealings. This deflationary phase will drag on for a while IMO. Keep in mind more capital was destroyed in the post 1929 markets than in the initial drop. While Livermore made it big in 29, he was bankrupt by 34 and committed suicide in 40. You don't want to make those sort of mistakes after getting the gold call correct. This will not be easy, most people will lose, that is just the nature of the beast.

Good Luck.
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Welcome to the Fringe!

Zed · Oct 21, 2014

Silver Weekly Chart.

This is a Silver chart that I have not touched for MANY months. It is as over sold as silver gets, more so than its entire bull market history in some respects. If this isn't wrung out and looking to AT LEAST revert to mean then I would suggest that the laws of the universe have been changed! IF it reverts to mean THEN a stack of shorts are up against the wall. By rights this should get VERY exciting, at least for a short period of time. Given the current chart and OI it is an astonishing setup that I consider a very high probability long trade.

2c

FWIW

Zed · Oct 21, 2014

USDX Weekly Chart

I'm still a little tentative on the USDX here, while I am bullish the USD we have been running a little too hot. I have previously commented that so long as the weekly held above 84 it was still OK. So far it has done that and more. It looks like it may not break this short term and very hot move it has been in and basically continue on. The USDX almost without fail goes further than I think it will, so if this holds at these levels you can start looking for a resumption of this move in the next week or two. IMO this spells choppy action across most markets until they settle down to the new reality of a bullish USD and how that is going to play. As I have said before I think this will challenge some of the standard knee jerk reactions like selling gold... but we have to get through the adjustment period first.

The USDX could take a shot @ 90 before this move exhausts and we settle down to a more sustainable pace. JMO.

Goldhedge · Oct 21, 2014

Welcome back ZED.

What's all the fuss? I like T/A ... Tips and Assets...

How do you figure in the QE billions into all these computations? A margin of error?

Zed · Oct 22, 2014

Goldhedge said:

Tips and Assets are becoming more of conceptual thing as I age. :biggrin:

QE Billions etc... It is all in the chart, every players expectation given what they know, and believe, is distilled into price action. It is all there bar complete surprises. The market hates them... a total surprise will always produce something that you have no hope of anticipating with a chart. Chartists simply rely on a level of predictability that the repetitiveness of human nature provides. Not perfect by any means but all it has to do is skew the odds in your favour. Then you add in risk control and you have success. Risk control being the last word and the hardest aspect of the whole deal. Also the least discussed by anyone.

Howdy... by the way.

Traderjoe · Oct 22, 2014

Glad to see you here, Zed. I've always appreciated your hard work and insights.
Thanks for sharing.

Zed · Oct 22, 2014

Silver has that choppy algo traded look again. Never used to look like that in "the old days"... It would be good to see a few motherboards fry in a melt up one day! Will you look at me, getting all emotional about it... chit boy, back to business!

Scorpio · Oct 22, 2014

hey up Zed,

that is my take on the dollar also, too far too fast, which should be positive for metals,

yet longer term, not sure on this dollar thing as there is nothing to prevent it from rising more yet, and that would be further neg for metals,

now that Japan is in deep straights re importing more and more energy to replace nuc energy, there has been no strength coming out of there,
Euro is showing no signs of decent improvement against the dollar,
China doesn't trade freely, so that won't help it

Where is the strength going to come from to apply pressure to the dollar?

So if no one is there to ring the bell on the dollar, then what will be a catalyst to get metals moving to the up in that environment?

Inflation? They are scared of deflation right now it seems,

Zed · Oct 22, 2014

Scorpio said:

Hiya Scorp.

Basically yes... once the taps are opened in Europe and still further in Japan, the other opportunities narrow and the Fed basically gets forced to join the party for the sake of "market stability"... then gold will be looked at as under value and it will not matter much that the USD is in a bullish period. I really think we are going to see a bit of syncing up of stocks, the USD, gold and commodities. The crack up boom scenario that will lead to the next 2008 event, might take until 2017/18 but if we are priced for perfection all round by that point then LOOK OUT! Of course it will be spun as the market discounting recovery etc while in reality it is pure inflation finding its way into in the financial markets yet again. IMO we are doomed to repeat this cycle in slight variations until something big breaks for good and the global monetary landscape shifts into what ever the next phase is. I'm not even sure the next big crisis will deliver that but I am sure its coming.

... so yeah, a couple of years of gold rallying along side of other markets is what I think we are in for. Some time later gold goes prime time, probably in the last phase of this bull market.

JMO.

Zed · Oct 22, 2014

The DJI Weekly Chart.

I know there is a wide spread howl for the DOW's demise but frankly I just don't see it in this chart yet. This is normal corrective action for this market... so far. What is more it is at a predicable time of year, managed money people come back off holidays and reevaluate and re-balance going into the end of the year. They sell first, step back because they know everyone else is doing similar, then buy. This is why crashes tend to happen at this time of year, any major flaw in the market is often exposed by this flurry of activity. So far we have done no more than blow some froth off this market. Get back to me if ~15500 breaks and we can talk crash if 15000 follows. So far we haven't done 10%, which conveniently is about 15.5K. So far support is looking good with aggressive buying off the lows, yup I know that there are issues, yup I know that the average money manager is holding his/her nose as they buy BUT this is inflation driven, the money is in the system and it must go somewhere... the bank is no option, the bond market is in the clouds, stocks are fully valued but... wait a sec, lets take another look at commodities and errrr... um, gold. :biggrin: The only fundamental that matters here is "more money"... and the Fed ain't the only source in town.

Scorpio · Oct 22, 2014

yep, exactly what we have spoke to for some time now, how sm's are driven by monetary supply across the spectrum,

which lies the foundation for a implosion over time into a deflationary heap,

so yeah, the real question is deflation? or inflation first then deflation?

doesn't really matter as we still end up in the same place eventually, wherein the magnitude of phony fiat needs to be exterminated

I think with the worldwide actions, the game has increased speed, and the deflation has been brought closer than if the normal trajectory would have been kept, thereby pushing the end result further into the future,

When is that? I surely don't know, but I think many of us agree that the inevitable conclusion will be a doozy

mcmurph · Oct 22, 2014

Thank you for posting your charts and opinions, Zed. It's appreciated.

Zed · Oct 22, 2014

Scorpio said:

Yet so many people still seek fundamental explanations for things, all the while ignoring the biggest fundamental --> money supply dynamics.

Scorpio said:

You know I think that, while a deflation is a logical final leg, it will not come to that. I think that event will be preempted and disguised in some sort of currency reset... new dollar, whatever guise it comes in. That is the tool to counter a big deflation and I think they will use it. The background positioning to achieve that should take years, I am going to watch that one with interest.

Scorpio said:

Just like a coked up party goer... the only real choice is more gear or crash & eventually more gear stops working. The trick will be to be on the right seat at the right time... like musical chairs... there will be winners and losers. IMO gold has a big role in this game... but I can't be sure that right at the end it will be the asset to hold, it may not be that simple. Still there is time to ponder these things and gold is about to have some time in the sun IMO.

I'm expecting POG $3900 to $5400 in this next run with about $4300 being the highest probability target.

2c
FWIW.

Zed · Oct 22, 2014

You know even Bitcoin is looking like it is trying to sort out a bottom here. Not that the charts are consistent on it!

Whatever you think of it the BC price represents peoples preference level for bits over USD... it means something and I do look at it occasionally.

Zed · Oct 22, 2014

Rate Hikes and Gold ... another view.

Scorpio · Oct 23, 2014

that brings back memories going back a long time,
we used to term it as that buying metals, you needed your seat and to sit down and enjoy the ride
even gponds avatar represented dancing fiat currencies in a circle at the time,

re bitcoin, yep, seems to be tracking gold now as things are settling in, a lot of money moving that way

re fiat being unlimited as some claimed back in 2007-8, I disagree, while electronically it may be unlimited, the ability of others to absorb it and consume is in fact limited. That is what will eventually break the back of fiat. Then it becomes a question if they front run the result, or if it proceeds to its logical conclusion.

If they do jump it, they will need a bad guy to blame it on, a reason, and a replacement.

Ahillock · Oct 23, 2014

Re: The DJI Weekly Chart.

edited by Scorp,

Ah and Zed don't play nice together so it is better if'n they do the space thingy

Zed · Oct 23, 2014

Scorpio said:

It is a logical choice but the one thing I fear is government action in, or government distortion of, the market. In the end if you have more than a small amount what they do can alter the logical choice significantly. Toward the end I believe this will be a real consideration.

Scorpio said:

Going to be so interesting to see where this ends up.

Scorpio said:

Over production of claims on wealth eventually destroys the wealth it is supposed to represent, yeah I would agree... there are limits, people take action.

Scorpio said:

Yeah, it would be a significant event. Events like that don't seem to happen in isolation... I'd agree there will probably be a bad guy to blame things on.

Zed · Oct 23, 2014

Re: The DJI Weekly Chart.

Ahillock said:

My issue with the VIX is that as 'fear index' it is losing relevance. This is simply because less and less people are pulling the trigger on trades and more and more volume is computer algorithm driven. Basically your 1985 vix is not your 2005 vix, save maybe in extremes, but then what is happening is obvious. Its not consistent data anymore... so we are guessing trying to derive anything from it.

Effective T/A also morphs over the years due to fashion, trends and things like algo trading. Ideally you find a chink in the market that no one recognizes and keep it to yourself, popularity sows the seeds of demise.

So as for the VIX... well, give me the algos and maybe I could pass an opinion that is worth something. My best guess is that it is just the result of the dominant algos competing for oxygen in a market where nanoseconds count. Computers gaming computers... where is the emotion to measure?

Ahillock · Oct 23, 2014

Re: The DJI Weekly Chart.

Zed said:

My issue with the VIX is that as 'fear index' it is losing relevance. This is simply because less and less people are pulling the trigger on trades and more and more volume is computer algorithm driven. Basically your 1985 vix is not your 2005 vix, save maybe in extremes, but then what is happening is obvious. Its not consistent data anymore... so we are guessing trying to derive anything from it.

Effective T/A also morphs over the years due to fashion, trends and things like algo trading. Ideally you find a chink in the market that no one recognizes and keep it to yourself, popularity sows the seeds of demise.

So as for the VIX... well, give me the algos and maybe I could pass an opinion that is worth something. My best guess is that it is just the result of the dominant algos competing for oxygen in a market where nanoseconds count. Computers gaming computers... where is the emotion to measure?

Thanks. If my memory doesn't mess with me, didn't VIX go a little crazy leading up to 2008/2009?

Zed · Oct 23, 2014

HUI Quarterly...

Just take a moment and back up for the long view here.

This thing is as beaten up as it was when the bull market began. It is on a support level (the last bar is obviously incomplete) and showing signs of life with some momentum indicators diverging slightly. This is not the sort of chart that leads to a catastrophic decline, this chart depicts exhausted bulls, IMO most all who would sell have most likely sold at this point. We can always see a final washout event, they happen, but in the over all context of this market it should be a brief affair.

The last time the HUI looked like this is progressed ~15x from its base. If that where to occur again we are talking HUI ~3000!!! That is a move that could set you up for life if you are smart.

Like silver I see astonishing potential here among the remains of the dead bulls.

My 2c

FWIW.

Zed · Oct 23, 2014

Re: The DJI Weekly Chart.

Ahillock said:

... more in the thick of it than the lead up from my memory. It was obvious from a large number of other factors well before the VIX told us much, it is not like it was a Canary in the Coal mine. The Commercial Paper market seizing up on occasions was probably one of the first real clues things where out of control, late 07 early 08 if memory serves. + The DOW had sold down from late 07... etc... etc. The setup is not the same... yet... IMO. We may get there, but to call it from the VIX, here and now, is to draw a very long bow IMO.

Zed · Oct 23, 2014

Re: HUI Quarterly...

JS will be all over it if we see commercial paper seize up again. Is he? I have not been there for a while...

Zed · Oct 23, 2014

Jim Willie: Shanghai Shock to Shatter the Gold Market!

Jim is on the blow horn again. Make no mistake about it, I consider him more than a little crazy... but sometimes even the loonies have a point.

Goldhedge · Oct 23, 2014

Zed said:

"We've been floating this market with the Ritalin of easy monetary policy," – Richard Fisher, CNBC News, October 20, 2014.

I thought Ritalin was used to help one keep calm and maintain a level head...opposite of the outbursts of creative energy and fantasy one normally has...?

That certainly isn't what $1.2T a year in QE has been doing...

Zed · Oct 23, 2014

Goldhedge said:

...yes...no... more like a cocaine flame out.

More coke is arriving at the party soonish, will they get up and boogie once more or stroke out?

I actually think they can stagger through a few more sets.

... but it probably will not take much to change that.

Zed · Oct 23, 2014

Another look at the HUI

From one of my many spreadsheets...

... almost a sentiment low... almost.

Now if I had told you this was going to happen in June 2006, that gold was going to be over 1200 and the HUI below 200... what would have you said?

savvydon · Oct 23, 2014

Goldhedge said:

Ritalin is an amphetamine. It is a stimulant and thus the analogy is quite apt.

Ritalin can be used effectively with those who have true adhd because the stimulation it causes at the brain's synapses allows an afflicted individual to settle into the task at hand. They are effectively mentally energized so as not to aimlessly bounce from one external task to the next.

smooth · Oct 23, 2014

Re: Another look at the HUI

What if I told you in 96 that in eighteen years gold will be triple what it is today, But the miners will have gone the way of Moses?

Zed said:

Zed · Oct 23, 2014

savvydon said:

Medical people, you just have to go get all factual on us don't you! LOL... Coke is sexier! :biggrin:

Zed · Oct 23, 2014

Re: Another look at the HUI

smooth said:

Its all about cost and margin isn't it, but still you'd not have bet on that as an outcome... especially if history shows this to be mid bull market, not the end, like some fear.

savvydon · Oct 24, 2014

Zed said:

True dat! - must have been my adhd kicking in... :

Zed · Oct 24, 2014

savvydon said:

I'd offer a meaningful reply, but the truth is I got distracted before I got to the end of your post.

Zed · Oct 24, 2014

Gold is cruising and Silver looks algo battered AGAIN! IMO they are in such a jam with that metal and that stonkingly large OI. If it could be easily wrung out they would have achieved it by now. This is a prize fight, a big one.

Zed · Oct 24, 2014

Saturday Coffee & Weekly Charts

First up the USD...

Zoomed in but lines untouched from the last USD post. Well, I lie a little, I changed the colour of the projected up channel from the default. A constructive week really but there is some room for more sideways movement. I would think that the bears will be back next week but I'd expect support to hold here. One maybe two more weeks of this then I think that the bears will be getting nervous an be on the back foot. Should be enough new short action here to reignite the move north at a reasonable pace. JMO.

On to the DOW...

Speedlines holding up with a solid rejection of the lower prices. Using the last time we had an decent interim rally from these relative sorts of levels it would not be unreasonable to expect ~18300 by May 2015. We need to crack that 17230 level before the conservative trade will jump in. I guess that we will sort out just how strong that resistance is in November some time. This is losing steam IMO but slowly, if this plays out to the upside I would expect a steep sell down in May of 2015. JMO FWIW.

Now the yellow BLING!

Still looks OK to me, like there is fuel in the tank. In all probability more sideways until the USD sorts itself out and then we sort out golds reaction to that. So far we have held up OK considering the USD, the more weak shorts we gather here the more kick the up move will have. Cracking ~1250 would seal that deal. I'd say we need to stay over 1220 to stay safe here.

Now the grey BLING!

Looks ready to go, but I guess she has one nervous eye on gold. I don't think that anyone will be getting overly brave in Silver until Gold makes a move.

Gold v Silver... da GSR.

If it where a stock I would think it is running out of steam and near a top here. Correction target, say 66-68, depending on the speed we are moving at. If that cracks the wider trend north is broken. If that occurs we can eye off the lower bound which will be in the low 60's by then, crack that line and she is off the leash..... BUT it is not a stock, its a ratio. Anywhoooo, at the least this looks like it needs to cool its heels.

Black gold...

Given what it is oil is about oversold as it gets. If this is not discounting the end of the world as we know it then I would expect a high probability long trade next month. She looks due for a green candle... IMO it will be a decent size one.

FWIW, to me, the other charts are not really looking like a global catastrophe is about to unfold. I think that oil has been gamed here and, as I have mentioned before, a lot of this chop is due to one heck of a lot of money adjusting strategy to an unexpectedly strong USD. I will say it again... my call is chop, chop until the USD proves sustainably bullish AND the market has sorted out the right reaction to that. I expect that the knee jerk sell commodites & PM's reaction will prove wrong... after all most of 2013 into 2014 has seen a weakish USD with commodities etc getting slaughtered. However we still need to live through the adjustment period to get to a market consensus on what I think is the new reality of a strong USD.

All JMO folks... take with salt to your taste... manage your risk well and I think that a few hot little trades are soon to unfold.

Unedited... PM me if I have confused summin.

Zed · Oct 25, 2014

This article has a bit of age on it now but there is every possibility that this will be a big factor in November as the market front runs a yes vote. The chart looks set up for that, may be a sell the fact event for a little while, early December may bring a dip.

All Eyes on the Swiss Gold Referendum

lunar · Oct 25, 2014

Zed said:

Egon von Greyerz on the Swiss Gold Referendum - A Yes Vote Would Be A Shock in the Gold Market

Rick Santelli Predicts Stunning Victory For Swiss Gold Initiative

Today CNBC’s Business News On-Air Editor Rick Santelli surprised King World News when he predicted a stunning victory for the Swiss Gold Initiative. Santelli also brought up Germany’s struggle to get...

....I do hope but I doubt :eek:

Zed · Oct 25, 2014

Yeah... if any nation is going to vote yes on that one it would be the Swiss. JMO.

Chester-Copperpot · Oct 25, 2014

Zed said:

I agree but....... Every major vote these days seems to swing in favor of TPTB. I'm not a tin foil hat guy, but corruption is so deep, and generally the public just shrug there shoulders and carry on.

Zed · Oct 25, 2014

Chester-Copperpot said:

It will be interesting to see.

If we don't put much weight on in November + it is a NO vote, hmmm, well I am sure that will be used to full advantage.

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