RM's occasional market calls...

Quote from Rearden Metal:

I called the initial drop in gold , but for some reason I've had a difficult time properly re-shorting the bounce. I added a little more size today at various points, but still not nearly sized up like I was a month ago.

Why doesn't gold short right now feel 'perfect' like it did a month ago? Maybe more information will help: <b>Are the trend following hedge funds still long a boatload of gold?</b> This is important to figure out.
More...

It is a good question. I don't like the short side here.
I had a stab at buying it earlier, as a day trade.
http://www.elitetrader.com/vb/showthread.php?s=&postid=3795279#post3795279

I covered it immediately when it went off very hard at 07.17, similar to the spike at 05.10 EST. Experience tells me that moves that fast usually don't carry that further so best to cover while the covering is good.

When we broke down just after 8am I thought we'd get to about 1447-1450 before forming a short term bottom. First bottom was 1446.6, good for a short term bounce only. Then lower as the trend followers piled in.

I believe we concluded the short side of the cycle at the lows today. My view on 1500 remains unchanged, and as I wrote on the other thread earlier

However, the overall condition has not changed, with few shorts around and the high probability of squeezing to take out new highs and likely also 1500. Any further selling is going to be an opportunity to pick up some longs on the cheap.

I think this was achieved today, with sellers who were waiting on the sidelines now committed and the powers that be with their long positions filled.

I can't speak directly to what the hedge funds own, but we've had a timely comment about "trend followers":

Quote from Ghost of Cutten:

Any self-respecting trend follower is short or flat gold, not long. The people still long are the 'fundamental investors' in gold, bottom fishers, and true believers.
More...

Then any self respecting trend follower is likely to be squeezed to 1500.
Of course, this means nothing without stops, targets, etc, so (if guest calls are permitted) I'll make the call that 1500 will be taken before todays low.

If the gold short no longer feels "perfect", perhaps its the difference between shorting a market which has many traders long with stops below "support" and plenty of shorts who will rush in and sell a break, and shorting a quiet market which is already a long way off the lows, being talked down, and has all sorts of nice patterns like double tops to sucker in the short interest.

When the sellers are out of the way, what next for this market? Well, their stops I'd have thought, and then any new buyers who want to play.

See attached. We can see that selling is in control with the double top and the apparent downtrend today, but who is buying against that. How much is shorts closing out for a profit and how much is new long positions?

Quote from Ghost of Cutten:
I could understand covering if gold blew above 1500 on super bullish news etc
More...
Exactly. Hence my forecast. As ever, I could be wrong, but this is what the information is suggesting to me at the present time.
 

Attachments

Quote from Samsara:
When you say gold's a short below 1400 regardless of your entry, I never think that way. I want to take larger size with either a defined risk exit, or a time exit, rather than a macro position. The longer it takes for everyone to watch and take sides, the more I start looking for a reason to go, and go back to my normal stuff. These moves are so rare and no longer part of my quiver.
More...

Exactly. I'll add something. While it isn't good to be in the market while people are waiting, watching, and choosing up sides (lack of consensus)...what can appear as apparent indecision can tell you which way the market will break. If you can time the end of the consolidation period, the best entry is often inside of the range before any break is "confirmed". So entering towards the end of these conditions can provide some meals. But of course one does not wish to be holding a position which is going nowhere. Ties up capital, concentration, etc which is better used with other opportunities.

I trade gold intraday with between a 1 and 3 point hard stop. This allows for sensible use of leverage. It also means that I need my timing to be right. If gold is a short "below 1400" how many thousands of dollars per contract needs to be risked to allow the view to play out? Sure, you could get it right most of the time, but what is the risk per trade? A few % of the underlying contract. And to be properly capitalised you need at least 10x-20x of your maximum loss. So risking 50 points a trade on gold, requires capital of $50-100k per contract.

I'd rather be stopped out 5 times for average 1.5 points each before catching a 50 point or bigger move than put in a 50 point (or more) stop plus maintenance margin, cross my fingers, and hold overnight and through weekends, major news etc. If I'm nimble enough, I might also be able to take 2-5 points here and there throughout the day when the market has no discernible "trend", appears choppy, or is not providing clear signals for other methods. Sometimes you can get a signal for what you think is your position trade, and 4-5 points later the market tells you "not ready" and you take your small profit and wait. That can add up over time.

Its horses for courses, and of course there is nothing wrong with different ways, but some of the macro concepts and position management techniques are more suitable for real money or very large funds than an independent trader with limited capital day trading in futures or ETFs.

The fundamentals in gold haven't changed since Friday, nor really have whatever long term technicals people use, yet we've had a range of nearly $5000 a contract. Even a small/medium size independent trader with a $1 million account would do better trading a 50 in the GC futures with a 3 point stop compared to trading a 5 with a 30 point stop working a fundamental or macro concept. Of course, doing this way, the vig is high, you need to concentrate, know exactly what you are looking for, and unless you are a top level expert (I'm not) deal with your fair share of losses along the way. I can see why someone who is already short, or was short from higher up and covered lower down would prefer just to decide to put the trade back on once, and pick a worst case exit point, once.

It is lovely to see a market move several tens of thousands a contract in a few days, and kudos to RM for correctly predicting quite a few of them right here. However, there are plenty of intraday opportunities in markets and my personal view is that there is more potential trading multiple timelines intraday than being caught up in one and trying to work out what the trend might be.
 
Quote from Rearden Metal:

OK, reading a few relevant recent articles has boosted my confidence. Paulson, Blackrock, and others look to be stuck long huge gold positions...
More...

Stuck is interesting. Ideas where they would want or need to liquidate their positions? Or how much they are carrying? From what basis?
With hedging, options, OTC stuff, can we really be sure what they hold?


Hypothetically speaking, trying to imagine myself as a huge player long a lot of gold. Would I wait for the price to drop before pitching it in a one way market with no decent bids, as we collapse double digit percentages in a day. Or would I be selling it ahead of that?

More interestingly, if I still had a big long position, would I be aggressively trading around it, selling at the top of this trading range for sure, but covering the shorts and adding aggressively to my longs around the bottom? I'm making a small return on both sides and helping to support the price in the expectation of being able to offload it at a better price later.

If the market really is going lower, and I have huge long positions, and I'm big enough to bully the market with some purchases for a few days, it might make sense to run it up to 1500 if I can cover there what I bought to get it there AND sell out my existing longs at a better price.

Never played at that level, probably never will, but its reminiscent of Livermore's operations in Erie, the greenshoe for IPOs, etc. Typical of very large players in small markets when conditions are right.

How big is the gold market?
Remember Buffet, Philbro, and the silver manipulations?

We could assess three kinds of stuck:
#1 - stuck long, hope it goes back up, can afford to hold either forever or until silly prices ($200 or so). Might look a bit silly to clients but will survive.
#2 - stuck long, not much new selling around, and its mostly paper selling on margin so new shorts can be squeezed, big enough to bully it up there to cover at better prices.
#3 - stuck long from way higher, can't afford to hold longer, angry clients on the phone and needing to dump size with no bids in sight.

If #3, how come they are still long and didn't have to pitch it 10% lower a few weeks back?

Without knowing more on the situation, how can we make a call on whether this will help or hurt our trade?

Sorry, this is getting long again, not my thread, down periscope.
 
"Sorry, this is getting long again, not my thread, down periscope."

My philosophy: <b>Whatever works!</b> When your comments are that good and that accurate, I wouldn't mind seeing them anywhere.

So here's the deal: All I get is occasional flashes of brilliance here and there. When I try to force it, the results can go either way, but probably not in my best interests to size up when I'm 'confident idea constipated'. I still like ADT bear, long term (but the short-term bullish chart pattern has not gone unrecognized there). Other than that I'm best off just waiting for it, not forcing it...
 
Yeah, I just can't put on size either way in gold. Long term I'm still bearish, but the entry point to get short with any kind of size still hasn't materialized yet.
 
Quote from Rearden Metal:

Yeah, most likely he just pumps ADT again tonight, IMO.

So the following is NOT a market call, but rather I'd like to direct your attention to an interesting, dramatic stock with even more near term volatility practically guaranteed: TSLA. See what's going on there? Powerful bull run for the last few weeks, massive short interest at 42% of float (The 7th highest of all- http://wsj.com/mdc/public/page/2_3062-nasdaqshort-highlites.html#shortF ), ridiculous options skew due to unavailability for borrow, and earnings May 8th after the close.

I have no play in mind here, I just think something interesting is about to happen...

-----------------------------------------------------------------------------------

This chart is 20% or more are short interest.


http://www.highshortinterest.com/all/1





Ticker Company Exchange ShortInt Float Outstd Industry

BTH Blyth, Inc. NYSE 65.08% 8.17M 16.56M Personal & Household Products

ESI ITT Educational Services, Inc. NYSE 57.31% 14.81M 23.36M Schools

USNA USANA Health Sciences, Inc. NYSE 56.63% 6.39M 13.50M Personal & Household Products

CALL magicJack VocalTec Ltd Nasdaq 53.70% 9.70M 19.07M Computer Services

VRA Vera Bradley, Inc. Nasdaq 51.95% 20.05M 40.56M Apparel/Accessories

UNXL Uni-Pixel Inc Nasdaq 49.09% 8.94M 9.98M Electronic Instruments & Controls

WWAV WhiteWave Foods Co, The NYSE 47.31% 22.99M 23.00M Food Processing

CSTR Coinstar Inc Nasdaq 47.16% 27.50M 27.91M Scientific & Technical Instruments

QCOR Questcor Pharmaceuticals, Inc. Nasdaq 46.91% 58.25M 59.55M Biotechnology & Drugs

AFFY Affymax, Inc. Nasdaq 43.56% 36.34M 37.17M Biotechnology & Drugs

TSLA Tesla Motors Inc Nasdaq 42.14% 72.84M 114.52M Auto & Truck Manufacturers

BRLI Bio-Reference Laboratories, In Nasdaq 41.93% 24.53M 27.72M Healthcare Facilities

IOC InterOil Corporation NYSE 40.12% 34.40M 48.61M Oil & Gas Operations

AVG AVG Technologies NV NYSE 39.72% 21.42M 54.02M Software & Programming

SODA Sodastream International Limit Nasdaq 39.51% 18.31M 20.41M Misc. Capital Goods

GEVO Gevo, Inc. Nasdaq 39.21% 19.53M 41.06M Chemical Manufacturing

FIO Fusion-IO, Inc. NYSE 38.58% 71.74M 95.76M Computer Hardware

SPPI Spectrum Pharmaceuticals, Inc. Nasdaq 38.39% 57.74M 60.16M Biotechnology & Drugs

ATLC Atlanticus Holdings Corp Nasdaq 38.28% 4.93M 13.88M Consumer Financial Services

HGG hhgregg, Inc. NYSE 38.17% 13.28M 33.36M Retail (Technology)

VHC VirnetX Holding Corporation AMEX 38.04% 42.21M 51.15M Software & Programming

FRAN Francesca's Holdings Corp Nasdaq 37.94% 42.20M 44.00M Retail (Apparel)

LRN K12 Inc. NYSE 37.60% 25.52M 37.10M Schools
GME GameStop Corp. NYSE 37.00% 118.36M 121.18M Retail (Technology)

ONE Higher One Holdings, Inc NYSE 36.52% 26.98M 46.33M Schools
More...
 
Quote from Blotto:


I believe we concluded the short side of the cycle at the lows today. My view on 1500 remains unchanged, and as I wrote on the other thread earlier

However, the overall condition has not changed, with few shorts around and the high probability of squeezing to take out new highs and likely also 1500. Any further selling is going to be an opportunity to pick up some longs on the cheap.

I think this was achieved today, with sellers who were waiting on the sidelines now committed and the powers that be with their long positions filled.

Then any self respecting trend follower is likely to be squeezed to 1500.
Of course, this means nothing without stops, targets, etc, so (if guest calls are permitted) I'll make the call that 1500 will be taken before todays low.
More...

I'm out of all my gold at 1475. That is 35 points off the PDL, or $3,500 a contract. Even without tight stops and good timing, traders should have been able to pull in at least 20 points today. Trading at a conservative 1 lot per $20k equity, that is a possible return of 10%.

Thanks very much. What happens next is beyond me, but I still don't trust the short side for a bigger picture trade. I'm just a daytrader though, so I don't carry overnight and I do make the most of good prices when they exist. If we go to 1500, I'll likely get a chance to buy in at a better price. Todays move looks done.
 
You must log in or register to reply here.
Back
Top