Sign Sign everywhere a sign...
Blocking out the scenery breaking my mind...
Do this, don't do that, can't you read the sign ?
The Five Man Electric Band - 1970
Sign:
- a motion or gesture by which a thought is expressed or a command or wish made known.
- something indicating the presence or existence of something else.
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A prerequisite for successful Natural Resource trading is to correctly identify the primary "catalysts" for the underlying commodity, sector and individual companies you are trading and to make prescient decisions from the data in the market that will affect those catalysts.
For goldbugs - the US Dollar is certainly a primary catalyst that must be followed and as such, we must always be looking for "signs" from the market that will influence the direction of the US Dollar.
Yesterday the TIC data turned positive for the first time in the last 3 reporting periods and the USD still sold off. But, today the USD is rallying ?
One of the positive "signs" in the Gold Sector of late has been the ability for the Goldstocks to break their strong correlation to the US Dollar and to rallying back 40 HUI Index points off of the recent sector washout - directly into a US Dollar rally.
That, along with Gold breaking to new highs in multiple currencies has been a very positive "sign" of late.
A negative "sign" has been that Gold has once again failed to penetrate resistance in the $440's and has been smacked down once again sub-$420.
However, a positive "sign" within those smackdowns has been that Gold is putting in a series of higher - lows:
- $410.40 in February
- $413.85 in May
- $418.25 in this month of July
In looking for "signs" from the above, we must be ever mindfull of the huge short position in Gold from the Commercials, as well as the corresponding Large long position in the US Dollar amongst spec's.
Those are the sector "signs" that should be rather obvious to anyone following the Gold Sector.
What is not so obvious...are the following "signs".
- 75% of the net purchases of US Treasuries were from non-official, "private interests" - read: HEDGE FUNDS.
- the "official" share of of total foreign US Tresury purchases fell to just 25% of the total - significantly below the 44% average over the last couple of years.
- we have seen the first net selling of US Stocks from foreigners since Sept. 2004 - to the tune of $720 million.
- the purchase of foreign stocks by US Investors rose + 69% to $10.6 Billion and rose + 27% in foreign bonds.
re: "signs"
...its seems the only one actually "bullish" on the US and the Dollar are those "non official" entities down in the Carribean !
Maybe there is a reason after all, for this rally off of the April/May bottom in the goldstocks to be holding strong within this narrow trading band, directly into the face of a US Dollar Rally, the Dow rebounding and Gold getting smacked down sub $420 once again ?
Hopefully it is a "sign" - that the goldstocks are now held by stronger hands.
One of the most challenging aspects of trading is when we are right on the first half of a significant trade...ie: correctly calling a bottom and re-entering and buying strongly this recent April/May bottom in the goldstocks...and now having to exercise both the patience and the confidence, to allow the 2nd half of the trade to unfold - directly into the face of a rising US Dollar, a broad Market Rally and another retracement in Gold.
Patience, as well as confidence, must always be measured against discipline... the discipline to exercise prudent money management - ie: taking some profits into strength and keeping a dynamic "stop loss" position in mind.
As quite a few market negatives have been thrown into the face of this HUI rebound...and the tape action has been compressed into a very tight trading band here of late; both patience and confidence are being severely tested here.
In times like these... Traders must dig beneath the obvious of a rising US Dollar, a broad Market Rally and a retracement in Gold and really search to find the real "signs" that will determine whether patience and confidence will be rewarded.
I've just listed a few above... now we must once again maintain confidence and exercise patience in this trade for the Goldstocks....and hope that our "stop loss" discipline does not have to be exercised.
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