Man, this has been a long week. Craziness. Madness. Downgrades. FOMC minutes. Bank runs. Margin hikes. I can't take much more and we still have tomorrow to go. I may need to hit Liquorville tonight!
Before we get started, Santa posted some wisdom a few moments ago. C&P'd for your convenience:
Now that we have reached $1800 gold, what should you do?
1. Those holding gold to hedge the systemic risks of the Western Financial world simply stay in your position.
2. Traders lighten up your positions as gold approaches the next two Angels.
3. No market fails to have reactions at some point.
4. Reactions in this market will be deep, but brief when they occur.
5. The undervaluation of good gold shares has passed manic.
6. Utilization of some of your gold profits into good gold shares is pure logic.
Yes, I know this was a tough day for everyone, particularly after how rosy everything looked yesterday at this time. Once again, the old adage is proven true: When everything looks great...when everything looks ready to roll...Sell. The EE always stands ready to change the rules and complicate things at the most inopportune times. The key from here will be two things:
1) Will there be more margin hikes coming? If so, I suggest that you seriously consider selling your current trades and moving what you have left to the sideline.
2) How will gold respond when it approaches 1800 again? Notice how I typed "when" because it most assuredly will approach 1800 again, probably by early next week.
The stock market is extremely volatile but it is not making new lows. I take that as a sign that the current selloff is almost complete. A recovering equity market will remove some of the "safe haven" bid from gold. The overall commodity market is rallying for a second day in a row, confirming our suspicions that the 5-day selloff ended back on Tuesday and we are now back into a general "risk on" mode for the next 3-4 weeks. Though "risk on" is generally good for gold, the further removal of the safe have bid will serve to contain price, too. I guess what I'm saying is...Even though I'd gotten pretty excited just 24 short hours ago about the near-term prospects for gold, I think I'll use the rally I expect tomorrow and Monday to lighten some of my trading longs. I'll keep you posted.
For as lousy as today felt in gold, is was still only down about $30 from yesterday's Comex close and, frankly, you'd be foolish not to expect a 3-5% correction after a margin hike. It was possible that gold could shrug off the hike but, when the hike was combined with the 300 point stock market rally...well, that was just too much for gold to withstand. Regardless, just two days ago gold traded as low as 1725 so 1745 isn't really that bad. From here, we could still see 1725-30 overnight. It wouldn't surprise me if we did but we don't necessarily have to. Gold will rebound tomorrow whether or not the selloff continues. Why, you ask? Let me put it this way. Would you like to be long or short gold heading into the weekend? Would you like to be long or short stocks headed into the weekend? If you answered short gold/long stocks, you're crazy. Way, way, way too much real and imagined risk to take that position. Nope, I expect gold to rally tomorrow and stocks to pare gains simply because the smart move is long gold/short stocks. Given all the dramatics around 1765-1775 this week, don't be surprised if gold goes out tomorrow, somewhere right in that range.
By the way, did anyone help out poor ole Turd by compiling all of the gold guesses from back on Monday? The contest ends at 1:30 EDT tomorrow. What did you guess? I hope it wasn't something in the 2000s.
Speaking of silver...It still can't seem to get out of its own way. It's a commodity when commodities are going down. It's a precious metal when gold is going down. Nuts! Driving me freaking crazy and I'm the one who has it dangling in the wind with a pick of $44 by Labor Day. I still think that the next three weeks will prove me right as it's clear that the entire commodity complex has found another short-term bottom. Like gold, it may bottom tonight or early tomorrow. When it does, I'll be trying to buy that dip.
That's it for now. Perhaps I'll see you at Liquorville later. If not, relax and chill for a while. Tomorrow promises to be another crazy day and you're going to need to be ready. Turd out.