Filed under: Trader Dan Norcini
Dear CIGAs,
Today was all about trader trepidation over the size of next week’s expected QE announcement to the extent of future purchases by the Fed. There was a growing fear among a certain segment of the trading community that the Fed was going to disappoint with the amount. That led to a rush out of commodities in general and brought selling into both gold and silver. Equities were also knocked lower in a foretaste of what is going to happen if the Fed does indeed fail to meet the hyped up expectations that they themselves initially created. We now see some of the FOMC members attempting to somewhat tamp down expectations without pulling the punch bowl away completely. In other words, they are trying to walk a very fine line as criticism mounts over the policy that they have embarked upon.
You could see the same effect in the bond market as those were down on the exact sentiment. Traders there are looking over the huge supply and are wondering who is going to buy them if not the Fed.
Gold did run down to the lower portion of the recent trading range and bounced from near the $1,320 level. If that fails to hold, it will more than likely drift down towards $1,300 where I would expect powerful buying to surface. As previously stated, gold could drop as low as $1,280 and it would do nothing to hurt the powerful uptrend on the charts.
Silver ran past the top of its range near $24 in overnight trading but then puked when it came into New York and moved lower. It still looks to me like it wants to consolidate in this general region for the time being.
Next week is going to bring one helluva ride in these markets so hold on to your hats. For example – copper put in an outside reversal day after making a new yearly high and then promptly selling off. Cotton, after running limit up for 3 out of the last 5 sessions, is now limit down. Volatility is going to go through the roof as traders place their bets. Some are going to win big and others are going to lose big. The result is going to be a significant increase in activity in the already extremely jumpy markets. If you are a trader, my advice is to be careful. You might want to lighten up a bit. What you are doing is surrendering a bit of potential profits in order to sleep well at night and not become a splot on the pavement of the market roads.
The HUI dropped back down below 500 once again as it too works a range between 490 on the bottom and 510 or so on the top. A breach of 490 on two consecutive trading days would not be welcomed by the bulls. Some of the shorter term technical indicators are down in the oversold zone for the HUI so that might serve to keep the bears from getting too aggressive ahead of the FOMC meeting next week. We will just have to see who blinks first.
The Dollar is currently the beneficiary of the above mentioned fears regarding the size of the QE. The Fed either saves the Dollar or saves the stock market. They cannot have it both ways.
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2010/10/October2710Gold.pdf
Today was all about trader trepidation over the size of next week’s expected QE announcement to the extent of future purchases by the Fed. There was a growing fear among a certain segment of the trading community that the Fed was going to disappoint with the amount. That led to a rush out of commodities in general and brought selling into both gold and silver. Equities were also knocked lower in a foretaste of what is going to happen if the Fed does indeed fail to meet the hyped up expectations that they themselves initially created. We now see some of the FOMC members attempting to somewhat tamp down expectations without pulling the punch bowl away completely. In other words, they are trying to walk a very fine line as criticism mounts over the policy that they have embarked upon.
You could see the same effect in the bond market as those were down on the exact sentiment. Traders there are looking over the huge supply and are wondering who is going to buy them if not the Fed.
Gold did run down to the lower portion of the recent trading range and bounced from near the $1,320 level. If that fails to hold, it will more than likely drift down towards $1,300 where I would expect powerful buying to surface. As previously stated, gold could drop as low as $1,280 and it would do nothing to hurt the powerful uptrend on the charts.
Silver ran past the top of its range near $24 in overnight trading but then puked when it came into New York and moved lower. It still looks to me like it wants to consolidate in this general region for the time being.
Next week is going to bring one helluva ride in these markets so hold on to your hats. For example – copper put in an outside reversal day after making a new yearly high and then promptly selling off. Cotton, after running limit up for 3 out of the last 5 sessions, is now limit down. Volatility is going to go through the roof as traders place their bets. Some are going to win big and others are going to lose big. The result is going to be a significant increase in activity in the already extremely jumpy markets. If you are a trader, my advice is to be careful. You might want to lighten up a bit. What you are doing is surrendering a bit of potential profits in order to sleep well at night and not become a splot on the pavement of the market roads.
The HUI dropped back down below 500 once again as it too works a range between 490 on the bottom and 510 or so on the top. A breach of 490 on two consecutive trading days would not be welcomed by the bulls. Some of the shorter term technical indicators are down in the oversold zone for the HUI so that might serve to keep the bears from getting too aggressive ahead of the FOMC meeting next week. We will just have to see who blinks first.
The Dollar is currently the beneficiary of the above mentioned fears regarding the size of the QE. The Fed either saves the Dollar or saves the stock market. They cannot have it both ways.
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2010/10/October2710Gold.pdf
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