Discussion in 'Commodity Futures' started by hcour, Mar 20, 2006.

  1. hcour

    hcour Guest

    First chart is 12/05 contract. Second is 4/06 w/total vol and OI, top pane is the spread between 4/06 and 10/06 contracts.

    I'm having trouble interpreting some of the seemingly bizarre price/volume action in gold futures and would appreciate any thoughts or advice knowledgeable futures traders may have on the subject. I'll try to explain my confusion in the following analysis. This is how I see it playing out:

    Feb contract: From mid-Sept to mid-Nov there is a trading-range following an uptrend. 10/12 there is an upthrust closing on the low followed by a quick shallow test, then a reaction back to the bottom of the range. Another shallow test 10/27 then a reaction back to the bottom of the range 11/01 on strong relative vol on a good spread closing on the low. But there is no follow-thru as this turns out to be a shallow spring on 11/04. From 11/10 - 11/15 volatility completely shuts down for 4 days on very narrow spreads and those last 2 miniscule dojis on very low relative vol and completely flat closes across the board, sitting smack-dab in the middle of the range. Talk about an apex!

    11/16 a huge gap up on a good spread closing on the high on strong vol, closing just at prior resistance. The next day another nice gap on a good spread closing at the high on higher vol.

    On 11/21 & 11/22 there is some extreme pv action that is nasty, confusing stuff. There is massive relative vol but price action and the narrow spreads are not commensurate w/that strong vol, that much effort. (I suspect there was some kind of news this period or perhaps it has something to do w/rollover?) However there is no follow-thru to the downside at all, despite all the churning, which suggest strength. On the rally from here to 12/08 almost every close is at the high on good spreads and lots of nice empty candle-bodies.

    12/09 a huge gap up on high relative vol, closing mid-range, followed 12/12 by the widest spread on the chart thus far, making a new high but closing on the low on higher vol. Note here how far price is from the 5-day ema, which has acted as a nice moving trendline on this rally thus far.

    Here price plummets on an island reversal, 12/14 a massive gap down on strong vol.

    From here looking at the APR contract: 12/21 the pullback completes on a tiny doji at the 62% retracement and the still-rising 50-d ema. Here the subsequent rally begins weakly on narrow spreads and low vol, then picks up steam 1/03 as the next 9 bars close near the highs and break above the 12/12 high, but note the struggle to gain price day to day.

    1/20 a wide spread closing on the low on strong vol w/an upthrusting tail, hammer-time. From here note once again the very strong vol as price pretty much goes flat on relatively very narrow spreads, again churning. Again, no pullback, but as price makes a new high 1/31 price again goes flat for 5 bars on narrow spreads, this time on low, contracting vol. So unlike following the previous churning episode, price is not making any progress at all.

    On 2/07 a gap down on a wide spread closing on the low strong relative vol. There continues a reaction 2/15 - 2/16 to a convergence of s/r at the 50d ema, the 12/12 high, and the 50% retracement from the 12/21 low. Here one might define a trading-range from the Buying Climax 2/02 and the Automatic Reaction 2/16.

    The subsequent rally is a shallow test of the BC on low vol. This followed 3/06 by a wide spread closing on the low, then a drop back to the bottom of the range and a new low. But note three days close near their highs and 3/10 is a dragonfly doji which springs the 2/16 low on very strong vol. The next 2 days seem to begin a nice rally but the last 3 days are dojis going sideways near the middle of the range at around the 50% retracement level. Hmm, have we seen this before? An apex? Note the support of the flat converged ma's on the closes.

    I think the rally is unimpressive so far and look to a downside move back to the bottom of the range at least. As always w/TA, this impression may change on the next bar. This is why God made stops (and why I'm not rich yet).

  2. jeez dood

    all this TA stuff is really overdone vis a vis gold

    it's a bull market


    sell the pops

    like this morning

    easy entry on pback. april contract 548's nd 549

    easy pop to 551's, 552, 553 and 554 for sells
  3. hcour

    hcour Guest

    Ha. Ok, dood, fair enough. To each his own. Simple is good. I like simple.

    Actually my "TA" is pretty basic stuff - support, resistance, price, volume. That's about it.

    Thanks for your comments,
  4. it was a bull mkt, no question, but... is it still a bull mkt???
  5. hcour

    hcour Guest

    Indeed, that's always the question more or less. "The trend is your friend until it bends" and so on... TA-wise.

    I admire Whit's enthusiastic confidence in his bullishness, I'm never that confident in the long-term, but I assume this is based on more than just TA?

    Whit, are you also looking at fundamentals? Are you using "intermarket analysis", like the relationships of currencies and interest rates and oil and the stock markets and so on? And if so, could you share some of your methodology? I always feel intimidated by fundamental analysis because it seems like if the greatest minds on such a complex subject cannot agree and rarely seem right, what chance does little ole me have, especially considering that I'm not especially intelligent (which I usually make up for by being exceptionally good-looking).

    Not sure how much you want to share, just asking.

  6. i am somewhat a contrarian. i was buying gold before it was a bull market (last several years) admittedly because i thought it was incredibly oversold and cheap relative to stocks. and prices ALWAYS regress to a mean.


    this has been a very short bull market in gold thus far, and gold is still very cheap relative to equities.

    pull up any 30-100 yr chart of the price of gold RELATIVE to equities, and gold is phenomenally cheap

    furthermore, XAU (gold/metal stocks) are trading very cheaply in relation to spot gold/metals.

    so, there are great opportunities for spread trades, in addition to either going long, and or options

    but XAU is VERY cheap compared to metals, and metals are very cheap compared to equities.

    Dow - multiyear hi
    AMEX composite - recent multiear hi
    TRANSports - all time hi's
    Russell 2000 - all time hi's
    gold- very cheap

    do the math :)
  7. i also want to mention thisis why i started being bullish on Nikkei about a year ago

    just exceptionally cheap relative to US equities and coming out of a looooooooooooooong bear market