The Really Useless Thread

loaded some shorts ...

...and I will take that in Gold. Cleared first target on the test 1360.xx in the morning, right on time for the BOE.

Well done all Earlobe, DexterMorgan, Fadhl, ptoftangency, goose bone, manosk, PAStalker, ratty for clearing first target. Simple ride after the tepid FED and right on time for the BOE. All shorts out.

a++++Currently GOLD is trading 1359.xx++++

Iteration 15

"All that glitters is not gold ...or may it is"

Update 2 (Elapsed time 4 day 4 hours)

-> LMT BUY 1330.x [check] -> TP1 => 1360.x [check] | TP2 => 1410.x | TP3 => 1490.x | STP => 1300.xx | max r:r -=> (+)5:1*

aEarleone

DexterMorgan

Fadhl

ptoftangency

goosebone

manosk

PAStalker

rattyo

-> LMT SELL 1330.x [check] -> TP1 => 1300.x | TP2 => 1250.x | | TP3 => 1170.x | STP => 1360.xx [check] | max r:r -=> (+)5:1*

Grinsakh

nutts

eborn

TuTang

glassblower

Replicant

suntan

Ghandi

hoom

Time to wrap the first point on this iteration:

->This iteration is a live trading set variation with a proper R:R. It's titled: "All that glitters is not gold ...or may it is" and its aim to define some fundamental correlation between monetary policy (CB) and GOLD. A couple of FA points here for those who asked and wanted FA details on how markets and correlation work:

--> Gold has 3 main moving forces:

1. Inherit supply and demand factors (gold as commodity),
2. inflation/value hedge/protection factors (monetary policy, gold as value/'currency' storage)
3. risk (gold as short term asset)

The purpose of this iterations was to focus on the 2 last factors and particularly how to understand makes correlations and flows in this context. Iteration 15 is a perfect live case for illustrating and trading live these flows.

Generalising the main relations/flows from a trading perspective:

1. At the start/end of interest rates cycles. Gold is heavily correlated with monetary policy (interest rates) via inflation expectations. While in the middle of the economic cycles the correlation fades and is nearly irrelevant for trading purposes.
2. Gold is also a superb instrument to hedge against short and mid term risk because it hold its value as an asset instead of as a paper currency. So if you are sharp enough you can clearly see how the main macro flows work in Gold (outside of gold as commodity which is most of the time ''irrelevant' for trading).
3. Monetary factors are key at setting direction at the end/start of economic cycles while risk provide the ebb and flow for the inner waves.

--> Iteration 15 is/was the perfect case to see this first key correlation in play in a live case.

1. When FED flopped in June/July it pretty much killed any option for a selloff via the monetary policy side because ECB/BOE/BOJ/SNB/RBA/and you name it across the world are heavily in negative rates and deflationary cycles.
2. Risk short term faded away the last 3 weeks from the Brexit front since European talking heads 'signed' a ceasefire for the summer and we wait for the first macro numbers and news to see the initial real or potential impact.
3. The long side was the obvious conclusion.

To wrap it up the main point here is understanding basic but very powerful correlation. For those who ask why I change outlooks on FA factors instead of TA factors is because macro factors are the most important forces to define swing direction ...and the sooner you realise the path of less resistance in any market, the better and the more consistent your trading results will be despite of the trigger you use.

For those willing to give it a try, you may get your AHHA moment. The more you 'practice' , the more your will be in synch with the market, the easier will get to 'get' the major FA forces in play and more importantly the more consistent results and less risks for trading.

Before I open question 15a for those long. I leave an idea open: What would you think happen in GOLD if:

-> BOE/NFP both flop and there is nothing new on the risk environment?, or if
-> BOE send a HUGE bazooka and NFP a massive undershoot? or if
-> BOE flop and NFP overshoot?.

Obviously the point is not defining all potential iterations. The point is to know what would be a game changer ,what would produce a natural ebb and flow, and what would create 'chop'. After that mapping a trade is just a simple task (whatever TA you use) to put risk in a tradable play ...

I hope it helps for those who asked...

sisse

Let me have a go...........probably wrong but would be interested in feedback!

-> BOE/NFP both flop and there is nothing new on the risk environment?, or if [GBPUSD heads towards 1.39, Gold falls]
-> BOE send a HUGE bazooka and NFP a massive undershoot? or if [GBPUSD tests the lows 1.2850, Gold rises]
-> BOE flop and NFP overshoot?. [GBPUSD spikes higher towards 1.35, then reverses the move and end up back where we started 1.33, Gold choppy rising then falling]

My thinking would be:
Nothing new in risk= slow, choppy grind up. Boe bazooka + good employment news = gold down. Boe flop+ bad employment news= gold up. I'm sure it's not that simple but that's my general idea of it. Unclear area for me is how nfp reaction would go. Meaning is good news good news or bad news right now from risk point of view? My feeling is that good news is good news and that FED hikes are not all that instrumental in market expectations atm.

...and that was it for the opening range. Only key development is OIL completing the leg to 40.xx. We wont go further down with US markets still holding on the highs. On the FX board soft dollar extending the lows in UJ to the 101.xx handle in thin markets. Itchy fingers in yen to load this week, nothing new in Sterling and Euro.

On iteration 16. Table closed with both long, sell and neutral triggered and in play... GL all trading live.

===Table Closed===

Iteration 16

++++Currently EURO is trading 1.121x++++

(Elapsed Time 2 days 12 hours)

"arghh revenge, calm or I am done with it"

-> LMT BUY 1.115x -> TP1 => 1.135x | TP2 => 1.155x TP1 => 1.138x | STP => 1.1080 | max r:r -=> (+)4:1*

manosk

Ghandi

-> No touch 1.125x / 1.105x (till BOE) -> TP2 => No touch 1.1350 | 1.095x [check](till NFP) max r:r -=> (+)4:1*

Vorex

eborn

PAStalker

-> LMT SELL 1.118x -> TP1 => 1.098x | TP2 => 1.078x | STP => 1.128x | max r:r -=> (+)4:1*

primejarvis

Fadhl

Fisher755

IMARICH1

Pharm0r

Replicant

pmmebids

glassblower

Earleone

sisse

This is how I understand this amazing iteration. It's the first time for me to see it clear and net.
-> BOE/NFP both flop and there is nothing new on the risk environment? Gold will continue its upside trend and Equities downtrend
-> BOE send a HUGE bazooka and NFP a massive undershoot? Translation: New policy (BOE) and high Risk (NFP); therefore Equities up and Gold down until NFP and then the reversal
-> BOE flop and NFP overshoot? Equities down, Gold up until NFP and then a reversal movement from NFP.

I think we might be in for a big surprise on Thurs..............

Everyone is expecting BOE to cut, most economists for instance - didn't they also forecast UK would remain?

Why would they cut - pound is down 10% since Brexit - a cut now would kill it. Just before Brexit the next move was going to be up - the only thing thats changed since then is the pound is a lot cheaper which would normailly indicate a hike.

Look at the markets they all look like they expect n/c or hike.

“I personally think that central banks are increasingly questioning zero rates in terms of what they do to generate economic activity versus what they do to their own financial systems,” he said.
And Metro Bank’s chief executive believes markets may be overestimating the chance of an interest rate cut.
“I know the market expects it, but the market expected that we would vote remain, and that there would be a cut in July,” he said.

“We need to be a bit sanguine on this one. You’ve got inflation going up, you’ve got the pound weak, but all of the impact you would get from cutting rates is already playing through into the economy, so there is a question mark [over whether it is necessary],” he said.

http://www.telegraph.co.uk/business/...st-investment/

really the effected UK's data after Brexit have not come yet,
and I dont think that they cut on Thur
but I dont know the reason of Sterling rally ,
I bet on Aggressive Sell last week😌😢

-> BOE/NFP both flop and there is nothing new on the risk environment?, or if = BOE flop would be against expectations & would create a short-term risk environment - Gold would continue upwards

-> BOE send a HUGE bazooka and NFP a massive undershoot? or if = a bazooka would be expected, which would create a risk-on environment, but NFP would offset it - causing gold to go into chop

-> BOE flop and NFP overshoot? = unsure, probably chop as well -

The rally in EU clearly shows that they will cut on thru .... My point of view is that they are trying there best to get rid of the BOE bazooka

Short EG might be a good play

As much as I understand fa wise ... If they don't cut now they will be very surprised too see the upcoming future reaction ... It will be more disastor then ...

Ok some good attempts to digest the questions but a bit of confusing ideas. The question for the iteration was very simple. Trying to mix everything, Sterling, Brexit, Equities, Risk, etc etc etc is probably not the best idea for now so back to basics:

The question is: how the simple correlation between monetary policy expectations (Central Banks rates, QE, etc) and GOLD right now and how the ebb and flow of this move is affected by risk in between.

Building on all the previous posts and iterations (for those following) here are the main points:

1. -> Markets mainly trade expectations not facts. The only time that facts prime over expectations is on major RISK/PANIC/GAME changer events.
2. -> Gamblers, newbies and mostly struggling traders think in terms of winners and shoot at everything that moves, good seasoned traders and investors think in terms of risk management and consistency.
3. -> Once you have market expectations clear, you can define macro direction. Why?
4. -> Because it will give you the path of less resistance. what for?
5. -> Because trading on that direction will dramatically reduce risk? increase w% and reduce drawdown...ok so?
6. -> If you do all that you can evaluate and get consistent result.

Going back to this specific GOLD case and to the very specific questions BOE/NFP (nothing less, nothing more) :

-> Question 1. What are current market expectations for the BOE?

a. BOE doing nothing. UK is al fine, all roses and and a bright present. Europe will rock the world this year.
b. BOE is super concern about the economy booming and is overheating. Rate Hikes urgently and kill QE.
c. BOE is worry about Brexit uncertainty, early numbers are softening, political risk is all but decided in the negotiations, etc etc etc BOE to cut rates and/or QE, etc

-> Question 2. What are the current expectations for NFP (FED)?

a. US is collapsing and is borderline of recession, all numbers are poor and bad NFP will trigger FED to cut rates and more QE
b. US is booming and the global problems are just a tiny bump in the road that are pretty much over, the sky is the limit. A good NFP will just confirm FED hikes as early as an emergency meeting next week
c. US is growing with good numbers but global jitters and election are weighting heavier. FED is dependent on macro numbers and good/bad NFP will align expectations for hikes no hikes this year

Now before making a simple matrix of outcomes (for understanding the main options) by experience I know a chart usually trigger and solve a lot of doubts.

So here is the current SIMPLE short term GOLD chart with the last 4 outlooks updates and the iteration in play (check back-posts for context). No indicators, no nothing, the point is about understanding flows ....

sisse

1) c.
2) c is where personally I am more confused (about expectations of hikes this year partly baked in already or no, and even how much effect nfp results good or bad will have on those expectations at all)

1. B
2. B & C

I understand the general expression/sentiment, but sometimes it is confusing.
E.g. the current 200+ pip GBP rally leading up to this week's BoE rate cut decision.

If the rally is indicative of expectation or 'pricing in' then the markets don't appear to be expecting a cut.

Is there another interpretation or is the rally basically prima facie?


>Question 1. What are current market expectations for the BOE?

I would also say (c), but it is precisely the above rally (and implied expectation) that makes me question my own assessment.

I know nothing has been promised by Carney so the BoE could (like the FED) be in 'data dependence mode' and wait.
I have to admit, the last statement/meeting seemed quite dovish to me.
Perhaps it is just a case of being correct about the sentiment but wrong about the timing (which you discussed several weeks ago).

What is your interpretation of this rally?

Good. Indeed, since the early morning of Brexit when the BOE put a hard stop on the bleeding and then saved/ flooded markets with liquidity, then increased QE but failed to cut rates in July.

--> So if markets trade primarily expectations and the expectations are "BOE is worry about Brexit uncertainty, early numbers are softening, political risk is all but decided in the negotiations, etc etc etc BOE to cut rates and/or QE, etc": What would be the main and basic options for the flows?:

 

1. If suddenly BOE backpedal and suddenly announces limiting QE and the outlook of Brexit is all good and is nothing to see and hikes are back on the table this year (extreme example for the sake of the example).
   1. That will caught markets on the wrong side of expectations. Meaning a dramatic Game Changer in the FA side.
   2. Gold will short-circuit on expectations putting strong pressure down both in the monetary policy side (hikes) and less risk ...meaning ....you do the math

   
   
   

2. If BOE is inline with expectations (ranging from small cuts to more QE and any combination in between)
   1. Markets are well aligned for that. The meat of the move is already digested and main hands well positioned. Not much to see a soft continuation on the main flows.
   2. Gold nothing new same levels/same trades/same all scenario. Natural ebb and flow (retrace/pullback/break/continuation/consolidation/rinse and repeat)

   
   
   

3. If BOE overshoot and announces deep rate cuts, an awful outlook for the year, a massive increase in QE and/or related, etc
   1. That will caught markets under positioning. Look for smart money riding the pig without anybody else jump on board. Sharp continuation...
   2. Gold means aggressive forces to the top side via monetary policy and risk ....

   
   

​--> ...Same for NFP. Quickly same thing:

1. NFP a huge overshoot.

    

   1. Markets are expecting +/- inline/slightly softer numbers. A overshoot will caught markets on the wrong side creating a short-circuit and game changer.
   2. Gold means shortcuit via monetary policy (hikes sept) putting lots of pressure to the down side ...

   
   
   

2. NFP inline / slightly softer

    

   1. Markets are well aligned for that. The meat of the move is already digested and main hands well positioned. Not much to see a soft continuation on the main flows.
   2. Gold nothing new same levels/same trades/same all scenario. Natural ebb and flow (retrace/pullback/break/continuation/consolidation/rinse and repeat)

   
   
   

3. NFP a massive undershoot.

    

   1. Markets under positioning. Look for smart money riding the pig without anybody else jump on board. Sharp volatility across main related markets...
   2. Gold means aggressive forces to the top side via monetary policy (no hikes) and risk (global meltdown around the corner) ....

   
   

​Now you can mix and match your option in the matrix. So if your expectation of C and C are validated:

-> what should happen in charts?
-> do you have your map clear? a flip? a target?
-> can you jump in before, after, not anymore?
-> Whats your 'exit' strategy if things flop massively in expectations and we get a game changer?

Give it a try in your terms of course to see if it makes sense.

@primejarvis you are completely out of synch with expectations on the BOE. You may want to read whats going in the financial market a bit closer. Remember that we are talking about market expectations for trading not emotional feelings, neither our political, personal or technical bias.

@bullionman (What is your interpretation of this rally?)

In Gold check chart above as its very visual and easy to understand. No hikes FED June/July (main monetary policy side) with BOE/ECB/RBA/BOJ and you name it with even deeper stimulus and rate cuts. No brainer Brexit on the risk side. All ducks aligned ...

sisse

...and that was it for the day. A very timid profit taking in Equities before BOE/NFP and a good shake in Dollar across the currency board. All cards on the table in major currencies with all maps cleared for this week ....

sisse

sisse,

Thanks for a good way to interpret all of this. My answers are C and C. I will look into answering the other questions but this is a good way to design a MAP once you know expectations w FA.

sure but I already 'dissected' the concept in Gold so why not taking out the training wheels and do it in the Euro ...what about an update on the current Euro short term chart/outlook? ... I have the feeling you are having some questions after the current move ...lets see what you got.

sisse