Well I am not sure how in depth I need to go on this topic, if you have turned on your TV today you likely know what I am talking about. A group of traders on reddit have changed the trading game. They have targeted hedge funds shorting massive positions and succeeded. Lets take a look at the stock that started it all. Game Stop rose from about $20 a share to over $480 in 2 weeks... This bled into blockbuster, AMC, blackberry, and more.
In a successful move to force price back down, brokers like Robin Hood and Interactive Brokers stepped in and either halted trading on these stocks or refused to submit orders for them.
The reason I am talking about this as a commodity broker and trader is today, I believe, we saw this move into the commodity market, specifically silver. As soon as the stock market opened at 9:30 AM EST silver was up 6% and over 27 in a matter of minutes. Things like this are all over twitter.
Now this was out before the stock market opened. AG, a miners stock for silver opened well above the close and eventually also had trading halted. With these stocks, they halted buy orders but allowed people to sell, literally forcing price back down as your only option was to sell. Lucky for us, the commodities market cannot halt trading the same way, although there are circuit breakers that can get triggered that limit moves.
You may remember our post from 1/8, 12,000 gold contract dump, where we explained how bullion banks dumped 12,000 contracts at 3 AM in the morning to force price back down in metals when we had been making good money on the trade. Obviously it was no coincidence this was done at 3 AM, that is when trading volume is lowest so price is easiest to manipulate. These banks and large companies can freely manipulate price while we, the casual traders can only hold 200 contracts on one side of the market at once. That is an CFTC regulation which was put in place to prevent price manipulation... By us, the casual traders while these corporations can hold thousands.
Wall street does not know how to react to what is going on in the stock market. Hedge funds are calling brokers and telling them to stop submitting orders, CEO's of these companies are going on news networks and berating day traders. These companies are losing up to 20% of their value from what I have read which equates to multiple billions. It is something I never imagined I would see and is really exposing how the market is set up for so few to succeed. Hopefully, this creates transparency in the the commodities market at a large scale, creating transparency which will allow a level playing field between small traders like us and large companies and banks.
We have a few folks interested in catching a falling knife here. There is a real risk that the metals could left translate, meaning that we have a failed intermediate cycle happening. We just don't know and should stay on the sidelines until this situation resolves itself. Before re-entering any metals, we will need to wait for a swing low at the very least.
For starters, the Dollar looks to have bottomed. We were expecting the dollar to drop a bit further down to 88 before a final cycle bottom but now it would appear the dollar is on day 2 of a new daily cycle. This will make long positions in the metals harder.
We are all out of metals now but we are still vulnerable with stocks. We are advising that you tighten stops on NQ positions to 12900 and RTY positions to 2050 or to just exit your positions entirely and move to cash.
Gold and silver came under attack this morning at 3:00 when the bullion bankers dumped 13,000 gold contracts. Fortunately we had tightened up stops just a few hours ahead of this. The one minute chart below shows how this looked while you were sleeping.
Manipulation in the gold market just goes with the territory. This does not change our plan. It just means that the drop into a DCL is happening now and we will have an opportunity soon to take re-ownership at a lower price.
The stock market has put the 2020 election in the rear view mirror and it is full steam ahead into the stock market bubble of 2021. The NASDAQ Index closed above 13000 for the first time ever today and there is no resistance as we move forward. Cycles and sentiment do not work in bubble phases, As was explained in the Market Shifts Video a month ago, this melt up phase should take the NASDAQ to the 15,500 to 17,500 level before topping over the next 3-4 months. We will be recommending advancing stops and adding positions at each dip along the way.
Gold is in the first daily cycle out of its recent Intermediate Cycle Low, but gold is now in the timing band for a Daily Cycle Low. Early in the cycle we want to keep stops loose.
We are now in the phase of the cycle where we will want to tighten the stops daily on gold and silver or exit alltogether. We recommend keeping stops at the 10DMA or tighter until we get stopped out. Once the 5 day RSI becomes oversold and the 10 DMA turns lower, we will wait to spot a swing low and re-enter.
So for now, your strategy should be to put the petal on the gas for your stock positions and to be tapping on the brakes on your metals positions.
I have had many people reach out today with concerns about their metals positions. Some wondering if they should exit, some wondering if they should add. Here is my thought, we knew today would be a volatile day as the Georgia run off election results are being tallied and winners are announced. As we get closer to the results it appears, at this time, that the Democrats will win both Senate seats meaning they would control the House, Senate, and the White House. Regardless of political opinion we know that the Democrats have been keen on providing government funding to state and local governments and stimulus. To me that means more spending and more money printing which translates to inflation and a decreasing dollar. You can see a direct correlation between a dropping dollar and increasing metals prices.
There is no better time to add positions then right now. We are trading in a market that is great for metals and stocks. Look at any major financial news network and you can see they all agree bitcoin, metals and stocks are going to have a huge year as people look for safe havens from the dollar to protect their assets value. I don't foresee gold dropping below the 10 DMA. When the 3 day RSI hits oversold levels I see price reverting. Entering or adding to your metals positions near the 10 DMA is the best advice I can give you, the worst thing you can do at this point is exit positions.
In the investment world, traders like us are considered "dumb money". It is just a fact, so if I refer a trade idea as a dumb money trade, please don't take offense. Without the benefit of multi million dollar research departments that most of the people we trade against have, we are the dumb money.
When an asset (like soybeans) begin to trend strongly, and you are not in the trade, you begin to feel anxiety. You feel like you missed the boat and now you are willing to chase. You feel like everybody is making money but you. When you speak to others who are also trading and admit that you are not in (soybeans), it is painful. What dumb money traders do is finally jump in late in the trade. Your smart money traders are happy to sell you their shares at these inflated prices.
Buying soybeans now would be considered a dumb money trade. Soybeans are making a parabolic move. Is it really rational to think that soybeans should be $14 or $15 now? It is barely January and there are no weather or supply issues. Buying frenzies such as this are not rational and they are dangerous to trade.
Look at this soybean chart which will be giving a CCI sell signal soon on the daily chart. The weekly soybean chart is at extreme overbought levels. This is not an asset you want to buy.
The time to buy these assets are at the beginning of intermediate cycles if you want to capture big moves such as this. This is why we want you in metals now. We began buying metals when gold was at 1800 back on the first of December. In 4-5 months, we expect the gold chart to look a lot like the soybean chart does now. .
Already, I have traders asking me about exiting their gold. NO!
Most assets will not trade as soybeans have but they could in this environment of massive money printing. All of the metals are set up to produce strong trending moves over the next 3-5 months. You want to buy these assets now.... not wait until the move has become obvious. Buying early is what smart money traders do. Buying soybeans now is a dumb money move.
The Speculation page is used for educational purposes and to talk about our opinion on trades and what is going on in the market. All trade recommendations are made in "The Pit". This is also a blog page where you can ask questions, post your thoughts, or ask for help. Be sure to use an anonymous name. If you have any questions feel free to reach out to us via email.