Martin Kronicle

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Was gold too high to buy in Q4 2009? That’s when George Soros became massively bullish on gold, and more than doubled his original position in GLD. The fourth quarter is highlighted in the red rectangle in the chart. Compare the prices within the boundaries of the red versus where it was before, and where it’s gone since.

Since the beginning of Q4 last year, the yellow metal has appreciated 20 %. Since his position was approximately 9 % of his portfolio, we can deduce that the metal’s performance could have added almost 2 % of net gains to Soros Fund Management.

Psychology, self-awareness, and emotional intelligence are the keys to whether you’re made for trading. How many readers said “I’m going to wait for a pullback?” “It’s too high now.” “All the bad news is priced into the market already”…famous last words.

It did pull back…did you buy some? Why not? What were you feeling at the time ? (not thinking, but what were you feeling?)

Who could have figured on the Euro bailout package? Greek tragedy? (besides George)

What do you make of the fates of Italy, Portugal, and Spain? How about the UK?

Then the United States – are we immune from the bumper-crop in US dollars that we’ve printed?

With all this in mind, do you think gold is too high?

When the long-term charts are in sync with the shorter-term time periods, you have the making of a great trade set-up. Such is the case with the GBP, which you can trade via futures, interbank, or FXB.

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The GBP is rallying after the election in the UK, but that doesn’t tell the whole story. Check out the weekly chart below.

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And the GBP Monthly Continuous chart:

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Whatever is happening in the UK, their economy is not going to change overnight b/c of an election, despite how smoothly it might have gone or how “selfless” Gordon Brown acted. Same goes for the US, of course.

The GBP has a long way to go before the downtrend will change. Like in my Gold, Euro, S&P 500 Bailout Aftermath post, you’d look to fade the UK election on the reversal down. You can use your intraday charts to pinpoint the reversal.

You can see how to identify a trend reversal in my earlier post How To Marry Fundamental & Technical Analysis in Cocoa.

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Here is the first Charles Goyette podcast.

Here’s a video interview with Dollar Meltdown author Charles Goyette.

Defining the downtrend in the S&P 500.

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The reasons why the market sold off are largely irrelevant at this point. The damage has been done. I guess it’s fitting that it might be incompetence. The world is starting to blow up.

After the long uptrend was broken, and the support at 1180 was broken last Monday, the downtrend was defined as I outlined in my post yesterday Downtrend In The S&P 500: Won’t Be Long Now.

Now you’ll need to see something like 1190 basis the June’s to break the downtrend, and that isn’t going to be for a while – it’s 70 points away.

Any rally to 1170 – 1180 in the June’s, sell the living hell out of the reversal or buy long-dated out of the money puts, turn your TV’s off, and listen online (and free) to the new CD from Peter Gabriel, Scratch My Back.

You can get the chart yourself. The ticker for the S&P 500 futures contract is SP_M0.

SP = ticker for S&P
M – month symbol for June
0 – Zero, for the last digit in 2010

Notice the underscore between the ticker and the month – it’s needed.

India needs to centralize and streamline it’s data from the exchanges, but at the same time make sure that the hedgers (producers and users) of commodities can get quick access to the data itself: End of Day data at a bare minimum.

Commodity markets exist for a) Risk Transference; and b) Price discovery. What good is it to have a such markets, yet not get the data into the hands of the people who need it most?

So the evolution of India’s infrastructure has a lot to do with the success of her commodity exchanges.

The exchanges should consider sms/texting the data to the most remote locations in the near-term, at least until there will be electricity running 24 hours a day.

MCX and NCDEX need market makers, traders who will be able to take on bulk orders, and evolve the exchanges beyond the “agency-only” basis. Adding such will smooth the price-discovery process as the market will not be deluged with sell orders nor hammered by an imbalance of buying pressure.

India must embrace the Managed Futures industry from an educational and regulatory standpoint. As an asset class, it shows to reduce risk and enhance returns, but uneducated traders (small speculators) will not reap the same benefits that can be achieved by hiring a professional commodity manager in a PMS-like structure.

The FMC needs to be more progressive and catch up with the rest of India. They should begin looking into allowing foreign commodity investors to trade the local markets to enhance liquidity. The trading platforms are already in place.

Read: Financial Markets in India: A Snapshot