Bill Cara’s Blog for Sep 12, 2012
CTA Trading Desk Morning Report
[7:00am ET] Good morning.
The Michael Lewis article on Obama is an interesting read:
Meanwhile, confidence in Europe strengthens following the German court decision.
Good morning, Geoff here.
The German court decision was positive for the markets today, now we wait to see what the Fed has in store for us tomorrow.
While we wait for Big Ben’s announcement, I’d like to quickly show you how we use sentiment to help our trading.
Gold and silver have been on strong runs recently. The most successful way to trade the metals is to buy weakness and sell strength. Much of that has to do with the fact that the metals tend to be a very emotional trade – people allow their feelings to drive their trading decisions as they puke at bottoms and buy tops. To make sure that you are making the correct decision, you need to track sentiment, which we do through sentimentrader.com (charts provided by sentimentrader.com).
In the following 2 charts, you can see that public opinion in gold and silver have risen along with the price of the metal. In other words, the room is growing more crowded and the door is shrinking.
This is not a tool to use alone, but it does provide an important piece of the puzzle and it is saying that buying now is a higher risk proposition than weeks ago when we were bullish precious metals.
In the long-term we continue to be bullish and short-term price action could continue to drive prices higher as more and more traders get back on the PM bandwagon. However, odds are rising that a pullback is on the horizon and with the news from Germany driving the euro higher, we need to look at the US Dollar which could make a big move tomorrow on the Fed announcement.
Here is the public opinion poll on the US Dollar:
You can see that it is in negative sentiment territory that has led to rallies in the past.
Here is the chart of the dollar that I showed you on Monday that signaled a continued downtrend in the intermediate term but also shows that the buck could be due for a short-term bounce.
I think the way to play this is to wait until you get a swing low in the dollar and watch the rise. Then you are in position to buy precious metals into weakness if you have low exposure.
Have a great trading day!
Here are the 7:00am ET snapshots of the latest equity market trading results for Europe, and futures prices plus 5-minute charts of the futures for S&P 500, 30-year US Treasury Bond, US Dollar index, Gold and Crude Oil.
|Symbol||Name||Last Trade||Change||Related Info|
||17.12 (0.80%)||Components, Chart, More|
||8.00 (0.33%)||Components, Chart, More|
||18.84 (0.53%)||Components, Chart, More|
||59.66 (0.82%)||Components, Chart, More|
||1.90 (0.57%)||Components, Chart, More|
|^OSEAX||OSE All Share||499.55
||3.63 (0.73%)||Components, Chart, More|
||1.99 (0.60%)||Components, Chart, More|
||5.51 (0.08%)||Components, Chart, More|
||6.85 (0.12%)||Components, Chart, More|
||6.70 (0.70%)||Chart, More|
||2.31 (0.16%)||Chart, More|
|GD.AT||Athex Composite Share Price Index||763.70
||32.19 (4.40%)||Chart, More|
The team will check in during the day, reporting in the Discourse when there is a new entry.
Enjoy your day.