Tuesday, August 23, 2011

No harm done, hopefully

8:40 am (Hawaii) A lot of precautionary behavior, folks calmly leaving buildings, staying outside, handling any potential danger. Meanwhile, gold plummeted during the news of the quakes. Just before the quake, DGP had a mini-rally back up to 70.40 or so. I felt OK about that. But the quake hit, news spread and DGP had several minutes of selling that took it back below 70, then hovered at 69.50 or so, then some heavy dumping (hedge funds?) took it below 69.00.

I still waited, though it was down more than $3 from the 72.25 high. OUCH. DGP hung around 68.75 for a few minutes, then another big dumpage toward 68.50. I got out at 68.57, and that was followed by a plunge to 68.00. (Spot gold hit an intraday low of 1829.)

It's all good. I got in around 63-64 and had a nice paper profit as of yesterday. Those of you who scaled out, good move. The rest of us? Not one knew a quake was coming. If DGP had stayed at 69+, I'd still be holding. But it's a trade, not a marriage, and I thought it was too late to sell at 68.75. At 68.50, like everyone on the Eastern seaboard, I headed for the exit.

DGP now struggling to stay above 68.00. There's almost nothing as lousy as selling at the bottom, but with so much momentum to the upside in gold lately, there are some gaps to fill once the momo changes direction. I'll be ready.

Do I think the CME mafia took this down? Not at first. It was an up market and gold sold off in orderly fashion. But once the quake hit and volume became VERY THIN, price went straight down (see chart below). That's CME mafia 100%. Their prints are all over this one. I should thank them for cheap prices later. Meanwhile, the Dow went from +170 points to 211 now.

Update 9:02 am Griffith on CNBC noted that the NYMEX had an "unofficial evacuation" after the quake while computers kept trading. That would explain how momo/algo/HFT took gold (and silver) to new lows for the day.

Indices at highs: DJ +267 (+2.5%), Nas +87 (+3.7%), S&P +32 (+2.8%).

Update 9:08 am I won't feel good about this pullback or even using common sense and stepping out of the DGP trade until I get back in at a lower price.

In: 63 and 64
High: 72+ yesterday
Quake: DGP at 70.40
Out: 68.57

So, traders who got out at 72, 71, 70 ... they're looking smart. I won't feel smart unless or until I get back in at 67 or 66. Or lower. I have nothing against getting back in at a higher price than my sell point of course. But as Brother Turd Ferguson noted today, a takedown was coming one way or another. So this thinly-traded takedown during the quake aftermath works, or should work, as effectively as a margin hike would have.

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