News, analysis and commentary for gold traders and investors

"Be Right - Sit Tight"

Jesse Livermore
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Gold Market Wire

News, analysis and commentary for gold traders and investors

Gold Market Opening

Sucking in Weak Length - While the Shorts Cover.

December 22, 2020 - (Gold Market Wire) - In truth, it was a classic - something of beauty to behold.

The shorts, who have done quite well for themselves over the past few months, have to cover before the markets close shop. No Way, are they going to run the position over the holidays. Anything could happen to send Gold soaring. And in fact it did. News came out (Covid news...yawn) the market flew, the remaining shorts were forced to cover. And although many had already flattened out in the days before (i.e. - proper risk management), the weak buyers still showed up on schedule and came out to proclaim, yet again, "This Is It!...Buy with Both Hands!!" As they did, and once the last of the shorts finished covering (i.e. - the inexperienced traders who left things too late), the hyenas and jackals, aka COT, stepped in to feed the weak length (still screaming 'This Is it!') with their spec shorts... and down we went. Right back to where we started.

Straight outta central cinema and their casting department. And everyone played their role perfectly.

Which part were you cast in?

Now the market has returned to its original state; fighting over the 50-day Moving Average, which we are sitting right on.

fun and games for the end of year.

So what is the lesson?

It's simple, really. Number one - don't chase strength...especially on news. Number two - if you positioned for trading at the end of the year...cover early and get flat! Early as in two or three days before you think you should - the big players will always be ahead of you. During the current craziness we are living through...with professionals running to winter retreats days, if not weeks early, you better move very early. This year you needed to be out of the market by December 15. Number three - you really shouldn't mess around in markets prior to big holiday periods. The jackals are waiting in every corner. They are hungry and want some free money, and they are very good at spotting it and getting it. They know the look of road kill before its been killed. They will stick around until the bell goes off on December 24, just hoping to claim a few scalps.

Now, if we look at the market, what else do we discern? Well, the buy back by the professionals started on exactly December 1. Can someone spot a trading manager's edict here? Indeed. The MDs laid down the law on the first day of the month - "cover your positions and get flat." Any trader who didn't has no bonus this year and may have no job next year.

And so we return to the 50-day moving average, which the market must defend. We are literally sitting on it, deciding what to do next. That's what yesterday's Doji was indicating: Indecisiveness. But yesterday's hiatus has produced some solid information, and the chart spells it out clearly.

downtrend revisited.

It really doesn't come any clearer. Until that downtrend line is cleared, we aren't going anywhere. The market stopped right where it should have. And now, the 50-day moving average had better hold, or we will have more downside ahead of us. That is why we didn't rush in when the 50-day was first cleared, and advised patience. Whenever you think you are going to "miss the boat", its almost always best to let it sail. Because emotional reactions are costly. And emotional control is what trading is all about.

For the wild eyed gamblers, we cleared out a lot of suckers and weak length in that last move up and the whipsaw back. Small speculative length with a tight stop is the gambler's potion today.

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