Market Overview

Curbing Trading Influences


I wish the pundits, experts and analysts would quiet down.  Oh, they don't influence what I do.  I just focus on the message of the markets and proceed accordingly.  But many are looking for rational answers and just continue to use quick and easy excuses to influence decision making.  Did you buy into the hype Thursday with a big rise in precious metals? 

So, what caused the big spike in gold  on Thursday?  Was it something Fed Chair Yellen said in the press conference on Wednesday, or something in the statement?  I'm not so sure, because gold barely budged for a full two hours after the decision.  If there was some indication of worry on inflation we might have seen gold start its rise just after.  Demand for the metal had been so weak for so long that it was due for an inevitable rise - and use any excuse you wish. Those who have been long the metal since the rise in Spring have been rather disappointed.

Prior to Thursday's surge gold was still up nicely for the year, one of the best asset classes in 2014 but well off it's highs.  In fact, with the big move up gold is still below the highs achieved in April.  Even 50% below all time highs after a miserable 2013.   It could have certainly moved because of geopolitical worries, potential conflicts in the Middle East (which has influenced the rise in crude even if demand has tapered off) but most likely gold rose as it had dropped sharply, and the chart was starting to turn up.  It was noisy - all day long.  I heard it over and over in the chat room, and the 'reasons' for the big rise.  If you listened to all the chirping and chatter you might have jumped into a firestorm without a plan to enter properly or even get out of a trade.

What I saw in my market analysis was a sharp rebound on strong one day volume that brought the metal to a very overbought condition in the short term.  I will not jump at a one day move such as this but if there is some indication of a follow up there may be a good entry point.  If there is power behind this one day move, then it'll certainly be extended.  But that is based on the charts, technicals of gold - not outside influences.

However, what was the word going 'round?   Higher food prices, rampant inflation is on the way, it's the end of the world as we know it (incidentally, we have heard that so often, how many times has that bet ever paid off?).  Some pundits were voicing the same message we've heard over and over again - that things will eventually end badly, but they are more like a broken clock rather than a consistent prognosticator.

My concern is the influence these messages have over the majority of those who are longing for understanding and rationale.  I can only suggest what has worked for me for years - follow the message of the markets and not any other influences that cause wrong-way decision making.  While it is surely important to listen and to take in all sides and not shut out any opinion, let's remember to keep it all in perspective.  Nobody should have enough influence to induce a trading decision upon you.  We are all accountable and responsible for our actions, and while we should listen to others they are not the ones pulling the trigger on a buy or sell.

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.


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