Thursday January 12, 2006 - 11:44:15 GMT
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Black Swan Capital - www.blackswantrading.com
“A vicious property of a Black Swan is its surprise effect: at a given time of observation there is no convincing element pointing to an increased likelihood of the event.”
Though we know trying to pick tops or bottoms is a mug’s game. We tend to do it anyway.
At some point it seems the market has to jettison some of the speculative extreme building in the metals. (Not necessarily representing the end of the bull-run, but some type of pause that refreshes at least.) Sure, the supply and demand dynamics are real—we don’t doubt that. And much of the reasons for buying are very solid. But, it just seems that everyone we know loves the trade i.e. buy gold and copper. And they love it because they have been right. And because they have been right, they have added. And after adding, they have told their friends. And friends don’t want to be left behind when a friend is making money without them. At some point, there will be no more price-led traders left to buy—that’s the raw material of correction.
Here’s a look at the copper chart, followed by the gold chart. The bars at the bottom of the charts represent open interest levels.
(One could make the case that if a +$40 correction in gold didn’t shakeout many, then there is real commitment and this market is going higher.)
Anyway…no surprise that Aussie would be supported by the move higher in metals. Our simple thought is the Aussie looks very overextended. And the metals appear due for a rest. And if we see them start to move down together it could be a setup for a very decent tradable correction.
Aussie chart vs. gold daily below:
Black Swan Capital
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