Just 6 Days Left in August- I’d sit tight

  • Posted on: August 23, 2011

I wrote before how the month of August is typically horrendous for volatility. Program traders with their “disruptor” programs push thin markets around.

I found it interesting about a month ago I was doing my weekly taping from the floor of the cme. I mentioned that the markets could get thin. The moderator, who’s pay check is signed by the cme, asked me not to mention that, because they like to talk up their liquidity. What a joke.

Any how, the stock indexes still look ill. I imagine they will remain so until November 2012 when we get through this election.

The country is in an economic funk, but for the next 14 months, we’ll be hearing a new land slide of negative sludge and mud which will make Shleprock look like a bloomin optimist on a manic high.

The S&P Cash looks like it will trade between 1100 and 1200 for a bit. The Dow looks to be dancing around 11,000.

At some point even the news people will realize that 100 to 500 point moves are going to be regular events in the age of computerized trading.

At some point they will admit to the fact that “investors” really have been replaced by fund managers who turn their buy and sell decisions over to the black box.

At some point they will stop hemming and hawing about how “the market seems nervous”.

Of course, at some point, we will be able to buy flying cars as well.

So my point is, totally ignore the media, unless you use their hysteria as a decision point to do the exact opposite of what ever they are crowing about.

I have been a reluctant long in gold above 1600. We traded up to 1917 but we have gone vertical on the weekly charts for the past 2 months. That is not sustainable.

I am also not ready to try to pick to top. I do, however, like buying dips and selling new highs. I am a big believer that nice fat round numbers attract attention.

My guess is that we’ll run gold up to 2,000.00 and then possibly 2,500.00

Those big numbers will attract trade. Just like Dow 10,000 was the holy grail until it wasn’t.

In the grains, the crop tour is under way. The story line is bullish. The producer and general public are bulled up.

I think we may see a repeat of wheat, where all we heard was “the wheat is not there, the wheat is not there, the wheat is not there”, and then once harvest got going it looked a lot better than any of the the naysayers “had thought possible”.. What happened? Chicago Wheat dropped from 9.80 down to 6.40… $3.40 cent break when for 6 months all we heard was the end of the world stories.

Poor Gartman was on CNBC touting his long wheat position which had been very profitable for a year. He had been long high protein KC wheat. KC dropped from 10.00 down to 7.20.

So, in my humble opinion, its time to look to be selling rallies in corn. As harvest gets underway, we could have the same story pan out that happened in wheat.

That is all.

CER