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Mix-Ansicht- Warum wird die Volatilität am Goldmarkt immer extremer? - wuzge, 12.02.2006, 20:16
Warum wird die Volatilität am Goldmarkt immer extremer?
-->Hi,
anbei eine Begründung für die immer extremer werdende Volatilität am Goldmarkt. Nehmt meinetwegen Alka-Seltzer, wenn es Euch den Magen umdreht, aber lasst Euch nicht aus dem Sack schütteln.
(...)
At exchanges where the contracts are traded upon a fully electronic platform where orders can flow directly into the exchange's order system, the result is a near instantaneous execution of an order that had a buy or sell signal generated only mere seconds earlier! You want to talk about lightning fast!
Think about this for a minute and you will begin to understand the repercussions of this development and how it can result in unprecedented barrages of orders flowing into the exchange at any given moment in time. In time past, orders had to be phoned in to a broker's desk who then phoned it down to the floor which then sent the order into the pit via a runner to the floor broker who then executed it. The process had by today's standard, a huge time lag. Not any more. The process is frighteningly efficient.
Now, I submit that it is this very process which lies behind the unbelievable wild swings and huge intraday price movements that mark so many of today's markets, especially the futures markets. At any moment in time, thousands of these computers are tracking the very same price data in a given market. Any move that therefore triggers a sell signal on one will soon trigger a sell signal on another. That will trigger yet another sell signal on a third and so on and so on and so on.
In reality the sell signals are being triggered on more computers than one at a time but you can understand my point here. With all these fully automated trading systems sending their orders to the exchange within seconds of one another, all price movements become incredibly exaggerated as sell order upon sell order is piled upon the next. The net result is that existing bids can be swamped in a matter of mere seconds producing a snowball effect that quickly becomes an avalanche.
This is precisely what we witnessed in gold on Tuesday, February 8, 2006, this week. It is also the exact same thing which we have seen for better than a year in the copper market as well.
The interesting thing about this is that while the intraday sell offs can quickly cascade out of control, the price reactions seem to be finishing up much swifter than they have done in the past with the result that the primary trend is reasserting itself much sooner than was the case formerly. In other words, though the price reactions tend to be more brutal on an intraday basis, they also are completed in a shorter time frame before the market resumes the direction of the previous trend.
(…)
It simply gets done as the computer is not programmed to get its job done with skill - it is incapable of that - it only knows to sell and so that is what it does and it does that automatically by continuing to send its orders to the exchange until it has exhausted them. Unless that same system then somehow gets flipped to generating a new signal to go short, the selling is exhausted within a matter of days and there is no one left to further sell the market. At that point, fundamentally oriented traders looking to buy jump back in and the market then reverses itself and heads back up with the result that the same hedge fund computerized trading systems are now sending buy orders to the very market that they just finished selling a few sessions ago.
(…)
The entire upward course of copper over the past couple of years has been punctuated by these days in which we have seen huge downdrafts only for the market to apparently shrug them off within days and then proceed to make new high after new high.
Take a look at the charts below and you will see these some of these big down days noted for you.
(…)
Note the sharp sell offs and the resulting paper losses for longs during these periods. Yet note how quickly the market recovered and once again went on to make new highs in a relatively short period of time after what appeared would be a debacle for the longs. Opportunistic shorts who tried their luck at this market soon learned the hard way what it means to try trading against the primary trend. The big two-day downside cascade of June 30 and July 1 was completely erased in the next 4 trading sessions. It took 9 days to undo the $8.20 swoon in mid August but nevertheless, it too came and went.
(…)
Folks this all seems quite cold and distant when we can sit here and objectively analyze these things but I can assure you, any trader who is long and is stomaching those kind of paper losses is anything but calm and serene while this is occurring. It is absolutely guy wrenching to witness these kinds of swings in one's trading account. An element of distrust is always introduced;" Could I be wrong? Is the move up finished? Is the bull market history? Where are all the buyers?" Those are the thoughts that a trader grapples with after a brutal sell off of this sort. Yet the amazing thing is that in both cases in this contract, the losses evaporated within days and the market stormed on to make yet more new highs. The ferocity and intensity of the sell off was quite severe while it was occurring but it was also incredibly short lived.
(…)
The point I have been attempting to make here is that the computerized trading systems that no doubt are being employed by the macro funds playing copper have sent many a sell order at the same time on the same day into the copper pit over the last year. The result has been stunningly severe sell-offs which rocked the bulls' convictions to the core but nonetheless, when looking back, were nothing but momentary blips on the radar screen of this massive bull market that copper is experiencing. Each correction instead of lasting for weeks on end has been relatively short-lived with the primary trend quickly reasserting itself within a short period of time.
Looking at this particular market it certainly seems that my observation about price reactions being brutal yet short lived has some credence to it. But is this phenomenon peculiar only to copper or is it perhaps the beginning of a more common pattern of market behavior? Are these computerized systems so efficient at their tasks that they can actually condense heretofore reactions into a shorter time frame?
I am not yet sure about this to be perfectly honest but I do find that many different commodity markets seem to displaying this same sort of pattern of late - Strong, sustained up moves accompanied by swift, sharp and brutal sell offs which run their course in the matter of a couple of days or a week at best before the bullish uptrend reasserts itself.
I strongly suspect that gold is not going to be immune from this pattern. Why? Because all of these various commodities that exhibit this pattern have one thing in common - the fundamentals behind the upward move in price are so strongly bullish that speculators, particularly hedge funds, want in no matter what. Demand seems insatiable and rising prices are simply not slowing it down. Simply put, people want the stuff and keep paying up to get it. While the downdrafts are gut-wrenching, the setbacks in price are viewed as buying opportunities by those either wishing to get in or those wishing to add to their existing long positions. The computer generated sell-offs flush massive amounts of positions out of the market but demand is so strong that fundamentally oriented buyers rush back in on the heels of these sell-offs. Their buying then flips the trading systems back to the buy mode resulting in an avalanche of new automated buy orders. These in turn drive the price on up to new highs where the advance temporarily stalls out as the market pauses. Then the entire process repeats itself all over again as the sell signals get generated and down it goes again only to pop back up like a cork in the matter of a few days. It is really something to behold.
The conclusion to this is simple - get used to this wild volatility in the gold market - it is here to stay and is only going to become worse the deeper we get into this phase of the bull market and the more that the bullish fundamentals intensify. Be very careful about heeding the siren songs of those who are willing to call for a top in gold every time it experiences a significant down day or two - remember copper! The more macro funds that are attracted to gold, the more open interest is going to surge. The more open interest surges, the more volume is going to increase. The more volume increases the wider the daily trading range is going to become. The wider the trading range becomes, the more chance there will be for automated trading systems to generate buy and sell signals. The result - more volatility and wicked price swings on both an intraday and day to day basis.
Trading discipline is essential if you are going to survive this period and prosper. That means respecting trendlines and watching for support and resistance levels to develop. Watch for stalling markets in particular as those will be the time periods in which the computerized trading systems are the most dangerous since patience is not one of their virtues.
Novices and even some of your more experienced traders would do well to keep this in mind and be careful about the position size you put on. We are entering the period in which gut-wrenching is going to be commonplace and unless you want to live on a diet of Maalox or Alka-Seltzer, it will be prudent to know your emotional limitations.
Dan Norcini
10 February 2006
<ul> ~ http://www.gold-eagle.com/editorials_05/norcini021006.html</ul>
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