Trade Alert: Betting against this glittery stuff

Trade Alert: Betting against this glittery stuff

Good morning and welcome back to the fairgrounds, where you should know before you lay your money down that most of the games are rigged.

The markets are up a bit and tech sans-Apple is finally starting to lead.  Someone asked me yesterday about shorting gold here and it was like they read my mind — you guys know that I think gold likely put in a major top back in the autumn when it was hitting all-time highs. In the time since then, the gold chart has been putting in lower highs and lower lows, meaning that every time it rallies off its lows it fails to get as high as it got the last time it rallied off its lows. Take a look at the pattern as its clear in the 1-year chart GLD here:

See how after it touched its all-time high in late August and early September up there near $185 and then it fell and when it rallied back in mid September, it didn’t quite get back as high as that $185? And then it fell and when it rallied back in November, it didn’t get anywhere near $185. And then it fell again and this time it looks like its bumping up against what a chartist would call “resistance” lately every time it gets into the $170s? I’m going to buy some puts on gold here for a short- to intermediate-term trade.

And see that spike down again lately? This thing looks like it’s doing the “dislocation topping process” that I wrote about yesterday in the chat transcript in regards to silver and which I’ve mentioned many times. Search the site for the term “dislocation” or even search “cody willard dislocation” on Google as I’ve been successfully using this as a top indicator for years and have written about it repeatedly.

I’m looking to buy puts dated out into September and with strikes ranging from $180 to $160 or so. I will probably start off putting my bids in between the existing bid/ask on these puts and am in no rush to get completely filled today. I’d like to buy maybe 1/3 or less of what I will eventually end up with as my position in this one. And as always, if you don’t trade options or don’t want to trade options on this idea, you could start a 1/3 position by shorting the actual ETF position instead of buying puts. The puts get you a bigger bang for your buck but come with an expiration that increases your risk so there’s a tradeoff and I just happen to be using puts this time instead of shorting the GLD ETF.