AmplifyLIVE In Session: Gold Volatility

Okay folks, so we're now, uh, in a, in a sort of a gold crushing down scenario here on the G21 contract. So we've essentially come offered heavily under the S1 down here. We're currently down 1.3% on the day. We were looking at trying to catch some, some bids on the 250 EMA here. As you can see on the left, so just here is the daily bar on gold. And then on the left here is the VIX futures, /vix on my Thinkorswim. You can see this chart here is the 1-hour. This chart here is the 5-minute and the one below is the 1-minute. Now, as you can see, this trend we're looking at here is, let me go out to, max month all-time on the VIX. And you can see the previous high, 69.4, matching up to the high of Feb 2018 volatility, gives us this downtrend. And we broke out over here up to new highs, 80-squat, 85 on COVID. Now look where we are, we're back down testing this trend from the upside. So there are, there's, there's reasons for bulls and bears to be getting involved here at this The only thing is the squawker came on just before this volatility and said that the VIX cash was dropping under 20.

And so maybe that, you know, in terms of volatility, maybe some stops were run around there. And then a trickle-on, a knockdown effect happened here. And so then I looked at the VIX cash, couldn't really see much volatility happening. But I went to the futures here with front month futures VIX, which I've just explained to the room. Uh, technically there is—

there's quite an interesting level here for the VIX.

Um, basically that multi-year down, uh, downtrend, so capping the highs, and then we broke out over that over COVID. We're now retraced back to that trend from the upside. And so there's probably, there's probably the volatility that we're going to expect for repositioning, for people to hedge their long equities exposure with some put calls. And but from the looks of it, it looks like people are actually going to be, are buying a ton of calls for, i.e., You know, the, the VIX is indicative of 60-day forward pricing, uh, of the, of the equities markets. So that means that if the VIX drops, that means people are piling into calls, calling higher prices on their equities for 60 days ahead. If, if the VIX is rising, that means people are buying more puts. Than calls, meaning they are targeting lower prices within 60 days. So, um, so what we've done is actually we're crushing down on the VIX right now. So it's probably—

this makes sense in a classical correlation sense that people are rotating out of risk products into equities, and we're seeing a bid across US equities right now on the back end.

Yeah, I mean, this is— so I had a conversation with, um, the guys on the pro training this morning, and it was the idea that, you know, a day like this, which is a holiday-impacted session— so you've got short— so markets in America are open today, they're just observing shortened trading hours. But often then over this period when the holiday's on Thursday like Thanksgiving and Friday, volumes are low. Now that can mean things are quiet and they respect ranges, and, you know, you can see just playing off, you know, the highs and lows. But then the opposite can also happen due to the lack of almost participants, and you can get these quite sharp, quite radical moves on the back of the fact that there's just not a lot of people in the marketplace. So like gold, for example, we know is already an incredibly volatile product to trade in the first instance. If you eradicate out a lot of the volume sat there on the ladder, then, then you can get these quite sharp moves and Yeah, interesting that that 200 DMA as well obviously was quite a big one. I know, uh, at least on the daily continuation that I look at, that was a key area that's held up price really since the main bulk of the activity, which was the selling on Monday, Tuesday. And obviously that getting wiped out, that was that bottom end of the consolidation that I was talking about in the briefing a couple times from the July phase of consolidation from around just shy of what around 1,800 to kind of 2,000 at the top. And yeah, a lot of this I think is indicative of the conditions of today specifically, um, in terms of the scope and size, the speed of that move. As you've already said, that I don't think you actually need a news catalyst. It's almost like the technicals are the catalyst.

That's right.

Um, so that's an important thing to understand here. Markets don't always need to move back of news in that sense. So how do you manage this, Tim?

Talk me through it.

Now we are recording, so, uh, yeah, all right.

So this is kind of high volatility, so I use OCO orders and I work limits. So I have inflection areas that I think are interesting, and I'll put a limit there with like a 10 or 20-tick stop. And I'm hoping, like, as the market shunts down and I put an offer on at a level, it will just whip back to try and find a bid and then get smacked down. And as it comes up in that bid, I'll get filled on my limit order and then it shuts down. So right now, I just had one of them for an 80-tick profit.

Right.

So as soon as it's filled, the profit order is also sitting there. It came up, filled me, and bang, down, like within half a second. It takes you out.

Like, so that's what you kind of want to do in highly volatile markets. You don't want to be hitting in at market trying to just jump in. You want to be working limit orders.

So now I basically, I'm just paring back some losses that I got. I'm trying to buy a couple of kilos.

So yeah, talk me through the Dow then. Yes.

So I'm like, okay, well, if gold is tanking off, something else has got to be giving on the upside, right? And so on the Dow, Um, on the Dow we had like—

we were monitoring. I'm going to share my chart here.

Yep.

Um, on the Dow here, as you can see—

sorry, on the Dow here, just so—

but while you get that up, the dollar is just taking a bit of a move as well now. Just saw the major pairs just perking up a little bit. Euro and cable.

See the charts here, the gold charts?

Yep.

Yeah. All right. So on the Dow, um, I'm just gonna pop this down. On the Dow, I'm looking at a breakout over the Asia-Pac highs of yesterday. I have this range that we fell out of, came back in, went big. Now we're holding the highs. It's a slower play, but that's all right.

I like that.

Um, the S&P— I could have been getting on this S&P, but it's a messy market.

Oil now is actually taking a bid as well.

This dollar dropping OK, this is going to be a pretty volatile session here because I look— I think this dollar is going to test below this support of yesterday, which is then going to be pretty much upside on the euro.

The euro is sat there right now testing up at around the morning high.

So I was talking about potential shorts here on this point in the pre-US session video.

But I said we'd have to wait and see what the situation is once we get up here. So now Dollar at this key point, euro at this key point, I need to say to myself, is this going to continue?

Is this volatility going to continue, or are we done and we're going to retrace quite back?

Yeah.

And then one of the things, if I can just quickly—

Go ahead.

So it almost feels like the sequence then here was initially with the gold livening things up, then as a subsequent domino effect, a few other correlated assets start moving in relationships we just discussed. But looking at gold here, if that was the initial indicator then of the first catalyst to then create the movement across the board, I mean, gold is holding up on that longer-term daily level at the moment. So that was what we were talking about when I was saying just several minutes ago that gold could get quite hairy here. That was a reference to if we break down through this level, well then, I think then it really— people will start chasing it down. And as we said, with the generally thinner volumes, then pushes of another $20, $25, $30, $60, $70 loss on the day is not uncommon in these types of conditions. So quite interested now as well is looking at, even if you're not— like Tim's looking at the euro, or even in the Dow, doesn't necessarily— although we're not looking to trade gold in this instance, given it is a bit difficult, given how quickly it's moving, it can act then as the flag, if you like, for not just the entering but the managing of subsequent other positions.

But I can highlight the size. So 161 here on the 4 TANs. But look at this liquidity here above, right?

This is where traders get really screwed in terms of ladder reading skills.

They think, oh, there's a whole lot of volume above, so this is going to keep the market down.

Well, you have to think the opposite. More liquidity on one side means the market will— is more likely to trade that side than the thinner liquidity side.

Okay, so it means when you see size, you need to think about trade facilitation in that direction. Okay, so the reason why I'm, I'm interested in a long here— I mean, look, this thing might— this buyer at 94.10s may disappear and it'll pull down to this volume here at the, uh, 3.80s or 3.75s, right? See, there's more volume here. It could just rotate down.

But I'm, I'm now basically positioned that someone is going to—

yeah, okay. So here you go. 4 tens, 148, 49 contracts exchanging, 181 exchanging on the bid. Okay, now they're out of the market right now. Now it's just passively auctioning here.

And I'm going to— I'm going to— I'm just about to try and flatten that because I don't want the rotation down to the 70 30, uh, 375s. No, I'm not gonna take that. I'm just gonna wait now because there's a lot of stacked bids at the high of day here, or offers here at the high of day.

See this?

But the—

to me, that was worth putting the risk on.

You can see, I mean, having obviously just sat in front of charts for a couple of tens of thousands of hours One of the observations I often see is that when you get these types of momentum pushes in the market, and where there isn't anything other than that, and it's kind of like goes in these kind of wave patterns almost in momentum, um, sometimes what I see is when we get to the top and bottom of hours, it's almost like the flush, the effort, it kind of pushes into the, the top and bottom of the hour, and then it, then it's over. Yeah, have you ever identified that?

Absolutely. You get, you get a volatility push and then it just unwinds.

Yeah.

So yeah, that's for sure. So that was quite a point of frustration for myself and a couple of the traders, um, that I used to work with on a prop desk, and that we would trade something directionally really well volatility, and then we, we wouldn't catch the turn and flip the other way. And that was kind of okay with us because we were making money and we didn't need to try and nail the turn, right? Um, but yeah, this, this guy was not really playing ball here. Or sorry, no, that's— sorry, that's different. Um, so the thing is, is you know, you don't have to try and catch the turn, and you can really give up quite a lot of P&L trying to catch a turn, and you can, you can actually give back everything you just made, um, trying to catch a turn in the market. So I wouldn't really recommend trying to do it that often, apart from when it's extremely obvious and the exhaustion is