Platinum/Gold Spread: Setup To Go Long

Record Extremes

The blog has been sitting with an unleveraged platinum/gold spread since September of 2015.  We’re running this position as an “investment”, ergo, the lack of leverage.

The reason for the investment is because the platinum/gold spread hit a record low, the platinum/gold ratio hit a thirty-three year low, and the time that platinum has been priced below gold is at a record duration.  Our thought is that this is like a stretched rubber band that’s due to snap back violently.

However, rubber bands will sometimes break.  That’s another reason we’re doing this experiment without any leverage!

Trader’s View

Investment experiment aside, the platinum/gold spread looks like it could be good for a speculative trade.

First of all, the spread recently tested last year’s record low and stated to recover.  The bounce faded off at the end of May, but a recovery above the May high could put it on an upward trajectory.

Also, the last two times the spread dropped this low (June 2016 and October 2016) it was soon followed by rallies of $182/oz. and $135/oz.

Now, the spread initially bounced off the early May multi-month low and then fizzled out just a couple of weeks later.  Last week it even closed just a mere five dollars away from the May 4th low.  That’s not how it played out the last two times, so it’s a little suspect.

But that brings me to my next observation…

Over the last year or so, the 50-day Moving Average has done a good job of defining the trend in the platinum/gold spread.  The bounce into mid-May stalled out once the spread encountered the declining 50-day MA and failed to clear it.

Platinum Gold spread (nearest-futures) daily

Platinum Gold spread (nearest-futures) daily

A two-day close above the 50-day Moving Average for the first time since February would turn the trend bullish again.  Having that happen right after a test of the prior lows that launched the last two sizable rallies could stack the deck even further in the buyer’s favor.

As a trader- not an investor, mind you- it seems that going long in the platinum/gold spread on a close above the 50-day MA and liquidating on a close below it would not be a half-bad strategy.

Trade Strategy:

Place a hypothetical contingency order to buy two 50 oz. October platinum futures contracts and simultaneously sell one 100 oz. October gold futures contracts if the nearest-futures spread makes a two-day close above the 50-day Moving Average.  If filled, exit the position on a two-day close below the 50-day Moving Average.

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Copper/Gold Spread: There May Be More Downside Ahead

Bag the Profits

IMC blog entered a long position in the July-June copper(x2)/gold spread from the equivalent of -$21,885 (premium gold) on September 29th.

The spread exploded higher at the end of last year.  A double top was established at similar highs in December and February.  At this point, the value of a pair of copper contracts had a 15% premium over the value of one gold contract.

Based on history, it seemed that this was merely a consolidation phase before the next leg higher.   After all, previous instances where two copper contracts traded at a discount to the value of one gold contract were followed by major trend reversals that ran the value of two copper contracts to a premium of 66% or more to the value of one gold contract.  This meant that the expectation of more upside was significant.

Alas, the market didn’t take out feelings, wishes, and hopes into account.  The copper(x2)/gold spread has been steadily eroding and taking back some of our open profits.  It’s now approaching the 200-day Moving Average as well.  A close below the 200-day MA for the first time since October could accelerate the decline.  Therefore, it makes sense to cash in our chips and wait for another hand to be dealt before we place anymore bets on this spread.  However, we won’t complain: the trade will net us a profit of nearly +$23,000 per spread.

July-June Copper Gold spread daily

July-June Copper Gold spread daily

For the December copper(x2)/gold spread, a Fibonacci .618 retracement of the run up would set technical support at -$12,428.  If the spread gets back down to this level, we will be watching to see if some sort of setup materializes to allow us back on board.

Trade Strategy:

Sell the two July copper contracts and simultaneously buy back the one short June gold contract at the market-on-close on Monday, June 5th. 

 

 

Gold/Silver Spread: The Next Big Move?

A Personal Note

Readers may have noticed that posts on the IMC blog have been sparse as of late.  This has been due to time constraints as I’ve been juggling several projects, including a potential launch of an RIA.  (As you would probably guess, the firm will be considered an “active manager” of assets.)  

This may or may not impact how I’m allowed to continue blogging on the subject of spread trading in the futures markets.  Until then, I will try to make a few posts on some current opportunities.  Should anything change because of the RIA business, I will keep you updated.

Tip of the Iceberg

Last year, the gold/silver ratio clipped the double top that was established just above 80:1 in 2003 and 2008.  It then rolled over and triggered a Wash & Rinse sell signal.  Based on historical precedent, I provided an argument for why I expected this to be the start of a wicked decline that could ultimately send the ratio below 50:1.

Gold Silver ratio monthly

Gold Silver ratio monthly

This outlook for a decline in the gold/silver ratio was intrinsically a bullish outlook for precious metals.

The ratio bottomed a little below 66:1 last summer, went into a messy trading range for several months, and finally made a sizable bounce from late March into early May.  It never came close to the downside target I was and am expecting.

Here’s what recently caught my attention: the early May multi-month high of nearly 76:1 just happened to be right near the Fibonacci .618 retracement of the entire decline from the March 2016 twenty-one year high to the July 2016 multi-month low.  It also coincides with the bounce high from last May.

Gold Silver ratio daily

Gold Silver ratio daily

After tagging this resistance area three weeks ago, the gold/silver ratio has been backing down.

Based on the fact that the initial downside objective of 50:1 or lower has not been achieved and the fact that the ratio rolled over after hitting resistance, I can’t help but think this could be the start of another sizable down move…maybe even the one that finally takes it to 50:1.

Backed By the Buck

Remember, a drop in the gold/silver ratio usually means that precious metals are on the upswing.  This is because silver tends to move faster than gold.  When the ratio rises (like over the last few months), it is because silver is dropping faster than the gold.  Conversely, when the ratio drops, it is because silver is moving up at a faster rate than gold.

Many people know that there often tends to be an inverse relationship between precious metals and the US dollar.  Therefore, a decline in the greenback should be supportive of an increase in the price of precious metals and, by extension, a drop in the gold/silver ratio.

As it turns out, there is mounting evidence that the greenback is on the downswing.  This is supportive of the idea that the gold/silver ratio should be heading lower from here.  I will shortly be publishing a post on Martin Kronicle that lays out the reasons that the US dollar has peaked.  In broad strokes, though, it’s due to monetary policy, cycles/seasonal patterns, and recent price behavior.

US Dollar index daily

US Dollar index daily

Let me also state for the record that I am not a gold bug.  I am a gold bull when prices are moving higher and I am a gold bear when prices are moving lower.  My only intent is to be positioned on the right side of the trend in precious metals.  As famous speculator Jesse Livermore said, “There is only one side of the market and it is not the bull side or the bear side, but the right side.”

Trading the Spread

The December gold/silver ratio closed a little below 73:1 on Friday.  Currently, the closest that a trader can get to creating a ‘dollar neutral’ spread position in the futures market is to trade 100 ounces of gold against 7,000 ounces of silver.  This can be accomplished by shorting one 100 oz. gold futures contract, buying one 5,000 oz. silver futures contract, and buying two 1,000 oz. ‘mini’ silver futures contracts.

Not surprisingly, the price chart for the December gold (100 oz.)/silver (x7,000/oz.) spread looks very similar to the chart of the gold/silver ratio in that it recently hit an eleven-month high, clipped the major Fibonacci .618 resistance line, and then rolled over.  Technically, this appears to be a good reason to take a shot at the short side of the trade.

December Gold (100 oz) Silver (7,000 oz) spread daily

December Gold (100 oz) Silver (7,000 oz) spread daily

The midpoint of the current pullback is at +$6,520 (premium gold).  That’s nearly $2,500 from the current pullback low.  Since the prior bounce off the May 16th low was $2,141, getting a bounce to the current midpoint doesn’t seem all that difficult.  Therefore, a bounce to +$6k is not an unreasonable expectation.

The May multi-month high of +$8,982 is near-term resistance.  Shorting a bounce to +$6k and exiting on a two-day close above +$9k seems like a logical play.  If so, it would set an initial risk expectation of somewhere in the neighborhood of $3,000.

It is important to keep in mind, however, that this isn’t a guaranteed cap on the risk because we have no idea how far above +$9k the spread could close if it moves adversely.  But we can at least use it to give us some sort of rough estimation of the reward-to-risk profile on the trade.

If our thesis is correct, the spread should not have any problem returning to the 2016 low of -$9,315 (premium silver).  This is the minimum downside expectation.  Shorting at +$6k with an initial risk of approximately $3,000 on the trade puts the reward-to-risk ratio at 5-to-1 if the minimum downside expectation is met.

But a ratio of 50:1 (our minimum macro projection) implies that the gold (100 oz.)/silver (x7,000/oz.) spread would be priced somewhere between -$35,000 and -$51,000 (premium silver).  With that sort of price target, the initial risk of approximately $3,000 sets the reward-to-risk ratio on the trade somewhere between nearly 14-to-1 and 19-to-1.

On the one hand, the reward-to-risk may be a little overstated since we cannot ascertain the exact risk on the initial trade.  On the other hand, we didn’t do any projections on the impact that pyramiding would have if we add to the position if the trend unfolds in our favor.  That seems like a fair trade-off to me.

As a speculator, this kind of a potential payoff seems like a pretty smart bet.

Trade Strategy:

Place a hypothetical order to sell one December 100 oz. gold futures contract, buy one 5,000 oz. silver futures contract, and buy two 1,000 oz. silver futures contracts if the December gold (100 oz.)/silver (x7,000/oz.) spread closes at +$6,000 (premium gold) or higher.  Initially, liquidate the position on a two consecutive day close above +$9,000 (premium gold).   

Platinum/Gold Spread: Roll to Halloween Contracts

The Long Road

The blog is holding an unleveraged April platinum/gold spread from the equivalent of -$206.30 (premium gold).  It was originally entered in September of 2015.  Boy, it’s been a looooong year and a half.

Leveraged was briefly added in April 2016, but the ‘add-on’ investment position was liquidated just a couple of months later.  This was because the uptrend failed to materialize.

This unleveraged spread position is experimental as it deviates from our normal trading rules of getting in and then exiting if there is an adverse move.  The idea was that a mean reverting commodity spread at record lows (it hit an all-time low of -$343.30 on June 27th and then nearly matched it on October 21st when it traded to -$337.30) with a confirmation on the ratio (it registered a thirty-three year low of 0.7335:1 on October 21st) would be a temporary event.

Platinum Gold spread (nearest-futures) daily

Platinum Gold spread (nearest-futures) daily

Furthermore, platinum has been priced at a discount to gold for a record two years and two and a half months, which is substantially longer than the prior record inversion streak of one year and seven months (September 1981 and April 1983).  In terms of both price and time, the historic extremes argue that a major reversion is long overdue.

The $64,000 question, of course, is “when will it finally happen?!”

Until we get more clarity on the situation, we remain unleveraged on the position.  But once a breakout above -$200 takes place, we’ll pay closer attention.  When that happens, it will time for a challenge of the 2016 high at -$161.20.  If this hurdle is cleared, the odds are pretty good that this record bear market is finally over.  Until then, we’ll patiently roll the contracts and bide our time.

Investment Strategy:

For tracking purposes, the blog will liquidate the long April platinum/gold spread investment position and simultaneously enter a long investment position in the October platinum/gold spread at the market-on-close on Tuesday, March 28th.  There are currently no liquidation parameters for this low-leverage position.  Factoring in the results of one ‘add-on’ investment position, the bankroll for this spread is currently $101,920.

Copper/Gold Spread: Stay Long For More Upside

Keep ‘Em Rollin’

Currently, the blog is holding a long position in the March-February copper(x2)/gold spread from the equivalent of -$22,700 (premium gold).  It was entered on September 29th.

We’re still happy with the position.  But with the February gold contract expiring on Friday and the First Notice Day for the March copper contract hitting next Tuesday, it’s time to roll out into the later contracts.  Since the summer spread (July-June) is only about $300 more than the spring spread (May-April), we’re going to opt for more time and hop into the summer spread.

Since peaking out just above +$17k (premium copper) on December 5th, the July-June copper(x2)/gold spread has been stuck in a trading range.  The spread clipped the December 5th high last week, but has retreated once again.  What we need to see is a sustained close above the early December/mid-February high to get the momentum going again.  If that happens, the spread will stay on track for a run to the resistance zone between the 2015 high of +$28,190 (premium copper) and the November 2014 high of +$34,380 (premium copper).

july-june-copper-gold-spread-daily

July June Copper Gold spread daily

But remember that we mentioned before that the ratio between copper and gold (currently around 0.56:1) indicates that the spread could go substantially higher than the 2014/2015 price peaks!  Historically, prior occurrences where two copper contracts traded equal to or at a discount to the value of one gold contract were followed by major bull markets.  Each one lasted until two copper contracts were valued at a minimum premium of 66% over the value of one gold contract.  That puts the ratio at 1.66:1.

To hit this minimum ratio target of 1.66:1, the copper(x2)/gold spread would have to soar to somewhere between roughly +$53k (if the current copper price remained the same) and roughly +$78k (if the current gold price remained the same).

Based on this history, we are watching the spread carefully to see if a setup materializes to add to the long position after a breakout above the current trading range.  We’ll keep you posted if that happens.  For now, though, let’s roll out to the summer contracts.

Trade Strategy:

Sell the two March copper contracts and simultaneously buy two July copper contracts at the market-on-close on Wednesday, February 22nd.  Also, buy back the one short February gold contract and simultaneously sell one June gold contract at the market-on-close on Wednesday, February 22nd.

 

Platinum/Gold Spread: Roll to the April Contracts

The Long Road

In September of 2015, the IMC blog bought an unleveraged platinum/gold spread at the equivalent of -$201.20 (premium gold).

We added leverage in April 2016 when we purchased an ‘add-on’ investment position, but the spread moved adversely and knocked this one out a couple of months later.

So far, this position has not made us any money.  But we will continue to pursue it.

Why?!

First of all, commodity spreads show a strong tendency of mean reversion over time.  The platinum/gold spread is no different.

Secondly, the spread has set new records in terms of both price and time this year.  Since it’s a mean-reverting spread, the new price and time extremes should only increase the probabilities of a severe snapback in the future.

On June 27th, the platinum/gold spread sank to an all-time low of -$343.30 (premium gold).  It then came close to matching it on October 21st when it hit -$337.30 (premium gold).  Interestingly, the platinum/gold ratio touched a thirty-three year low of 0.74:1 on June 27th and then hit a slightly lower low of 0.7335:1 on October 21st.  The ratio hasn’t been down there since October of 1982.

platinum-gold-spread-nearest-futures-weekly

Platinum Gold spread (nearest-futures) weekly

In terms of time, we are only three weeks away from marking the two-year anniversary of platinum trading at a discount to gold.  This broke the previous record inversion streak of one year and seven months that occurred from September 1981 and April 1983.

So even though the platinum/gold spread has not performed for us yet, we will continue to exercise patience and money management so we can stick to the original plan.  It’s nothing more than a waiting game right now.

Investment Strategy:

For tracking purposes, the blog will liquidate the long January-February platinum/gold spread investment position and simultaneously enter a long investment position in the April platinum/gold spread at the market-on-close on Tuesday, December 27th.  There are currently no liquidation parameters for this low-leverage position.  Factoring in the results of one ‘add-on’ investment position, the bankroll for this spread is currently $101,920.

Copper/Gold Spread: Roll to 2017 Contracts

Mean Reversion Underway

Last spring we said that the plunge in the copper(x2)/gold spread was setting up for the buying opportunity of a lifetime.  We reiterated this statement again in the summer.

Looks like we were right.

The IMC blog bought a December copper(x2)/gold spread at -$23,100 (premium gold) on September 29th.  Here we are two months later and the spread is trading at a nearly seventeen-month high of +$15,740 (premium copper)!

Currently, the spread appears to be on track for a price resistance zone between the 2015 high of +$28,190 (premium copper) and the November 2014 high of +$34,380 (premium copper).  Based on history, a rally into this area after an inversion in the spread seems very likely.  On the surface, this seems like it might be a good price zone to consider bagging the profits.

december-copper-x2-gold-spread-daily-3-years

December Copper (x2) Gold spread daily (3 years)

The ratio between copper and gold, however, argues that the spread will greatly exceed the price zone between the 2015 and November 2014 highs.

History shows that prior events where two copper contracts traded at or below the value of one gold contract were followed by reversals to where the two copper contracts would reach a minimum premium of 66% or more over the value of one gold contract.

Just to hit the minimum ratio of 1.66:1 from here, the copper(x2)/gold spread would have to soar to +$53,475 if the current copper price remained the same.  And if the current gold price remained the same, the spread would have to reach -you better sit down for this one- a nosebleed level of +$78,540!

Split the difference and you’re looking at a projected target of +$66,000 for the ratio to reach 1.66:1.

Therefore, it makes sense to simple roll the December spread over right here ahead of the First Notice Day for the December contracts and stay on the ride.

Trade Strategy:

Sell the two December copper contracts and simultaneously buy two March copper contracts at the market-on-close on Monday, November 28th.  Also, buy back the one short December gold contract and simultaneously sell one February gold contract at the market-on-close on Monday, November 28th.  This will roll the position from the December spread to the March-February spread.

December 2017 Copper/Gold Scale: Over $70k In Profits!

Planning the Work

On July 20th the blog implemented a scale trade strategy with the December 2017 copper(x2)/gold spread.  The scale ran on $5k intervals where a spread would be purchased every $5k down and then liquidated every $5k higher.

Keep in mind that the price intervals for the scale were based on closing prices.  This led to several better-than-expected purchase and liquidation prices since the closing price would often overshoot the exact $5k interval.

Furthermore, we launched the scale with several ‘bonus fills’ as the spread was well below our theoretical start level of -$5k where the value of the sum of two 25,000 lb. copper contracts is worth $5,000 less than the value of one 100 oz. gold contract.  We initially bought four December 2017 copper(x2)/gold spreads at -$21,135, yet we set the liquidations targets at -$15k, -$10k, -$5k, and even money.

Working the Plan

As the spread continued to drop, we picked up a couple more positions.  They were purchased at -$25,725 on August 1st and -$30,915 on September 6th.

The spread has been in a downtrend since the spring of 2015, so the drop to new record lows certainly was a test of a scale traders mettle (metal?) and conviction!

Finally, a bounce came.

The spread that was purchased on September 6th was sold on September 15th for a profit of +$6,800.

The spread that was purchased on August 1st was sold on October 4th for a profit of +$7,030.

Then we experienced nothing but radio silence for the next month.  The spread was bound in a tight range as it refused to drop low enough to trigger a repurchase or rally high enough to trip the wire on another exit.

Ringing the Cash Register

The silence was finally broken one week ago and the move has been explosive!  On November 7th the December 2017 copper(x2)/gold spread closed at -$13,090 and triggered a liquidation order.  This resulted in a profit of +$8,045.

On November 8th the December 2017 copper(x2)/gold spread closed at -$8,970 and triggered another liquidation order.  This resulted in a profit of +$12,165.

december-2017-copper-x2-gold-spread-daily

December 2017 Copper (x2) Gold spread daily

A third liquidation order for the week was triggered on November 9th the December 2017 copper(x2)/gold spread closed at -$4,985.  This resulted in a profit of +$16,150.

Finally, the last remaining position in our scale was liquidated on November 10th when the spread closed at +$375 and gave us a nice profit of +$21,510.

The total profit on this scale was +$71,700.

In just under four months.

Not too shabby!

What Next?

All positions in the scale have been liquidated.  So what now?  Simple: Leave the plan in place!  The blog will buy a December 2017 copper(x2)/gold spread on a close at -$5k or less, buy another one on a close at -$10k or less, buy another one on a close at -$15k or less, etc.  The purchase intervals are set every $5k lower.

On the other side of the coin, any purchased positions will be liquidated on a close that is $5k or better than the interval purchase level.  Note that the liquidation targets are based on the scale intervals, not the actual purchase price.  This means that any better-than-expected purchase prices will result in even bigger profits when it is finally liquidated.

If the copper(x2)/gold spread just goes to the moon from here and never dips back down into the scale trade zone, we will simply look elsewhere for other scale trading opportunities.  The strategy is applicable to most traditional commodities.  Therefore, we don’t have to be dependent on the metals or any one commodities sector.

Copper(x2)/Gold Spread: Long-Awaited Birth of the Bull?

The Real McCoy?

Just before Memorial Day, the IMC blog bought a December copper(x2)/gold spread.  The position was liquidated with a loss a few weeks later when the spread hit new lows for the move.

Glad we got out.  The spread proceeded to head south.  Just a month after our exit, the nearest-futures copper(x2)/gold spread breached major support at the 2009 all-time low of -$29,380 (premium gold).

However, there was no dramatic waterfall decline triggered by the support break.  The spread bottomed at -$30,085 on July 7th and the reversed higher.  The bottom was established less than $1,000 below the 2009 Financial Crisis low.

However, the July low was finally broken right after Labor Day.  That’s when the copper(x2)/gold spread crashed to…-$30,840.  Huh.  Not very dramatic, was it?  The September low was set in place only $755 below the July low.

copper-x2-gold-spread-daily-nearest-futures-for-10-yrs

Copper (x2) Gold spread daily (nearest-futures for 10 yrs).jpg

The fact that the spread cracked the Financial Crisis low by a slim margin –twice!– and then quickly turned around indicates that this bear market is scraping the bottom of the barrel.  As a matter of fact, it is a major buy signal.  Readers of this blog may be familiar with what we call this pattern: The Wash & Rinse.  It’s a failed breakout signal that often leads to a major move in the opposite of the initial breakout.  Looks to me like that’s what happened.

Bullish Trend Change

Back in June, the blog set trade parameters in place to take another crack at the long side of the December copper(x2)/gold spread.  Our trigger point was to get in if/when the spread could make a two-day close above resistance at the declining 100-day Moving Average.

Prior rallies had ended either side of the 100-day MA, so a sustained close above the 100-day MA would be our indicator that the switch had been flipped.

december-copper-x2-gold-spread-daily-100-day

December Copper (x2) Gold spread daily (100-day MA)

Last week, the trend change finally happened.  The spread made a two-day close above the 100-day MA for the first time in over fifteen months.  The fact that it occurred after a Wash & Rinse off of historic lows endorses the idea that a major bottom is in place.

Therefore, the IMC blog entered a long position in the December copper(x2)/gold spread at -$23,100 on September 29th.

Like we said a few months before, we believe that a bullish trend change signal could position us in the buying opportunity of a lifetime before it makes any fundamental sense.  Last week’s action may have just done that.

More Confirmation

Commodity markets are mean-reverting, so trends that reach historic extremes are often followed by sizable trends in the opposite direction.

Not only did the copper(x2)/gold spread reach an all-time low last month, but the ratio between the value of one 25,000 lb. copper contract and one 100 oz. gold contract also bottomed at a multi-year low of 0.386:1.  This was just a stone’s throw from the Financial Crisis low of 0.35:1.

Keep in mind that the copper/gold ratio has only been at 0.35:1 or lower on three occasions in the last four decades.  So this was a rare event to get in the same vicinity.  The fact that the copper/gold ratio also surpassed the 100-day MA for the first time in over fifteen months was more confirmation of a trend change off of historic lows.

copper-x2-gold-spread-weekly-underwater-line

Copper (x2) Gold spread weekly (underwater line)

In addition, the copper(x2)/gold spread is still inverted!  It has been underwater for over nine consecutive months now.  This is the longest inversion since the mid-1980s.

So despite the recent trend change and the run to a three-month high, the copper(x2)/gold spread is still historically underwater.  This leaves a lot of profit potential ahead of us.  You can bet that we will be watching vigilantly for opportunities to add to our long position as the trend unfolds.

December 2017 Copper/Gold Scale: Another Good Exit

Pulling Down Another Winner

The IMC blog is currently running a scale trade campaign on the December 2017 copper(x2)/gold spread.  To review the strategy, read some of the prior posts on the subject.  This post is merely an update on the most recent action.

The first profitable trade in this campaign was bagged on September 15th when a position was liquidated for a profit of +$6,800.

After purchasing a December 2017 copper(x2)/gold spread at -$25,725 on August 1st, we immediately put in liquidation parameters to sell it on a close at -$20k or higher.  This finally happened on October 4th when the spread closed at -$18,695.

The trade secured a profit of +$7,030 this time around.

If the spread closes back below -$25k the blog will simply reenter a long position.

If the spread closes above -$15k the blog will sell one of the four spreads that was purchased at -$21,135 back on July 20th.  That was when we initiated the scale campaign with ‘bonus fills’ for the -$5k, -$10k, -$15k, and -$20k intervals.

Interesting Developments

As scale traders, we don’t care which happens next: a sale or a repurchase.  But as chart technicians, it is interesting to note that the recent rally has brought the December 2017 copper(x2)/gold spread right up to the declining 200-day Moving Average.

december-2017-copper-x2-gold-spread-200-day-ma-daily

December 2017 Copper (x2) Gold spread (200-day MA) daily

The 200-day MA is a widely-watched indicator that trend followers often use as their line of delineation for which side of the market to be on.  It certainly has merit.  Many studies have backed the use of the 200-day MA for market timing.

If the December 2017 copper(x2)/gold spread can make a sustained close above the 200-day MA for the first time since May of 2015, it could turn the tide for this bear market.  If so, expect it to continue the recent trend of profitable liquidation orders.

Unlike traditional trend followers, however, a scale trader hopes that the move higher does not occur in a straight line.  Countertrend pullbacks are needed to reenter positions after profitable liquidations.  However, the market is in control of what happens next.  Not us.  All we can do is have a plan in place for how to react in either direction.