Gold has breached overhead chart resistance centered near the $1740 level in extremely light holiday trade. One thing to keep in mind about this is that pit locals are notorious for using these ultra thin trading conditions to go hunting for upside or downside stops. Since there is not the depth of liquidity that is normally present in the market, resistance to their hunting party efforts is minimal.
What this means for chart watchers is that one has to take the price movements with a bit of healthy skepticism. If the move is for real, it will hold on the resumption of trade during the next trading period. In our example - gold will need to remain above its breakout level of $1740 during both Sunday evening trade in Asia and during Monday trade here in the US.
The same goes for silver.
For today, the money flow is to the upside. All it takes is one or two hedge funds to start playing games and the locals, reading the direction of the money flow, enter the fray. The victims in this perfectly legal game of theft, are those who have foolishly placed stop loss orders and forgotten to cancel them during the holiday trade.
Lesson for traders - unless you plan on trading during these thin trading condition periods, get out of your positions before the holiday and wait for the return of the full week worth's of trading to re-enter. You might miss a move while you are enjoying some vacation but at least you will have the satisfaction of not enriching the pit locals.
It is the same for the S&P 500 which is witnessing a huge short squeeze. Thin trading conditions are allowing the locals to play.
This is where many of these guys make their annual incomes....
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