Kim Jong Boom

I have always discouraged political discussions on Evil Speculator for many reasons. One, the news are 80% composed of lies and subjective opinions. Two, the remaining 20% are mainly composed of ideologically driven misinformation, which leaves us with an extremely low signal to noise ratio. Three, the human mind can only process and absorb a finite amount of daily information, and excess of input can result into mental overload. Four, all information will to some extent affect you subconsciously, even the one you have consciously dismissed as worthless.  Chew on that for a moment.

But we’re in the midst of summer and most of my charts are in hibernation. So I’ll make an exception today, let’s talk about Kim Jong Un and the newest episode of saber rattling in the Korean peninsula. Unlike many of you guys I have actually spent a bit of time in South Korea and even visited the North Korean border once. Having met and talked to many Koreans in the peninsula as well as many Korean expats during my time in Los Angeles, I believe that I at least have a rudimentary understanding of the people and their culture. Remembering full well the horrors of the last Korean war, very few North or South Koreans would want another one, that much I can guarantee you. Thus I fervently hope that the peninsula and the rest of the region will be spared a military or even worse a nuclear conflict.

A lot of pundits are quick to point their finger solely at Donald Trump but I suggest that we focus our attention on the DPRK, which has been a thorn in the side of the UN for many decades now. Even during the Obama administration North Korea continued to cross one ‘red line’ after the other. According to reports, under Kim Jong Un the DPRK allegedly has continued to develop various advanced nuclear based weapons, rumors circulate about miniaturization as well as multi stage intercontinental missiles. Which in the hands of a madman could of course spell disaster for the entire region.

What Do We Truly Know?

But there goes the rub. We do not have any reliable intelligence on the situation in North Korea. Quite frankly speaking I trust what is currently coming out of the White House as much as I did during the Obama, Clinton, Bush, etc. years – meaning not at all. Because even assuming that they are truthful and there is no ulterior motif or political agenda, their own intelligence may be completely skewed or manipulated for a whole host of reasons. Anyone perhaps remember the Iraq war? How many intelligence and military filters has all that information passed through before it actually reaches various journalist reporting on the situation? Who then invariably proceed to slap their own ideological spin on it to satisfy the collective perspective of their readers. Unfortunately at this stage there remains very little true investigative journalism, as much of that culture has long fallen victim to attention grabbing clickbait and social media popularity contests.

Judging Events In A Vacuum

For us mortals to judge this situation is just as impossible as calling the future direction on a highly volatile chart. If we had the ability to get access to credible intel (if we were on the inside) then we could have an informed discussion as to whether or not a pre-emptive strike may or may not be warranted. Let’s say for a moment that uncle Kim is actively planning to send a missile straight into S.F. harbor or wipe out a good chunk of L.A. The odds of that are infinitesimally small, but hey – I got friends there!! So given irrefutable evidence of Kim Jong Un having the finger on the nuclear trigger I would probably support taking out the regime –  in that particular case.

But lacking any reliable intel arguing about rumors and hearsay here or on any other site only devolves into ideological bickering and finger pointing. And in the end it’s a colossal waste of time as our opinion very rarely winds up affecting reality anyway. I don’t know about you but I rather spend my time learning something interesting that may help my edge. But that’s me, I’m a grouchy old dog who has seen one too many politicians and journalists lie in order to justify a particular short term agenda.

Now if Kim Jong Un is dumb enough to actually fire a missile at Guam or any other foreign sovereign territory then I’m pretty sure the gloves are going to come off for a long overdue smack down. Which by the way may be delivered by a U.S. led coalition force along with the South Koreans, perhaps the Japanese, or even the Chinese. However until that day comes (and I hope it won’t) I suggest that we focus on what we always do, our charts and our own lives.

Alright let’s talk about yesterday’s exhaustion spike and what it means for the current sideways range we’ve been trapped in since late June. Yes, it could be an exhaustion spike but a bit of weakness here would not be atypical especially given recurring bouts of short term volatility. This whole talk of nuclear war is obviously a great excuse to bang around the tape a little, especially since there are fewer participants.

The volume profile chart shows the E-Mini touching the upper range of a small volume hole between 2450 and 2460. A drop through 2450 may actually draw us lower toward 2400. But one day does not make a bear market, so we should be looking at participation on the Zero and of course see if price is staving a bounce here. I would not chase this candle down as there is not sufficient evidence yet that a real correction is afoot. Sometimes these quick reversals burn off a few weak hands in order to produce new momentum for a spike higher. This spells true in particular after being trapped inside a trading range for several weeks.

This may be a good moment to point out that the VIX has now risen by 28% over the past ten days and there may be more to come. I wish I would have recommended some long term puts while the VIX was painting new historical lows. Oh wait a minute – I actually did 😉  And now you know why – you’re most welcome and if you’re not already a member then you know what to do.

That dip in gold was quite a bit more than I had in mind yesterday but after it had recovered to our entry range continuation higher had pretty good odds. I really hope you caught this one. Since it’s running on four cylinders now I have already moved my stop to break even. This one looks like a runner – we know for sure once that NLBL at 1275.6 has been breached.

My only worry is the USD/JPY which thus far has continued to drop (another topic I covered in the past two days) and which could reverse if the DX is in the process of building a floor here. Well, we’ve got our stop in gold at break/even so at this point there is little risk in holding this position.