Traders of multiple instruments often review their positions for contradictions and logical inconsistencies. The dangers are overexposure (too many positions that are largely correlated) or positions that cancel themselves out. Logic is a powerful tool in trading.

Looking at client sentiment this morning, there is a clear logical inconsistency:20140904 cs multi

Leaving the US 30 (Dow tracker) aside, there is a clear contradiction between currency traders and precious metals traders. If the USD goes up, its very likely gold will fall.

Long USD/JPY, and short AUD/USD and EUR/USD, are consistent in that they will all benefit if the USD strengthens. However, Mr Spock would be appalled by these strong long positions in USD sitting alongside significant long positions in gold and silver. If both of these groups of traders can't be right, who is going to profit?20140904 goldThis chart suggests that long gold positions may be costly. Gold has broken through key support between $1274 and $1275, and the MACD is suggesting accelerating selling momentum.  This could see tests of the May lows just above $1240, and the 2013 lows around $1180. Any further weakness would signal a sea change for gold.