Muppet Time!

It never fails. Despite all efforts to the contrary a handful of you retail rats accidentally find yourselves in the midst of a winning campaign. Invariably early withdrawal symptoms to your expired ADHD meds are starting to appear as the urge to do something (i.e. take profits now or otherwise ruin your odds of long term profitability) is growing by the hour. After all, winning is not something you are accustomed to and there’s no social media support network backing you up as everyone now hates your guts and hopes for an opportunity to urinate onto your shallow grave. For it is lonely at the top and you are on your own.

Now I have tried many times to drill this point into your rodent brains but apparently the reflexive Pavlovian response is tantamount to my childhood attempts of stacking snausages onto my dog’s snout. Very rarely do you get a to a count of three as Woofy simply can’t wrap his canine brain around the fact that the longer he is able to wait the bigger the pay-off. In the end all this boils down to the fact that the half-life time of your ability to sit still and do nothing is shorter than that of your average field mouse.

The-Muppets-1

Now, to answer the question on your mind: Yes, and no. It all depends on your trading style.

Oh, what was the question you ask?

Is it a good time to take profits here?

Well, obviously it’s a great opportunity to shake out the muppets. Look at the chart below and what I posted yesterday. If you got positioned when/where I told you to on Monday morning then you are an honorary member of the strong hands club right now (no secret decoder ring). And this grants you the rare luxury to do nothing and let things run its invariable course. For every time you are in an ongoing campaign there is only one equation you should be concerned about:

What is the ratio between opportunity and risk right now?

2014-10-22_spoos_briefing

Meaning, what are the odds the tape is going to advance (or drop) more than the odds for it to reverse and stop me out (wherever your stop is). This is not an easy answer and it depends on your trading style. For automated systems for example I painstakingly measure the average MFE and MAE of each system and then use those statistics to arrive at an optimum campaign management style.

For discretionary campaigns you employ a fuzzy logic approach based on your pertinent experience and again your trading style, which can be shifted as the campaign unfolds and new evidence is revealed. That however requires strict personal discipline and that right there discounts 90% of all participants. I know I know – the truth hurts – you can blame your Kindergarten teacher or some dramatic childhood experience if that makes you feel better. Believe it or not – I don’t come here to stomp on your fragile egos – no matter how tempting.

2014-10-22_1510

Now for me personally here right now I am more concerned about the possibility for the bears to have their faces ripped off. And the odds are about 50/50 that this will happen in the coming week. However we still cannot discount the the possibility that we may retest the lows or drop even lower. Plus today’s event schedule offers a ton of opportunity for monkey business across the board. The bears still have a prayer of a chance to turn the table as long as we remain below the 25-day SMA.

I for one am perfectly happy to endure a deep retrace because if this eventually continues higher I’ll be holding it all the way. And if it fails – well, I’m out at break/even. So my worst case sceneario is to lose nothing and the best case scenario is to smile all the way to the bank. Again. Remember the Dollar campaign two months back. Same idea and same approach.

2014-10-22_crude_briefing

On the setup side I really like crude this morning which seems to be gaining a bit ground. Besides everyone hates it right now which increases the odds of a little surprise squeeze. I’m putting half an R on long above the 25-hour SMA – stop below 82.


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Words to the wise:

The-Muppets-2

For some of you it is important to realize that trading is not a spectator sport. Invariably you will get the crap kicked out of you a few times and everyone processes that experience in different ways. Some simply walk away, others dust themselves up, learn their lessons and jump back into the ring. But there are many who cling onto the dream and at some point decide to become some sort of couch coach. A lot of self deception and pain avoidance is at play here but essentially it makes you feel as if you’re still part of the game. ZeroEdge is full of these people – the vast majority of them haven’t executed a trade in years.

Drawing lines on a chart and talking about it doesn’t make you a trader – only placing trades and accepting the invariable consequence of either winning or losing does that for you. Even if you’ve had a tough year and you may decide to sit things out for a while there will come the day when you have to get back on the horse. When you’re at that point we are here to help you and guide you along. But it’s unproductive to come here post some illustrious charts without intent to use them for trading. At best it’s a boring academic exercise and at worst it’s a waste of your and our time.

Cheers,

 

Hurdles Ahead

We have come a long way in the past three sessions but the easy part of the journey is now nearing its end. For there are hurdles looming ahead plus I’m seeing some signature signs of short term shenanigans flashing all over the place. Let’s start with where we are right now:

2014-10-21_spoos_update

Quite a climb since that is and there’s probably room for a few more handles. But bear in mind that we are now facing a trifecta of previously tested moving averages – at least per my lens and more often than not they have been observed.

2014-10-21_NQ

On the NQ things are looking quite a bit more bullish – AAPL definitely had a thing or two to do with that. However daily resistance is right ahead and we’re about to smack into it. On the weekly panel we’re however above the 25-week SMA, so that’s pretty positive.

2014-10-21_UVOL

Today’s session looks like it’s been on cruise control – the Zero also suggests that the bots are driving this one higher.

2014-10-21_VXV_VIX

Quarterly volatility has eased off quite a bit along with the VIX and the ratio has been leading the advance in the past few sessions. All good and given that we’ve got more than a week of trading ahead of us it’s not impossible that the bulls may actually pull this off and close the month above the NLSL.

So much for the good news – now let’s talk about some of the concerns:


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Cheers,

Elvis Has Left The Building

One of the prime directives I preach here on an ongoing basis (soap box included) is that we as traders must, by all means and without hesitation, yield the iron when it’s hot. Despite the emergence of financial media, trading blogs like this one, social networking, FB, twitter, etc. the daily grind of being a trader is really not that exciting. Unless you are completely nuts and addicted to a daily dose of adrenalin (which means that you are day trader) 90% of the time you wind up sitting around waiting for the moment to happen.

2014-10-21_spoos_briefing

And when it finally does you strike without hesitation because you know that just for a moment the odds may be in your favor. The market has shown you a door and odds are it’s about to step through it. There are no guarantees and there never will be. But that is beside the point – you are a trader and this is what you do. Take action when the odds are shifted in your favor. And then you wait agin.

The orange arrow on the chart above shows you exactly that very moment yesterday near the open. That was one sweet entry and any self respecting steel rat should have at least grabbed a handful of contracts there. What happened instead was an ear shattering silence and tumble weeds rolling through the comment section. Maybe I should have put Ebola Alert in the subject line. As the old saying goes – you snooze you lose…

2014-10-21_spoos_LT_briefing

And still I concede that this may turn into one fat bull trap – yes, nothing is baked in. But to me it doesn’t matter because I got positioned near the lows when the odds were in my favor. If I wind up getting stopped out – that’s the cost of doing business.

The monthly panel now shows us in earshot of the NLSL we breached over a week ago. IF that really happens then the bears will be on record for having fumbled the best shorting opportunity in years. And you know what I’m going to say next – exactly: There will be a price to pay. Until that happens there is a short opportunity right below the monthly NLSL – but in order for this entry to be considered we would have to see some considerable weakness here today and tomorrow. What I’m seeing in the futures right now is not encouraging for the bears.

Leftthebuilding

No ST setups this morning – Elvis has left the building and the time to get positioned was yesterday. For now we watch and wait…

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Cheers,





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    1. Muppet Time!
    2. Hurdles Ahead
    3. Elvis Has Left The Building
    4. Mad Monday Morning Briefing
    5. I Robot
    6. FEAR
    7. Falling Swords
    8. The End Of The Beginning
    9. Not Business As Usual
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