Sitting This One Out

My apologies to Scott in advance but this is one of the rare times when our respective outlook differs. First up we are not at a crucial inflection point – the 2k level is simply an opportunity to shake out weak hands. If we dropped from here the downside potential would be rather limited as I pointed out yesterday. So there is no reason to get all all excited here – wake me up if we drop through the 100-day SMA perhaps.

2014-09-09_spoos_update

It all started out with a little fun after a tickle of the 2k mark but due to equilibrium on the buy/sell side it has now turned into yet another limbo zone. Nothing really has changed as of right now – in essence you want to be:

  • Long nar 1990.
  • Short near 2010.
  • Long above 2011.
  • Short below 1989.

In all four scenarios your stop would be no more than a handle or two away. Although this seems rather tight it has the highest odds in the current market phase. Any reversals back inside ‘ye ole’ chop zone’ invariably draws us back toward the magic 2k mark. Today’s proposed entry would already have us back inside as we just touched 2k again (and then we dropped again…)

2014-09-09_zero

If you’re watching the Zero right now the situation couldn’t be any clearer. I keep seeing statements/complaints about this being difficult tape and I completely disagree. It’s S.H.I.T. – absolutely – but it’s not hard to read at all. Today’s divergence on the Zero Lite should have gotten you out of any short positions you may have taken on.

In a nutshell: The downside potential here simply does not outweigh the whipsaw risk. EVEN IF we close below today’s lows today or below 1990 I would personally sit out any downside correction. Trading against the trend here is not worth the hassle. FYI – I’m posting this at 2:33pm EDT as the spoos are back at 1991 – which now has me long with a stop at 1989.

2014-09-09_EURCAD_update

Update on our EUR/CAD campaign – hey, it’s actually getting its groove on. Better to be lucky than good I guess. I’m not going to touch this one – as the old saying goes – if it ain’t broken don’t fix it. Next stop is either my ISL or I’m moving it up to 1R.

2014-09-09_ZN_update

Update also on the bond campaign – I got stopped out and immediately flipped for a short position. My stop is now above 124’3 which ought to suffice to weather out an obligatory LKGB move.

I have some very nice setups waiting below the fold – please meet me in the lair:


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Have fun but keep it frosty. FYI – I would love to see a few charts in the comment section.

Cheers,

Darth Mole’s Evil Deeds

Since last Friday some of you have been enjoying the fruit of Darth Mole‘s predictive abilities ahead of volatility surges. Although I am the one who developed this newest contraption I myself am stunned by how spot on it is. Personally I consider it a huge step forward in identifying intra-day market cycles. Why? Because once you identify an entry opportunity near a systemic or technical inflection point a successful campaign hinges on two key components: 1) direction and 2) volatility.

Direction is binary in most cases – you are either long or short. But obviously there’s a lot more to this than meets the eye. You could be right about the general direction but you could still be whipsawed out of your entry. This happens quite a lot. Or perhaps you have a time-based window in which you are operating. Nevertheless in order to pick effective entries getting positioned ahead of large moves is obviously key (unless you dabble in calendar spreads). Protecting yourself against whipsaws and shake-outs obviously complicates matters but volatility is what drives profits and losses. Very rarely do we enjoy slow orderly advances to the upside – at least on an intra-day basis.

I wanted to share a few charts with Darth Mole alerts during the past three sessions. Here’s EUG/GBP – the yellow candle signifies an anticipated slowing in price volatility while any blue candles suggest a jump in price volatility. Getting positioned after the latter was triggered would have been rather profitable had you followed price lower and bowed out after 1 or 2 R. Obviously GBP was expected to whipsaw due to event risk today and I would advise against keeping any pertinent ST campaigns open during that time.

Here’s cable – very similar idea formation and Darth Mole called it spot on. One could suggest that this was easy to anticipate due to the BOE Inflation Report. Okay, let’s look at a few more then…

Here’s EUR/USD – once again Darth Mole nailed it.

USD/JPY – very nice calls as well. On the very left I saw an instance where Darth Mole got it wrong. But then again compared with the preceding candles I do believe it made a fair call. Because volatility did slow down – this is not about direction after all. Sometimes a slow down means sideways tape but sometimes it means only a slow down but the trend continues.

USD/CAD – beautiful.

And here’s gold – caught it a bit late here on the very right and admittedly it would have been a tough trade either way.

Bottom Line: In conjunction with your existing entry and campaign rules Darth Mole has the potential to significantly shift the odds in your favor. Just like sailors heading into the open sea, knowing when and where to anticipate rough waters would be an important survival tool in your arsenal. Frankly, I don’t think trading will ever be the same for me. Granted, as the author I’m probably subjective, so the thoughts and insights of traders like you would be very much appreciated.

If you care about price volatility (and as any self respecting trader you should) then here’s your chance to give Darth Mole a test run. We’re making it available for FREE throughout August to show you how awesome it is – we are confident that it will revolutionize your trading. You can sign up right now and enjoy your free ride for the rest of the month. If you want free Jabber alerts as well then send me an email to admin@ with your amember user id and the password you want. You will find step by step Jabber/XMPP instructions on the bottom of the DarthMole page.

Cheers,

No Crying Over Spilled Milk (Or Beer)

I’m sure you all know what I’m talking about. Here we were trying to short this bitch several times in the past two days which on my end resulted in three ignominious stop outs – the last one at 1982. Only 1.5R lost, so it wasn’t a big deal but pretty much what I told you yesterday ‘would happen’ of course ‘did happen’ the next day. There was no reason for my stop to be at 1986 – it was too far in enemy territory. And then equities got Amazoned and here we are fifteen SPX handles lower. So what do we do now?

I tell you what we’re going to do. ABSOLUTELY NOTHING. We did everything in our power to exploit an entry opportunity near an inflection point and we simply didn’t get in. That’s life and unless you were on the inside there was no knowing ahead of time that Bezos would slip on the banana peel last night. Don’t beat yourself up – actually better yet, get used to it. Which is why we don’t take large risks on the equities side – or any correlated market for that matter. 1% is the max and if you’re a stock market junkie then always keep a close eye on being as delta neutral as possible (look it up or ask in the comment section).

Now on the ES futures we’re near 1971 right now and there are no major support zones nearby. ES 1966 looks like the next best line in the sand as the 100-hour BB is lingering around down there.

The S&P cash however has been holding its 100-hour SMA and we’ll have to wait until Monday to see if it holds.

But the real news of the day is the one that hasn’t been reported. While everyone else is talking about yesterday’s losers I’ve been taking a long position on the Dollar side (yes, I can’t believe I just said that). This is actually a weekly setup I shared with my subs last night and originally we’ve been expecting ole’ bucky to do the same old thing which is fold like a chair near any major LT resistance. Now I can’t promise/expect that this time it’ll be different but those two NLBL breaches do look promising. The fun may begin if we see a pop aboe 80.993 – so make it 81. That’s where the 25-day SMA sits right now and we’ve got plenty of air looming above.

This is the first time I’ll show the turkish lira here and I have to confess that I haven’t traded this one before. So I’ll ease myself into this one with 1/2R. I however do like the double inside day – and I’ll play the outer one on the stop side. I hope that’s clear as I don’t think my drawing is. Long Sunday on either breach of today’s candle (high or low) – but set your stop on the opposite side of the Thursday candle.

More setups waiting below the fold for my intrepid subs:


More charts and commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don't waste time and sign up here. And if you are a Zero subscriber you get free access to all Gold posts, which gives you double the bang for your buck!

Please login or subscribe here to see the remainder of this post.

 

And now it’s time again to kick back and crack open a bottle of your favorite alcoholic beverage. As you all know in my case that of course would be a bottle of Hefeweizen. A simple Paulaner is one of my favorites – it’s smooth but has that typical Bavarian disciplined but hefty flavor. Simple pleasures…. Well, I hope to see you all next week :-)

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