Is It Summer Already?

Temperatures over here in Spain are slowly crawling higher and the locals are busy preparing for the annual onslaught of UV deprived Northern Europeans (and a few Americans as well). Down here at the lair air massive air conditioning units are running in overdrive as my charting/reasoning abilities degrade inversely with every degree Celsius higher on the scale. There has been very little activity here yesterday and the tape did its best to keep everyone bothering to pay attention bored to tears.

However when the bus is empty it often winds up picking up speed. Although I’m getting concerned on a medium to long term basis equity futures are looking solid here on a short term. If you are ever looking for a textbook example of a clean diagonal with nicely separated touch points then look no further than the E-Mini futures today. If I don’t wind up heading to the beach or gym then I will probably grab a long position if we retest that diagonal.

What I like about it in particular is that the 25-hour is merging with it right now and that gives us dual support. Put your stop a handle below and don’t play more than 1/2R – if it pops it’ll be worth the hassle. However if we wind up gyrating sideways again don’t waste your time – you’ll probably get a pretty good idea of where we’re heading in the first hour of the NYSE session. If in doubt consult the Zero indicator, which by the way was flatlining most of yesterday.

The NQ dons a similar pattern and although I would follow the ES it may be worthwhile to split your 1/2R between those two. It’s always good to see those two get into alignment when things are looking bullish.

EUR/USD – I’m going to play a tiny position here (1/4R) with a stop below the recent low. It’s a speculative entry – a bit of a lottery ticket based on an early formation. Those patterns either take off like gangbusters or die in their cradle – we should know soon.

Believe it or not the damn ATM here in Valencia has starting to print derogatory Dollar jokes on my paper receipts. We expats get no respect over here!

A few more Forex goodies waiting below the fold – please step into my lair:

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Have fun but keep it frosty – also expect low participation tape banging which means don’t be too stingy with setting your stops.


Time To Strike The Iron

We are at an important inflection point this morning and it’s time to strike the iron as it’s hot hot hot! I’m running a bit late today so I only have time to report on equities – but it’s a very good one, so pay attention:

This is what’s working in our favor right now – the GBP/JPY is still looking divergent or at least unsupportive. Could change quickly but there are no guarantees in the trading game. So let’s look at the price action on the futures side:

This is a textbook RTV-S configuration and you can play it by the rules. My discretionary style however differs a bit from Ivan and Scott which is why I use Net-Lines as additional price inflection points. Sometimes they afford me better entries near important price congestion clusters. In this case we have a typical 1-2 pattern here (if you allow me a tiny bit of wave wanking). What comes next will of course determine where prices head next. I personally have no bone in this fight (yet), so I’m able to objectively assess all entry possibilities that the tape is affording me right now. Here we go:

  • Short via the NLSL below 1948.25 – put your stop above a few ticks above yesterday’s highs (1953.25).
  • Short via the regular RTV-S entry point one tick below (or at if you want) 1937.25. Your ISL will again be above 1953.25. This will result in a smaller position size as you are affording yourself a larger stop. When in doubt use our handy futures risk calculator.
  • Long above the NLSL or yesterday’s highs. My stop would be below 1937.25.

Now I know what you’re thinking – those NLSL entry triggers are dangerously close to each other, and you’re right. I will have to monitor the Zero after the open (you do have a subscription right?) as to assess whether participation favors more up or downside. If you’re cheapskating it I suggest you watch the 100-hour SMA on the spoos plus the GBP/JPY correlation. In summary I’ll be all over this like a fat kid on a Mars bar – this could be a very fun campaign.

You have been briefed – now get busy!

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The Mole Smells A Rat

Let me cut right to the point: I don’t trust this tape further than I can throw the average NYSE market maker, and if you’ve been there then you know that most of those guys aren’t exactly underwear models. Whatever is the source of your paranoid suspicions, you ask? We barely have three down candles and you already getting antsy, you say? That’s right – once again the Mole is smelling a rat. Let’s observe:

Exhibit A: The tape has been dropping (thus far – we ain’t seen the close yet) but UVOL is clearly outrunning DVOL. Rather suspicious and that’s putting it mildly.

Exhibit B: NYUD clearly in ‘meh’ territory. There is no selling pressure and this is all for show. Perhaps it’ll change by the EOD, but for now I’m not seeing any angry bears taking advantage of a clear inflection point as the SPX is pinned below its 25-day SMA .

VIX:VXO – on the rise already and that divergence on Friday before the close looks rather iffy (especially given the late Friday drop). Perhaps EOM artifact – possible – but even then today’s ratio does not suggest MMs are overly worried here.

The only one that’s doing what one would expect is the VXV:VIX ratio. Provided here as the Mole believes in ‘fair and balanced’ charting practices ;-)

The Zero Lite isn’t exactly screaming bearish either here. But again, let’s not jump to conclusions and wait for the close.

In the absence of any daily/weekly/monthly resistance levels I would keep my eye on the 25-hour right now. It held up well this morning and I expect it’ll be the decider here.

Remember one of our prime directives – it’s not the first sell-off that counts, it’s the follow up. The Mole is watching in eager anticipation.

Bonus Chart!

I would be remiss in not sharing this prime rib AAA rated EUR/USD setup with my intrepid steel rats. It’s bumping against daily AND weekly resistance, of which the weekly is rather pronounced (i.e. 25-w and 100-w right above). Excellent inflection point for the Euro and if it hops the fence(s) it’s going to be one cold summer for the greenback.


It’s not too late – learn how to consistently bank coin without news, drama, and all the misinformation. If you are interested in becoming a subscriber then don’t waste time and sign up here. The Zero indicator service also offers access to all Gold posts, so you actually get double the bang for your buck.


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