Squeeze-A-Licious

The squeeze continues on all fronts and we are either at the cusp of some major move in both forex and equities or we are at the end of a beautiful run. And if it’s the former it has to happen today before the close. No, we can’t have it both ways, so let me elaborate.

The E-Mini has made a phenomenal recovery since those 1890 lows – we’re talking nearly 90 handles in eight sessions. If you were caught short near the bottom you just got your ass handed to you. I trust none of your rats were that stupid – if you were then you didn’t pay attention.

The situation we’re facing now is an interesting one. This has massive short squeeze written all over it as we’re but handles away from the old ‘not so fast’ zone delineated by ES 1980. And if it was any other week I’d say we’ll probably paint an obligatory red candle and then take the bears to the woodshed.

However, this isn’t an ordinary week – starting tomorrow we are graced once again by this month’s FOMC minutes – the good ole’ Yeller is so reliable. But expect price volatility to (as measured by for instance ATR) come to a screeching halt as the global cabal of banksters hold their annual conference at Jackson Hole.

I actually was invited but decided to abstain for – ahem – personal reasons. Anyway, as usual the tape will most likely start freezing up starting tomorrow, which also means I won’t be doing much on the trading side. So let’s review some of our recent gems – there’s a good chance that at least one of them is going to hit their stop once things start swinging widely.

You all recall (and some hopefully enjoy) the NQ trade we’ve been holding since 3917. Fortunately I am not employing CrazyIvan campaign management as I suspected that this one may turn into a squeeze and cheated by switching to Heisenberg style campaign. Otherwise I would have technically been forced to close out yesterday as it touched 3R (almost exactly). And there is still a chance that it’ll run much higher – the ES is at 1981 as I’m typing this and we still have 90 minutes to go go go go!!

Now on the currency side you may have long forgotten about that LT campaign on the Dollar. That sucker has banked me almost 5R by now – it’s been one of the best setups of the year. As some of you may recall – that has been a Heisenberg style campaign from the get-go. There was a very low probability it would get above 80 and when it did a lot of Dollar shorts starting running for the exits. I’m holding this one and my stop has been advanced now to 25% trailing.

Now the EUR/USD is looking extremely sweet to this lowly expat – in a way I am perpetually short the EUR as I earn in Dollars and live in Europe. Which is why I hedged myself near LT support (see yesterday’s post) and was happy to be stopped out today. However, it may not last – for the same reasons outlined above. Either this thing drops now – today – or most likely the rumor mill will take over and punish the early shorts. Right now I don’t have a dog in this fight but I hope that it’ll drop a few more pips before things start slowing down.

For the reminder of the week I may mix things up a little to keep you guys entertained. I always considering to post a little series on cognitive biases – what do you think? It’s something most of you have probably come across but it bodes repeating as we humans are unfortunately so easily corruptible. Or perhaps fortunately? ;-)

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.

Cheers,

Welcome To The Wood Chipper (Again)

I’m happy to report that I’m on the path to recovery but it’s been one rough weekend down here at the lair. The week prior I injured my lower back and just when I was getting better I came down with a nasty cold that kept its grips on me until Sunday. Not feeling 100% by any measure but the reflection in my mirror is starting to resemble a human being again – well, sort of (in the right light and special effects).

Now back to business – this is the situation in the nutshell: The bears dropped the ball near an important medium term inflection point (i.e. 1900) and the ensuing punishment has been swift and brutal. We’ve recovered almost all lost territory and are now back where none of us really want to be – in the dreaded wood chipper zone which spans between 1955 and 1980. Twenty five handles of pain and I don’t expect this to be a fun week. Chances are there will be profit taking up here and fortunately we may be joining the fun:

If you’re a sub you should still be long since 3917.25, which at this point has banked us around 2.6R. My stop has been advanced to the 2R mark at 3985.25 and so should yours. Nothing much else to report on the equities side. I don’t see any entry opportunities worth taking about right now and given where we are picking a direction here is tantamount to a coin flip.

However if you want to grab a few lottery ticket shorts then this is pretty good territory. Perhaps pick a collection of 194 to 193 Spider puts and then link your stop to ES 1580. That is where the bears should lose all hope (again). The bearish case isn’t completely dead but it’s looking pretty bloody due to massive stab wounds. Expect it to expire if the ES finally manages to hop above 1980. I don’t have a directional bias here – let’s see what the tape does. If we start looking weak I may myself grab some of those lottery tickets – for a limited time (i.e. in this chop zone for a day or two) the risk/reward here is pretty good actually.

For the subs I have some very interesting EUR/USD perspectives – you don’t want to miss this!


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You have been briefed – now have fun but keep it frosty. See you guys later this afternoon.

Cheers,

Zoning Laws

After an exhausting topping pattern equities finally resolved to the downside last week. And as always it is magnitude and vehemence of the follow up bounce that determines what happens next. But it’s not as easy as waiting a session or two and then declaring a winner. Sometimes those bad boys are trying to fake us out. So when caught inside a sideways guessing week without the proximity of any significant technical context I often resort to zoning in order to structure my approach.

Clearly the volume hole near 1935 is the gateway for the bulls and it also demarks bearish from bullish potential. Anything beyond 1940 is still part of the obligatory bounce we have been expecting – remember the 25-day SMA sits right there to block the way (shown below). If the bulls advance above it then we are in the high bounce area, which does not completely kill the bearish case but puts it into serious peril. And obviously anything above 1965 shifts the odds back to the bulls.

On the downside we have the guessing zone in which we’re currently stuck. Being short here is actually not a bad spot to be in IF you grabbed your shorts near 1940 (i.e. yesterday). Otherwise there is nothing of interest down here until we drop below 1910 – if the bears manage to drop the tape this low we could easily see acceleration lower. However IF we do it’s still possible that the bulls stage a late f-u rally higher.

What to do? 1) you are already short since 1940ish – don’t do anything and put your stop to break even. 2) You can get short right now but only with 1/2R – then build your position as it drops lower each 1/2R increment – your stop would be above yesterday’s highs. 3) Going long near the lows is possible if we approach 1910 – if you are short already then I would simply hold them and monitor the situation. 4) Be long above 1940 with a stop below – this is not expected to be a long term campaign unless the bulls start ripping this higher.

I know – complicated but as Scott mentioned – this is going to be a shitty week on the equities front.

Here’s a wee bit more context – the SMA/NL ┬áchart shows us a support trifecta sitting below. There’s a NLBL at 1923.5 – the 100-day SMA at 1911 and finally a NLSl below 1900. A breach below that one puts us solidly into bear territory.

Now on the long side I would not play the spoos – I would go with the NQ instead. Technically we are painting an RTV-L today and if we get that bounce (yellow and green in the zoning laws above) then this would be my instrument of choice.

On the short side however… well, more about that below the fold and a few more goodies for my intrepid subs:


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

Honorable mention:

Gold – courtesy of Darth Mole. If you saw this one last night you may have played that break out higher. And that wasn’t the only one today: EUR/GBP, crude, soybeans, bonds – significant jump in volatility. If you haven’t signed up for Darth Mole yet – it’s FREE all through August. Have fun!

Cheers,





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    1. Double Whammy
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    4. Squeeze-A-Licious
    5. Tuesday Morning Briefing
    6. Welcome To The Wood Chipper (Again)
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