Tuesday Morning Briefing

Welcome to our morning briefing. Here we are reviewing short term setups ahead of the NYSE opening bell. If you are a scalper or swing trader then these setups may be of interest to you. As usual keep in mind that these are short term setups although they could be used as early entries for more longer term positions.

Equities continue to look weak and yesterday’s session in addition to the overnight action has opened a small door for the bears. Whether or not they are capable of ceasing the opportunity remains doubtful but we shouldn’t dismiss it outright.

The E-Mini remains our main guide in general for the equities side and it’s useful to know how activity is distributed on our volume profile chart. As you can see there is a volume hole at around 1965 that separates the previous churn zone from the new 4/7 holiday range we are bouncing around in right now. If we hold here today and tomorrow then we’ll probably continue our course higher. A drop below 1965 however increases the odds for another medium term correction.

Always worthwhile monitoring is the S&P 500 cash index which is currently back at its 25-day SMA. Suffice it to say that this line needs to hold – just like last time it was touched. Now if you think we are due for a correction then you may want to look for opportunities to play along. Please step into my lair for a few suggestions on that front and plenty more…


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!

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Here’s today’s event calendar (now dynamic and clickable!) – seems like we’re having a quiet day:


And the spike controller for you Forex traders:

Since we’re on the topic of Forex – here’s a bonus chart:

That’s the ZeroFX (part of the Zero service) which has been making very nice calls on the EUR/USD and USD/JPY side (former on first row and latter on second row). Those star patterns you see happen usually near buying/selling exhaustion. Not many of you are following it but it’s a great tool which provides quite a bit insight on participation patterns.

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

Cheers,

Watch Your Six

It’ll be a short week as many vacation deprived worker bees over in the U.S. are busy preparing for an extended 4th of July weekend. So expect low participation on the market front starting Wednesday and turning into a flatline on Thursday. Which unfortunately works against us this week as this is probably just the quiet before the storm. Since I was gone Friday I’ll start this off with a wrap up of where we are followed by a few pointers on how to get positioned and of course some short term setups:

Here’s the E-Mini volume profile. Apparently we are not only heading into a holiday weekend but we’re also in the mid of a nasty chop suey zone. There is no saying how long it’ll draw out but I concur with Scott when he advices that it’s best not to be caught in between the swings.

On the short term side the spoos are looking pretty ugly. The recurring theme appears to be a test of the 100-hour SMA – so if you must/need to play then you should use that one to your advantage.

Also on a short term basis – the GBP/JPY correlation we have been watching over the past few weeks. It’s pointing down on a general basis. Watch this one during the session – if this divergence continues gravity may set in on the equities side.

Which brings me to the big whopper. I updated the daily Zero this morning and was rather stunned by the extended divergence that has developed over the past week. As it runs on the daily chart we use it mainly to assess the overall trend and in particular to spot situations where the long side may become hazardous. I have highlighted prior occurrences and as you can see we usually get some kind of correction although its magnitude cannot be predicted. IF you are trading on a long term basis (i.e. daily or weekly charts) then I suggest you make sure that your stops are set where you need them to be. There is yet no reason to panic but I would follow price very carefully – I will be posting two equity setups below which should guide you through this week just fine.

On the SPX cash side we are still in good shape and unless 1948 gives way any sudden drops to the downside are most likely going to find some dip buyers. However if that line is crossed things could accelerate quickly – an impending long weekend be damned.

More goodies below the fold – please step into my lair:


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.

Cheers,

Volatility Cycles

Some of you eager beavers have to start wrapping your mind around the concept of markets moving in volatility cycles. Just like it is a common observation in natural systems (i.e. water, sound, electromagnetic) imagine a sinusoid wave that oscillates in repeating cycles. A few days ago I wrote an indicator that visualizes the idea very nicely – I call it ATRIP as it’s a hacked version of average true range:

What is important to understand is that these cycles are a natural aspect of all basic market types – bull, bear, and even sideways. In sideways markets they allow us to scalp or swing trade – an apt definition of the activity obviously. In trending markets low volatility cycles allow us to assess the tape/configuration and get positioned when high probability odds arise. Obviously the cycles don’t come and go like clockwork but there are ways to leverage them. For instance we are currently in a high cycle on the spoos and we are dropping. Once we start slowing down again it may be time to look for support zones but not before that.

The repeating cycles are prevalent across all market verticals, you will find them on the futures, on stock symbols, on Forex, bonds, everywhere. For some reason however I have rarely seen anyone address them in a constructive fashion (not saying nobody has but I have not found much) which is why I am spending some time on this. Once you grasp this concept you will never look at the market with the same eyes again. And it will probably affect your trading decisions as well – for the better!

Talking about possible support zones – on the E-Mini we’re looking at 1944 as the next possible bounce zone – assuming we actually drop much further that is. I’m not seeing a lot of mojo on the Zero today – at least not right now.

And if you add fair value then you get near the 1956 mark on the cash index – that’s where we find the 25-day SMA, which has been carrying prices higher before the recent correction.

EUR/USD – very interesting configuration here. This looks like a floor attempt and if we breach today’s highs I want to be long with a stop below today’s lows.

More goodies below the fold – please meet me in the lair:


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.

Cheers,





    Zero Indicator

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