Don’t Burn In The Sideways Churn

Not surprisingly we’re getting a sideways churn day after yesterday’s short squeeze toward 1880. The Zero has been rangebound and we’ve been bouncing between +/- 0.5 all day. However things apparently are coming into alignment as we’ve got a plethora of setups popping out of the woodwork. Let’s get to it!

Here’s today’s Zero chart – as you can see it’s not been a fun session. But the patient trader may be rewarded in the end:

That’s a rather tiny inside day candle – as a matter of fact I suggest that you widen your stop by a handle or so for extra whipsaw protection.

If you prefer the Dow futures then here are the triggers for that as well. Identical setup.

USD/JPY – it’s ambitious alright but thus far it’s not managed to stay above that NLBL. But we have three more sessions until it expires and if it claws its way above then you know what to do.

Gold – Double inside day and NR4. But we also have a picturesque Retest Variation Sell on the roster – each side should be fun.

We’re just getting warmed up folks – many more goodies await below the fold:

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Wednesday 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.

The USD/CHF is back at its 25-hour SMA which has been acting as support in recent days. Conveniently we also have a NLBL in place and I intend to take a long breach with a stop a few pips below the SMA.

Copper also near its 25-hour but it’s a lot less defined. Here the NLBL is in play for five more hours and as the current pattern is resembling a Retest Variation Long I’d be happy to take the failure (meaning a long breach).

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SRSLY?! Nine days in a row? In my time trading the markets (and there were a few of them) I don’t ever recall seeing nine consecutive higher daily closes on the E-Mini. I’m sure it has happened before but you can probably count it on one hand – so it’s extremely rare (someone got the stats on that?).

And we’re already half way through that ‘trading range of pain’ we found ourselves stuck in last January. Most definitely a wonderful Valentine’s gift to the bulls – someone’s eating steak tonight! Guess what – I’m one of them. Eating steak that – not being a bull – the Mole holds no allegiances.

I don’t expect to see a niner anytime soon – but let this be a lesson for anyone relying on mean reversion when taking contrarian trades, and these days especially on the way higher. When she rips she rips hard – five years and counting and unfortunately some folks have yet to learn that lesson. It will be taught in the end – for better or for worse. I personally prefer to see you guys maintain your principal and perhaps even grow it. But I can only do so much.


See the problem is that retail keeps expecting mean reversion (platykurtic or mesokurtic distribution). However, our reality post-Bernanke is that we see an increasing frequency of leptokurtic distribution. Which means long squeezes – technically speaking short squeezes would be included but like nine consecutive daily higher highs you can count them on one hand since 2007.

You would think that this has become rather clear by now but astonishingly one keeps encountering a fair amount of cognitive dissonance in the retail space. So if I come across a bit harsh every once in a while then feel free to hate the messenger but perhaps in the long run I may just do you a favor. The concept of satori is not well received in Western cultures but I am a firm believer that some people only learn to properly duck after being punched in the face a few times. Hey, it’s your account and I’m not your daddy.

“The truth does not change according to our ability to stomach it.” ? Flannery O’Connor

It’s Valentine’s Day and I’m going to make this a freebie – so don’t run off. Let’s first take another look at gold, which as I suspected took off like gangbusters. My campaign ended after 2R due to my CrazyIvan campaign management. The day before I got stopped out I actually considered changing to the Heisenberg campaign rules which would benefit a possible outlier. Partial profit near 1.2R and then let ‘er run!

However, I had already posted our new stop and couldn’t really preach one thing and do another. So I’m out with 2R but if you’re still in this then you are a lucky bastard and you owe me a beer. Set your stop to -1R – let’s see if we can’t get this one to 1350. BTW, we are not done yet with gold by a long shot. This push higher most likely introduces a new chapter for gold – remember the weekly panel? So I’m looking forward to playing the shiny stuff quite a bit more in 2014.

Alright – setups – Monday is an NYSE holiday but the futures will run. So if you’re around keep an eye on these. Copper now touching its 100-day SMA as well as its 25-week. This is a speculative short (which means only 1/2R or less) with a stop above both SMAs.

Coffee – as you know we have been waiting for this one. Still now trigger but it’s now painting an inside day candle. Perfect actually as it opens the door to both directions.

We have a bunch of AUD setups today so spread yourself across them – meaning 1R total for all of your AUD related campaigns. AUD/CAD – inside day and RTV-Short – I like this one as it’s coiling up again.

AUD/CHF – even better IMO – same configuration but on top of the 25-day SMA. As always use the inverse trigger as your stop – check the cheat sheet if you are unclear about the rules/patterns.

CAD/CHF – tiny inside day which is fine and dandy but only play 1/2R as there’s whipsaw risk. I do like that touch of the 25-day however and it may pick a direction next week.

Finally GBP/AUD – another IP plus it’s an NR4 (narrowest range in four days). Juicy as it’s pinned below the 25-day SMA. Again, starting watching this one on Sunday night.

And that’s my cue to bid you goodbye until next week. Enjoy your weekend and Lincoln’s Birthday on Monday (screw ‘President’s Day’). See you next Tuesday morning* – bright eyed and bushy tailed.

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.


* No, I’m not calling you a cunt ;-)

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