Freaky Friday Freebie

The getting is good this morning and I thought I’d throw out a Friday freebie for the leeches. We’ve got quite a collection here, so there should be something interesting for everyone. Please step into my lair:

Let’s start with the spoos which are above a good short term inflection point. I want to be long here with a stop below the 25-hour SMA. Short positions should not be considered unless we clearly fail that rising SMA.

Inverse on the Dollar – I may wait another hour as for price to catch that 25-hour SMA. Long only above 78.8.

Speculative setup alert! Sugar busted higher and burned any shorts to a crisp. Whoever’s left standing may be looking for a good exit right now. This is a bit of a strange ST setup as we’re actually relying on the weekly and monthly panels as resistance. So don’t go crazy and keep your exposure to 1/2R on the futures. Sugar 11 is kind of a strange contract – here’s some interesting info from an interview with Peter Brandt who’s been trading it on the floor during his early days:

The Sugar #11 contract is all the sugar nobody has bought under a long-term agreement. It’s the non-wanted sugar in the world, and that’s why it’s so crazy. Most sugar in the world trades under long-term agreements. It’s called contract sugar. And then you have the #12 Sugar contract in the US which is domestically protected sugar. The #11 sugar is basically the sugar that’s not spoken for. That’s why it vacillates so much, because it only represents about 10 percent of the world’s sugar production. But that portion of the world’s production can disappear quickly. Or it can glut quickly.

EUR/NZD at the pointy end of a ST SMA collision – my triggers are on the chart.

Cable – I want to be long if it drops closer to that NLSL with a stop below the 25-hour SMA.

Finally USD/CAD – looking like a short term bottoming pattern but it could also be a fake out. I’m planning on a long if it gets its act together and pushes above 1.03. My stop would be below the 25-hour SMA.

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How To Survive This Week

This is a special Evil Speculator update. I’m seeing an increasing amount of panic in the MSM and the bears are salivating at the prospect of a bond market default. Ignorant little buggers they are indeed – if that really happens your silly SPY puts are going to do you no good as the U.S. Dollar is going to drop headway into the dark abyss of ex-reserve currencies. Now I’m not going to sugar coat it for you either – the situation is grim and it’s quite possible that we’re going to see some nasty gyrations over the coming week. And that’s what I’d like to cover this morning: How to survive this week and not tell your grandchildren about any of it (it’s too embarrassing).

So this is what you’re going to do. Put on the tune above, lean back, and try to put your mind into a relaxed state. Maybe go full screen and mentally fly along with those dare-devil knuckleheads. Good – you’re still with me? Now, let’s cover a few basic rules:

  1. What everyone knows is not worth knowing.
  2. Do not worry about things outside your immediate control.
  3. Stay away from correlation trades.
  4. Emotional trades are losing trades.
  5. Don’t Panic!

Obviously everyone and their grandmother is expecting a market default at this point. Frankly I cannot tell you what the odds are for this to happen (I don’t bet on idiots) but what I do know is that there is absolutely zero edge in taking positions against an event that a large group of market participants is already expecting. Even if it happens the ‘boyz’ will find a way to cut your legs off before things take off for real. So attempting to somehow get in front of a market crash here is pretty futile. The best you can do right now is to keep your exposure limited and to stick with the charts at hand.

Worrying about a market default is useless. Why? Because its completely out of your control and if it really happens there is nothing you can do about to protect yourself. Markets all across would be halted and you would most likely be locked out of whatever paper profits you may have accrued while they’d find a way to screw over the bears, just like they did in 2008. Besides, as I mentioned above, the Dollar would probably plunge hard and since your profits are denominated in Dollars you still lose (just a little less – again, assuming you get to collect).

Correlation trades work until you need them the most. Just don’t. If you need any proof then look at the bonds all last week – or look at gold. Not much there to see given all that fear. Shouldn’t both be running sky high at the current time? Again, this relates to rule #1 – what everyone expects to happen probably won’t. Plus six sigma events are impossible to predict. It’s possible that we’ll see a last minute debt ceiling extension and then the market falls. That’s what happened last time after all.

There is a lot of fear out there and I’ve seen this script play out over and over in the past. I’m not saying that we should stick our collective heads into the sand but fear and strong emotions in general lead to bad trading decisions and although this may sound a bit academic to you right now I strongly suggest you don’t fall prey to the fear mongering that’s currently saturating the main stream media. Stick with a strict information diet and do not pollute your brain with useless information.

So what to do?


Well – if you’re active one thing: Keep your exposure limited. If you’re long from the bottom (courtesy of our Zero – snicker) then hold what you have but don’t add positions here either thinking you’re taking advantage as a smart-ass contrarian. We’re most likely going to see a lot of volatility here if the congressional stalemate pushes further ahead and that’s not a good recipe for us market plungers.

If you came here expecting some secret super trade that will tripe your account overnight, well – sorry to disappoint. Manufactured crisis are great opportunities for people on the inside – they usually hurt everyone on the outside. And that unfortunately is us – the hapless unwashed 99.9%.

The spoos are wanking sideways right now after an overnight gap lower. I mentioned on Sunday that the daily NLBL is where we should expect support -as of right now we’re still holding there. Things don’t get too serious until we breach that 100-day SMA near ES 1659.

A few tasty FX setups for my intrepid subs:

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Setups Setups!!

Frankly speaking I’m getting really tired of the latest drama coming out of Washington and the resulting slow motion churn we’ve had to endure on the equities side. I’ll give you the skinny of where we are but would very much like to focus on some rather juicy setups I’ve dug up on the futures and Forex side. And not a minute too late I may add as I see you guys dropping like flies out of sheer boredom – so let’s get cracking.

Alright – I think the SPX is still out best guide (plus the chart I posted this morning). Still painting lower lows and lower highs – that’s the story and not much else to be said about this except…

… the ES volume hole which was almost touched again this morning – we basically reversed  a handle and a half above it. We’ve been testing this one three times now in a week and thus far it’s been holding. Again, that’s the futures – the cash is flowing a bit differently obviously and it remains my main guide as the futures are a lot more emotional.

Quick update on copper from this morning. I did point out that playing the swings would be fun and a few minutes later copper dropped back to that support line giving us an excellent entry for a ride up. Almost made it up to the upper diagonal – well, it’s no exact science but if you hitched a ride then it was easy money. FYI – wait for a solid touch before trying another ride on this puppy.

Alright, let’s run through the setups quickly as Mrs. Evil is waiting with dinner. EUR/USD is painting an RTV-S but given the NLSL below I would be more comfortable taking the IP-L setup tomorrow. Yes, a NLSL would be a good short but given the current gyrations I think that the bulls have the home team advantage and may try to squeeze the top pickers a bit more.

Quite a bit more below for the subs – please step into my lair:

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


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