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:


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

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,

Monday 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.

It’s officially summer now and quite out of season things are heating up across the front. Damn it – shouldn’t you guys be at the beach by now? Here’s the spoos plotting against the GBP/JPY (the carry pair we are tracking), the latter of which is pointing downward. So prepare yourself for the possibility of a little down cast – bring an umbrella. The NQ and TF are near their short term SMAs (e.g. 100 and 25 hour) so look for possible support there should we drop lower.

Otherwise there are no glaring signs tempting me to be short. The VIX:VXO ratio showed an abnormal spike last Friday but remember that it was quadruple witching day and it may just be an aberration. I suggest you keep an eye on the Zero indicator throughout the session to be alerted of any possible shake out attempt. Thus far at least the trend higher on the equities side continues unabated.

Setups – here’s crude which looks like it may gain traction via its 25-hour SMA. It’s a buy above the hourly Net-Line Buy Level at 107.36 – put your stop below the SMA.

Silver is looking rather ripe here as we have a juicy bollinger compression. The idea is a long above the NLBL.

I think the EUR/USD is a good swing trading vehicle right now. Obviously once we see a breach outside the sideways triangle things may accelerate. Be aware that it’s not uncommon to see a false breach first followed by a run in the opposite direction. When in doubt stick with the daily trend.

More goodies below the fold – grab your decoder ring and 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.

Here’s the daily Forex spread spike controller from Dukascopy. Look at those and compare them with your current broker. As a matter of fact I would appreciate if you would post screen grabs of your own b/a spreads. We need to start collecting a list of favorable brokers.

Cheers,





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