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:


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Cheers,

Scaring The Children

Some of you guys have to start paying attention as the comment section is starting to resemble the Slope. Meanwhile I see very little activity on the trading front despite an avalanche of setups I selflessly scraped together despite an ongoing world cup game with Germany in the lead. So since nobody seems to be interested in trading let’s revisit some of yesterday’s victims to give you a rough idea of what you’ve been missing out on:

If against all odds you did pay attention – if just momentarily – then you remember that I predicted at least one attempt to scare the children – well, so far we got three. All of them have been contained in within the 25-hour BB and that is positive.

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Way Too Many Setups!

That’s right – you read that right. Way too many setups today! Germany is leading Portugal 4:0 right now and I would rather be watching the game right now. Sometimes I myself cannot fathom the sacrifices I’m willing to make for you guys. In case you have no idea what I’m talking about – you must be either American or living in a cave. Just so happens the rest of the world is watching the world cup (football) right now – call your Latino friend if you have one, he’ll explain it to you.

So let’s get to it – we have a ton of charts to chew through:

The spoos are attempting a run after scaring the children one more time (as predicted this morning). It’s looking good right now but unless that 100-hour gives way nothing happens.

Here’s the SPX cash – as you can see we already triggered an IP-L – we may also paint a hammer today which would be a good long play. Soylent Orange is still in play but we have to see how forceful the run higher will be – assuming it materializes.

I meant to keep this one for the subs but they’ll be spoiled enough today so here we go. Beautiful double hammer on the YM – good support below in form of the 25-day SMA. I prefer this one instead of the spoos.

Platinum – I must be insane giving this one away. BEAUTIFUL shooting start slash inside day right on top of the 100-day SMA. Also lines up nicely with the recent lows. Amazing setup and not one to be missed.

Okay, one more – we have plenty to spare today: NZD/JPY – RTV-L as well as IP-S. Either way looks peachy.

Quite a bit more below for my intrepid subs:


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.

Did I promise too much? That ought to keep you guys occupied for a while :-)

4:0 Deutschland gegen Portugal. Vielen Dank Hummels und Müller, gut gemacht Jungs!!

Cheers,





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