Apparently Scott’s early morning paranoia seems to have been justified as we’ve seen quite a turn around in equities today. Which by the way clearly began ahead of reports of a plane crash near the Russian/Ukrainian border. What a royal mess and sincerely I hope this doesn’t turn into a larger conflict. As you can imagine both Russia and Ukraine will be in the hot-seat until investigators are able to figure out what exactly happened.
But let’s talk about the market. I often point at the GBP/JPY as one of the major carry trade pairs however some traders prefer the watch the EUR/JPY. Well, it’s been pointing down since yesterday and today it turned into a veritable cascade.
Which was mirrored by the GBP/JPY as well. I am keeping my eye on this one but thus far I don’t see any signs of a bounce. Not good for the bulls and it could mean we head lower.
Suffice to say that my long campaign was stopped out near the NLSL on the ES. Here’s the SPX cash which offers possible support near its own NLSL at 1969.56 followed by its 25-day SMA at 1962.39. Prices are currently re-testing the former but if it gives we’ll most likely visit the latter.
A lot more luck on the gold campaign which almost banked us 2R today as it literally exploded higher. That was actually unexpected as we just came out of a big move. I think by now you know the rules – if we close above the 1R mark we’ll keep the campaign open, if we do not then we close out near the EOD.
30-year bond futures also above the 1R profit mark at this point. Same idea here – we need to close the session above the 138’04 mark or it’s time to take profits and end this campaign.
I wanted to offer few more thoughts given the developing situation in the Ukraine. Over the next few days I’m sure we will see a lot of news drivel rife with accusations, rumors, misinformation, human tragedy stories, you name it. I strongly suggest you stick with a strict information diet which means ignoring all of it until we get unequivocal confirmation of the culprit responsible. Suffice to say that it should not affect your trading in any way – whatever price swings would have happened have already happened. Don’t let the drama queens, conspiracy theorists, and tabloids affect your mental equilibrium. As much as I regret what happened to the passengers on this ill-fated flight – this is not an opportunity to satisfy your lust for sensationalism.
Make no mistake – none of the sources spreading rumors or theories about what may have happened today should be trusted as they couldn’t give a rat’s rectum about the truth or the people who so horribly died. Eventually I am certain the truth will be revealed – until then the minimum we owe to the victims and their families is a speck of respect, which means not participating in a sensationalistic media frenzy. Just consider for a second it was the charred remains of one of your loved ones laying there on the ground – that ought to give you a bit of perspective.
I hate rubber-necking and refuse to engage into such egocentric activities – and the same attitude extends to any type of catastrophe – be it man-made or acts of nature. Let’s act like adults and maintain a sense of decorum. My thoughts tonight are with the victims as well as their families.
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After a big squeeze like yesterday it’s perfectly normal to see a sideways or sluggish session. After all it’s the natural prerogative of any self respecting market maker to instantly manhandle any late comers who weren’t nimble (or smart) enough to accumulate when the getting was good near the prior lows. I hope that doesn’t include any of you guys – after all you were given plenty of warnings right here in our humble lair. Now let’s see where we are on the equities side:
If you went long the spoos then you probably banked one R – it’s time to call it a trade now and exit. I’m not yet tempted to short this thing but I may tomorrow if we produce a shooting star candle tonight. Is that really too much to ask?
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Just yesterday morning as we were scraping all time highs I suggested the following: After a three week melt-up the bears are feeling pretty crappy right now – there’s very little desire to short this rally and in combination with yesterday’s doji we may be due for a small correction. Apparently the last bear had finally left the building and after some consideration I believe we may be getting more than just a little dip lower – let’s review:
Let’s start with the obvious – as you recall the GBP/JPY was pointing down strongly and gravity has finally set in on the equities side. Some prefer to follow the EUR/JPY which actually is looking even more bearish.
This is the ratio between the SPXA50 and the SPXA200 – this refers to NYSE stocks above their 50 and 200 day SMA. The ratio shows us inflection points when we should expect normalization – i.e. medium term corrections. Since about early 2013 the 1.0 mark (i.e. par) appears to be where we should expect a shake out and we have pushed a bit beyond it last Monday.
On the volume profile side we never had much to work with since about 1890 – remember how long it took to overcome this? I see us either holding right now and right here in which any of the below becomes moot. Or we drop to 1925 for a bounce. There again we either hold or slide quite a bit lower.
Here’s the hourly SPX – I always like to look at the cash which guides my activities on the futures. As you can see we finally gave up the 25-hour SMA and now it seems the 25-hour Bollinger is being breaches as well. Again, unless we see a recovery here late today we are probably due to visit 1925ish (which lines up with what we see on the volume profile chart – nice!).
The Dollar meanwhile is pushing against its 100-day SMA and I fear that the buck literally stops here. A continuation higher would be very positive as it not only would get us above both SMAs but also interrupt a sequence of lower highs and lower lows. I would very much welcome such a move but call me skeptical.
But we’re just getting warmed up – I have a few more goodies up my sleeves plus I’ll tell you how to best get positioned here. Please step into my lair:
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If you ever called me an idiot you may be on to something. I don’t know why I bother trading complicated setups. I should just go long on three consecutive green candles and short after three consecutive short ones. I mean is this the easiest futures contract ever? Literally a trend trader’s wet dream. We should consider trading with the trend here on a regular basis. I think I actually pointed this out in the past – this is a very well behaved contract. However it’s thin and you probably get a bad fill so it’s not something to jump in/out in – be in it for weeks at minimum.