I don’t have too much to say at this point – except that copper is making me a bit nervous:
As you know those divergences usually end in tears. But as long as HG can remain above 4.2 we should be okay – if it drops through that mark equities may get hit in the process. This is the only fly in the bullish ointment I see right now – but it’s usually one I take very seriously. I also think that we may be due for a little reversal in equities by the end of this week – let’s see how high they can push it until then.
Alright, here is one setup on the FX side that sprung out at me:
FX setup 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 it includes access to all Gold posts, so you actually get double the bang for your buck.
As so many times before in the past two years the inflationists won the game:
Every once in a while I put this chart up for everyone to keep an appropriate perspective. In gold the SPX as it’s trading – in purple the SPX as measured in gold (yes, I should swap those colors next time). In the end what you see in your equities portfolio is nothing but an illusion.
That’s right – I’m hip! I’m with it! Down with the man!
Alright, let me snap my lower back into place as it’s time for my long overdue trend chart roll call:
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 it includes access to all Gold posts, so you actually get double the bang for your buck.
Absolutely no participation today – basically a continuation of a phenomenon we saw on Friday. And clearly evidenced by the Zero Lite:
It really seems like they ramped this thing across SPX 1300, ran a few stops and then walked away to spend a week in the Hamptons. The drop in the last hour was of no surprise to me, when there is zero participation nobody wants to be caught holding the bag. I would not want to be long here right now as it’s very much possible that what we saw last week was nothing but distribution (i.e. a short squeeze and selling into strength). If the longs want to keep their coveted 1300 mark they’ll have to do better than this. Very strange tape…
ZeroFX is showing us nice divergences – I particularly enjoy the EUR/USD side. Maybe I need to slow this thing down a bit as it seems a lot more responsive than the S&P Zero – we shall see and I don’t want to jump to conclusions. The USD/JPY seems harder to swing trade – just look at those candles. Perhaps we’ll settle for a different FX pair in the end – please cast your votes but bear in mind that we want pairs that can be scalped or swing traded. Also – you can pick up to four favorites – not just one.
Geronimo lost one today – no surprise in a completely sideways tape. This also confirms that the boyz are probably not even trying, which gives credence to more bearish tape to come. It’s quite simple – if institutions walked away after SPX 1300 then it could be that retail traders are now the ones holding the bag. And you know how that usually ends up (i.e. retail schmucks taking it up the rear).
You have been asking – you have been begging – and fortunately a few of you resorted to bribing. I myself of course always wanted a Zero indicator for the FX market but knowing what’s feeding the Zero for the S&P the looming challenges on the coding side appeared to be rather daunting. Not only did I have to figure out a way to produce a similar style market oscillator for currency pairs – I also had to recreate several market metrics that are basically unknown in the Forex world. So knowing all that I realized that my only chance to slay the beast was to wait for an undisturbed stretch of time during which I could sit down and focus on coding for a few weeks straight. If you happen to be a code monkey and have ever slung more than a few lines of code then you probably can appreciate that ‘being in the zone’ is a mental process that is essential to producing any high quality (and bug free) work.
But the long wait is finally over – after several weeks of hard work I proudly present to you the beta version of what shall be known as our brand spanking new ZeroFX oscillator:
There it is in all its glory – and I have to say that I am rather happy about this first effort. I think there is enough space on this screen to accommodate four FX pairs but let’s start with my two favorites, the EUR/USD and the USD/JPY, and then update the chart in a few days once you guys have voted for your FX favorites in the new poll on your right.
Obviously this is only a beta release and I’m sure over time we’ll find all sorts of ways to improve it. My first impression is one of familiarity – and I hope you agree. As I was putting all the different pieces together to produce the final signal I was running it across several weeks of data and was pleasantly surprised by how similar it felt to our old S&P Zero. If you have been a Zero sub for a while then you will most likely feel right at home. Here’s a run down of what makes it tick and how it differs from the S&P version:
The base currency for FX is the one on the left – as most of you know. However, if you trade ZeroFX the symbol of interest is the cross currency. So, on the left panel we have the EUR/USD – and that should be used to trade the Dollar. On the right panel we have the USD/JPY and that should be used to trade the Yen.
There are divergences of course and that’s really where the meat is. If you see a ramp higher but the signal line is diminishing then it may be time to get positioned to the short side – the inverse applies to long trades. The challenge in comparison with the S&P Zero is that this version is a bit busier. That was a conscious decision on my part as I wanted to see if it takes with you crazy FX scalpers. But if the signal flow turns out to be too squiggly it’ll be easy to slow down the signal quite a bit. As the old saying goes – premature optimization is the root of all evil.
Bear in mind that FX pairs move quite differently from equities and thus you will not see as much ‘no action’ tape as there is a lot more trading volume. The Forex market trades 24 hours a day, 6 days a week and it’s open from Sunday at 5pm EST to Friday at 4pm EST. So no matter what part of our giant blue marble you happen to occupy – the ZeroFX is always running.
There are currently two signal lines – one in white and one in blue. Why? Well, I’m not sure yet. What you are looking at are actually two completely different data sources and initially I was planning to merge or correlate them together. But as I was watching the interactions of the two lines I thought that there actually may be value in looking at both at the same time. It seems to me that the blue line is usually more honest and when there is an increasing separation of the two the tape often is due for a reversal (not always though). Again, this is not chiseled in stone and I may decide to merge them later. But let’s just look at this for a while and then decide what works best.
Dips below the zero mark are obviously bearish – and a pop above is bullish. Again, this thing moves quite a bit faster than what you may be used to from the S&P Zero. If you go long on a zero mark breach (i.e. the yellow line in the center) your trade may be done in a matter of minutes, depending on your style. So watch it for a while and then let me know if the smoothing I have set is appropriate of if I should slow it down a little.
The magnitude of the signal line does not appear to be as important as it is on the S&P Zero. Obviously a strong signal should give you a bit more confidence than a tiny one but from what I’m seen so far it is all contained within a +/- 1.0 range.
I thought that a 5-min chart would be a good first way to start. But we could of course use a 15-min chart if this thing moves to fast for you guys. However, if you guys want four pairs we’ll have to somehow compromise. I could buy more graphic cards and add more monitors but I’ll only do it if I hit a certain number of subs later down the line. I wish i could somehow add ‘virtual monitors’ (not desktops), which would make adding more versions of ZeroFX a lot easier. I am already looking at five monitors – two of them 32 inchers.
For some reason the VWAP indicator in NinjaTrader appears to be broken. I have already submitted a support request and will add it as soon as I got a functioning version. I really think that VWAP will be as helpful on the FX side as it has been over on the S&P Zero.
Everyone Loves A Freebie
Now, the really good news is that most of you guys are already subscribed to ZeroFX! That’s right – I used the member admin console to give anyone whoever created an Evil Speculator login a free two week trial. The reason why i said most of you guys is that the process somehow got stopped on the server end and in the end only about 80% of all members got touched by the database update. So, if you want to give this thing a spin then please point your browser here. If it doesn’t accept your existing login then please go to your membership page and add ZeroFX to your subscriptions (for free under add/renew subscription). If you have never subscribed to anything here on Evil Speculator then you will need to sign up here first and create your login credentials – again you will get 14 days for free.
Depending how this thing flows and whether or not it offers us a consistent edge I may extend the trial period for a bit longer. If you must know – once it goes pay2play the subscription fee will be the same as for the old Zero – $49.- per month – no auto renewals. I think that’s a steal for an indicator that runs 24×6.
Obviously these is but a humble beginnings. It is up to you stainless steel rats to provide me with comments and suggestions that will help make it better and useful for banking coin in the Forex markets. And no – I will not change the background to white or gray as I hate looking at bright charts at night – sorry. That’s my only prerogative – otherwise I’m open to all types of changes of course. If you think it sucks – please let me know and tell me why. If you love it – I’m always open to praise but would love to know how exactly it’s helping you and in what scenario. Maybe ZeroFX is helping your own FX trading system – or it supports one of your existing indicators. Your inquiring market megalomaniac wants to know! Obviously posting and annotating charts in the comment section is strongly encouraged and I hope you guys will go all out.
Finally, please vote! Another advantage of the ZeroFX is that it can support a variety of FX pairs. I would like to settle for a 2×2 grid chart, thus accommodating your four favorite FX pairs. Unless of course the majority thinks that the chart would be unreadable. In that context I would also like to know if 1600×1200 is too large and if we should change it to 1280×1024.
That’s all I have for tonight – quite frankly – I’m exhausted. As you may have noticed I have been a bit quiet in the past two weeks and that’s because I was working my butt off to launch this thing. Now that it’s up I hope I can pick up some of the slack that will be left by Scott’s five day mini vacation. Damn him that lazy Ozzie bastard!
Well the battle for 1300 appears to be won by the bulls. Nobody has any business at all being short right now. I am long, with enough profits to cover the failed shorting exercise. Thats how we roll when we trade unbiased!
Two things can happen from here.
1) We can continue on to test the new highs and beyond. Highest probability outcome.
2) The move up could be a stunning BULL TRAP, trapping retail traders long and wrong, causing a savage move to the downside when they cover.
Now this scenario is the lowest probability outcome, but we all know Scotts rule
IF SOMETHING WHICH *SHOULD* HAPPEN DOES NOT, EXPECT A LARGER MOVE IN THE OPPOSITE DIRECTION!
Here is the trade plan I’m using. I’m setting my stops
The reason I’m staying alive to this possibility is the market internals have not confirmed the upmove yet.
Now here is the choice signal of the day. Long awaited retest variation buy on bucky. Don’t jump the gun, wait for break of the daily high
So we pushed above the 1300 Maginot line and it seems the longs are settling in for the long haul.
Interesting signals on the ZL today. After the initial gap at the open we dropped but recovered quickly and the boyz pushed it above SPX 1300. From there it was basically just a slow churn into the close with a clear trend to the upside, with one exception that is. Thre was a brief drop in the ZL signal but prices did not manage to breach VWAP. From there the signal kept crawling higher along the green diagonal I drew half way through.
Geronimo had a decent day – two winners and one stop out. What this also tells us is that the boyz are playing the game again and implicitly is supportive of the bullish outlook.
This is Volar with a sentiment update. I suggest re-reading Part 1, which will help put this into context, but also show you how this time was not different.
News did not matter, and the “BOYZ” got away with selling 14MM puts with a VIX >30. Until we have confirmation of a bear market, I expect bull-market rules to work. We may go test that low sooner than later, but the bears clearly took too long to capitulate the market- and very little to show IMO.
I ask why are algos so very popular? Well most of them do not listen to news, and all of them are rule based trading systems with no emotion. Humans have emotion- which is utterly useless and counterproductive.
Here is a chart of my custom %upvolume (daily 16 years or so)
Here is a my chart of custom TRIN
Both those charts have the same variable- no up issues. So according to this, and most of my sentiment data, everybody was looking for a correction, and that leaves bears little ammo. So far that looks to be the case- guess we will see if they can fire another shot.
Here is one of my custom MOMO indicators for my put/call ratios. This is simple to build- should take less than 5M in excel, and honestly is one of my better buy indicators.
Also seasonality has not failed us yet either.
And POMO… of course… POMO
The BOYZ know of the Greenspan/Bernanke Put believe it or not…
Lastly my Sentiment Survey Index with bollinger bands.
Guess we will see if the bears can fire another shot at the retrace..
The bears make get one more shot, but most of my data would say that all of this is acting 100% normal with my data. Personally, I will wait till more (or any for that matter) of the stars align for a kill shot before I plunge short. The game does not change- JLL.
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