Burn Those Shorts!

We have movement across the board and I regret not being able to post yesterday as I missed out on several juicy entry opportunities. Unfortunately life sometimes (or always as I was reminded by a loyal contributor) takes precedence. Nevertheless our daily routine over the past few years hopefully prepared you sufficiently and allowed you to take advantage while the getting was good.

The E-Mini in particular was a great entry opportunity courtesy of our trusted Zero indicator. I’ve always maintained that bullish/bearish divergences in participation on the spoos are pure manna from heaven and have allowed us to bank some mighty coin over the past eight plus years.

And once again the Zero delivered when it mattered the most. That final stab lower produced a spike low that was a solid buy about mid session yesterday. Not being completely useless I did mention it before the E-Mini pushed > VWAP and started to burn the shorts. If you managed to grab a long position then I suggest you simply trail higher as momentum now should take over for the remainder of the week.

Not surprisingly the VIX has once again dipped into single digits and serves me as yet another opportunity to remind everyone that downside protection is extremely cheap right now. You have been briefed!

Meanwhile crude has been doing a solid job on burning shorts itself and I’m extremely pleased to finally see our patience and borderline anal retentiveness to taking solid technical entries rewarded. It’s once again time to advance our trail as we’ve pushed toward 3R MFE and I’m tightening in a bit locking about 2.5R at this point.

Gold is a bit of a head scratcher right now as it’s decided to ignore the advance in the USD/JPY and is only now showing signs of a possible bounce.

Quite honestly I don’t yet know what to make of it and although I’m very pleased given my current long campaign in GC I have decided to make a very rare exception and move my stop to break/even ahead of my minimum 1R MFE rule. Maybe this turns out to be nothing but I expect either gold or the JPY to be moving in sync again and that soon.

Bonds are now on my watch list for a possible long position but before I can justify an entry I will need to see a more thorough retracement, preferably touching the 100-hour SMA.

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Before I run I wanted to revisit the USD/CAD campaign which stopped us out a week ago, fortunately after having already secured much ill-gotten loot on the first leg up. If you remember, we attempted to grab a possible trend move higher on the short term panel which unfortunately blew up in our faces. Or at least mine!

And this should serve as a great example of how you can be right but get shaken out by either execution, your system rules, your risk exposure and tolerance, or external events. In this case I had chosen our stop a bit too tight due to the preceding run higher. I think subconsciously I was under estimating the daily range a little and was only expecting a shallow correction. Well, I had it almost right but the few extra ticks cost me what would have turned into another major home run, probably by now exceeding 4R in profits.

I won’t beat myself up over it but, as always, am determined to learn from the experience. This in general is how I approach this trade and making mistakes or letting yourself getting lulled into complacency, like this time around, is a constant battle that can never be won but should become part of your nature if you want to survive as a trader on a long term basis.