It’s been a fun ride since last night when the spoos were breaching the red line on our inside day chart. I really hope you didn’t snooze that entry as double inside days have pretty high odds of success:
Whether or not we bounce back here is of course the one big question circulating in our rodent brains right now. Not to worry, the old Mole is on the job to offer a few insights you may find useful in making a call here. In essence – we are at an inflection point right now and right here – one that seems to be rather pronounced on the equity, currency, and commodities front. So please step into my lair for a quick inflection point chart roll call:
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All I can say is ‘watch the spoos’! That NLSL at 1360 is the doorway to 1350 and if we break that we’re going to 1312 or even 1300. Yes, a long trade here is permissible – just keep your stop a few ticks below that NLSL.
Ozzi/Yen – very same picture and there’s even the upper 100-day BB line for extra support. Same setup – you can be long here but the odds are 50/50, and I would actually hope to get stopped out for a run into 85.0 or lower.
Ole’ bucky has attempted to push a bit higher and that’s good news. However, nothing exciting is going to happen unless we breach the 80 mark. That’s really the event we’re waiting for as it may accelerate things on the equity side. In the meantime it’s positive to see it hang on to the 100-day SMA – let’s keep it that way (tengo que pagar mis strippers en dólares).
Euro/Dollar – also sitting right at the cliff’s edge and is supportive of our DX chart – a drop below that would get us to 1.3.
Kiwi/Dollar has made the plunge and unless we see a bounce back and breach above that NLSL we are going to 0.8 or lower. If you missed out – don’t chase it and wait for a last kiss goodbye.
The old lady is also sitting right at the knife’s edge and thus far support has been holding. I think you are getting gist of it at this point – it’s definitely the currency side we ought to be watching, especially after hours. Just embrace your inner vampire.
Dollar/Loonie – a surprising turn about here as this thing was just about to fall off the cliff. We are now near resistance however and then we have that NLBL at 0.999, which of course also represents a threshold ahead of parity. Definitely a situation to watch – again, it’s fine to be short here unless we breach the parity mark.
Copper is sitting on its NLSL right now and thus far it’s holding. I think a breach here would be necessary in order to see anything exciting on the equities front. And even then we’ve got support near 3.73, so I remain skeptical.
Silver is tinkering with its NLSL at 33.9 and unless it corrects that situation swiftly we should be heading toward 32.4. THEN things will get really interesting but let’s talk about that once/if we get there.
Some of you long term subs may remember my RSI_EMA chart on the spoos. As you know I have been tinkering with that 2011 analog idea for the past few weeks and the current pattern thus far is supportive of that theory. We are in a similar spot as last year plotting a similar fractal formation. Based on this we should correct a little lower here and then continue upward before things start falling apart in a big way later this year. Now, having said that – as you know history never repeats itself – but it rhymes. So as soon as we see a detachment from the 2011 script we must immediately cast this analog in our mental trash bin. Until that happens of course this seems to be a handy guide.
Okay, so it’s summer and everyone is bitching about how there’s no edge in the tape – especially some of those lazy ass Ozzies who shall remain unnamed. Well, let me prove you otherwise and also take this opportunity to rub it in a little. Heck maybe I can even convince you to part with a mere $29.-/month to stop the slow drip drip drain on your portfolio 😉
Yesterday I postulated (to the subs) that the spoos may either hold steady or drop toward the equivalent of SPX 1300 and then bounce back from there. It happened overnight and a lot faster than I thought but that’s exactly what happened.
Bonds: Once the 30-year futures pushed above the 25-day MA without a retest a touch of my 127 target proceeded as suggested.
The NLBL gave us two targets – one at 1526 and we are now at T2 (mislabeled on the chart) at 1560+. Again, the push above my trusted 25-d SMA sealed the deal on a push higher. But bear in mind that without price context (i.e. the Net-Lines Buy Level) that MA would only have limited meaning. Folks who only use MAs for entry decisions quickly learn that lesson – one way or the other.
Last but not least – Corn futures. I suggested a long entry at 600 when everyone ran in circles with their hair on fire. Look where we are now. I think I am going to add Corn and perhaps Sugar to our daily Net-Lines inventory.
Finally, a little freebie for everyone: Crude bounced at the NLSL and although we may see a little retest this suggests we are pushing toward the 100 mark. That NLBL is near the first target range, so if you take this NLSL rejection as a long entry (some play it that way) then I would be out there.
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The onus now is on the bulls to show that they can take this thing higher. Thus far we seem to have switched back into slow up grind mode and a breach of SPX 1341 should take us higher. If you are however looking to the downside then I have quite an interesting setup for you.
Either way, some of you have been clamoring for a short term chart update and since I’m in a good mood you shall receive:
[amprotect=nonmember] 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.
Let’s start with the good stuff – the spoos have been churning sideways since Monday’s abbreviated session and as I’m typing this we are actually painting almost 1336. What’s more interesting however is that new NLSL that will be active starting tomorrow – yes, it’s already baked in as we painted three higher wicks. So, if we happen to drop toward 1328.25 at the EOD it may be a great setup to go short for a few bars. Otherwise however it seems to me that we are pushing toward 1360.
Interestingly the EUR/USD dropped through its NLSL this morning – if you happened to catch this one you should be taking profits quickly as my first target range is lurking below. Not much edge here – too much support below. I would prefer to see a long setup first.
Copper is on the run and may aid equities in bubbling higher. I think a target of 4.45 is absolutely possible.
The NLBL on Gold is actually incorrect – nevertheless it seems we are pushing toward 1560 now. The current NLSL is miles away and if you’re in this trade you should be good to go – but I would not chase it if you’re not already positioned.
Silver is in a similar setup but much more compressed as you can see. The target area is looming above and if you’re in this hold to 37.6. Again, I would not chase this one.
Crude also is pushing higher – target area is more generously at the 100 mark. If it drops then bear in mind the new NLSL at 94.75 which should be active tomorrow.
Now, as recently promised, I do have a little surprise for everyone:
Remember those mysterious charts I used to post in the past few weeks? Well, I labored hard and actually turned it into a blackbox trading strategy which I call Helter.Scalper. There are some similarities with Geronimo – it’s got the same target of 10 ticks and the same stop of 12 ticks but it has a completely different set of rules. Which incidentally is one of the major differences – where Geronimo has four to five entry rules Helter.Scalper currently has nearly 30. But there is one additional and essential difference – those rules constantly change. Let me explain.
See the problem with traditional trading strategies running against the type of tape we have seen in the past few years is that they all break down at some point as the game is constantly changing now. Trading equities against high frequency bots is a bit of an arms race and I literally see how the game is changing from one month to the other. So a major epiphany of mine was that a trading strategy should act a bit like viruses or bacteria – in that they constantly mutate and thus evolve to adapt to a changing environment. Which means the rules that make any trading strategy tick need to be able to adjust quickly enough to respond to environmental changes.
Now, that doesn’t mean that it should trade yesterday’s tape but my observations of the past two years shows that certain rules remain successful while others have off and on periods. This then led me to develop a completely new type of base strategy that is driven by configuration files instead of hard coded rules. Those configuration files are in turn generated via iterative optimization runs that constantly vet various rules against each other within a six month window (which for a 1-min scalper is a sufficient test period). When new rules emerge or old rules fall behind they are being re-ranked as each rule has a success percentage setting. As you can imagine the highest ranking rules have priority – they also happen to be more rare it seems. For instance the highest scoring rules right now are over 85% – but they only triggered around 15 times in the last six months, which is statistically weak. Then there are the worker bees, which are around 70% – those triggered around 50 – 60 times in the past six month, which is statistically stronger. Nevertheless you want to give statistically higher rules their chance and the solution lies not in complex comparison rules but simply in the strength of numbers.
By averaging a large number of rules together we arrive at a situation not dissimilar to what large trading shops are doing these days: Many different strategies (i.e. rules) are run concurrently and this way you wind up averaging out successfully and more consistently over time. When one set of rules starts breaking down odds are that another is starting to bank coin. Now hard coding this is extremely confusing and also difficult to maintain – which is why I spent a lot of time coming up with a way to use a configuration file model which can be updated dynamically.
The one challenge I will be facing of course is performance tracking and my goal now is to write an export function that writes all trades executed to the database. This way I can then use Google charts to produce dynamic and daily updates on Helter.Scalper statistics. Obviously this is going to take me a little while and in the interim I decided to invite everyone to a one-month beta testing period.
Please feel free to sign up for a free one-month evaluation period right now – you will receive email notifications just like with Geronimo, however since it’s a free testing period there won’t be any SMS messaging via my gateway. If you would however like to receive free SMS alerts, and have a Gmail account here’s how:
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