Not A Game For Adrenaline Junkies

All eyes are on equities right now as a lot of people have been taken by surprise in what should be the early phase of the seasonal Santa Rally. Someone in the comment section pointed out yesterday that it’s not unusual to see a correction in early December and a push higher starting near the 15th, just when a lot of folks are getting ready to leave town (hint – trading bots don’t take X-Mas vacations). And that’s exactly right – in fact I was suggesting on several occasions that we would actually benefit from a pre-Santa buying opportunity. Well, folks – here it is – so let’s take advantage of that when the time is right.

What bothers me however right now is exactly what I mentioned in my introduction – all eyes are on equities right now. Which means a lot of folks will be trying to either find a floor, find a buying opportunity, waiting for the pain to stop (some poor fellow mentioned he was still short from the top), are waiting for another leg down, etc. You get the point – movement attracts attention, right? Now SLOW moving targets evade attention – take a cue from the turtle. You barely see it move along and so you quickly lose interest. But before you know the little bastard has crawled yet another mile or two.


A good example of that is the slow squeeze to the upside we enjoyed in the past two months. Please do yourself a favor and go back to some of my older posts throughout October and November. Boy oh boy – was it lonely in the comment section. I literally had to go in there and clear our the tumble weeds. Meanwhile we were adding one R after the other – quietly – while the bus was literally empty. Then near the top people finally started to chase the endless squeeze higher.

I remember one guy who canceled his sub and I always make it a habit to get in touch and (politely) ask whether I’m doing a lousy job or why our service wasn’t working out. Turns out the poor bastard had been short all the way from where I went long – I think it took him 10R or so to finally capitulate. Which was the point when he basically had blown up his entire trading account. This kind of stuff happens all the time, which truly saddens me as I’m working very hard to offer as much guidance as I can. Not that I have all the answers, but I do know how to cut my losers short and in particular how to let my winners run.

Now suddenly the blog is hopping again – as always when the tape starts to drop fast. Why is that? It seems that people like the ‘action’ – the ‘excitement’ that are part of big volatility swings. I’ve said this before and I’ll say it again: If you want excitement and fun then please jump in the car (or plane) and head for Vegas. At least there you’ve got pretty girls in short skirts serve you drinks and otherwise before they separate you from your ill gotten gains.

Trading is not an endeavor for adrenaline junkies. Quite on the contrary – it’s a lot like bingo or playing a long con. You need to know what you’re getting into and carefully plan for all eventualities. You need to keep track of what you are doing, where you’re going, where you’ve been. And you need to keep track of yourself, your emotions, your desires, your greed, your fear. The less of all that the better. All in all – quite boring really. There is no such thing as the ‘exciting world of trading’. It’s only exciting when you lose your ass – and not in a good way.

So the moral of the story is this: Change your mental programming. I know you guys are around because you’ll always show up at the wrong time! AFTER the big moves happen – preferably to the downside. In some of the most difficult gyrations where we have little technical context to work with. Instead you should have been here all October and November when banking coin was easy. Easy/boring tape – that’s when you bank the most coin.


Obviously I’m not going to argue the point that anyone who went short near 2079 is all smiles right now. Please show me that person because I haven’t met him/her. Remember Monty Python’s Spanish Inquisition bit – it works like that with market turns. Everyone talks about them all the time – fears them even – but they always show up when you least expect them. Of course in hindsight it all makes sense, right? Just ask the guys over at ZeroEdge.


Now on the spoos we are at the second and most pronounced volume hole I pointed out yesterday. Chances for a bounce here are pretty high – even if it’s just for a day or two. My short positions are still in play but I don’t think that my stop at b/e (a few ticks above 2035) is going to hold. And frankly I don’t really care too much – there are many other markets for me to focus on right now.


If you can’t detach yourself from equities then here’s a pretty good ST inflection point: 4240 on the NQ futures. A push above it probably drives us higher for a session or two (maybe more). If the NQ cannot pop above it then down we go – where we can’t really just yet.


Cocoa – I’m long here with a stop below the 100-hour. BTW, I’m reducing all my exposure to 1/2R now as this tape is a bit fast for my taste, that includes Forex.

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Post FOMC Madness Update

Finally this month’s FOMC madness session is behind us. As usual I won’t bore you by regurgitating any pertinent tidbits of the day – if you’re interested in the noise I’m sure you’ll know where to find it. Let’s look at some charts instead – shall we?


Yesterday I told you guys that such a sharp jump off the lows usually suggests continuation higher. So far that’s exactly the scenario that’s been playing out. If you’ve been taking Scott’s hammer time setup – good job and you may now move your stop to the break/even mark.


Interesting range on the hourly day – we touched both sides and that now establishes the SMA and the upper BB as respective break out / reversal points. However, as I said – at this point odds support continuation higher. Unless we breach below 1982 the bears are officially toast (again).


The NQ is now approaching a daily NLBL which is also near the 25-day SMA. IF it manages to breach higher then more upside is pretty much procedural.


And what really really hits below the belt line is the 18% drop on the VIX since yesterday (and we also touched it earlier today). If you were sitting on puts then your premiums just got flushed down the toilet. If you were long calls then (depending on your strike) you may have actually suffered a loss today. Vega squeeze is a bitch indeed.


Update on the USD/JPY campaign – I got stopped out today and then re-entered just in time for the ride higher. Taking 50% profits now and converting the rest to a daily campaign. Never ever underestimate the potential for extended squeezes (long or short) on the FX or futures side. Never.

BTW, that was one beautiful BB squeeze on the hourly – I hope some of you rats took this one.


The EUR/NOK is still in play but it’s so-so – I’m keeping it in play and my stop will take of the rest if it must.


EUR/JPY – another short term campaign I posted yesterday and it’s off to the races. I’m also converting this to a daily campaign but my ISL remains in place.


Unfortunately our cocoa campaign found its untimely and ignominious ending today – it had good potential but you can’t win ‘em all. But you can try ;-)

Alright – a few more setups for my intrepid subs below the fold:

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That’s it for today – have fun and keep it frosty.


The Long Con

As you can imagine I wanted to wait out Draghi’s announcement before putting up a post but that didn’t leave me with much time before the bell. So here we go in no particular order:


Equities still in whipsaw mode but I’m actually starting to give the bears more credence here. Neither side has been able to make much of a dent but let’s not forget that 1) the onus is on the bulls to continue the trend and 2) there are really no bears left. In a late bull trend downside corrections are usually generated by a lack of bulls as opposed to being caused by strong selling pressure. Which is why we have seen the tape plot extended tops followed by a quick fall to the next support zone.

Bottom line: The bulls need to push this turd back above 1997 – if we close the week below it tomorrow then there may be a price to be paid next week.


Bonds are on the way now – my new target area is 123’295ish. Glad I flipped that initial long to a short after being stopped out. A lack of directional bias does have its rewards ;-)


Cotton is accelerating higher and I’m moving my stop to the 2R mark. Very happy camper because I think we may have a runner here. Current target near 76 – if we touch that I may just be able to afford a turkey for Christmas!


The cocoa campaign also back on track and we may have another runner here as well. Target – well, who cares – there’s nothing but air below. I have to say – the fun has been in futures lately!


Coffee is looking great today – inside day candle right on top of a very tested 100-day SMA. I’m taking either breach it’ll throw my way tomorrow/tonight.


EUR/USD – may attempt a bottom here (much to my chagrin of course) – time to hedge, triggers on the chart.


And I promise I won’t boast about my DX campaign (snicker) – but for the rest of you guys here may be a chance to play a shake out. Double inside day – usually decent odds on that as velocity seems to be slowing up here. A breach in either direction is a good play. I’ll put my stop at today’s lows – if stopped out I’ll be short with a stop near yesterday’s highs.  If we get a double whammy (stop out both ways) I’ll continue higher with my current position size.

FWIW - the long con across various futures contracts seems to be the play of the year. This is easy money folks with beautiful prime rib entries and strongly trending tape. If you keep staring at equities all day you may not just go blind but also miss out on a lot of fun. And that – my dear steel rats – would be unforgivable. So get with the program!


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