Riding This Beast Into The Sunset

Forget about equities – everyone and their mother is trying to sort out this gyrating stop sweeping mess. And yes, they are about to get interesting (see below), but I expect our chart of the month to be gold and not the spoos or the NQ.


Fortunately some of us rats managed to secure a seat on the bus just before it took off. I have to run the numbers as I scaled into a bit over an R between 2012 and 2018. Which gets me to roughly 10R at this point and I’m just getting warmed up. The weekly shows us approaching the 100-week SMA – our first major hurdle. However I’m going to keep my stop below 1272 for now in expectation of an obligatory shake out attempt.


The long term implications of this campaign are very promising and with a bit of finesse it’s possible that we’ll ride this sucker into the sunset. Which means somewhere around 1500 – you heard it here first.


Okay on to equities – which as I said are about to get extremely interesting. We currently are what I believe are the late stages of a limbo period (see my 2012 excerpt on market weather). However we are most likely facing long term implications here – this is not just another leg lower or higher. I repeatedly have pointed out the increase in intra-day volatility expressed here by long wicks and overlapping candles. Very very tough tape to get a read and even tougher to get a good entry. Which is exactly why most traders miss the early stages of a downside correction.


But let’s not count our chicken before they are hatched. Most likely it’s going to get worse before it gets better. The GBP/JPY correlation is pointing upward right now and I think short term it’s quite possible we’re going to stop out the current NQ short campaign (courtesy of Thor).


However there is conflicting evidence and in order to interpret the big picture we need to put it all into context. Now our UVOL/DVOL ratio today remains pretty negative despite the current push higher – could be indicative of slow accumulation especially as the Zero is donning a very flat signal (meaning little participation and quite a lot of monkey business).

A LOT more below the fold – not a post to miss – please meet me in the lair:

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Bonus chart:


CrazyIvan now at 77R – new all time highs since 1/1/2014. Who would have thunk? And it started to really get cracking when volatility was on the increase starting November/December. Seems like CrazyIvan is loving the IV and I hope to see more of this. Message to everyone who left during the summer: Watch the Nick Rage video again. This is a long term game, folks and instead of going with the program I watch you picking up pennies in front of bulldozers. Enough said.


Strap On Your Helmets

I don’t know what exactly happened near 2050 but equities somehow hit an invisible about an hour ago. I sense a major disturbance in the force. Please make sure your seat belt and safety bar is securely fastened – we’re about to embark on a wild ride!


Alright, I’m trying to keep up here but things are unfolding quickly. See how we breached yesterday’s highs briefly and then suddenly fell back and that fast. There is a tiny volume hole near 2020 and as you remember it demarks the bear from our current 40 handle shake out zone. Should we actually close the session below it then things could get out of hand here quickly overnight.


Back in the box with you! By the time you read this we could however be near the 100-hour – this is highly contested tape. I’m still short the NQ via Thor and we were literally a few ticks from getting stopped out today. Crazy tape and anything may happen here and probably fast.


That was one chart that looked a bit ominous to me all through today’s advance. Keep on eye on the EURJPY correlation for early hints of either bull or bear traps – and of course the Zero. Honestly I have no idea where this ends up but as of right now I’m out of today’s ES longs and still in my NQ shorts (again via Thor).


Gold update – you may remember that I was lucky there as well – our stop was below 1207. More precisely I had it at 1206.5 as I never put my stops at an even number. Which kept me in long positions since 1212 – thus far banking me 5R – it was 7R an hour or so ago but gold fell hard since then. My trailing stop is at 1233.5 and I have an inkling it’ll get touched today.

Two juicy setups await below the fold – please step into my lair:

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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.

More 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 you get free access to all Gold posts, which gives you double the bang for your buck!

Please login or subscribe here to see the remainder of this post.


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    4. Riding This Beast Into The Sunset
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