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:

2014-09-11_spoos_update

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.

2014-09-11_ZN_update

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 ;-)

2014-09-11_cotton_update

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!

2014-09-11_cocoa_update

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!

2014-09-11_coffee_update

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.

2014-09-11_EURUSD_update

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

2014-09-11_dollar_update

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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Cheers,

Volatility Cycles

Some of you eager beavers have to start wrapping your mind around the concept of markets moving in volatility cycles. Just like it is a common observation in natural systems (i.e. water, sound, electromagnetic) imagine a sinusoid wave that oscillates in repeating cycles. A few days ago I wrote an indicator that visualizes the idea very nicely – I call it ATRIP as it’s a hacked version of average true range:

What is important to understand is that these cycles are a natural aspect of all basic market types – bull, bear, and even sideways. In sideways markets they allow us to scalp or swing trade – an apt definition of the activity obviously. In trending markets low volatility cycles allow us to assess the tape/configuration and get positioned when high probability odds arise. Obviously the cycles don’t come and go like clockwork but there are ways to leverage them. For instance we are currently in a high cycle on the spoos and we are dropping. Once we start slowing down again it may be time to look for support zones but not before that.

The repeating cycles are prevalent across all market verticals, you will find them on the futures, on stock symbols, on Forex, bonds, everywhere. For some reason however I have rarely seen anyone address them in a constructive fashion (not saying nobody has but I have not found much) which is why I am spending some time on this. Once you grasp this concept you will never look at the market with the same eyes again. And it will probably affect your trading decisions as well – for the better!

Talking about possible support zones – on the E-Mini we’re looking at 1944 as the next possible bounce zone – assuming we actually drop much further that is. I’m not seeing a lot of mojo on the Zero today – at least not right now.

And if you add fair value then you get near the 1956 mark on the cash index – that’s where we find the 25-day SMA, which has been carrying prices higher before the recent correction.

EUR/USD – very interesting configuration here. This looks like a floor attempt and if we breach today’s highs I want to be long with a stop below today’s lows.

More goodies below the fold – please meet me in the lair:


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Cheers,

Scaring The Children

Some of you guys have to start paying attention as the comment section is starting to resemble the Slope. Meanwhile I see very little activity on the trading front despite an avalanche of setups I selflessly scraped together despite an ongoing world cup game with Germany in the lead. So since nobody seems to be interested in trading let’s revisit some of yesterday’s victims to give you a rough idea of what you’ve been missing out on:

If against all odds you did pay attention – if just momentarily – then you remember that I predicted at least one attempt to scare the children – well, so far we got three. All of them have been contained in within the 25-hour BB and that is positive.

Read the rest of this entry »




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