Curb Your Enthusiasm

Equity futures have survived the night and are still looking solid. Not to sound cynical but isn’t it time for a shake out to the downside now? Just kidding! Frankly I have nothing to add right now – as you know I’m holding longs since 2112 but my expectation of finally seeing some directional tape remains low.


This looks and smells like a break out but after two months of sideways hell one wonders how many shorts remain to be squeezed. Scott pointed out that yesterday’s push higher was accompanied by waning momentum, however that hasn’t stopped prop desks from banging the tape higher in the past. So I choose to not over think this and simply move on. Quite honestly I’m sick of looking at this formation and something tells me the less I do and the less I care the better I’ll manage, no matter which way it’ll resolve.

There’s a good Spanish expression I’ve come fond of: Mucho ruido y pocas nueces. Roughly translates into ‘much ado about nothing’. Pretty much sums up equities since late last year. And sadly most people I’ve met in my life ;-)


AUD/CAD – I’m grabbing a long position here with a stop below 0.962. That 100-hour SMA has been rested recently and is the next best support line before things start turning much lower here. Admittedly not a whole lot of context here so I’m only playing 1/2R.


Copper – very unusual tape for copper here in the past two weeks. I’m daring a long position near the lower 100-hour BB. Would be tempted to go short on stop out. Still this looks like a chart that’s trying to pump higher but like crude it seems to completely lack any directional mojo.


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Breaking The Big Bad Bull’s Back

Every once in a while it’s a good idea to detach yourself from your daily trading activities and take stock of the big picture. Although I do not trade weekly or monthly charts they do however serve one very important purpose – which is as a measure of strength given the prevailing trend. So let’s forget about playing the daily bounces for a moment and let’s simply revisit at the tape of the past six months:


I don’t know about you but to me this looks pretty ugly. Since late December of last year we have suffered through two massive high volatility sideways periods, only interrupted once by a nice straight run higher during February. The rest hasn’t been fun, to say the least, and I’m sure it has blown up retail accounts left and right. However hitherto the bears remain unable to break the big bad bull’s back. Nevertheless the price action clearly tells us that the ongoing trend is weakening. This is not the same bull market we have come to enjoy (or to hate at particular trading blog which shall remain unnamed) and the implication for us, as traders, is that we need to respond in kind and adjust our trading activities.

Now what I am not suggesting is that we immediately start to look to the downside. Long term tops take quite a long time to form (clearly) and shorting the market without confirmation is a pretty bad idea. Bear in mind that we have yet to break any long term bearish inflection points – be this the 25-week SMA, the 100-week SMA, the 100-month SMA for that matter. So boy – do we have a lot of time to change our minds about this market – more time than most of us would care for. Going forward however what we do need to adjust are our expectations. The long straight runs to the upside are most likely over.


Although we are stuck in sideways mode we are seeing the VIX bounce around between 13 and 16. Which I consider a very casual risk pricing model at best – and most likely rabid complacency after six years of effervescent bull market exuberance. What happens from this low base will most likely not been six months of the same – I really don’t think we are going to see the VIX drop to 10 or lower and paint a range there. If that happens after all I won’t be caught with my pants down however as I’m not shorting the market here. What I am however doing is to adjust my trading to accommodate the possibility of:

  • Fake out breaches – like the one we recently saw near the top.
  • A sudden rise in volatility if one of the major support levels give way.
  • In general more and prolonged sideways corrections going forward.

I think these three points really summarize some very realistic assumptions going forward. Perhaps we’ll be positively surprised  as I wouldn’t mind another extended run higher. But until I see a major breach to the upside, and even then probably, I’ll be extra picky with my setups, take profits a bit earlier, especially on the equities side, take smaller position sizes and wider stops. The overall goal for the coming quarter is survival and to keep one’s powder dry.

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Thursday Morning Briefing

Welcome to our morning briefing. Here we are reviewing short term setups ahead of the NYSE opening bell. If you are a scalper or swing trader then these setups may be of interest to you. As usual keep in mind that these are short term setups although they could be used as early entries for more longer term positions.


The Euro is shaking off some overeager longs this morning but call me skeptical – I doubt that this has legs. As long as I keep seeing articles suggesting a reason for the big Euro squeeze to stop it’ll just keep on running, like the energizer bunny.

I can honestly say that this is one of the few commercials I ever missed seeing. Brilliant idea and they should relaunch it. Anyway, back to the Euro – I’m waiting for a long entry near that 100-hour SMA – it hasn’t even touched that one, so I don’t know why people are looking down.


Natgas – still at the knife’s edge – I’m grabbing a long here with a stop below 2.748. Those hourly BBs are really compressing and I’m about to be either horribly wrong or horribly right. 1/2R only for that very reason – tough to get a fill on your stop once she runs off.

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.

You have been briefed – now have fun but keep it frosty. See you guys later this afternoon.


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    1. The Bulls Are Back On Notice
    2. Tuesday Morning Briefing
    3. Equity Curve Filters And Compounding
    4. Pre-Memorial Day Freebies
    5. Scaring The Children
    6. Wednesday Morning Briefing
    7. Introducing LAMM Based Auto Trading Service
    8. Campaign Updates
    9. Monday Morning Briefing
    10. Curb Your Enthusiasm