Monday Morning Briefing

I’m back from my weekend get-away and much to my shame I was looking forward to getting back to the lair most of the time I was gone. What the hell is wrong with me? Well, we’ve got very interesting tape unfolding this morning which means we’re going to hit the ground running. But first let’s get up to speed on what’s happening on the equities side:


After a rather eventless looking Friday (good timing on taking the day off) we seem to be slowly descending lower. Damn you Skynard! ūüėČ

Anyway, we are looking at soft support here between the weekly NLSL and the 100-day SMA near 2080. I know that’s a 20 handle window but I can’t offer anything that’s not on my chart.


The YM is looking a bit more productive actually. It’s already trading below its 100-day SMA and the next weekly NLSL is at 17690 (typo on chart). Which means I wouldn’t think about long positions before we descend into that range.


Soybeans is looking like it wants to continue higher plus volatility is expected to jump here soon. I’m long with a stop below 937.


AUD/CAD – long here as well with a stop below 0.9460. I would prefer to be below the spike low but that’s a¬†bit too far away, so I’m taking a little chance here.


CAD/CHF – short here with a stop above 0.758. Again I would have preferred to be above the spike high but it’s a bit distant right now.

I have some very nice goodies for you subs – please meet me in the lair:

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In completely unrelated news: The German women team beat Ivory Coast 10:0. What are they feeding those gals?



In one of the pics you actually see one of them floating in the air. My money is on advanced genetic engineering… YOU GO… uuuuhhhh…. gals? ūüėČ


Twiddling Thumbs Thursday

With the exception of the ongoing Euro squeeze (also affecting bonds) the tape continues to run¬†in circles. My appetite for exposure in either direction has been greatly reduced as I’ve been spinning like mad over the past few weeks, extracting¬†a small edge out of each incoming wave of gyrations.¬†There however comes to the point when you must admit to yourself that the input required does no longer justify the return. I’ve been lucky to not having banked any losses but not since my high school days have I¬†worked so hard for so little return.

So why bother? Well, these are the times when you collect evidence, get a feel for the pulse of the market. Right now what I’m seeing is mostly noise, confusion, exhaustion, indirection. Not surprisingly so after almost six months of mostly sideways tape.¬†When I analyze myself I’m pretty much in sync with that range of emotions and I’m not easily crushed by difficult tape.


And those are exactly the times when I visit some of my old friends. If you’ve been coming here for a while then you may have come across this one – the weekly stochastic on the SPX. You all know I only use indicators very sparingly and stochastics – ha, almost never! This is the one exception because rarely has it let me down. I have highlighted the times when we have seen a cross over followed by a dip below the 80 percentile. In almost all cases we saw some degree of correction following it.

What’s interesting right now is that price has not responded yet. This is not completely unprecedented – we saw¬†a similar pattern in late 2013. Then equities punched higher, burning the shorts, only to paint a pretty significant correction shortly thereafter. But what’s different this time is the sideways mess which has¬†preceded this pattern. To me this either means we are correcting sideways or large market participants are distributing. We’ll know more once/if K% line touches the 50 mark – it rarely does without triggering price action. If that happens then we are most likely talking sideways correction.

Either way what follows is likely to be big and therefore my concern is that of getting a seat on the bus. Thus far we have failed in picking a direction. We were extremely fortunate to not get burned on either side (i.e. long/short) but I don’t want to try my luck by forcing the issue. As of right now I don’t see a good entry on the equities side. And yes, it may drop without warning and leave me behind. Which would be frustrating, especially after several attempts. But not as frustrating as damaging one’s account by relenting to guesswork and reactive trading activities.


Another old friend of mine – who of you guys still remembers this chart? And who of you would know what it represents?

The Baltic Dry Index is a composite of three sub-indexes that measure different sizes of dry bulk carriers (merchant ships) – Capesize, Supramax and Panamax. Multiple geographic routes are evaluated for each index to give depth to the index’s composite measurement.

There you have it – you are basically looking at average container shipping rates across the planet. And clearly the drop over the past year also has a lot to do with lower¬†crude oil prices. But still the question bodes – how many more years will equities be able to bubble higher without the backing of a real economy? After all you can only sell so many yoga apps on iTunes. Meanwhile I’m seeing VC capital being thrown all over the place, just pop by Tech Crunch and look at the recent queue¬†of investments and acquisitions. I just did and only had to scroll down to run into this:

Diabetes Management App One Gets $8 Million In Series A Funding To Build Out The Platform

Scott told me the other day that one of his friends raised a few Million for a meditation iPhone app – no joke. It’s all eerily reminiscent of what I was witnessing up in Silicon Valley during¬†the dotcom bubble.

As you know I don’t trade this stuff and I don’t want it to affect your trading activities either. Remember the old adage: Markets can remain irrational a lot longer than you can remain solvent. I’m not turning into a bear by any definition. However, that said, the long term picture is¬†rather scary and it seems we are approaching a point when this equities bubble fueled by global printing presses may just hit a snag. May hit this year, next year, perhaps in 2020 – who knows. But plan accordingly. Which means:

  • Don’t get into any debt.
  • Have at least one year in savings.
  • Put some of your money in tangibles.
  • Take care of your family.
  • Don’t get suckered into the hype.

You’ll thank me later.


On the setup front I’ve got copper – tried to get in here before but got kicked out, fortunately at break/even. It’s now pretty much where I see buyers defend the 100-day SMA. Long here with a stop below that big spike low. Let’s see what happens.

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The Big Furball

Equities have clearly been one big nasty furball over the past few weeks. You remember me writing about this weeks ago already and with the exception of one quick fake out higher we have reversed back into sideways shake out territory. Tough going here but to me it seems like we are either witnessing massive accumulation or distribution over the past few weeks. I’ve touched on that about a month ago and the fact that conditions have remained since then tells me that whatever comes next is going to be significant.


Which means my modus operandi has been one of taking calculated risks near potential inflection points. On the E-Mini we are sloping lower slowly but seem to be jumping higher occasionally to shake out as many participants as possible. And that means I cannot enter here – neither long nor short. Well perhaps long if we were near the recent spike low. But I’ve got a much better entry and I’m posting it for the subs below.


Gold is very juicy here – I’m grabbing a long with a stop below the NLSL which also happens to be near that diagonal I drew. Clearly a short position below this is a possibility but tough going – those daily NLSLs ¬†(right panel) won’t give way easily.


GBP/CAD – very nice context developing but so far no resolution. I’m long here with a top below 1.898.


Soybeans update – nice entry yesterday and I came very close to being stopped out. Moving my stop up to break/even now. If it wants to get going then now is probably the time.


I also grabbed natgas yesterday – so far so good but I’m leaving my stop in place as we haven’t moved anywhere yet. But the longer we remain those ST NLBLs the higher the chance for a stab higher. Volatility should set in here in the near future.


AUD/CHF is also still nibbling on it. Keeping my stop where I left it.

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