Thursday Road Map

Finally this month’s Mad FOMC Wednesday is behind us and we can get back to what we do best – squeeze ill-gotten gains from this crazy market. We have a ton of juicy setups today and equities also offer us various ways to get (mildly) exposed, so let’s get to it.


Now, I’m going to make this extremely easy for you today:

  • While we’re between 2100.75 and 2095.5 – do NOTHING. This is hardcore churn territory.
  • Above 2100.75 the bulls are in possession.
  • Below 2095.5 you can be short with 1/2R or less.
  • At 2085 we evaluate – best to consult the Zero at touch down to see if there’s a potential fumble in the cards.
  • Below 2083 I will already be short if I see lackluster participation on the Zero. And yes, I misspelled SHORT – but at least I spelled misspelled correctly.


Similar thresholds on the YM – I think you get the general idea. The easiest configuration by the way happens to be on the NQ today but I’m keeping this for my intrepid subs.


Crude – I think the chart is pretty clear, n’est-ce-pas?


The Euro – well, as much as I want to see it crash and burn I have long learned that there’s a magic buyer down here and I probably won’t get my wish. Long here with a stop near 1.092 at which point I’ll flip for a small short.

You want more? Then pay up and join the club – freebie mongers only get to see the tip of the iceberg.

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!

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That’s probably a lot more leads than you cared for – being mid summer and all. Just crank up that A/C, grab a glass of iced coffee and get to work, you lazy bastards!

Oh sorry – coffee is for closers only.


Dangling By A Thread

Once again we are trading near bearish territory but I don’t mean to attach any directional bias via this post’s title. We all have seen major support come and go many times over the past few years. In most cases they served as great opportunities for the bulls to BTFD. Now clearly market conditions are shifting and the bearish case has been gaining a lot of credence over the past few months. However short of having a crystal ball the best we can do is to position ourselves appropriately near important inflection points and monitor the tape carefully for early clues. But have no fear – the Mole is on the case, as usual.


We are actually enjoying quite a bit of context right now and I plan to take full advantage of that. The spoos are now testing a weekly NLSL near 2063 and thus far it’s holding. Should we close the week below it then the trend will most likely switch to the downside. So this will be a key week and that’s exciting!

I’ve moved my trailing stop covering my remaining shorts near the 100-hour SMA. May be a bit tight but unfortunately there’s no NLBL or old NLSL to bolster resistance. Sometimes you just have to make due with what you got.


The NQ thus far the strongest of the bunch and here our inflection point is 4550 – above it we are pretty much in bullish territory. Below it we may be testing the 100-day SMA but there’s a LOT of support to still be taken out – so call me skeptical.


The YM clearly is the most bearish index here and after scaring the children a little we bounced higher here overnight. Which however does establish 17319 as our bearish inflection point. If the YM goes then the ES and NQ may follow suit.

In general seeing such discrepancy between the three horsemen are not the hallmarks of a healthy equities market. Which is why I am considering the bearish case at this point – but I’m most definitely respecting all that support that still lays below us.


Bonds – the 30 year now in shake out mode and I think it’s a plausible buy near 154 – if we get that low.


EUR/CAD – also correcting and that would be expected after that first stab higher. Nice entry opportunity IMNSHO near the 100-hour SMA which is strongly rising now.

You want more? Then pay up and join the club – freebie mongers only get to see the tip of the iceberg.

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.

That ought to keep you guys busy for a while. Have fun but keep it frosty – don’t get over exposed, which means split your exposure between correlated symbols.


Meanwhile Down At The Evil Lair

Over the past few weeks I have hinted a few times that I was developing a swing trading system based on Darth Mole. Which you may recall is a simple indicator I developed last year with the aim of predicting expansion in price volatility. Quite a good thing to know if you’re about to enter a symbol and over the past few months we’ve been watching it nail one big swing after the other. Some of you are subscribed to the free email alerts or have seen it in the twitter feed. But for the uninitiated here are a few screen grabs:


Here’s DarthMole running against the EURUSD. The blue arrow indicates when you received the alerts.


Here it is killing it on crude.


Here it’s calling out gold.


And here it’s having fun with the 30-year bonds.

I guess you get the idea – it’s bang on when it comes to predicting volatility. Of course the missing piece always has been DIRECTION. Quite frankly DarthMole has been driving me crazy over the past six months or so – I kept watching it nail those volatility swings day after day and became almost obsessed with developing a system that would take advantage of its uncanny abilities.

For months I spent almost entire weekends scrolling through mountains of charts. Just watching and taking notes of anything that stood out to me. Exhausted and desperate I tried to get Scott involved who took a long look at it and pretty much told me he was seeing no edge. There simply seemed no way of making a directional calls and thus building a system around, no matter how tempting, seemed out of reach. After all volatility knows no directional allegiance – it’s great to know when it’s coming but what to do with it?

But persistent (and a bit obsessive) as I am I kept plugging and testing various ideas – correlations, other indicators, Net-Lines, moving averages, heck, everything I could think of. I realized that taking losses would be part of the process and that any successful system would thrive via large outlier winners followed by a succession of small losers. But when exactly to take that entry was the big puzzle I needed to solve. I was laboring for weeks on end until about three weeks ago the light bulb suddenly came on. The result is a fairly trivial and unoptimized swing trading system which is frankly speaking is killing it across the board. I call it (drum rolls) SCALPIUS. Let me show you:


Scalpius vs. the USD/CAD – all stats show the past 19 months (i.e. since early November 2013).




The spoos…


But it really really loves Forex for some reason. Here’s the gofer.


Cable is just a beauty, isn’t it?


EUR/USD – gorgeous…


And finally here’s a graph showing all symbols above combined. I know – 732R – insane. Took over 2700 campaigns to get there – a bit over six to seven campaigns per week day (i.e. about one per symbol). Yes, it loses more than it wins – the ratio is a win rate of about 1: 1.6. But the winners can be huge and it loves to ride the trends.

In case you’re wondering – no this is not something I plan to offer as a service via email/Jabber alerts. It’s way too busy for that and I’ve learned my lesson with CrazyIvan (remember, only 4 subs left). And honestly I’m still pondering whether or not I’ll be accepting LAMM signal subscribers either. Perhaps a small number in a few months from now – if so only the people who already signed up for the LAMM service recently. Frankly it’s probably the best system I’ve ever build plus it very much suits my trading style. A bit busy but it’s manageable as it’s running on a 60 minute chart.

I’ll be leaving for Austria for a few days on Friday morning and will start trading Scalpius after the 25th when I’m scheduled to be back in Valencia. I’ll keep you guys posted on how it’s doing. In the meantime keep watching out for those DarthMole alerts – I always told you guys there is a great system in there! 😉

The future is now – so don’t bring a knife to a raygun fight. If you are interested in becoming a Zero subscriber then don’t waste time and sign up here. A Zero subscription comes with full access to all Gold posts, so you actually get double the bang for your buck.


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