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.

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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.


Filling The Gaps

Last night’s dramatic gaps at the open across the board have been followed by systematic reversals. Before I went to bed my wife had actually joked that I should run to the ATM and clean it out. Well, when I got up this morning I wished that I had followed her advice:


Because that sweet EUR/USD exchange rate of 1.095 is no more. The entire gap has been filled and I can only assume that Greece suddenly doesn’t matter anymore or that a new batch of hopium has hit the streets in expectation of the July 5th referendum.

Being a proponent of game theory I personally believe that the Greeks will vote to stick with the Euro – both sides simply have too much to lose in any other scenario. I also imagine all those Greeks standing in line at the bank today during the smoldering summer heat and that may dampen their resolve to ‘stick it to the EC’ and go it on their own. Don’t get me wrong – as I suggested yesterday my notion is that Greece would actually be better off over the long term but I just don’t see it happen. Fortunately we only have a few days to wait and I’m very much looking forward for this dreaded saga to finally meet some level of resolution.


Gold also just filled its gap and we are back from whence we came (Friday). Fortunately Scalpius was able to snag a few R here (see below) – that’s certainly a good start.


Equities also on the rebound but thus far it’s been rather modest. The level we should keep our eye on is 2053.5 which marks the weekly Net-Line Sell Level (NLSL) and we traded merely two ticks above it last night. So definitely a technical level to watch and probably the last bastion of support as the 25-week SMA is currently at 2072.

Skynard grabbed a few longs at the open and that took some balls – big props for that mate. I refrained from getting involved after having spent over 25 hours last weekend coding and refining Scalpius as well as refactoring CrazyIvan into a leaner and meaner 2.0 edition (see previous post). Suffice to say I’m exhausted but clearly this will not be a week to rest or relax as volatility is upon us.

Honorable Mention:


Scalpius grabbed a  nice long position on Gold (and crude) near the lows – not a bad start! Unfortunately it was in a demo/test account – no real action just yet as it’s in early alpha.

Lesson learned:

Let Mrs. Evil handle the forex action moving forward.

Obviously I am not eager to touch anything right now – too much gaping action and it’s too late now to touch any of those moves. Let’s see what happens over the next few hours – I’ll be sure to put up a post later after the open once we see more participation.


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I just contracted a sudden bout of gold fever. My trusted donkey is packed and I’m ready to ride out West – which from VLC is short of a 6500 mile journey. Just kidding of course – I’m more of a keyboard miner of sorts, toiling in the digital soil that are the financial markets.


Let’s see if we can’t dig up a few nuggets here, I’m really liking this chart I just stumbled over:


Now let me clear that it’s early days and that we have not seen any signs of a bounce. I’m grabbing a a few lottery ticket longs as it’s touching a support trend line I painted a week or two back. It’s also touching a daily NLSL and although that doesn’t mean much on its own it’s worth 1/2R. I may add more if I see price respond. DarthMole is also suggesting that we are heading into a low volatility cycle which may help us grab a position here.

Alright, got to run – Mrs. Evil is waiting with dinner.

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    1. Bonds Bonds Bonds!
    2. Monday Morning Briefing
    3. Fixing The Flaws In Fixed Fractional Position Sizing
    4. Thursday Road Map
    5. Volatility Wave Surfing
    6. Dangling By A Thread
    7. Paying Attention Pays Off
    8. Sell Off Thursday Wrap Up
    9. Pay Attention Now
    10. Setups Setups Setups!