There Be Dragons!

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.


More downside overnight over in crude and the Euro - I still have little interest in catching any of those falling swords. Bonds are looking interesting and I’m long the ZB with a stop below 145’10. Half an R only though as it’s turned into a bitch of symbol lately – actually what hasn’t? Seems like the gloves came off across the board in early December…. be on your guard – there be dragons!


Natgas not really showing a clear direction just yet but there’s a reasonable chance it’ll hold the 100-hour SMA here, especially as the 25 is now crossing above it. Long here above that NLSL with a stop below the 100-hour. Again only 1/2R – just easing myself back into the tape here.

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Per my dragons reference above – I’m seeing an accumulation of nasty traps and stop runs lately, especially over in Forex. Meanwhile we’ve got a race to the bottom in crude and of course in the Euro crosses. All that volatility offers opportunities but we also need to be cognizant of the fact that it brings with it increasing risk. For instance during fast moves you may not get properly filled on your stop – so be conservative and use market orders instead of limits. Better to get a shitty fill than none at all – or use a looser limit as to ensure a fill at a price you can live with. That of course also means that you need to reduce your position sizing accordingly to maintain your risk management. Finally be doubly aware of correlation risk – for instance, if you’re short EUR/JPY and the spoos then you are correlated to some extent, so reduce your exposure accordingly.

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


When There’s Blood In The Streets

You surely have come across the old aphorism coined by the Baron Rothschield, an 18th century British nobleman and member of the ultra secretive and original one-percenter Rothschild banking family: When there’s blood in the streets – buy property.


However that does not mean you should blindly step underneath a falling sword. Either you know something nobody else knows (which is illegal but clearly was the modus operandi of 19th and 20th century tycoons), OR at minimum you need to see some technical context that justify jumping into some lottery tickets. Given the level of fear across various verticals today I set out to take advantage of the situation. And I did find three charts that tickled my fancy. One of which I’ll throw out for free:


You probably guessed it – crude. Not much context here on the daily but we are dangerously close to the 50 mark and that’s where we also find the lower 100-month Bollinger. Will we see 48, 45, or even lower? I really don’t know but wipe outs like these are usually where I start looking for some short term context. I do like the hourly panel (very left) and have taken out an experimental 1/2R with a stop below today’s lows. Heck if I’m wrong we’ll be pumping gasoline for free by the end of the year!

FYI – in that context: Here in Spain gasoline prices have barely moved despite a drop of crude from 104 to 54 in a bit over a month. I can’t say that I understand all the dynamics of crude production and refineries but I do know when I’m being gipped.

Anyway, two more lottery tickets below the fold:

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Play these setups with only 2R combined max - if you want to be conservative reduce your exposure to 1R total. We are talking lottery tickets here people!


Another Profitable Week

There is simply no stopping this freight train – momo divergences be damned. But for some mysterious reason I continue to see people exerting a lot of energy on calling a top and worse – stepping in front of it. Although I do understand the underlying psychology behind it, I still fail to understand the purpose, as it rarely serves our trading results.

To make predictions is of course an inseparable part of human nature – the constant need to project forward into the future and to gauge the odds of what may happen next. It has helped us survive as hunters and gatherers during the past 100,000 years or so. But when it comes to predicting market direction these very instincts do not serve as at all, quite on the contrary – usually they do us in.


I hate to keep pulling this rabbit out of my hat but few charts do a better job in visualizing the simplicity and benefit of simply letting market forces run their course, especially during rocket periods. My ES campaign has now reached the 14R mark and I continue to trail the action via each new emerging spike low.


Clearly the buy bots are back in the game as is easily discernible by monitoring the NYSE UVOL/DVOL plots.


The only discretionary setup I’m interested in right now is wheat which is painting a beautiful hammer. Look at the panel on the very left – looks pretty ‘top heavy’, doesn’t it? Well, don’t let it fool you as these types of conditions can easily turn into massive short squeezes. The odds here are pretty mixed – 50/50. But if it gets going even 1/2R exposure can turn into very profitable campaign. So keep an eye on this one starting Sunday night.

I’m well exposed and among some discretionary trades I have a few ongoing campaigns running on Thor – plus CrazyIvan has been trading the house down again this week. For some reason participation here has been rather low, which is disappointing as we’ve been banking coin like bosses over the past few weeks.

But I guess that is part of the game – not everyone is wired for success. Many try their luck but only few succeed in realizing their dreams. In the words of the venerable Vince Lombardi:


“The difference between a successful person and others is not a lack of strength, not a lack of knowledge, but rather a lack of will.”

Enjoy your weekend.

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