Time To Pay Attention (Again)

Most market participants suffer from chronic recency bias in that they weigh recent data or experience more than earlier data or experience. In particular retail traders more often than not expect more of the same, which actually is correct most of the time. Except for when it matters the most. Come again?

2015-08-31_spoos_briefing

If you have come here for a while then you have seen me use the word ‘inflection point’ on various occasions. I use that term rather deliberately as it succinctly expresses a moment in time in which an equilibrium between potential outcomes can be shifted rapidly by comparatively small movements in price. Say again?

Back in my wave wanking days this is a typical situation I would refer to as the 1-2 conundrum. Meaning – do we push higher and then fall into our graves, or do we drop from here and then ramp higher and continue the long term bullish trend of the past few years. The implication of that would be that down actually would be short term bearish but long term bullish – whilst a move up would set up the bulls for an even bigger correction.

Since then I have come to accept that these are all valid scenarios but that there is quite a bit of a gray zone in between. And without boring you to tears let’s just jump to the conclusion which is that there is a myriad of ways this one could play out. But that is exactly the part we need to focus on. What matters the most right now is what happens in the coming days, starting today! If we push higher on quite a bit of participation (you are a Zero sub, right?) then the bulls have a good thing going and may be able to defend continued attempts to draw the tape down.

Interest hike be damned – whether or not it comes in September or next year or in 2020 – I suggest you watch the tape as it will give you all the information you need. But let me be crystal clear about one thing. If you are a bull then this is most likely the most important moment of the year. On the other hand if you are a bear then this is most likely the most important moment of the year. And if you are neutral – like me – then…. well, I guess you got the point.

By the way, in case you are curious. I am still holding the remainder of my long positions as I have not seen the need to pull them (i.e. my trail has not been touched). I have however advanced it to near the bullish Maginot Line, which in my mind is near 1940. If that one goes then we probably correct quite a bit lower.

2015-08-31_gold_briefing

Gold is actually in a similar spot and I just took a small long position here with a stop below 1127. However it could easily resolve the other way and drop quite a bit lower. The price pattern allows for either scenario which often annoys traders. In my book however this is where the benefit to risk ratio is the largest – in that I can apply deterministic rules within a small price range whilst expecting increasingly larger price moves the further we advance from said price range (up or down).

The majority of people feel uncomfortable embracing uncertainty and perhaps a long time I was one of them. One day however I realized that this is where the real opportunities are and it is probably the one take away I am still thankful for having studied Elliot Wave Theory. However when it comes to predicting future price movements EWT is absolutely useless. There is simply no predicting future price movements – many people smarter than you have tried and all of them have failed. What you can predict however (sort of) is volatility – but that is a topic for another day 😉

Alright, quite a few setups waiting below the fold – please join me in the lair…


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In case you guys need a good tune to get you in the spirit of things:

Alright, if nothing else this is what I need you to take away from this post.  Pay attention now and bank coin all the way into December/January. I mean it.

Cheers,

Inside The Mind Of A Retail Rat

In a column in the Financial Times at the start of the week, former Treasury Secretary Lawrence Summers, whom the Obama Administration passed over to appoint Yellen, argued that it would be folly for the Fed to raise rates. Damn it – this is going to be a boring one again – alright you can do this – this is important, pull yourself together…. Now Ray Dalio, the manager of one of the world’s biggest hedge funds, Bridgewater Associates, has weighed in on the debate… what the fuck does he know…  arguing that the Fed, rather than tightening policy (that is, raising rates), might well end up easing instead—purchasing bonds and pumping money into the financial system ... say what??... a policy known as quantitative easing. (Between 2008 and 2014, the Fed carried out such a policy.) OMG this shit is boring… okay, okay, now we’re getting to the good stuff…

mouse_hamburger

When Dalio’s remarks, which he delivered in a note to clients, were first reported, it appeared that he was suggesting the Fed would back off a rate hike, a move Wall Street had been expecting to take place in September or December. On Tuesday, he published an article on LinkedIn ... who the fuck still uses LinkedIn – snort... , in which he clarified his views. “To be clear, we are not saying that we don’t believe that there will be a tightening before there is an easing,” Dalio wrote. “We are saying that we believe that there will be a big easing before a big tight…

Oh for f…s sake, this is IT! How does this crap even make any sense? Am I supposed to buy stocks here or not, for crying out loud!? Or is gold the way to go? It’s fallen a lot lately – gotta bounce at some point! Man, this shit is a lot harder than I thought… perhaps uncle Cletus was right… I should have just invested in his chicken farm instead of opening that damn TDA account.

Alright, what was that guy again who banked some coin recently? Evil Investor or something [googles] – ahh right – Evil Speculator….. Haa-haa – funny guy … damn his charts are really dark, he must be color blind or something. Bad taste in music too, jeezes… Seems to know what he’s doing tho… What? $49 per month? Is he insane? Who can afford that!!? Alright, we’re done here – let’s see what’s on ZeroHedge today, they sound smart and know a lot of stuff…

2015-08-28_USDJPY_briefing

Pssst… wait… is he gone? Oh good – now, let’s get on with our business. USD/JPY is looking like a juicy long position but not just yet. This is looking WAY too easy and I’m waiting for a drop toward the 100-hour SMA just to screw with everyone a little. Probably worth waiting until Sunday night.

2015-08-28_SI_briefing

Silver – good to go here IMO but I’m taking only a tiny position (0.3R) as it’s been a wild ride lately. 14.2 is your minimum stop, mine is actually a bit below that.


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Don’t go crazy now – easy does it ahead of Jackson Hole and all. So, keep yourself busy – I for one have big plans for this weekend…

Hey, evil is as evil does.

Cheers,

Sky Diving Elvis’

I’m going to dip my toe into a few symbols today again – however let’s re-emphasize again that small position sizing clearly should be our modus operandi for the foreseeable future. It is important that you understand that a practice of small position sizing (e.g. < 0.5% per campaign) and wider stops does not hamper our ability to profit but instead leverages this high volatility market phase in our favor. To place large bets during this period is tantamount to gambling, and if that’s what you’re after then I suggest you head for Vegas or Reno.

At least there you get to enjoy low priced hotel rooms, pool side entertainment, a sky diving Elvis, and girls in skimpy outfits serving you free drinks while they suck money out of your wallets*. You have been warned.

UPDATE: I had posted a ZB and ZN long trade but they hit the stop a few minutes after. I don’t see much edge in a short position here so I’m waiting for instructions. Meanwhile this is what’s left on the menu this morning:

2015-08-26_GBPCHF_briefing

GBP/CHF has been dancing on the 100-day SMA and I’m long here. However if stopped out near 1.46 I plan on reversing to short position. Again, SMALL position sizing – I’m taking 0.33% R position sizes today.


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Please login or subscribe here to see the remainder of this post.

2015-08-26_events

A little bit of event risk today an hour before the open. You have been briefed – now have fun but keep it frosty.

Cheers,

* Why am I not in Vegas right now again?




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    1. Time To Pay Attention (Again)
    2. Inside The Mind Of A Retail Rat
    3. Taking Profits
    4. Relive The Bounce
    5. Rammstein
    6. Sky Diving Elvis’
    7. Steadily – Consistently – Systematically
    8. The Tale Of The Big Bad Bear
    9. Long Term Support
    10. Medium Term Support