We are currently at a ST inflection point in that ES 2062 either serves as support or will lead lower if breached in the coming hours. If you were short yesterday then I suggest you move your stops lower or at least advance them to break/even.
I wasn’t very surprised to see us trading below yesterday’s close this morning as participation on the buy side was almost non existence in comparison with the selling pressure that accompanied us down. So this does have a fair chance of leading lower. And by fair I mean about 50/50 – which sounds like a coin toss (which it is) but given the current medium term trend is as good as it gets. It is important that you always consider the general direction when trading short term chars.
And the downside potential right now is pretty limited – I have support kicking in as soon as ES 2050 where the 25-day SMA hails right now. On the weekly we have 2035 and if things really get dicey there is there is a stack of weekly NLSLs starting at 2008. If the bears intent on hacking their way all through that they better bring machetes.
Update on cable – so far so good as well but price hasn’t picked up any pace yet. I will keep things as is and advance my stop to break/even once it pushes above 1.515. That diagonal support line has plenty of touches but it was also falling and thus has less meaning to me.
Besides, just to give you an example of what I talked about a few posts back – here’s gold proving that in the end trendlines are just that – lines – nothing else. Doesn’t mean price will always obey.
Bonds – in case you didn’t catch it yesterday – still is looking like a possible long. Same caveat as on the cable campaign: This horizontal trendline has not been touched sufficiently, thus the odds are low here. Which means at maximum deploy only 1/2R or less.
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Doing my morning work this morning, a change of market weather is apparent. My strategies have been going through a period of super performance, so any change is unlikely to be for the better, and it is interesting that Scalpius (non correlated alpha) has switched into super performance mode.
The EURUSD has made a classic bear flag and then FAILED to go down. This market is ripe for a short squeeze. Also, if you look carefully, you will note the increased size of the candles towards the end of the strong trend. This is an increase in volatility, indicative of a fear of missing out of the move, also a classic sign of the end of a long running move. I would not want to be short EURUSD at this point. A short squeeze after a year of trend is going to be sharp and violent.
The Yen weekly shows (for those wave wankers in the audience) a classic completed 5 wave move and a completed A-B of the next move. Now, this by itself doesn’t mean shit, but there are times when wave theory plays out correctly (just not enough of the time to get an edge). What I am particularly interested in is that after 7 months of sideways action from November through March, we could only limp up to fresh highs. Then after making fresh highs we tested the old highs with 6 weeks of down/sideways action. We SHOULD be shooting up on a fresh leg up by now. The fact that after 6 weeks we still have not recaptured the old highs is very very very stinky. Given that USDJPY is very affected by China’s joining the currency race to the bottom, this is the perfect macro event to provide a backdrop for change of trend. I’m actively looking for short setups here.
The DXY index has made a classic (but rare) double top, and instead of retesting the high is just falling off the plate to the downside.
AUDUSD is the pick of the actionable trades today, and I’m long here. Stop at the daily lows is a very nice place, well protected by a sideways flat bollinger band. Again we have a long running downtrend which stopped going down cleanly, indicating that two sided price action is in the game again, and a bear flag which failed to send the market down. This is a particularly nice setup, though I wouldn’t be surprised if it takes some heat before taking off.
Be careful in the current treacherous environment.
The Fed is pretty much running out of options at this point. Their current modus operandi is to continue pretending that they want to raise rates but without real intentions of doing it anytime soon. Every month we are being served another paltry excuse as to why they’re still hesitant or that they’ll assess their timing based on the economic data. Perhaps next time it’s the humidity or waiting for the moon’s phase to line up properly.
Which means that among the few tools remaining in their arsenal to to keep equities afloat is to stomp on the Dollar once it approaches escape velocity. And given the Greek drama the timing couldn’t be any better to stick it to those dreaded Dollar bulls. And that’s going to be our theme of the day. Not because I say so but because quite a few USD related Forex symbols have moved into sync over the past few hours.
For starters I’m grabbing a long here on the EUR/USD with a stop below the recent spike low. If the 100-hour can’t be held then we’re going to see quite a bit more sideways churn or perhaps even a revisit of the recent lows.
AUD/USD is looking pretty juicy here as well and I’m long with a stop below its recent spike low. Also nice to see the daily far outside the 100-day BB. Now it’s still early days here but if this thing bounces it’s high time – if it doesn’t manage a reversal here it may fall off the plate and turn into a trend trade to the short side. So short positions on a stop out may be possible here.
The E-Mini isn’t among my favorite charts right now but if I don’t talk about it you guys are most likely to ride me out of the lair on a rail. So here you go – a possible long setup on the spoos if it drops to 2050. May not do it though so don’t chase it.
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You have been briefed – now have fun but keep it frosty. See you guys later this afternoon.