Kitchen Sink Monday

Folks, roll up your sleeves, grab your favorite morning beverage, and prepare to get busy. For whatever reason the market is throwing everything but the kitchen sink at us this morning. Let’s review the equities side first and then dive right in. Ready – set – go!


Things are looking good here – the last hurdle here remains to be the 100-day SMA and if it can be breached this week then I see little in the way of taking out that weekly NLBL on the right panel. If you’re wondering, yes I’m still holding those long positions.


What I really like on the hourly panel is the 25-hour which is clearly being observed. There was an attempt to breach it but it failed right at the lower 25-hour BB. We are now starting to accumulate ST context below and that’s positive.


Okay, on to the setups. EUR/GBP – I’m long here with a stop right below the diagonal (0.786). If stopped out I’m already set to be short with a stop above 0.788. Love this one.


The Dollar is approaching a convergence point between the 25-hour and 100-hour. I have to be long here until being stopped out at 85.5. Given the onslaught of excellent setups today I would not be short after that as I think there are better opportunities.

More below the fold – please meet me in the lair:

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Looks like this is going to be a fun week. Shake And Bake!!


Sitting This One Out

My apologies to Scott in advance but this is one of the rare times when our respective outlook differs. First up we are not at a crucial inflection point – the 2k level is simply an opportunity to shake out weak hands. If we dropped from here the downside potential would be rather limited as I pointed out yesterday. So there is no reason to get all all excited here – wake me up if we drop through the 100-day SMA perhaps.


It all started out with a little fun after a tickle of the 2k mark but due to equilibrium on the buy/sell side it has now turned into yet another limbo zone. Nothing really has changed as of right now – in essence you want to be:

  • Long nar 1990.
  • Short near 2010.
  • Long above 2011.
  • Short below 1989.

In all four scenarios your stop would be no more than a handle or two away. Although this seems rather tight it has the highest odds in the current market phase. Any reversals back inside ‘ye ole’ chop zone’ invariably draws us back toward the magic 2k mark. Today’s proposed entry would already have us back inside as we just touched 2k again (and then we dropped again…)


If you’re watching the Zero right now the situation couldn’t be any clearer. I keep seeing statements/complaints about this being difficult tape and I completely disagree. It’s S.H.I.T. – absolutely – but it’s not hard to read at all. Today’s divergence on the Zero Lite should have gotten you out of any short positions you may have taken on.

In a nutshell: The downside potential here simply does not outweigh the whipsaw risk. EVEN IF we close below today’s lows today or below 1990 I would personally sit out any downside correction. Trading against the trend here is not worth the hassle. FYI – I’m posting this at 2:33pm EDT as the spoos are back at 1991 – which now has me long with a stop at 1989.


Update on our EUR/CAD campaign – hey, it’s actually getting its groove on. Better to be lucky than good I guess. I’m not going to touch this one – as the old saying goes – if it ain’t broken don’t fix it. Next stop is either my ISL or I’m moving it up to 1R.


Update also on the bond campaign – I got stopped out and immediately flipped for a short position. My stop is now above 124’3 which ought to suffice to weather out an obligatory LKGB move.

I have some very nice setups waiting below the fold – please meet me in the lair:

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.

Have fun but keep it frosty. FYI – I would love to see a few charts in the comment section.


Darth Mole’s Evil Deeds

Since last Friday some of you have been enjoying the fruit of Darth Mole‘s predictive abilities ahead of volatility surges. Although I am the one who developed this newest contraption I myself am stunned by how spot on it is. Personally I consider it a huge step forward in identifying intra-day market cycles. Why? Because once you identify an entry opportunity near a systemic or technical inflection point a successful campaign hinges on two key components: 1) direction and 2) volatility.

Direction is binary in most cases – you are either long or short. But obviously there’s a lot more to this than meets the eye. You could be right about the general direction but you could still be whipsawed out of your entry. This happens quite a lot. Or perhaps you have a time-based window in which you are operating. Nevertheless in order to pick effective entries getting positioned ahead of large moves is obviously key (unless you dabble in calendar spreads). Protecting yourself against whipsaws and shake-outs obviously complicates matters but volatility is what drives profits and losses. Very rarely do we enjoy slow orderly advances to the upside – at least on an intra-day basis.

I wanted to share a few charts with Darth Mole alerts during the past three sessions. Here’s EUG/GBP – the yellow candle signifies an anticipated slowing in price volatility while any blue candles suggest a jump in price volatility. Getting positioned after the latter was triggered would have been rather profitable had you followed price lower and bowed out after 1 or 2 R. Obviously GBP was expected to whipsaw due to event risk today and I would advise against keeping any pertinent ST campaigns open during that time.

Here’s cable – very similar idea formation and Darth Mole called it spot on. One could suggest that this was easy to anticipate due to the BOE Inflation Report. Okay, let’s look at a few more then…

Here’s EUR/USD – once again Darth Mole nailed it.

USD/JPY – very nice calls as well. On the very left I saw an instance where Darth Mole got it wrong. But then again compared with the preceding candles I do believe it made a fair call. Because volatility did slow down – this is not about direction after all. Sometimes a slow down means sideways tape but sometimes it means only a slow down but the trend continues.

USD/CAD – beautiful.

And here’s gold – caught it a bit late here on the very right and admittedly it would have been a tough trade either way.

Bottom Line: In conjunction with your existing entry and campaign rules Darth Mole has the potential to significantly shift the odds in your favor. Just like sailors heading into the open sea, knowing when and where to anticipate rough waters would be an important survival tool in your arsenal. Frankly, I don’t think trading will ever be the same for me. Granted, as the author I’m probably subjective, so the thoughts and insights of traders like you would be very much appreciated.

If you care about price volatility (and as any self respecting trader you should) then here’s your chance to give Darth Mole a test run. We’re making it available for FREE throughout August to show you how awesome it is – we are confident that it will revolutionize your trading. You can sign up right now and enjoy your free ride for the rest of the month. If you want free Jabber alerts as well then send me an email to admin@ with your amember user id and the password you want. You will find step by step Jabber/XMPP instructions on the bottom of the DarthMole page.


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