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?


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.


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.


Heavy Metal Friday

The Eurogroup meeting is starting in a few minutes and I hope that it won’t blow too many of my setups out of the water. I’m already seeing a lot of talk of why Draghi may jawbone the Euro down, which is why I’m glad that I made several runs to the ATM over the past few days (meaning a short squeeze may be coming).


Anyway it looks like it’s going to be a heavy metal Friday folks! Gold is back down for a bit of mean reversion and I’m liking it long here.


Similarly silver may be a long here – I’m taking out a teeny weeny position with a stop below 15.250.


So yes, the Euro may drop lower today but in general I think the Forex specs are trying to call Draghi’s bluff. I am short a small position but expect to be long here at the 100-hour SMA or 1.118 – whatever touches first.

But we’re just getting warmed up. I’ve dug up the motherlode on the Forex side this morning – and I got futures goodies as well. Please meet me in the lair for more:

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.

Having discovered Days Of Jupiter just two days ago I’ve become absolutely nuts about these guys. Don’t remember being so excited about a band in a very long time. If you feel similarly then help pass on the word – let’s promote those hard rocking Swedes!


My Spidey Sense is Tingling

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.

Screenshot 2015-08-13 07.58.40

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.

Screenshot 2015-08-13 07.58.25

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.

Screenshot 2015-08-13 08.02.18

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.

Screenshot 2015-08-13 07.58.01

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.

Scott Phillips

    Zero Indicator

    Darth Mole Alerts

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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
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