The Eagle Has Landed

My apologies for the late post today – it took me a while to get set up this morning as the storage place with all my equipment is all the way out in Los Feliz. And half way there I realized that we idiots had forgotten the key for the padlock, which added another 30 minutes to the trip. But I’m all set up now with my gorgeous Apple Cinema display and a surprisingly fast Internet connection. As you recall I already shifted my circadian rhythm over the past week and in general it feels like I never left Los Angeles. It’s amazing how quickly the brain re-adjusts to a familiar environment. Before you know it you’re cruising all over L.A., cursing at slow drivers of a certain ethnic group, A/C and stereo cranked up, sending hapless pedestrians diving for the sidewalk. You know – Los Angelino style :-)

LA_March_sunset_1

Here’s a snapshot I took last night here in Hollywood on Beverly right at the tail end of a gorgeous sunset. Today’s going to be hot – somewhere around 89 and it’ll breach the 90 mark tomorrow. I love the dry heat here and couldn’t be happier.

2015-03-12_UVOL_DVOL

Alright, let’s talk markets. As Scott pointed out – accumulation was in the works yesterday as evidenced by the NYSE UVOL/DVOL ratio. Buying pressure was solid and constant all the way into the close.

2015-03-12_zero

The Zero painted a pretty pronounced divergence on the hourly panel yesterday. Today’s session however (and yesterday) was driven by minimal momentum/participation suggesting prop desks and bots were running this.

2015-03-12_SPX_VIX

On the SPX/VIX panel the ratio is leading pure price and I think this could easily squeeze higher.

2015-03-12_spoos_update

So let’s look at the daily E-Mini which bounced at the 100-day SMA and the lower 25-day BB. The latter was actually the one which has been observed in recent history and the two together offered a nice opportunity for the bulls. Had I posted yesterday I would (like Scott) suggested to lighten up your short exposure here.

2015-03-12_LT_spoos_update

Long term we also had the 25-week SMA and a NLSL at 2036.5 – both of which I pointed out on Tuesday.

2015-03-12_NQ_update

The NQ is lagging the spoos which is interesting as it’s been the more bullish index recently. As you can see the weekly NLBL at 4286.25 has held up nicely so far.

2015-03-12_silver_setup

Alright, let’s talk setups – we have beautiful ones on our roster today. Here’s silver which I love short here until 15.565 where I’ll be long 1/2R, adding another 1/2R above 15.66. Frankly I would be happy either way – short or long and I have no directional bias.

More below the fold for my intrepid subs – please step into my Californian holiday lair:


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That’s it – see you guys tomorrow. FYI – while I’m here on the West Coast for the coming three weeks I will most likely post only once a day. Unless I fall out of bed very early – meaning near 6:00am. And that frankly happens rarely ;-)

Cheers,

Friday Morning Briefing

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.

For some reason we’ve hit the motherlode on the setup front this morning – everything is coiled up and ready to rip. But careful – it’s quadruple witching Friday and that means you need to set your stops particularly generous today – add at least 25% to your common distance. But before we get to the goodies let’s talk about price action on the equities side. We’ve popped quite a bit higher and then pushed sideways all day with minimal participation (see the Zero indicator flat lining) in a common ramp & camp fashion. What does that mean and where do we go from here?

Well right away that is the wrong question. There is no ‘right’ or ‘wrong’ when it comes to inherently flawed mindsets related to trading. You simply trade according to what *at the current time* is the most probable outcome – and sometimes that includes both directions (I can literally see heads explode here right now).

Let me give you an example. I have a chart on which price has reached an important inflection point based on your ‘lens’ (it’s all mental models anyway). How about a 100-day SMA plus we throw in a 25-week SMA nearby for good measure. PLUS the daily Bollingers have compressed and I suspect a big move is coming. Now based on prior history price usually has either bounced back or breached and then pushed higher very rapidly. Both trades could be profitable so I would get positioned short first with a stop above that inflection point. I expect to be stopped out of course (you always do) and once that happens I flip positions to be long with a stop below what now is tentative support. May I get whipsawed once or twice? Sure – can happen but in this particular case it doesn’t matter to me as I expect increased volatility to make up for some of the early losses if they appear.

Does this example always work? Of course not – but it’s an adaptive approach that over the long term has a positive edge. Now note that I spent a maximum of 5 minutes looking at my charts as the TA should only occupy 20% of my trading day. The other 80% are 20% campaign management and finally the most important and largest aspect of trading: self management, which is 60% of trading.

Too many of you guys confuse swapping directional opinions with trading – to me it’s merely mental masturbation. If that offends your fragile egos then GOOD – you are way too comfortable with your entrenched approaches. Trading is all about persona development and if you get settled/comfortable in a path that answers easy answers then the market will hand out instant punishment. Which btw, is why I love the trading racket – unlike in politics, the law, or religion it is not up to interpretation or opinion. Your acceptance of reality has no bearing on its validity – if you’re positioned incorrectly you will lose. In essence your job as a trader is to manage loss as best as possible.

Now let’s talk about the chart above – let’s just look at the price action. After touching and successfully retesting the 100-hour SMA the SPX is now back at the upper 100-hour Bollinger which has nicely contained price action over the past weeks and months. We may get scenario A or we may get scenario B – each direction is completely plausible as price has not yet told us that it’s ready to turn. Going short here right now is tempting as we ‘have not breached the new highs’, right? Well, yes and wrong – the assumption is that breaching the new highs has any meaning whatsoever – I mean we could breach it and then fall back like a rock! Maybe – so let’s look at how price usually moves:

This is our daily volume profile chart on the E-Mini futures – all based on trading volume concentrations. When we touched that 100-hour on the SPX we were near a volume hole and as you can see the big move up (and the prior move down) was exploiting an ‘easy move range with plenty of participation. Where are we now? Near a veritable volume chasm and that means we should be prepared for a pull back – but we can’t just go short without evidence. If there isn’t any on the daily (i.e. as in right now) then we look at the hourly panels instead for patterns. So let’s do that!

And there we have two Net-Lines opening the door to both directions. We are also seeing a bit of BB compression and if you curious as to what that means then look no further than to what happened on the 18th around 15:00 EDT. So we could get a big move here shortly – if you manage to get positioned early on the hourly then you can build your position up as the tape continued to push your way. And that means you may get an early entry into what turns out to be a daily or even weekly campaign.

And that is how professional traders approach it – it’s imperative that you remain nimble and continue to assess what the tape is telling you. How does that compare with simply drawing a line and saying – I’ll go short here, no matter what because the tape ‘is supposed to fall from here?’

On to the setups – crude looking at a lot of resistance here and I’m short with a stop above the 100-hour SMA.

AUD/NZD – coiled up like a clock and I’m long with a stop below 1.077.


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.

Here’s a new service I dug up the other day – dukascopy has a lot of negligible content but if you’re an Forex trader (and most of us are) then the daily spread monitor is very good medicine. So if you see spreads you can drive your car through it may just be your broker ripping you off.

Be careful if you’re trading the CAD crosses around 8:30am EDT – event risk. See you guys later today.

Cheers,

After The Burn Comes The Churn

After a big squeeze like yesterday it’s perfectly normal to see a sideways or sluggish session. After all it’s the natural prerogative of any self respecting market maker to instantly manhandle any late comers who weren’t nimble (or smart) enough to accumulate when the getting was good near the prior lows. I hope that doesn’t include any of you guys – after all you were given plenty of warnings right here in our humble lair. Now let’s see where we are on the equities side:

If you went long the spoos then you probably banked one R – it’s time to call it a trade now and exit. I’m not yet tempted to short this thing but I may tomorrow if we produce a shooting star candle tonight. Is that really too much to ask? ;-)

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