Breaking The Big Bad Bull’s Back

Every once in a while it’s a good idea to detach yourself from your daily trading activities and take stock of the big picture. Although I do not trade weekly or monthly charts they do however serve one very important purpose – which is as a measure of strength given the prevailing trend. So let’s forget about playing the daily bounces for a moment and let’s simply revisit at the tape of the past six months:

2015-05-07_equities_weekly

I don’t know about you but to me this looks pretty ugly. Since late December of last year we have suffered through two massive high volatility sideways periods, only interrupted once by a nice straight run higher during February. The rest hasn’t been fun, to say the least, and I’m sure it has blown up retail accounts left and right. However hitherto the bears remain unable to break the big bad bull’s back. Nevertheless the price action clearly tells us that the ongoing trend is weakening. This is not the same bull market we have come to enjoy (or to hate at particular trading blog which shall remain unnamed) and the implication for us, as traders, is that we need to respond in kind and adjust our trading activities.

Now what I am not suggesting is that we immediately start to look to the downside. Long term tops take quite a long time to form (clearly) and shorting the market without confirmation is a pretty bad idea. Bear in mind that we have yet to break any long term bearish inflection points – be this the 25-week SMA, the 100-week SMA, the 100-month SMA for that matter. So boy – do we have a lot of time to change our minds about this market – more time than most of us would care for. Going forward however what we do need to adjust are our expectations. The long straight runs to the upside are most likely over.

2015-05-07_VIX

Although we are stuck in sideways mode we are seeing the VIX bounce around between 13 and 16. Which I consider a very casual risk pricing model at best – and most likely rabid complacency after six years of effervescent bull market exuberance. What happens from this low base will most likely not been six months of the same – I really don’t think we are going to see the VIX drop to 10 or lower and paint a range there. If that happens after all I won’t be caught with my pants down however as I’m not shorting the market here. What I am however doing is to adjust my trading to accommodate the possibility of:

  • Fake out breaches – like the one we recently saw near the top.
  • A sudden rise in volatility if one of the major support levels give way.
  • In general more and prolonged sideways corrections going forward.

I think these three points really summarize some very realistic assumptions going forward. Perhaps we’ll be positively surprised  as I wouldn’t mind another extended run higher. But until I see a major breach to the upside, and even then probably, I’ll be extra picky with my setups, take profits a bit earlier, especially on the equities side, take smaller position sizes and wider stops. The overall goal for the coming quarter is survival and to keep one’s powder dry.

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Cheers,

Tuesday 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.

2015-05-05_crude_briefing

Pretty slow on the setup front this morning. Crude update – I posted this one yesterday and if you took it then you’re in pretty good shape as it just jumped higher. Move your stop to break/even. As you all know I’m still long since near 50 ;-)

2015-05-05_gold_briefing

Gold – worth a long if it drops back down near 1187.5. We’re building some sideways expanding triangle, so perhaps we’ll get another trip higher to test the 100-day SMA.


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2015-05-05_events

A bit of event risk today right after the NYSE open – non manufacturing PMI numbers for April are due. Also watch out later this evening if you’re holding NZD related pairs.

Cheers,

Monday Night Quicky

I just got off a long phone call with someone in the U.S. and now I’m running a bit late over here in Valencia. So I hope you can forgive me if I’m running us through the charts quickly – Mrs. Evil is not known to be very forgiving if I let her dinner get cold. And yes, she actually cooks – a rare skill to be found these days.

2015-05-04_spoos_update

The E-Mini managed to tickle the daily NLBL at 2114.75 but then promptly reversed. That’s not unusual really and we could easily see another retest of the 2100 mark. I think the bulls are golden above 2112.25 – in between that and 2100 we are a bit in limbo as we have not seen a real break out yet. Below 2100 we may just make a another trip toward the 100-day SMA. Frankly I have no idea what scenario will transpire – best I was able to do was to grab a good seat on the NQ and the rest is in the hands of Mrs. Market.

2015-05-04_cable_setup

Cable – heck, I’m going long here as we’ve dropped like a rock and are now on top of the 100-day SMA and a NLSL. The path below is plastered with more NetLines and I think the easy part of the journey down is over. Does not mean this is a guaranteed entry – but it’s a justifiable one.


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2015-05-04_events_tuesday

Alright – that’s all for today – see you guys tomorrow. Remember we have a bit of event risk on the roster – AUD, NZD, and of course the non manufacturing PMI numbers for April right after the close.

Cheers,




    Zero Indicator


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