Are The Wheels Back On?

Massive reversal today and frankly quite a bit more forceful than I had anticipated. So it seems the Mole got played on this one. I had it right on target regarding the bounce - our P&F pointed at SPX 1920 as its bearish price objective and our monthly NLSL sits at 1930. The SPX dropped right in between those two and our current low stands at 1926 and change. From there a bounce was to be expected but today’s rip higher is rather bullish and we could see continuation higher here.

2014-10-03_PNF_SPX

I posted this chart for my subs in yesterday’s long term update – the area I had highlighted in green was 1960, which is where I expected a low pole reversal warning to kick in. And that’s exactly what happened today – the odds were preeeettty tiny for this to happen. And it certainly took a few market participants by surprise. Fortunately I had no dog in this fight (except for the Thor campaign – see below) and thus escaped this little trap unscathed.

2014-10-03_spoos_update

If you are a bear this is a very ugly chart. Only a drop back below the ES 1960 mark (and better below the SPX 1960 mark) gives the bears another shot at some autumn fun. Not saying it won’t happen but it has to happen soon and in addition the tape must not breach back above the 25-day SMA.

2014-10-03_spoos_weekly

The weekly panel actually had triggered a double sell signal yesterday and a close below it would have locked in a major blemish for the bulls as this would have been our first official medium term sell signal. But both were reversed today and this is a big kick in the nuts for the bears.

2014-10-03_UVOL

As you can see on our NYSE UVOL signal – since the lows this has been one concerted short squeeze. It would be a mistake to cling to yesterday’s picture and not consider that the bulls can drive this higher. Yes, it could be one last spike higher but we get to that…

2014-10-03_VIX_update

More bullish ammunition – the VIX is most likely going to complete a bonafide equities buy signal. And potentially plenty of space below…

2014-10-03_zero

Now to the bearish evidence, which is why I don’t count them out completely just yet. The Zero signal is completely flat and this supports the previous chart in that this drive higher does not enjoy wide participation and could just be a bot driven squeeze which may fizzle out next week.

2014-10-03_spoos_GBPJPY

I am not seeing any confirmation at all on our old Forex correlation pairs – neither on cable…

2014-10-03_spoos_EURJPY

..nor on  the EUR/JPY. This is highly suspicious but the Dollar has been pushing hard today (who-hoo!) and this correlation has weakened somewhat recently.

Bottom line:  The bears are now officially on notice across the board and the onus is now on the bulls to drive this higher. Should the bulls fail to do so then the jig is up and the wheels will come off next week. However, simply holding SPX 1960 for a session or two will send any remaining grizzlies back to the sidelines – old habits die hard and the bulls still enjoy home turf advantage. Until proven otherwise they are effectively back behind the wheel. Inflection point: ES 1960 – below it the bears stand a chance – above it the bulls will probably bury them once again.

2014-10-03_cable

First up apologies for not deploying Thor earlier this week. I kept running into little things to fix – you know how it goes but it will be ready for Sunday night and (barring any major problem) that’s a promise. Here’s the GBP/USD which currently has earned us ~1R.

2014-10-03_ES_Thor

The ES bounce still left us with 1.25R as Thor took 50% off our units off the top near the lows.

2014-10-03_Thor_gold

Gold also in good shape and our stop is now at break-even. Let’s see if we see continuation lower – this is a great start.

One setup below for my intrepid subs – sorry, all I could dig up today but it’s a good one:


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Alright, I think I’ve done enough damage this week – see you guys on Monday morning.

060112Bierhaus1wf

Prost!

How To Let Your Winners Run

It’s Monday morning and I’m not going to bore you guys with an exhaustive reflection on why traders should adopt a policy of cutting your losers short and letting your winners run. If you haven’t caught on to this very basic tenet of trading survival 101 then you either are new here or haven’t been paying attention.

2014-08-25_dollar_briefing

Instead I’m going to let our charts do the talking as the two specimen at hand should be considered textbook examples of how a strong trend can extend to unanticipated highs (or lows in the context of short campaigns). The Dollar campaign actually started as an hourly entry which then got converted into a daily setup when it breached a NLBL. I did make quite a fuzz about the long term implications of the inflection point at hand during that time. Unfortunately judging by the comment section it got either ignored or you guys simply disagreed.

Whatever it may be – the tape started to move in my favor for about two weeks, at which point ole’ bucky entered a sideways correction below 81.7. I could have taken partial profits there but given the squeeze potential I simply advanced my stop a healthy distance away and was able to sit things out. Now there is no real recipe for doing this properly – it takes a bit of finesse but my general approach in a nutshell is to gauge daily/weekly momentum and consider the squeeze potential that may feed continuation of the ongoing trend. In this case my verdict was to ‘let her run’ as they say. Currency markets move quite different from equities – so do futures by the way. Once a trend gets going it truly is your best friend.

2014-08-25_NQ_briefing

Similar example here on the NQ – it’s pushing 5R and I simply keep my stop a healthy distance away. In this case I’m using the NLSL at 4032.75 – which would cost me over an R in profits but once again I am unable to determine when we’ll see a correction. Given the fact that we had eight consecutive higher highs the odds are now ridiculously high (i.e. in the 98 percentile) that we’ll put in a red candle or two. If we do I would like to ride it out – hence my stop – low enough to sit out an obligatory correction but near enough to get me out if it turns into a sharp correction. Again, there is no crystal ball and it only will be clear in hindsight.

2014-08-25_spoos_profile_briefing

You may wonder why I’m not running to the bank to cash out right here and call it a trade. That reason should be apparent – we are in absolute no-man’s land and there is no context. A lot of folks are going to try to pick a top here and that’s exactly why I give this trend fair odds of continuation. If I was in cash up here I would wait things out as well – there is no reason for me to short this tape right now. Similarly I simply hold my longs and advance my stops as needed and per my best objective judgment. Whatever happens – I’ll be happily banking coin as it is – given that I am representative of strong hands who got their entry early (either due to skill or sheer luck) and aren’t really worried about missing an R or two.

Anyway, if you’re watching this campaign from the sidelines don’t spend your energy kicking yourself for having missed out. Instead take it as a learning experience for the next time when you manage to get a good entry and the tape starts moving aggressively (in your favor). Being able to simply sit and do nothing is half the battle.

A now to a few short term setups for my intrepid subs:


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You have been briefed – now have fun but keep it frosty. See you guys later this afternoon.

Cheers,

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.

Cheers,




    Zero Indicator


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