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…

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!

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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.


I’m Your Huckleberry

I’m sensing a possible inflection point across various market verticals this morning. Now if you ask me what I mean by ‘sensing’ and if I have completely lost my mind then I would respond with ‘divergences and assorted correlated price action’ to the former and ‘affirmative’ to the latter. Let’s just say that I’ll be bull’s huckleberry up here – but only until 2124.25 – my boldness comes with price limits.


All jokes aside – I’m a bit pressed for time this morning so let me walk you through my nefarious plan. Basically equities seem to be slowing down and are clearly diverging. The YM for instance is already pointing down while the NQ is still holding strong. This could of course mean nothing but the 25-hour BB is looking like a python at this point and is seamed by Net-Lines on the up and down side. All that represents a reasonable inflection point I plan to exploit:

  • I’m already short 1/2R with a stop above 2124.25.
  • If we drop below  2115 I’ll be adding 1/2R to my exposure.
  • If stopped out I’ll be long with a stop below the lower 25-hr BB to ride the final phase of the ongoing squeeze.

That’s very little risk with potentially high rewards. Just the way I like it.


AUD/CAD is also looking good and I think it’s a great short (didn’t mark that on my chart) and that’s my current position. UNTIL of course we push above that diagonal – which is when I plan to be long.

More goodies below the fold.

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.

Promising price action today and other setups may be developing – so get busy and let me know how you fare.


The Measure Of Mojo

The canary in the coal mine is happily whistling along and until further notice I recommend you continue to suppress any bearish aspirations. Of course I’m talking about the NQ futures which I yesterday elected to be our measure of bullish mojo. And so far I’m not seeing anything suggesting we’re halting here – yet.


In fact we are painting new highs which suggests we may retest but probably continue higher. It would take a reversal below the Net-Lines with multiple attempts to breach for me to consider taking on any short positions. However even if we drop back below during the session today we have Yellen on the roster and that gives us little wiggle room here and event risk may run the tape far beyond our stops. Not worth the risk IMO but I’m not your daddy.


The spoos is actually where I would have played this inflection point – they are weaker and still dangling off the lowest Net-Line Buy Level (NLBL). It’s worthwhile noting that the YM is also lagging the NQ. Which keeps the bearish scenario in the game for now but I still need to see the end of today’s session first. May be too late by then but as the old saying goes: Better wishing to be in a trade than wishing to be out of one.


USD/CAD is the only setup I kind of like today. It looks like it’s going to start trending here and very few people would take out long positions here. Except for the mighty Mole of course – 1/3R only though and I’ll add another 1/3 if it jumps higher.


Otherwise I’ll be sitting on my hands until Yellen is done shaking the tree around 10:00am Eastern. So let’s take stock of the situation then.

The future is now – so don’t bring a knife to a raygun fight. If you are interested in becoming a Zero subscriber then don’t waste time and sign up here. A Zero subscription comes with full access to all Gold posts, so you actually get double the bang for your buck.


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