Last Stop Before The Abyss

And once again overnight things have turned from ugly to worse. In accordance to the growing pattern of countering NYSE buying interest with systematic overnight sell offs the spoos are currently choreographing the devil’s dance merely a handful of handles above the pivotal ES 1800 mark. After Chairwoman Yellen yesterday squashed any remaining vestiges of hope that negative interest rates may be on the horizon it seems that any remaining buying interest is now abandoning ship as evidence by exponential candles in the perceived save havens of gold and bonds. EUR crosses are exploding higher as well with the EUR/USD now piling for the 1.14 mark.

Given that everyone seems to be sharing the very same (negative) outlook I have taken out an obligatory lottery ticket (1/3R) at the 1805 mark. However I fully expect to lose that bet as all that separates us from the looming abyss now are the psychologically sensitive 1800 mark and the lower 100-week Bollinger. They may hold but given the prevailing pessimism odds have it we are going to close the week quite a bit lower.

Yellen is getting one more opportunity to smooth things over today half an hour after the open. Quite frankly I wish she would just get it over with and announce a 1% rate hike. It’s been over a year of blue balling at this point and I think I speak for most everyone reading this that we’re sick and tired of the ceaseless hemming and hawing. Perhaps it’s best to just tank this sucker and then build a functioning economy on top of whatever is left of this ridiculous house of cards.

The Penitent Man Will Pass

It’s okay to be contrarian here (i.e. while the 1800 mark remains intact), but do it with TINY position sizing and expect to lose at least three times your envisioned stop. That means if you want to lost 1R at most then don’t bet more than 1/3R and keep your stops loose (10 handles minimum). Do NOT use limit orders for your stops – yes, you will get screwed on the fill, that much I can promise you.

Remember the scene in Indiana Jones And The Last Crusade – ‘Only the penitent man shall pass’. You need to respect the force of the market that may be unleashed here. So don’t be arrogant and think that you may know something millions of other market participants don’t. Turbulent times like these attract gamblers and adrenalin junkies like the dancing light of the fire in the night draws the moths – in most cases resulting in the same outcome.