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Pre-FOMC Announcement Drift
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Pre-FOMC Announcement Drift

by The MoleDecember 10, 2012

Seems the bots are running some Christmas shopping algo today as the tape is drifting around without much participation. In case you haven’t heard – the Federal Open Market Committee (FOMC) meets for the last time this year on Tuesday and Wednesday. Timing is the main reason why this meeting is receiving special attention. Just so happens that Operation Twist comes to an end on December 31st and and Bernanke is expected to announce fresh measures to keep the party going. Whatever happens pre- and post-announcement, it should stir up quite a bit of volatility, So I suggest you keep your exposure small and your stops at arm’s length.

The E-Mini is running up a steep support line and is now right below a daily NLBL at 1424. There’s nowhere left to run and one of them is going to  be breached this week. Suffice to say that we are going to take whatever direction it takes. Long would be my preference as it’s a much easier trade. On the short side we would have to drop below the 100-day SMA to justify meaningful exposure to the downside.

Our speculative BIDU entry is in pretty good shape. After hopping over the 25-hour SMA it jumped higher and is now approaching its next short term hurdle. If it can overcome the 100-hour SMA then we ought to be good until that daily NLBL near 95.81.

If you enjoy inside day candle setups then this is your lucky day as I’m seeing them pop up all over the place:
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Let’s start with currencies today – the USD/CHF is painting an interesting ID candle near the 25-day SMA. So this is the plan – do nothing on a short breach but be long on a long breach tomorrow. Obviously today’s candle is bearish and the odds for the long scenario are low right now. However, this could be a pre-breach shakeout and if it pops higher tomorrow then we could see acceleration. It’s so evil, it just could work.

EUR/USD – another inside candle and this time it’s sitting right on top of its 25-day SMA. The long trigger here is the ID’s high of course, on the downside I would not take a position unless it drops below the SMA. Hope that makes sense.

CAD/JPY – also gracing us with an inside day candle. You know what to do as this is a traditional setup with no ifs or buts.

The greenback – guess what – inside day candle. That’s a rather interesting inverted hammer preceding today’s ID setup – in over 60% of the cases this means bearish continuation. Is the Dollar ever going to find a bid again? Not on Bernanke’s watch I guess!

Now on to bonds – what an exquisit setup!! I’m seeing a ton of support here and my preference would be a breach of today’s long trigger tomorrow. But if it drops through all that support then I’d be definitely short below the 100-day SMA.

And last but not least – here’s crude with a double inside day candle! This ought to be interesting 😉

If you’re a noob and don’t know how to trade ID setups then please look no further than our trusted cheat sheet. Keep it frosty and keep it small – I expect this to turn into a wild week once we make it past the dreaded FOMC announcement.

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Cheers,


About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at various social media waterholes below.
  • itslance

    VIX has barely budged on this down leg

  • http://dartht.blogspot.com/ Zen_Gerb

    I’m reminded of a cold Christmas several years ago.
    how many times did I say “die” as a bitter baby bear?  and my account shrank and shrank.

    http://s17.postimage.org/uqqe7gmd9/babybear.png

  • Skynard

    INTC, $20 trigger:)

  • itslance

    Yeah, I was a mite early on that one. :)  I assume you’ll be holding this overnight if we get a strong close?

  • BobbyLow

    Thanks for the memories of Yesteryear and Pee Three ZG.  :(
    During that time period, it was my bad for trading on what I selectively believed.  My heart and mind said one thing and the tape said another.  I chose wrong.But at least that experience proved that conventional logic can be and is often missing from the stock market.  Or stated in Bobby Low Axiom #1 :The Stock Market Is Completely Full Of Shit At All Times.  :)

  • Microwave_Prince

    I think most bears are way too optimistic about the market. I see Dow 1,000 before 2030. All of the “New world order” gains from 1980-2000 will be erased when the globalization and central planning idea falls apart.

  • Th3_Acist

    Snoozefest…

  • Skynard

    short: /DX, /LBS
    long: /ES, /QG, INTC, AUDUSD, EURUSD
    New high coming! Bulls need it today for some follow through.

  • BobbyLow

    LOL

    I’ll probably be too old in 2030 to witness this event.  So here is a picture of what I’d probably look like trying to trade it. 

    http://www.picturesof.net/_images_300/A_Skeleton_Sitting_At_An_Office_Desk_Royalty_Free_Clipart_Picture_100415-120233-622042.jpg
     

  • itslance

    Not pretty by any means, but SPX closed above the 50 day SMA

  • AmazingLarry

    I leave my desk to go outside and discombobulate my L5-S1 and MCP takes a 20% moon shot. Gotta love it. REE following but has more work to break.

    Coal stocks showing life, too. Love these ID’s. 

  • Microwave_Prince

    I’ll probably still be long oil then. One of these days, I bet the whole middle east is going to get sick of the meddling and join forces together against the west.

  • Rightside_ot_trade

    Did you see my comment to you Friday on the volume oscillator T with the center post mid October and ending mid to late December?
    Also you may look again at your GLD T for today

  • Skynard

    Hehehehe:)

  • Rightside_ot_trade

    I have some of that from
    Last month, looking at where to set a trailing stop, a bit parabolic on the hourly chart

  • AmazingLarry

    Right. I’m not going to chase. It’s right up into supply. Looking for a pull back to around the $9.40 and see how it handles that. I’d use the weekly BB as a stop if you’re just going to sit on it. 

  • Rightside_ot_trade

    Yes that looks pretty good above old resistance at ~9.3

  • Skynard

    Nat Gas has found the support zone. If not, will flip it:)

  • itcomesupinwaves

    Not many bears left in this one, at least for now..

  • AMCabrera

    IMO it will be the fastest drop for the month then if we start getting dip buyers it will likely hit .8100 very fast. Same fate awaits aud/usd imo.

  • amokta

     So, Prechter will be right eventually? :-)

  • itcomesupinwaves

    What would you say the probability of a reversal is here?

  • newbfxtrader

    110%….

  • newbfxtrader
  • AMCabrera

    Mmm I can say based on seeing that there is nothing on top to go for that it will likely not go any higher so the probability has to be very high the it will go lower.

  • Microwave_Prince

    Is that what he is saying too? Well, price always reverts to the median, and that would be 1,000 on the Dow. Just a matter of time.

  • newbfxtrader
  • amokta

     
    Prechter is a permabear. I dont even browse his site anymore
    He has predicted 10 out of last 3 bear markets :-)

  • newbfxtrader
  • Microwave_Prince

    Does Indonesia look toppy, or is it just me?

  • Rightside_ot_trade

    Credit ID’s: DHY HYG JNK FVX

  • Microwave_Prince

    SPX 1435 is my target for OTM put shopping.

  • Skynard

    Long /SB 18.83

  • Skynard

    Spoos on the move:)

  • Skynard

    Took profit /ES, will await a new entry.

  • Skynard

    Oh well, added to my /DX short instead:)

  • newbfxtrader

    Hehe take a shot at short nzd/usd instead come on…

  • AMCabrera

    well well nzd/usd is finally doing it FINISH them all off honey because Im still here.

  • Skynard

    My belly is full, that does look tempting though:)

    Double bottom on /SB.

  • newbfxtrader

    Lets see if the knife i put in its back sticks for now or maybe I will have a make a video like you did!

  • http://dartht.blogspot.com/ Zen_Gerb
  • Skynard

    Plan on trimming longs by tomorrow for Fed day:)

  • newbfxtrader

    Ben says hes got your back…..until 2015….

  • Skynard

    Yes, long term after a correction that is my plan:)

  • newbfxtrader

    If you switch to daily you can see multiple times these areas have been support all year.

  • Skynard

    Can not post a chart right now, GRPN looks like a good long:)

  • newbfxtrader

    Is it going for a discount?!

  • AMCabrera

    no it will stick literally nothing left not even that string of yellow at .8400 isnt there anymore.

  • http://dartht.blogspot.com/ Zen_Gerb

    Spoos Hourly, looks like a double bollinger squeeze run.

    http://www.comedy-zone.net/pictures/images/animals/170503/artictoilet.jpg

  • Skynard

    /SB sitting on the fiscal cliff should see some strong forces here:)

  • http://evilspeculator.com molecool

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