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Rude Awakening
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Rude Awakening

by The MoleAugust 7, 2017

I should be happy this morning as the Dollar finally produced a bounce after a largely upbeat jobs report last Friday. However for one that bounce is already in the process of reversing plus several of my open campaigns are either in the process of reversing or were taken out of the game. Let’s review where are and where we’re heading:

2017-08-07_DX_bounce

The DX futures show the type of bounce that usually leads to a bit of follow up. But – given the relentless six month long sell off preceding it I am unsure one positive job report will be sufficient to turn the tides here. Sellers have become pretty aggressive and the onus now is on the Dollar bulls now to produce a floor pattern.

2017-08-07_DX_LT

Especially given the disastrous long term implications should they end up failing. As you can see on the weekly panel, there isn’t exactly a lot of technical support context holding things up. I expected a little bounce near 92.1 last week as a breach toward and perhaps even below 91 puts the Dollar into a world of hurt which promises to deliver until about DX 88 plus minus.

2017-08-07_EURUSD

What should worry Dollar bulls the most is that the EUR/USD barely dropped and is still comfortably trading above 1.18. Remember that the EUR/USD is the most liquid currency pair representing over 30% of all forex trading activity. So if this one barely budges then the current bounce in the DX is most likely due to outlier weakness in some of the minor USD pairs. Thus I cannot help but be pretty skeptical about the potential of a rip your face off Dollar rally right now.

2017-08-07_USDJPY_watch

The USD/JPY is the second most traded forex pair and I’d be tempted to grab a long position if it manages to reverse a little and then paint a credible spike low. However as you already know, I will be watching the EUR/USD as well as the proverbial canary in the coal mine.

2017-08-07_USDCAD

Meanwhile the loonie is one of those outliers I mentioned earlier and continues to refuse to revert a little so that I’m able to grab a seat on the bus. Annoying… especially knowing that once a forex pair runs it rarely looks back.

2017-08-07_gold_update

Gold got stopped out as anticipated – it’s now bouncing around above a cluster of daily support waiting for (Dollar) instructions apparently. I may be tempted to try a long position again but not here today.

2017-08-07_gold_LT

The long term panel on gold is looking supportive, especially the weekly shown here on the right. But unfortunately gold has not made sufficient progress yet so that the current NLBL could act as a previously tested support zone. A pull back into 1244 is a distinct possibility should it wind up closing below 1258.

2017-08-07_silver

Silver is looking a lot worse by the way as it was unable to even poke its head above its 100-day SMA and a NLBL just below the 17 mark. The current daily pattern is one of lower highs and lower lows – not very positive, especially after failing the 100-day SMA.

2017-08-07_soybean_oil

Our Soybean oil campaign is still in the running but I’m giving it only a 50/50 chance of succeeding at this point. If the prior lows at 35.28 are being breached then this campaign is almost assured to be stopped out.

2017-08-07_crude_update

Crude seems less effected by the current bounce in the Dollar but our campaign has been sickly since the moment I jumped in there earlier last week. Apparently I chose a pretty good stop but that won’t help much if crude isn’t able to detach itself from the current trading range it seems to be trapped in. Long term however I think it’s looking pretty good here especially on the daily panel as the 100-day SMA is below and it’s starting to accumulate more context, e.g. the Bollingers are now starting to point up.

2017-08-07_ZB_update

Finally our ZB campaign got stopped out at 2.2R which is respectable but IMO way too early for what I had in mind. We snagged a pretty fortunate entry here and it seemed like it was destined to challenge its upper 100-day Bollinger. The short term spike in the Dollar unfortunately threw a big monkey wrench into this one.

Lessons Learned?

On the surface it seems that avoiding being strongly beta to the Dollar across your portfolio in the future would make a lot of sense. Unfortunately however in the past decade almost everything now depends on central bank machinations and thus it’s almost impossible to be ‘delta neutral’ to the Dollar.

Plus let’s not forget that we did fairly well riding the Dollar down over the past few months as many assets started trending and some even reversed into a new long term market phase. So I guess we just have to accept the good with the bad, and perhaps in the future I will start reducing exposure more aggressively once I see the Dollar approach a new bearish or bullish inflection point where we should expect volatility across the board.


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.
  • Julie

    MOLE $XAD : $XJY compared to $SPX Notice the present negative divergence and previous negative divergences which foreshadowed a correction
    JULIE https://uploads.disquscdn.com/images/968f5f9845ef5ee8fff6019a137c7269a3c09aedc3782d1ffaf90a370baa8ee0.jpg

  • http://evilspeculator.com Sir Mole III

    Slow here today!

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    slow but Powerful. sort of.

    https://www.youtube.com/watch?v=OhVQgedAmV4

  • Julie

    Good Morning Mole and GG ! USO about to breakdown out of it’s triangle Yeah ! I may have nailed the short. Today’s high 10.11 which is the ichimoku cloud 8 conversion line then a dump …. Day is not over ! Looking at F for a long but needs to clear 11 .00 resistance
    JULIE

  • ZigZag

    Have you looked at /ES? We have to be getting close to a record for smallest first-hour range.

  • Mark Shinnick

    …saw a post somewhere referring to market as an evolved homeostatic system.
    Has it outlived its purpose?

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    ok, you got lucky.
    but do you know where to add to the short?
    Muwahaha.

    [USO]
    http://stockcharts.com/h-sc/ui?s=USO&p=D&yr=0&mn=6&dy=0&id=p96745139404

  • Julie

    Not luck GG A planned trade ….with a target
    JULIE

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • Julie

    LITE moved stop down to today’s high 60.65 on remaining 1/2 short
    position
    JULIE

  • Julie

    EXAS the shooting star on July 26 may have been a buying climax and exhaustion gap up from the previous day’ Strong support 38.21 … A bearsih close below and …..
    JULIE

  • http://evilspeculator.com Sir Mole III

    I don’t really orient myself this much by equities futures, plenty more markets which are often ignored by a majority of retail traders (e.g. commodities).

  • http://evilspeculator.com Sir Mole III

    Wasn’t me!

  • http://evilspeculator.com Sir Mole III
  • ridingwaves

    quick fly by….
    headline-Fed’s Kashkari says he’ll remain doubtful there are worker shortages until wages rise

    me too…..
    it now takes $28 an hour job in Orange county to afford 1bdrm apartment…….

    bubble bubble, soon to be trouble…..
    pink ponies are cool
    I wish I had a Jessica Alba double….

  • Ronebadger

    SPY volume DEAD today

  • Mark Shinnick

    teva might have just arrived at some support.

  • ridingwaves

    hasn’t been down here since 2-03
    that is not a number error…..
    I might buy a bit here….with all the downgrades priced at $16…this would be a good place for hedgies to start loading up… for a move back to 23

  • CandleStickEmUpper

    what else is new these days. market is blah

  • Ivan Hrusovsky
  • http://evilspeculator.com Sir Mole III

    It sure looks pretty – like a snapshot out of Samurai Jack 😉

    Momentum is lagging now and yes it could lead much further, given the current pattern. There is still the 100-day though – let’s see what happens.

  • Ivan Hrusovsky

    100 not quite my happy number – using just Fibos; price of GLD now below all lines (3 whites+3 oranges) – let it show where it would go & just waiting on the sidelines for a long signal…

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • Ivan Hrusovsky

    the difference is that your Keltners does not define trends unlike mine pic..

  • http://evilspeculator.com Sir Mole III

    Doesn’t really matter – 100, 84, 75, 50 – those are all just lenses through which we are attempting to interpret what mostly amounts to being a random walk.

  • Ivan Hrusovsky

    understood – I just use fibolenses haha :-)

  • http://evilspeculator.com Sir Mole III

    I hope they are comfortable!

  • Ivan Hrusovsky

    ?:-)

  • http://evilspeculator.com Sir Mole III
  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    that’s important, a trader must have confidence in their charts.