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Thursday Morning Briefing
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Thursday Morning Briefing

by The MoleFebruary 6, 2014

Welcome to our morning briefing. Here we are reviewing short term setups ahead of the NYSE opening bell. If you are a scalper or swing trader then these setups may be of interest to you. As usual keep in mind that these are short term setups although they could be used as early entries for more longer term positions.

The spoos have arrived at the next short term hurdle – the 100-hour SMA. It looks like the 25-hour is starting to carry now and after some obligatory gyrations we may see a pop higher here. It is definitely starting to look like an attempt to paint a floor here now but the bulls need to finally show some real mojo or Monty Python’s boot will drop once more to stomp on ’em.

Almost identical configuration on the YM (and the NQ – not shown here) – same considerations. I think a short term long position above the 100-hour with a stop below the 25-hour would be appropriate. If you want to play it conservatively then only use 1/2 R and build up your position as it goes your way.

The short side however still has a shot here – in fact being short right now and here with a stop above the SMA (roughly above 15455) has potential. Again if the 100-hour gives way then I will be long with a stop below the now rising 25-hour.

Proper position sizing is key here and it’s important to not risk more than 1R on playing any particular correlated symbol. Meaning if I take both the YM and the spoos then I would only play 1/2R max each. In case you’re wondering – R is all about risk and if you’re unfamiliar with the terminology then I strongly suggest you read up on some of the key concepts.

Let’s assume we’d go long the YM at 15,456 with a stop below 15,390. In order to calculate your proper position size simply deduct your stop from your entry and calculate the ticks. That’s easy on the YM – here we would be risking 66 ticks – that is your 1R. Now all you need to figure out how many contracts you can afford – and that depends on your account principal and your risk ratio. A very easy way to do this in a few seconds is to use our Futures Risk Calculator shown above. Just enter your account size (which will be stored in a cookie for repeated use) and choose your risk ratio (ditto) – I strongly recommend not more than 1%.

Per the YM example with a trading account of US$100,000 you should not risk more than three contracts which should limit your risk to around $990. Done.

Gold is looking interesting as has produced a short term diagonal acting as support. I’m tempted to be long here above the 25-hour with a stop below the diagonal. If stopped out I would give it a bit breathing room and then try a short below the 100-hour. Once again you can use the futures calculator to assess your risk exposure. If you like it then also check out our FX Risk Calculator which is even cooler!

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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.
  • Skynard

    First again, holding on to AUD, trend change looking better after first support has held. Look at UVXY erode:)

  • Rightside_ot_trade

    Was waiting on /YM test of the BL didn’t last long; softball pitch to Draghi

  • Skynard

    Anyone catch /KC, whoa!

  • Rightside_ot_trade

    /CT ID’s failed to continue twice now past week. I stay away when contract rolls.
    Allegedly Goldman Roll Begins Feb 7.
    Rollers been selling March/Buying May so far

  • SilverEagle

    Boy these MMs are having a blast. Blowing through MAs and key levels by more than enough to trigger and whipsawing in every which direction. Sign to me there’s more pain to come – typically see fights like, huge candles and major volatility this at key turning points. Now just got to be ready for it.

    Great post as always Mole. Sometimes skull is a little thick. Was good to see your use 1/2R for correlated trades in writing to reinforce. Made the mistake of taking that /YM short yesterday and watched that lose 1R as my /ES short from the previous was eroding so I was looking at 2R loss. Hadn’t put two and two together (or did but got greedy without thinking of risk when I saw big gain in /ES). Sure you guys have multiple balls in air and multiple time frames, but for newb better to walk first then run. Fortunately your /ZC call has balanced me out.

  • Rightside_ot_trade

    Can’t take the yen setups long $ and £ crosses from yesterday

  • http://evilspeculator.com molecool

    I enjoy balancing my exposure across equities, forex, and futures. And yes, if you play equities make sure you don’t risk more than 1R – capital commitment guidelines are key in addition to campaign management.

  • http://evilspeculator.com molecool

    Slow here this morning – back to work bitches!

  • Skynard

    /DX getting smoked:)

  • momac

    anyone in sb?

  • Skynard

    New high, now run MF:) SPX 1770 next stop.

  • Guest

    ZL hang?

  • momac

    damn, and sb not moving much this morning. I wasn’t up early enough to catch the quick down move on sb. seems to be in chop now, I’ll wait

  • captainboom

    Might be a ToS issue. I run a paper trading account on ToS, and it appears to be stuck.

  • TravelinTrader

    If you surpass 1R do you trail your stop up to break even or 1R?

  • TravelinTrader

    we got a runner in chf/jpy

  • Skynard

    ZL is stuck, damn!

  • tradingmom

    Mine is stuck too.

  • ridingwaves

    Tape feels weak, going short, stop at your number…a vintage year

  • momac

    hemp got hit today, it’s trying to bounce off it’s 20 hr. sma

  • Skynard

    Hum, going to wait for it. Where do you see weakness?

  • Bun Dance Kid

    I’m reading Zero as showing a possible pullback – Mole arrow, two trend line downturns…

  • Skynard

    Decided to reverse AUD at 72%, .8962 for the ST.

  • Bun Dance Kid

    Then again, I’m always ready to be proved wrong

  • ridingwaves

    low volume spike, block sell side looks stronger than buy side..NFP number tomorrow should root out this afternoon via direction….10% Vix hit makes me leery, but I’m in trade..roll the dice

  • TexasRube

    Wild swings in /ZW

  • Skynard

    Intraday BS, fade that shit. Consolidation day, scare the children, if it drops below 580 then……………..GTFO

  • Skynard

    Div setting up.

  • Ronebadger

    Disqus is balky today here…no notices of new posts

  • Skynard

    Reversing longs, now short ST target. allot of resistance here.

  • TexasRube

    Run /HG, run!

  • ridingwaves

    well that didn’t work,

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

    Bull showed up today. happy cows.
    Mooo.

    Relief bounce. trade your plans.
    http://s1.postimg.org/nco9lep5r/cows.png

  • Rightside_ot_trade

    ¥ and credit very supportive of equity longs this morning, watching for weakening but flattening only right now

  • SilverEagle

    thought it was my browser or something, but i’m having same issues

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

    eats my post promptly for several minutes, then finally appears.

  • Skynard

    All about support and resistance my friend.

  • Bun Dance Kid

    Yep, ghosts in the machine today

  • Sean

    Well, we hopped over that near-term volume hole… next test is the 100d ma, but it is also bullish that we recaptured the 25w ma and the weekly NLSL at 1754… I’m not overly excited about the tick strength here, but that long-term volume hole support at 1730 provided a 30pt bounce so it appears to be solid for now…I think the key for today will be to hold the 1755-1760 level into the close, otherwise confidence could be lost and send this thing to the 1700 level everyone is looking for, if we do hold we’ll probably climb over that 100d ma tomorrow…

    Edit: Also, /NQ and /TF leading the way, indicating renewed confidence in risk assets?

  • Bun Dance Kid

    What’s coming next? Milking time or stampede. I wonder?

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

    ..above my pay grade. 😉

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

    diminished fear.
    appetite doesn’t appear until above the 21ema.
    Feb 1 was just ridiculously fear full, IMHO.

    http://stockcharts.com/h-sc/ui?s=$SPX:TLT&p=D&yr=0&mn=3&dy=0&id=p98801267796

  • Skynard

    Agree, this allows me to balance and take profit in a way until the market proves me wrong:)

  • Dyellowflash

    Taking the short side. I am going to trade against my system bcos tactically there is no way the bus will wait for so long for people to slowly hop in. ?

  • Dyellowflash

    The pace of this up move feels very wrong. Its neither fast enough nor slow enough to be a genuine up move imo.

  • Sean

    Unless it is waiting for a bunch of bears to get on the bus, before driving them off a cliff 🙂 … Maybe we have tepid volume because we have some buying off the lows, but no short covering yet… if we get people adding shorts here (maybe why the market is pausing now, but not dropping) and the market doesn’t drop tomorrow, then we could get some panic short covering that then triggers algo/risk buying and then you will see a real move… no idea though, just fun to speculate…

    Also, do you know how often trading against your system actually works?

  • Guest

    Unless it is waiting for a bunch of bears to get on the bus, before driving them off a cliff 🙂 … Maybe we have tepid volume because we have some buying off the lows, but no short covering yet… if we get people adding shorts here (maybe why the market is pausing now, but not dropping) and the market doesn’t drop tomorrow, then we could get some panic short covering that then triggers algo/risk buying and then you will see a real move… no idea though, just fun to speculate…

    Also, do you know how often trading against your system actually works?

  • Ronebadger

    Interestingly put…”neither fast enough nor slow enough to be genuine”

  • momac

    there’s a weekly nlbl around 580

  • Rightside_ot_trade

    Looking at /RB reversal response to daily and weekly sell lines
    Still work to do on weekly but we are in that seasonal period where it has ripped past 7of 8 years. Big consolidation on the monthly since 2011

  • Sean

    Seems like a dangerous spot to short based on a feeling or “knowing” something… if someone was already short then they are feeling some pain here and wondering if they should cover, and if you were waiting to get long then the longer it sits here the more you think the bottom was put in at 1732 and are starting to get worried you will miss the next move up… I think the pause is favoring the bulls here and the bears are screwed if we don’t get back below the 100h sma.. and I think above the 100d sma we will see some major short covering as well as algo/risk buying… now is probably not the time to make guesses, especially when there are such clear inflection points above and below…

    Also, how often does trading against your system actually produce a profit for you?

  • Skynard

    ZL showing some bears out there………………….

  • Dyellowflash

    6 times out of 117. Bad odds. But worth a punt of 2 fills bcos if they drive it up to this extent (quite above 61.8% of the previous big move down), either it clears this border and up the way or it fails here.

  • Dyellowflash

    above 61.8? to fake or real, guess we wont be kept guessing for long 🙂

  • Darkthirty

    also c = 1.618 of a. plenty of time for confirmation

  • Objectively_Bias

    Pretty strong Trend Day signal. I’m going to ride this up till 1771, then close out my remaining long and short it. Stop will be @ 1773.50

    Edit: 1767 appears to be a prickly pear. Stop set to 1761 on remaining Long.

  • Skynard

    2nd attempt failed, see what they have. If bulls can move above 1770 then looking for the next volume hole above 1800.

  • Objectively_Bias

    $TICK is slowly burning off from overbought without any real downside in ES. Another move up could be in the works. Good signal that the Trend Day is real.

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

    my $TICK averages today baaarely got below 0.

  • SilverEagle

    In my case, it would probably be high 90%. 🙂

    Need to be like Costanza and do the opposite of what intuition tells me.

  • Darkthirty

    LOL!

  • Sean

    Sounds like a damn good system!

  • SilverEagle

    Damn good for people taking opposite side of my trades.

  • TravelinTrader

    it works 100% of the time with women.

  • Objectively_Bias

    Agreed. IF is the big question. A good place for a short with a tight leash. Also right around the daily 100 SMA. It feels good when things line up.

  • Darkthirty

    Starting to look like your intuition is correct………………

  • Objectively_Bias

    Continues to burn off…

    Ok, day job time. I hate real work so very, very much.

  • http://evilspeculator.com molecool

    Not really – it shows minimal participation. Meaning lack of bulls – could drop easily if the signal falls below the mark again.

  • Skynard

    Gauging the bear di line, an early indication.

  • SilverEagle

    Shorted /YM here with stop few ticks above day high. IP on the last hourly candle. Probably should’ve set sell for break below that candle but I’m a glutton for punishment.

  • Sean

    Not sure what you mean by “burning off”? The TICK indicator is a measurement of a specific point in time, so any particular reading does not relate to the previous or the next, it all depends on the activity at that particular tick and can only tell you if a move that already happened had any real volume/breadth behind it, so it is not useful for predicting future tick values, (hence, “overbought” and “oversold” does not apply)… a better way to look at it might be as a cumulative indicator, which shows a pretty steady march higher today…

  • Bun Dance Kid

    Mole, forgive the naiveté of this question, but is a basic rule for swing trades to look to be long only when ZL is above 0 and short only when below 0?

  • Skynard

    Here comes AUD stop run, come and get me dammit.

  • Dyellowflash

    That was a long…. wait to TP some pennies… I shouldnt have trade against myself… now getting backache and shoulder strain ^^ … TP-ed one set for 35 points, left one set ard 20 Dow points from breakeven. I am probably going to bed soon. Its 2.30am at my place now

  • Skynard

    Hehehe:)

  • Dyellowflash

    backtesting 61.8 from the belly n on top of VW. looks fun.

  • Skynard

    Can not go wrong at these inflection/resistance levels to test your positions:)

  • Ronebadger

    you are right, but I know what he means…the top ticks for the day (I look at 1 min ticks) slant down

  • Skynard

    Check out /KC, anyone take that MF:)

  • http://dartht.blogspot.com/ Darth_Gerb
  • http://evilspeculator.com molecool

    ¤ø„¸¸„ø¤º°¨¤ø„¸¸„ø¤º°¨

    ¨°º¤ S H A K E N ¤º°¨

    ¸„ø¤º° B A K E !“°º¤ø„¸

    ¸„ø¤º°¨¤ø„¸¸„ø¤º°º¤ø„¸

  • http://evilspeculator.com molecool

    Impossible to get in – if any of you lucky bastards took it then take partial profits now.

  • Skynard

    Ya, tagged the 100 weekly. Hold this short, comparing it to /SB when it tagged it’s 100 weekly. Selling hard!

  • Sean

    Yeah, the 1 min tick is part of my standard charts, so I watch it every day… the problem is that is can (and often does) drift until it pops, and the direction of the pop is unrelated to the direction of the drift… the tick has no price memory or technical inflection points, so looking at it as a means to predict or thinking it should obey some set of rules is useless… I do think it is useful as confirmation however… if we look at today’s action, the tick value showed that there was a slightly more strength on the buy side from the open until we hit 1770. At that point the buying diminished, but the same time there wasn’t a great deal of selling, so the tick values drifted down as buying pressure was reduced. I would use that to confirm the narrative that yesterday was a bullish signal and 1771 is mild resistance, but not strong enough resistance to induce major selling, so at this point we can still go either way. But the fact that the tick was drifting down from a high reading doesn’t mean that it must now continue down to a low reading, we don’t know which way it is going to go now, it all depends on what price does…

  • Objectively_Bias

    To clarify, I don’t look at the value of TICK, I have it set to invisible. I only follow a set of moving averages on the 5 min TICK chart. That moving average stays very range bound and can be used with some degree of certainty as an intraday overbought/oversold indicator. The last extreme reading was today, and as the MA moved down from “overbought” levels, the price action did not follow, leading me to believe that a further move up was coming.