Back To You Know Where

It seems the subs are starting to develop a taste for the early morning briefings. Lots of fun to be had if you don’t mind getting up early and dipping your toes into a few short term setups. Let’s review some highlights:

Cocoa – right before the NYSE open we stood at an hourly NLBL which fortunately led us higher. Seems pretty zesty this one but I’m cashing out my ST positions at this point.

Crude seems to have developed an allergic reaction to the 25-day SMA as it’s trying to get as far away as possible. Admittedly a late entry today as we had already dropped off that NLBL but if you set your stop above the SMA you were good to go.

I also pointed out that 25-hour SMA on the spoos this morning and thus far it’s been holding up famously. What however should worry the bears is the lack of correlation on the currency side. All the FX setups I presented this morning seem to be frozen in time and that in itself suggests something nasty may be waiting in the woodshed.

And then there’s this – we are right back to you know where – our old volume hole. The bears seem to be either unable or unwilling to step over this one.

Take a look at the Zero Lite on the right panel. You can see two sessions – the one from Friday and then there’s today’s. Note how the signal has gone completely flat. That is pretty ominous and although I don’t have a crystal ball I can tell you that it has occasionally been a precursor to short squeezes in the past. Maybe this time will be different, which is why I suggest we simply watch the hourly for signs of a reversal. Stay short as long as we remain below VWAP and the 25-hour SMA on the spoos.

Before we get to the setups a quick house cleaning item: The EUR/CAD setup from a few weeks ago has run its course and is ripe for the picking. Cash out and wait for further instructions.
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The 30-year treasury futures are on the edge. Friday we pushed into that daily NLSL and then bounced back. On the hourly it’s been riding down the 100-hour SMA and thus far it’s been holding. You can use the SMA for your short entries as long as we don’t breach it. The daily NLSL is our line in the sand – once we reverse that we are back long, at least for a day or two. This whole construct on the daily is starting to look it’s ready to explode, so keep your options open (pun intended).

Sugar – also at the 100-hour, this trade is the gift that keeps on giving across the board lately (i.e. the 25-hour and the 100-hour). I think that 25-day SMA touch could produce downside, maybe not today but it’s permissible to be short here with a stop slightly above. Also mind that 100-hour which looms near 20.83.

Coffee is harassing its daily NLBL and if the hourly trend continues then we’ve got a good long here.

Crude remains to be a sucker for punishment. I LOVE this setup as we sliced through a NLSL and are now about to drop through the 100-day SMA. If that one gives our P&F target of 77 could be our Christmas present. So, have you been naughty or nice? Ho ho ho!

AUD/USD – this could be a good short if we drop through both daily SMAs. But it would have to happen with velocity as the 100-day is sloping up – which means we need the 25-day to crash this thing lower. Good watching for a few days and if she doesn’t move then let ‘er go. No sense in forcing it.

Bottom Line: As I said above – the currencies are not supporting equities today and that makes me a bit guarded and not too eager to take on new positions on either the FX or equity side. I’d watch this thing today and wait for the close to see if there’s movement. At minimum I want to see momentum return to equities tomorrow, this flatline has the makings of a bear trap. Doesn’t have to happen and I don’t want you to put on your bull hats just yet – BUT pay attention to the hourly panels on the FX side on on the spoos and you’ll probably see some telltale signs of what’s to come. They can try to fool those retail schmucks but not us steel rats! 🙂

Cheers,