Monkey Business

We’re seeing quite a bit of intra-day monkey business over the past week on the equities side. Specifically I’m referring to gapping action, wild swings during the RTH, all in the context of minimal momentum (at least judging by the hourly Zero signal). Someone mentioned this morning that he has been observing a significant drop in L2 activity (i.e. b/a sizes and durations) over the past year and that does not surprise me as many large funds have been exiting over the past year. Whether or not HFTs are responsible is another story but in general it appears that liquidity has been drying up. And of course that contributes to more intra-day volatility as it’s much easier to bang the price in your direction or to set traps bait and switch style.

The Zero indicator does often offer us implicit information in that it shows us lack of participation or suspicious price action during difficult trading periods. So what exactly is ‘suspicious’? Well, for example systematic advances or long squeezes accompanied by minimal momentum (blue) or signal divergences after increasing hourly volatility (green). Or sudden signal changes like the one this morning (red) which in itself is a very small reading but clearly some players attempted to run some stops and since I took this snapshot we’re already seeing a little bounce.

In short – a ton of monkey business aimed at discouraging participants and lure them into futzing with their open positions. This type of tape is not for the faint of heart and my recommendation is to simply trail your campaign (if you’re still exposed to the long side) per your system rules, and then walk away and forget about it.

The AUD/USD is accelerating and what we may be seeing here is a sideways correction of sort. I’m looking to be long near that diagonal I drew on the hourly panel.

Also waiting on an entry in soybeans – I absolutely love the daily panel which shows us a sideways triangle of sort with a pinched Bollinger followed by a break out and now we may get the last kiss goodbye (LKGB). Let’s see if it comes down lower toward the 900 mark and if it does Bob’s your uncle.

My favorite setup I’m keeping for my intrepid subs – please grab your decoder ring and join me in the lair…

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