Boxed In

As much as I hate FOMC days, I had somewhat hoped that Yellen would produce sufficient volatility to whack us out of the box in which we’ve been bouncing around in the past week. No such luck apparently, and when the market hands us a box of lemons, we’ll use it to make lemonade 

That short term panel is looking like a Northridge richter scale in 1994. I actually lived in Beverly Hills that ominous day and remember it well. I was woken up right away as the shaking began and quickly ran downstairs to figure out what was going on. When I opened the front door of the little guest house I had rented I saw the pool in front of me wildly sloshing back and forth like the Atlantic ocean during hurricane season. I noticed that our palm trees were swinging strongly with debris flying all over the place, and then the neighbor’s house lost part of an old supporting wall which had still been made of bricks. Suffice to say it’s not an experience I ever care to repeat. But we were really the lucky ones. Unlike some parts of Los Angeles, which had to wait weeks (and sometimes months) to regain electricity and phone service BH had all services restored the very next day. So the moral of the story is – if you have to face a natural disaster, do it in style.

Well, as you probably know I’m still long from last week with my stop below 2142. But a small ST long position here (with 1/3R only) may just produce a bit of extra profits. However, be alert – something’s changing on the volatility profile:

At first glance the current dip lower looks like all the others but what I noticed is that the previous dips on this 60-min chart happened during HIGH volatility periods, and then reversed during depleting realized volatility (RV). Right now we’ve got the inverse happening – the drop lower has been happening during the low cycle and it’s now popping higher.

This may mean that more volatility will continue to bring us lower, and IF that happens I would pull my current long positions and reverse sides after about ES 2154.

Quick update on our silver campaign, which we couldn’t have possibly been timing any better. I quipped in yesterday’s comment stream that I most definitely earned my keep for this week, wouldn’t you agree? Anyway, it’s more than fair to start trailing after over 2R in profits, but I would humbly propose that you keep some of it in the running. The long term view is looking extremely delicious here and it’s quite possible that this was the proverbial ‘last kiss goodbye’ before a massive pop higher.

Plenty of juicy setups today. Here’s AUD/CHF which you may want to grab as a long near 0.739 – stop should be at least two bagel throws away below 0.7365. If it resolves higher it’ll be a beauty to behold.

More goodies below the fold – please join me in the lair:

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