Lambs To The Slaughter

We are witnessing what basically has turned into to a continuation of yesterday’s coordinated sell-off. Now, call me a cynic (I’ve been called worse) but this slow motion downhill ride is looking way too orderly for my taste. I’m not seeing any emotion here – where is the drama and the tears? In other words the tape is being walked down and I suspect this is simply an engineered shake out.

Case in point: the Zero Lite has now completely flatlined, which strongly suggests little to no participation. Translation: odds are the tape is dropping because a few large players want it to head this way, not because anyone is being forced to cover. Which means this could change at any moment, so keep an eye on the Zero for hints of buyers becoming ‘inspired’ again.

The spoos briefly touched the 100-hour SMA this morning but immediately recoiled. In my morning briefing I had suggested to keep an eye on this one as well as the 25-hour, the latter of which now seems to be observed as well. I’m still not convinced that this is more than the shakeout I suggested last Friday. For one we are near the 100-day SMA plus there is a NLSL that I believe wants to be defended. Although I cannot exclude a close below today I would be very skeptical about continuation lower unless we are seeing a bit more participation – on the Zero that means a signal below -1.0. My perspective will take on a more bearish tone once/if we drop through 1400.

Quick update on gold – we got a nice short term entry the other day and if you’re still in it then I suggest you start taking profits. Although a breach through that 100-day SMA would represent a daily sell signal I have my doubts that it’ll be this easy. Feel free to hold on to a few lottery tickets but move your stop downward a reasonable distance away from the 100-day SMA, in case haven’t already. Similarly a long setup may be in the works but I would prefer to see the 25-hour touched before wasting any thoughts on that.

The pickings were pretty slim today but I did run into a few juicy setups. Please step into my badly decorated Christmas lair:
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EUR/JPY – I mentioned this one yesterday and I still think that a long breach here has big potential. I’m showing you the hourly, weekly, and monthly for a reason – the daily has little merit right now. But the long term setup here is extremely exciting, assuming of course we continue higher. On the hourly we are near the 25-hour SMA and that is a great place to acquire some long exposure on a short term basis with consideration of the long term opportunity. Of course if the 25-hour gives way then the entire LT long setup may go the way of the dodo.

EUR/AUD painting an inside day. No explanation necessary – may be a little shake out before continuation higher or perhaps she turns back down. I would prefer a long quite frankly but would be in it for a run toward that NLSL near 1,2355 should things turn more red.

AUD/USD – at the top of the hourly BB and it’s running into a NLBL as well as a diagonal resistance line. Now, don’t get me wrong – this is currently a great short but if she creeps above the NLBL then it’s possible we shoot higher. I’d say 1.05 is where the rubber meets the road – I’m short here with a stop nearby and if it pushes above 1.05 then I’ll flip it for a long.

AUD/JPY – inside day and you know the rules. Now I know that this one has been pushing sideways and that’s actually rather positive as I consider this a much needed consolidation. It speaks to the strength of the current trend and my preference would be a breach higher here tomorrow. I would be less interested in a short setup as the AUD/JPY has been riding a NLSL for a week and never closed below. Yes, I would take a short breach tomorrow if that’s what we get – albeit with only limited exposure. I hate to fight a strong trend unless I see a pressing reason.

Cheers,