Things are getting more tricky again on the equities side. If you followed along in the comment section during yesterday’s session then you know that I took out a long position courtesy of our famed Zero indicator, which stepped up the occasion and cut through all the noise as usual. This morning the main question for me was whether to hold long or to exit and consider taking out a short position.
Our favorite holiday of the year is upon us and judging by the price action in both the Dollar and equities it’s going to be wicked! As I indicated yesterday in the comment section, ES 2700 is our bearish/bullish inflection point and as I’m typing this we’re right on top of it. No time to lose!
Gold has greatly benefitted from recent Dollar weakness and in particular due to its close correlation with the USD/JPY which began in 2015 and has continued to this day. In fact if you overlay the Yen onto a gold chart then you will see that they follow each other very closely, with the latter usually leading large swings to either side.
Here’s the quick and dirty on the current situation: The past week managed to effectively wipe out three months of upside progress across equities. Beyond the obvious carnage what I found most interesting is something a bit more obscure and thus it often escapes the average trader: A shift in market behavior as evidenced by the failure of three consecutive BDFD lottery tickets. It’s a bit like not seeing the forest for all the trees. Let me explain.