Chop Chop Til You Drop

I’ve had a mini epiphany today just browsing through my universe of charts across bonds, equities, the futures, and even forex. In plain simple words – we are in the midst of a high volatility sideways market period right now. And that means that directional campaigns simply won’t work. You may get away with grabbing a good entry but just as you’re ready to reap the benefits the tape turns on a dime and stops you out. This has happened across several campaigns over the past two weeks but the incident rate is increasing. Which means it’s time to adjust our trading to the tape. In this particular case it means keeping entries to a bare minimum – personally I get extremely picky and reduce position sizing to a minimum during these types of market periods.

So let’s look at some evidence supporting my outlandish claims. You guys have seen this chart on several occasions and I’m not going to explain it again. Clearly we are in a sideways range. A few days ago it looked like we may defy gravity and take off but it wasn’t to be. At this point the only context worth its salt is the 25-day SMA and even that one is way too precarious to afford us swing entries. I am staying the heck out of this one for now. If we push to the extremes I may take an inverse entry with a small position size. But I’m really not obsessed with having to trade equities frankly – happy to let this thing play out and revisit in a few weeks.

Cable – part of the story for sure – just look at the daily panel on the right. That’s one nasty trading range with a lot of long wicks. Meaning stop runs galore and only recently have we seen a bit more directional tape.

The EUR/USD has gone nowhere fast int he past month. Thus far it seems like the 1.05 mark may wind up a long term low but the fat lady hasn’t sung here just yet. This is starting to resemble a real low however – the next few days should be interesting, but for now I’m not taking entires in the middle of the ongoing trading range.

Gold – just peeking at the ST panel is making me dizzy. The daily ain’t much better – once again we seem to be stuck in a sideways range below the 100-day SMA. However, the 25-day is now on the rise and if I see decent ST context in the morning I may be convinced to take a long position here.

Bonds – just nasty – don’t even ask me when this thing is going to resolve. No interest in participating here.

Crude is the one exception which in the context of the ongoing LT campaign is extremely promising. We got really lucky here when taking our entry and I’m rather conservative with advancing my trailing stop.

Early morning setup update: GBP/JPY was one of the few charts that actually triggered and didn’t hit its stop shortly after. However I’m long inside a downside trend on the daily chart – my expectations here are extremely low and I’ve advanced my stop to the break/even point. It’s a small position anyway but alas.

No new entries for the day – time to hunker down and keep one’s powder dry.

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Cheers,