Diet Tape

I feel like I’m on a tape diet as of late. Amidst surging volatility finding technically promising setups has been difficult as many of the most crucial moves happen after-hours or are preceded by massive intra-day volatility almost guaranteed to touch your ISL. And if you manage to get a seat on the bus good luck holding through deep retracements and sudden double whips triggered by rumors, Fed/ECB/BOJ machinations, or the occasional talking head trotted out to bang the tape in three directions.

Basically it feels like 2008 all over again – well, not quite to be honest. The damage thus far has remained contained as equities are still trading near their respective 25-month SMA. If you think the recent sell off was bad then you better invest in a helmet, foam wall padding, and a few boxes of anti-depressants. You ain’t seen nothin’ yet…

So let’s take a peek at volatility and the long term picture. It seems we’re producing  a mirror image of what happened late last year – but only on the surface. If you look carefully you’ll see that the lower BB has been pushing rather high as the signal didn’t drop by much over the past two weeks. So what does that mean? What are the implications?

1. Volatility is about to head even lower, which most likely translates into more trending bullish tape.
2. Volatility is staying up here or will soon curl higher again – which most likely will be in the context of a sell off.

We won’t really know which of those two possibilities is in play until we are pushing into some technical context. Let’s take a look at that:

The weekly shows us clear skies until about 4271. I would love to get a sell signal there and I’m sure so would you. In the interim I would stay clear from making any directional plays – we have zero context here and that means you’re basically gambling during a high volatility market period. Bad idea.

EUR/USD – I was delighted to have my long campaign stopped out yesterday and I took advantage of the lower exchange rate to clean out the local ATM (will be heading out once again today). However if it drops to near that diagonal on the short term panel then I’m already set for a small long play with a stop near 1.1115.

Market Events

We are most likely heading into a bit of intra-day volatility around 2:00pm Eastern today when we get the FOMC minutes. Yes, that time of the month again – you have been warned.

Keep It Together

You know the drill guys – don’t engage in guess work, forced campaigns, revenge trading. Ignore the rumors and the bubbleheads on TV – better yet, turn that stuff off and read a good book instead. If you must participate keep your positions small and your stops wide. Take advantage of this opportunity to catch up with some trading related topics or to simply chill and emotionally/mentally prepare yourself for what lies ahead.