Early Fall Market Momo Update

The third quarter is officially on the books and that means we are now finally entering the most profitable trading period of the year, at least statistically speaking. As with everything in life your mileage may vary. Since it’s the beginning of a new month this we should once again take step back and look at the characteristics of the ongoing market phase in terms of volatility, momentum, as well as market breadth.

Let’s take it from the top starting with implied volatility, which I’m sure you are a aware is once again scraping the bottom of the barrel, accumulating an extended series of single digits. I think the note I pinned on this chart many months ago serves as a constant reminder that low IV does not necessarily impel the precipice of a market correction.

Besides nothing even remotely bearish happens until we see the CPCE dip below the 0.58 mark. And even then it’s not always guaranteed. The current reading suggests that we are nearing the zenith but should be okay for the time being.

Market breadth as measured by the SPXA50R versus the SPXA200R is starting to resemble more and more the effervescent period the bears had to slog through between 2013 all through 2014. There is no predicting how long these conditions will prevail but small controlled corrections every now and then prevent bearish momentum from accumulating and causing something more pronounced. Of course whether or not this is possible without full fledged QE is a completely different story. However for now P/C ratios are being managed very effectively.

Okay, now that I’ve got you all warmed up join me in the lair for the good stuff:

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Campaign Updates

The E-Mini campaign is in great shape. My trailing stop is now at about ~2R which is 0.5R below MFE.

As a side note – I should really have grabbed a bit of small caps goodness as the Russell is completely out of control. How could I miss this one!!??

Okay I have had it with the USD/JPY as it looks like it’ll either take its merry time ahead of a push or descend into yet another reversal pattern. I hope I’m wrong here but for now I’m back in cash on this one looking for a more promising entry.

USD/CAD – the gift that keeps on giving, at least thus far. I have not moved my trailing stop since last week as I don’t see a compelling reason. Over 3R in paper profits at this point so I’m not going to start over thinking this and simply stick to my guns, i.e. my trailing stop.