Instead of relegating ourselves to headline slaves being whipsawed (and whipped) on a daily basis our small community of stainless steel rats instead has learned (sometimes the hard way) that inflection points are where the rubber meets the road. Yes, yes – Spain managed to sell bills to Spanish banks – did you really need to prepare for that particular event? Not in my universe – I could be doing what I do each and every day here without ever glancing at the news. When it reaches me it’s usually too late to act anyway – and besides, what everyone knows is not worth knowing.
As we rats are not on the inside we have to employ strategies which allow us to determine inflection points at important price levels. Yesterday was such a day and if you stuck to the script you should be sitting on some mighty green at this point. Let’s review – the daily spoos chart above showed us an important inflection point near 1360 in the form of a NLSL plus the 25-day SMA. My view was that breaching both would have profound consequences and lead us lower. Lo and behold – we held the level and are now back at the top of this week’s whipsaw zone.
Even more significant was the weekly SPX chart – showing us a NLSL near 1367. I suggested that this was your last line in the sand if you were long equities. Did I know that we would hold? Of course not – I don’t have a crystal ball. What I did know however was my trigger points and they were never reached – a long position here was absolutely permissible incurring only minimal risk by setting your stops below SPX 1367.
Now that I have told you about the past let me talk about the future. Since I’m in a good mood today I’m throwing it out for the freeloaders. In essence the hourly spoos has reached a point where I would start taking profits. Maybe we’ll see a bit more of a squeeze at the close – however we are traders, not gamblers, thus this is where I suggest you pull the plug. If you are interested in a short trade then I suggest you wait for a red candle – again, sometimes a powerful advance ends in a final f-you squeeze for the bears.
Our volume hole map shows up back above and I think we are okay as long as we remain above ES 1380. That’s really not much of a buffer, so the onus is now on the bulls to lead this thing higher. I do expect a bit of a whipsaw now based on my hourly spoos chart but 1380 should hold or we may see a bit more of this nonsense.
Cocoa finally crossed the Rubicon and I hope you took this setup. I don’t trust it all the way yet as it has pulled back below that 100-day SMA on previous occasions but there are no sure things when it comes to trading. Unless you work for Goldman that is. I am long until the tape tells me otherwise.
Finally, our ZB trade is looking good. We never breached 143, which meant we remained short. It’s in the green but I’m a bit bummed out as the long side would have been the money trade. Well, you can’t have it all – for now there’s nothing to do until either our stop above 143 gets hit or we approach that NLSL near 140.
I don’t see anything on the horizon today that I would want to touch with a ten feet pole. Always remember that you don’t have to trade every day. Poor Mole doesn’t have that luxury as you buggers always expect an update (and sprinkled with humor if possible). But the main lesson learned during my time is that watching a lot and being extremely selective with one’s trades is what separates the boys from the men in this racket.