Fractal Alert!

Gold is keeping us in suspense as it continues its own 100-day SMA sprint – recently added as an Olympic discipline. I still maintain that we’ll may need the help of Usain Bolt here to keep up with this thing once it picks a direction. Always remember the old adage ‘the bus moves fastest once everyone got off’.

Right before the NYSE opened this morning I sent out an email to my subs advising them to keep an eye on this thing. We did get a quick dip below the Maginot line but it has since recovered. Unfortunately I think it’ll keep playing with us until the big day – which may be tomorrow or in a week or two from now. My general approach to not getting whipsawed to pieces at inflection points is to take on only a small position initially and to then pyramid up as it breaks out. If you suck at math then Bernie’s Pyramid Calculator will be an invaluable tool to help you manage your positions.

ZN – the 10-year treasury futures contract gave us a great inside day entry on Monday. Seems to be well on its way right now and I am holding for a push into 133’025 – mas o menos.

If equities are testing your patience today then you’re not alone. We saw a lot of gap & camp sessions lately and tape like that is generally frustrating to retail traders. However there are good news – below the surface I actually see some interesting formations – namely the appearance of an old fractal we used to follow back in the days. I’m talking about the ‘Gothic Church Tower’ fractal and it’s back with a vengeance!
[amprotect=nonmember] More charts and cynical commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero or Geronimo subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.
[/amprotect] [amprotect=1,13,9,12,5]

If you are a senior steel rat then you may actually remember this one – as you recall I am plotting both the A/D and D/A TICK ratios here. Truth be told – the GTC has been showing up in the recent past but the old Mole wasn’t always paying attention. The idea here is that this pattern often (not always) precedes reversals to the downside. We also have seen it on the D/A panel but it only seems to pan out if the pattern is very pronounced – meaning a very high steeple and a proportionally small roof indicating a lack of downside momentum.

What makes the current GTC fractal even more interesting is the next chart:

Inside day on the spoos – that’s right. So as you can imagine what I want to see happen here is a breach of today’s lows sometime tomorrow – preferably overnight after the NYSE close. The one fly in the ointment is that NLBL which is still valid tomorrow and may act as support.

And in case you are wondering – yes a long breach is absolutely a trading opportunity. The only remaining question is how much upside potential is left here given the spoos volume profile I reported on yesterday.

CAD/JPY – mark your calendars as this one is approaching both its 25-day and 100-day SMAs. Should be good for a reversal play. If it happens to bust through then I expect quite a bit of acceleration as this one has been coiling up for a while now. So be ready to flip this trade if your stop is hit.

Finally copper is painting an inside day + NR4. Assuming how you are positioned here this give you two approaches:

You are in cash: Wait for a breach of either direction – simply take entries according to the ID rules.

You are already long after the NLSL reversal: If it breaches the long entry then you can either hold or add additional positions. If it breaches the low entry then consider this your stop out. If stopped out and it turns into a fake out then it’s permissible to enter back into your long position if she reverses back above the short entry.

Bottom Line: I’m actually rather excited today as we are seeing a reasonable setup in what I otherwise consider technical limbo. Given the tape of late I think we have been keeping up extremely well and although it hasn’t been easy it’s been productive and an opportunity to work on our discipline, exercise no-bias, and of course bank some coin in the process. Again, be careful about being drawn into overtrading – don’t bend your rules and keep it frosty.

Public Service Announcement: I am seeing very interesting formations on the new Mole indicator – and I am actually referring to the false positives we have been seeing in the past two days. Of course the positives are what we usually want to see but it seems that the false positives hold their own potential. I will explore this further over the weekend and report back next week.

Cheers,