Limbo Tape

Limbo tape – it’s what I call the annoying volatile sideways churn devoid of technical context we’ve been experiencing across the board since the beginning of June which has pushed retail into an early summer identity crisis. You may recall that it’s not the first time I’m talking about limbo tape and it probably won’t be the last. Now this may be a good time to once more remind everyone that we as retail traders have one principal advantage over fund managers or institutional participants such as trade desks or system operators.

We do not have to trade unless we want to or perceive the express need to risk our capital. Now given that the majority of our campaigns have run in circles over the past week we may again be well advised to claim that privilege.

I know this is going to annoy the living daylight out of you but our technical evidence is all over the map right now. We’ve got a few bullish and a few bearish signals. Take the Zero for example (shown above) which has been pointing down quite a bit recently despite buyers jumping on every single significant dip – at least this far.

The E-Mini has continued its slide overnight and does look like a nice dip buying opportunity. However given the recent short term gyrations I frankly have a hard time drawing a firm line in the sand here from which I could justify a long position.

NYSE breadth is looking solid and we still seem to be in a somewhat volatile climbing phase. But if you look closer then you realize that recoveries usually breached the upper threshold rather quickly. It’s when that first climb proves to be more strenuous we may wind up with another leg lower. A good example of that is what happened in early summer of 2015. The normal pattern is a quick recovery above the upper threshold followed by the appearance of a divergent signal which eventually dips back below it (and thus gives us a bearish signal).

A less pronounced situation on the SPX breadth chart. Here we seem to be climbing more smoothly and as long as the signal doesn’t start to look divergent we should be okay. However then there’s this:

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Campaign Updates

I’ve kept our campaign updates for last today. My soybeans campaign has touched my stop at break/even which may be as well since we’re rolling over tomorrow and I’m expecting an increase in volatility until open interest settles into the new front month.

EUR/USD barely scraped my stop – I guess this is not my lucky week. I’m actually surprised it survived the FOMC announcement yesterday but follow up selling overnight sealed the deal. As you probably are aware, I am not too sad to see a drop in the EUR as the current medium term trend had it pointing straight at a 1.15 target range. That one is not yet off the table unless the EUR/USD continues lower and breaches through 1.11. I’d love to tell myself that this is exactly what’s going to happen but frankly don’t see any compelling reasons why it should, at least for now. The current bullish trend remains valid until the recent spike low near 1.11 has been breached.

P.S.: Did I mention that I hate summer? And it’s not even summer yet