Long The Dollar 2.0

So, you’re long the Dollar (or short the Euro) and aren’t sure when to head for the hills? Let’s take a look at the tape first:

If you remember the last pertinent post – we were waiting to go long at around 75.9:

Well, actually we attempted to go long at 76.42 but it pushed all the way to 76.1 – the next RL would have been at 75.94ish. Of course the market doesn’t make it that easy for us, which is why 2sweeties averages up/down – more information on his style of trading is on his site – personally I don’t do this way but to each his/her own.

Now, since we already bounced we are now looking at where we would take profits if we are long or where to go short. The daily RL calculator is quite clear this time around as the highest frequency RLs are above the 77 mark.

I set my 100% chance of reversal at 77.42, which is the prior October 2nd high – not a back pick, especially since 77.9 is quite a ways away. So, if you are long right now and got a good entry around 76.10/76.20 then holding at least into 77 might be good medicine.

Of course this market is completely insane, so there are no guarantees. But unlike 99.999% of the FX traders out there you have reasonable odds on your side, which will help you define your entries, exits, and stops (if you choose to use those). More information on how various retracement level calculators is available at retracementlevels.com.

1:38pm EDT: Are you still holding long term puts – are they getting brutalized despite the fact that we’re painting a doji right now?

Nothing like a juicy drop in the VIX to make the life of the bears even more miserable. Whether or not this is a drop of volatility to shake out weak hands before a real drop in equities – or if it’s just plain old market maker nastiness remains unclear. FYI – in early September they did the same to my Jan/March puts (i.e. dropping the bid/ask spreads of the back months in particular) – I first thought that was indicative of a continuation of the bearish scenario but then was in for a bad surprise. I wanted to point this out just in case you are interpreting this merely as a shake out attempt.

The Euro meanwhile is busting higher and I expect equities to follow suit by the EOD. Yes, we keep reverting back to VWAP and am seeing a long red candle back to it right now – but we all know how those POMO days play out, don’t we?

Speaking of which – today’s POMO put $1.3 Billion into the bulging pockets of primary dealers itching to deploy them where it hurts the most. It’s not much but enough to keep the tape at bay right now.

2:10pm EDT: Still harping on the same subject – here’s the POMO schedule for the next two weeks:

As you can see the next one is next Wednesday – which might actually be the last one or at least one of the last ones. There is only $5.6 billion left – the well of eternal liquidity is slowly running dry…