Lost A Few Pounds

It seems like we were subjected to an enforced trading diet late Friday, and apparently it’s working since as you can see my abs are starting to show. By the way, sorry if you just lost your breakfast. Obviously this isn’t a big surprise to anyone as fast drops/advances *ahead of medium or long term inflection points* usually are quickly followed by a shake out. Pay attention now as this is important: Especially on the sell side the dynamics shift considerably once those inflection points have been breached, as violent selling usually tapers out more slowly before a bounce.

Meaning you see one or two shallow corrections which are followed by more downside as volume participation slowly abates and then eventually allows buyers to step in and defend a prior or new support zone. On the upside things evolve similarly but are usually not as violent for extended amount of times (i.e. usually only for one session or two). And there you have it, your weekly lesson in tape reading. I wanted to share these key observations as many younger/newer participants may have rarely witnessed highly volatile sell-offs. And although we are a long way from a new bear market it’s good to not get mentally locked in ever repeating patterns expecting the same in perpetuity.

Alright as many of you are on vacation I was planning to keep things brief for the day as I actually have a mountain of work to attend to on the coding front (yes, new toys and systems are in the works). So let’s review which of the campaigns are still alive and kicking. Fortunately the E-Mini short campaign is one of them as it magically survived the quick stab higher last Friday. I got extremely lucky there it seems as my ask near 2440 didn’t get filled and I hope that you were as fortunate given that the futures have continued to point down overnight.

The daily panel isn’t giving us much to work with in terms of projecting a possible flow as the 100-day SMA hasn’t been tested since the second Boer war. But the 25-week SMA near 2400 seems to line up nicely with two weekly NLSLs at 2405 and 2410, which is where I would expect the bulls set up defenses.

The TF campaign wasn’t as lucky and I’m out at ~1R in profits. Heck, these days being able to profit from any downside correction in equities seems to require a PhD in quantum physics, so I’m not too unhappy as this one seems to be the laggard of the bunch anyway.

Gold also got taken to the woodshed and fortunately it was at break/even. In retrospect I may have advanced my stop a wee bit too early but then again, intra-day volatility has really punched holes into any traditional campaign management rules. Usually when I see a hard advance higher I don’t expect it to turn on a dime right away for a revisit. When it does there usually is a second entry opportunity, which is what I am going to look for today and possibly tomorrow.

As you may have guessed, silver is also out at break/even. This is very unfortunate as I’m pretty convinced it’s going to keep pushing higher now. Pretty miffed about this stop out as I’m already seeing it push toward the 18 mark. Grrrr….

Fortunately the copper campaign survived a pretty nasty retest and thus far we seem to be in good shape here. I’m advancing my trail now to below 2.943 in order to lick in a teeny weeny bit of profits but give it space to run.

Since we’re on the subject of stop outs as well as tape reading: Remember that bond campaign from earlier last week which got taken out at break/even? Well, there was a dip lower which then was followed by a punch higher and then a revisit of our entry zone. This would actually have been a brilliant re-entry spot but I somehow missed it, probably because it happened mid-session (remember I am in Europe with different hours).

It’s a shame because these types of formations which feature an unsuccessful attempt to breach major prior spike lows do have a higher probability of succeeding. Yes, sometimes this devolves into a sideways mess but we deal in probabilities here and not in absolutes. I encourage you to often revisit some of your prior campaigns and then review how prior entry levels often serve as support or resistance zones.

So let’s talk Dollars, people. Old bucky is starting to droop lower, just as I feared. Thus far the bulls have a very good chance of painting a meaningful floor pattern here but if it drops through 92.7ish (typo in the chart, sorry) then things will get ugly for the greenback.

Which is why I’m pretty happy that I hedged myself accordingly last week. I have now moved my stop to break/even as it is starting to look like that NLSL and the 25-day SMA are going to hold.

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