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Magic Bounce
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Magic Bounce

Magic Bounce

by The MoleMay 12, 2015

At the risk of sounding cynical but that bounce off the lows today was rather mysterious and reeks like an engineered double squeeze. Once again our Zero indicator signal paints a pretty good representation of today’s whipsaw:

2015-05-12_zero

Some poor sub was asking me how to interpret those wild swings and the best I could offer was the following:

  1. Clearly the tape suddenly turned on a dime today. You may point at some random news event as an explanation but I smell turkey.
  2. The bounce and gap fill that followed looks like it was run by prop desks and institutional traders. The strongest spike was a 1.0 compared with a negative 2.5 on the downside.
  3. VWAP has not been touched since the lows, which is rather unusual given a) the initial drop lower and b) the diminishing participation which since has turned into a flatline.

Obviously all this is completely in sync with the current market phase – which remains to be one big sideways high volatility wood chipper bent on destroying as many participants as possible. So treat carefully and make sure you get exposed only when the odds are clearly on our side.

2015-05-12_spoos_update

Speaking of which – what an awesome entry at ES 2011 yesterday. Things looked quite rosy there after the open but it was not to be. I am staying short here as swapping positions here due to a bounce is not part of my system – I got a good entry and I’m riding it to the end. Moving my stop to break/even however, that’s for sure. I’ll be looking into swapping for longs if that happens – as discussed yesterday.

The positive thing here is that this dip lower builds even more context, once again demonstrating that the short side is unable to breach little more than short term support levels. The current NLBL at 2111.75 has already been tested and a breach higher would be a damn good reason to be long. But for now I’m not going to second guess direction – this is exactly the type of tail chasing we need to avoid. You got an almost perfect entry – stick it out as per the system rules.

2015-05-12_EURGBP_update

Some updates on our ongoing campaigns – EUR/GBP looked good for a while but has dropped back lower. Nothing to add since yesterday’s entry. Still willing to flip for a short position should it drop below the weekly NLSL.

2015-05-12_CHFJPY_update

CHF/JPY – also looked a lot better a few hours ago. I’m moving my stop to break/even now.

2015-05-12_AUDUSD_update

AUD/USD – that one seems to be good to go! As you can see it’s peeking over its 25-week SMA and a breach here could lead to a squeeze higher.

2015-05-12_natgas_update

Natgas – I think I threw that one out for free yesterday. I really hope some of you guys grabbed a few long positions after it produced more context near the 100-hour SMA. I’m riding this sucker all the way. Stop now at break/even of course.

A few more goodies below the fold for my intrepid subs:

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About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at the usual social media waterholes.
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