Mid-Correction Crisis

So I was catching up with the E-Mini campaign this morning and suddenly experienced a bit of an epiphany. Looking at the daily panel I suddenly asked myself ‘what the hell are you doing?’

Now don’t get me wrong, I’m not exactly unhappy regarding the fact that I was able to somehow squeeze out 4R+ in profits since the < 2600 lows early this month. But why do I keep expecting a directional move while we remain trapped in a sideways churn?

Well for one we are at a clear inflection point and given the prior gyrations odds have it that the bears are now going to throw another monkey wrench into the tape before it starts turning into a squeeze.

The VIX Sell signal I reported on yesterday is currently working in their favor and the window to strike is active until the middle of next week.

But obviously trading forward whilst always expecting what already lies behind you is a sure way of getting burned. Clearly volatility has been depleting over the past few months and that paves the way for more directional tape.

Timing all this however is next to impossible, to be frank. You just have to go with the swings as best you can. My volatility indicator suggests another swing higher looming on the horizon, and again we are talking realized not implied volatility here.

Translation: Anything can happen here and it probably will. Noise and price volatility produces uncertainty, confusion, and frustration among participants, which again leads to positions accumulating on both the bullish and bearish end.

One of them will end up getting squeezed and thus may at some point produce an outlier move beyond an important inflection point that once again shifts directional bias in one or the other direction.

This may sound a bit scary and error prone and it is. But it’s also where you need to get positioned if you enjoy trading break out markets. Which is my bread and butter when it comes to discretionary trading.

I don’t always get it right but when I do I am known to let my winners run. It’s satisfying not only from a monetary but also psychological perspective.

UVOL vs DVOL by the way has been weakening this week with the only exception being the Wednesday session. It remains to be as conflicted as most of us probably feel at this point.

Of course that exactly is the point as there lies profit in burning as many participants as possible during uncertain times. Once again, don’t hate the player, hate the game 😉

The Zero has been insanely useful to me over the past few weeks and it continues to warn us of the various traps and tribulations we are faced with every session.

The big burn lower yesterday didn’t impress the Zero Lite (right panel) and seeing a turn on the dime in the late session came as no surprise to me. If you are an E-Mini trader but are not yet a sub then I suggest you remedy the situation post haste.

Before I tend to my intrepid subs here’s a quick update on the Dollar. My early suspicion about the premature declarations of renewed Dollar weakness appears to have been justified.

Both the weekly and daily panel now suggest a run higher into about DX 94.5 where renewed profit taking will most likely take place. I wish I had bought that NLBL on the daily panel but after 10R on the big leg up it’s probably best not to get too greedy.

Yeah, you’re right Gordon – I can’t believe I just said that! 😉

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