Non-Manufacturing Mayhem

There was a reason I suggested OTM puts yesterday and it was among other reasons for the eventuality that another sugar coated non-manufacturing employment report would gap this turd into oblivion. Unfortunately there are forces at work here (i.e. politics in an election year) capable of stomping even the highest probability setup.

Scotty just buzzed me from down below and warned me that she’s running at fumes at this point. Now to some people this would look like a very bearish chart and I have to concede that I would usually count myself in. However, based on the failed setup, the weakness of the signal, the sentiment figures, the divergences on the Zero and other indicators, the recent VIX sell signal (which died), etc. we may be dealing with a train without a conductor here. Frankly, I have no idea who is buying up here.

My more price based view on the spoos shows us a strong push outside the hourly, which I think will respond a bit to gravity before this session is over. The daily is now right at both upper Bollingers. Does that mean we should go try a second short again? Not necessarily – I think the key here is looking at the currencies and in particular at the AUD/JPY:

As I said yesterday, this thing may still want to run and the first real resistance I see is at 82.83 where we find our next NLBL. I would not feel comfortable trying a second short position unless we get very very near that one and even then I may not be convinced until I see signs of a possible reversal. We may see a bit of whipsaw today after today’s strong push higher but let’s be clear – our technical setup on the equity side is dead until we see the AUD/JPY approach 82.83 – and even then the odds remain iffy. The trend is simply too strong at this point and it makes no sense to step in front of a speeding train.

Now what really made up for today’s non-manufacturing mayhem is our USD/JPY setup. The odds were iffy here yesterday but we were scraping support and I told the subs to grab a few long positions. And boy did they pay off! I would be out right now and right here as there will be blood at 76.77 – too much resistance looming above. I expect a few days of hemming and hawing after which time we can try to trade a continuation.

And this goes to show that you can’t be married to one setup on only one particular market – especially these days. Our currencies and commodities trades have been paying off in spates lately and what’s more important: technical setups are a lot more reliable. Plus we are able to manage our positions 24×6 – a luxury we do not get on the equities side as we are confined to only 6.5×5 hours of trading a week. Which are some of the reason why I have been pimping Forex to my intrepid stainless steel rats throughout the past year, and to much our benefit if I may add 😉

Cheers,