Running Nowhere Fast

Just yesterday I presented a laundry list of evidence suggesting that institutional market participants are engaged in systematic distribution and probably have been so since early this year. The take away message was that intra-day volatility is increasing steadily and that we should be prepared for sudden turns in direction.

And almost to prove the point my post was followed by a short squeeze higher which ran its way all the way into the close.

Only to be fully retraced again overnight. So if you held any long positions since yesterday then they are most likely worthless at the time you’re reading this. Sideways volatility tape is among the most difficult among all market periods, and this particular one has been tormenting traders for the better part of the year. If you insist on participating on the equities side then be sure to be nimble. More specifically this means:

1. Use small position sizing.
2. Use wider, more conservative stops.
3. Be prepared to take profits earlier, especially if you see acceleration.

But Mole – if I use wider stops and smaller position sizing – won’t that curtail my profitability? Exactly and there is no way to compensate for this. You cannot draw blood from a stone and personally I have stayed out of equities over the past few months unless I saw very compelling evidence that the odds were on my side. Treat carefully and listen to the Mole – you may just make it through this year unscathed and with your assets intact.

ZL – that’s soybean oil – a more exotic futures contract. But it may be ready to paint a floor which is why I’m taking a teeny weeny long position here with a stop below that spike low. Quite some ways away but this one could easily gyrate around down here for a session or two.

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Cheers,