A lot of people are on vacation and traders are of course no exception, evidenced by a general lack of participation across equities over the past few weeks. Here in Spain the month of August is pretty much synonymous with going on holidays. Almost everyone closes up shop (doctors included!) and takes off to spend the next few weeks with their family in some mysterious ‘pueblo’. It doesn’t matter if you’re from Madrid or Barcelona, the part of the city you grew up in is your ‘pueblo’ and that’s where you’ll pass your vacation. Unless you’re married of course, in that case you are condemned to spend the entire month with your wife’s in-laws in whatever god forsaken ‘pueblo’ she grew up in. No wonder the divorce rate in Spain is over 60%
There isn’t much to add to yesterday’s update plus I don’t see any tempting setups. Also given a reduced audience you’ll probably forgive me for being brief today. The E-Mini is pushing back into short term bullish territory and the daily panel also looks supportive as several NLSLs remain below us.
Bonds have not taken off yet but we didn’t get stopped out either yet. In general the ST chart is getting pinched by its 100-hour BBs, which means a bigger move is coming. The daily panel continues to look supportive. Nothing really to do for the moment – this will have to play out.
Silver retraced a little from yesterday’s highs and I’m leaving my stop at break/even. Given where we are on the daily panel we should typically NOT see deep retracements at this sage (i.e. middle to late stage trend move). So she either runs higher to her 100-day SMA or something else altogether is in the works.
Soybean Oil should be continuing higher from here and the fact that it hasn’t worries me a little. A retracement this early after the initial break from the upper 100-day BB usually means that we’re going back for a retest and that would most assuredly stop us out. I’m leaving my stop at 1R at this point as advancing it from here doesn’t lock in enough to offset what could potentially be gained by trend continuation.
I hope I explained that properly. Every time you advance your stop per your rules but as a discretionary trader you have the ability to consider outside factors such as currency dependencies, market correlations, long term context, etc., which is extremely difficult to account for when trading a fully automated system.
It’s possible that we may see a much needed Dollar bounce in the near future, which may throw a monkey wrench into pretty much anything we have in the running right now. Nevertheless I would however welcome at least a temporary low at this point as the current slide has been extremely vicious and may accelerate if the prior lows near DX 92.2 (orange line) and especially 91.3 (red line) are breached. If that happens we may be looking at a veritable Dollar dislocation which drags it all the way to 87 or perhaps even lower.
The Fed may think this may be supportive in the context of their stealth QE efforts, but increasing distrust in the U.S. Dollar may throw our economy a curve ball it isn’t prepared for. A ‘cheaper’ Dollar buys a lot less and I don’t see employers rising salaries by 20% or more across the board anytime soon. This in turn will have an impact on consumer confidence and that of course affects the economy the current administration intends to stimulate. Ergo, a weaker Dollar may be beneficial for right now but a crashing Dollar is not what the Fed wants or at least should want.
There you go – a much longer post than anticipated but once I get going there’s no … squirrel!!