Super Mario E-Mini Edition

Overnight gapping action on the E-Mini has shifted from being the exception to being the norm. And not just that, what’s even more interesting is that opening gaps in the majority of the cases preceded the direction of the ensuing trading session. In other words, a gap higher at the opening bell has a high probability of not being closed but followed up in the following hours and the same applies to an opening gap lower.

Now correlate that with the fact that all directional changes in the recent whipsaw emerged during a relative low in realized volatility (RV). I’m using my own home-brew indicator here but you can just use an ATR and slap a BB(14) on top of it to see something similar.

Which leads me to consider a possibly juicy intra-day trading system on the spoos: enter after the first 30 minute of the session in the direction of a preceding gap unless RV has descended < the lower 2nd standard deviation. If RV is rising then even better. Take profits once RV reaches its upper 2nd standard deviation.

Now on the daily panel the E-Mini has now reached the end of its June contract and is about to roll into September, the actual ‘spoos’. It’s become a little tradition here at Evil Speculator to use this occasion to pass on a bit of market history to some of you aspiring youngsters amongst my readers. And who am I to break with tradition?

What’s A ‘Spoo’ And Where Can I Buy One?

You often see me use the term ‘spoos’ here and some of you may wonder where it comes from. Well, look no further than the September contract the E-Mini is about to roll into. The word originated in the XMI pit on the America Stock Exchange (AMEX) in New York and refers to the symbol for the September contract: “SPU”.

Even though the name is based on the September contract symbol, the term is used to describe contracts of all expiries. When somebody speaks of the spoo, they are referring to the current, most active month trading. Yes, it’s silly to have a nickname for a contract but there are traditions inherent in all aspects of life – so deal with it!

What’s With The Boxes?

Okay with that out of the way let’s talk about the boxes I drew on the daily panel. About two weeks ago when we were barely scraping the 100-day SMA I made a point that the bullish battle zone above was quite a bit more shallow than the one below, thus giving the bulls a bit more of an advantage.

Now price has now advanced halfway through that range and if it manage to overcome ES 2800 then escape velocity will have been reached. The best we can hope for at this point is one last reversal lower toward the 100-day SMA, which would be a great entry opportunity. But as I said yesterday, that’s probably why it won’t happen.

Campaign Updates

Let’s start with the losers or at least the laggards today: Gold apparently isn’t going anywhere as it remains trapped in a sideways range after its roll-over. I’m going to stick with the rules with this one as surprises can and will happen – that said it’s looking like a stop out there.

Bonds – took this one on yesterday and it’s already heading toward its ISL. Looks like I pulled the trigger a wee bit too early here.

USD/CAD also not playing by the script and just stopped out at ISL.

The EUR/USD however has punched higher and although I have mixed feelings about that I’m happy to move my stop to break/even so quickly.

Curiously the USD/JPY is also heading into 1R in profits and as I already advanced my trail to break/even there’s nothing to be done.

And finally the GBP/USD is at 0.5R and given the current formation I decided to grant myself a premature advance of my stop to -0.5R.