Waiting For Godot

If you asked me about my favorite pet peeve then I must squarely point at the perma-bearish disposition of the average retail trader. After a full decade of posting about trading related topics on nearly a daily basis (weekends excluded) not a day goes by when I don’t come across a comment reflecting chronic bearish bias. There are a multitude of reasons for that, most of which I’ve covered right here in the past.

Nevertheless chronic bearishness seems to be the one cognitive bias that has proven to be as difficult to eradicate as mosquito transmitted diseases, thus my search for a possible cure continues.

Perhaps this chart may at least serve to relieve the symptoms a bit. What’s shown here is of course the VIX over the past 20 years and I’ve pointed at all spikes > the 30 mark. Not the ones > the 50 or higher mark but simply all occasions when the VIX pushed into bearish territory (i.e. ~20 and > ) and then continued higher.

And to my count I am seeing 13 occasions over the past 20 years, which averages out to about 1 spike every 1.5 years. So I wonder – are market bears only active once every few months? Well, that’s admittedly a loaded question as there is no predicting large outliers, especially on a long term basis. We can point at floor patterns like e.g. the one in late 2017 when ATR was dipping into extra low territory. But in general you can’t predict those big spikes, they (almost) come out of nowhere.

Plus taking proper advantage of medium term bear markets is almost impossible for the average retail rat mainly due to excessive margin requirements, general lack of capital, and lack of access (i.e. spreads widen significantly during bear markets and especially at retail brokers).

So the only opportunity that really remains is to ‘load up’ on short positions or perhaps puts during the good times, which in theory can turn a $100k account into FU retirement money. But once again there’s a hitch: remember that these outliers happen very rarely. Given about 253 trading days per year with one outlier every 1.5 years comes out to about 1 big opportunity every 126 trading sessions. Because just look at these spikes – they usually happen within just a few days after which vega squeeze starts robbing you of your ill-gotten gains.

Now if that sounds like a sustainable trading system to you then I have a bridge in Brooklyn to sell you. I for one prefer the steady daily grind which not only offers a large range of trading opportunities across several market verticals, but also a life without emotional drama and stable sleeping patterns.

Speaking of the VIX – it’s been pointing lower over the past two sessions as shown here by the SPX/VIX ratio next to the raw index.

The current correction is looking a bit listless but may just get ready to frustrate a few more longs before the historical stats begin to shift back in the bull’s favor. Let’s remember that we are wrapping up the most bearish season of the year, and once again with disappointing results (for the bears).

My long campaign is looking a bit iffy at this point but my ISL remains. Obviously a lot can happen today and tomorrow as reported on Monday.

Which of course is expected to affect my forex related campaigns. Here’s the EUR/USD which is softening up a little after a push to 1R MFE. I’ve fully anticipated a retest of the neckline on the daily and thus I’m leaving my stop at break/even (which btw may not be good enough but whatchagonnado).

The Dollar futures are basically at the make or break point and the next two days will most likely decide the trajectory for the final quarter. FWIW why the Dollar keeps falling against an already doomed EUR is beyond my imagination.

That brand spanking Ersatz-SWIFT system the Krauts have conjured up in collaboration with the Iranians, Chinese, and Russians will do very little to change the economic reality of Americans increasingly buying products manufactured by Americans. Once again I must congratulate myself for leaving that place over a quarter century ago. Best. Decision. Ever.

The Yen has kept falling and the USD/JPY may just be ready to make a run for it. As you know I’ve been monitoring this chart for a while now. Let’s see if we get a retest so we can hop on board before it transpires. Odds support that which is why I didn’t enter long proactively.

Bonds have been a rough trade over the past year and we are now back at where the ZB reversed late last spring. I see a potential binary entry situation here with a buy near 140’20 and a sell near 139’16. I would put my stop on the outside of the opposite trigger and Bob’s your uncle.