Watch Your Six

Mole’s pervasive paranoia apparently was right on the mark. As you may recall I mentioned early Monday morning that I did not care much for the patterns that started to emerge on the Forex front. This caused me to reduce my exposure and recommend small position sizing and wide stops. I hope you followed suit as the tape we are seeing all across the board has been rife with volatility and shake out attempts. Apparently we are getting ready for a big move.

Fortunately I was spared a lot of whipsaw this morning by holding back and waiting for a touch of the 25-hour before considering taking the long trigger at 1851. As you can see we ran all the way to the 100-hour and then bounced back.

Which got me curious and I zoomed out a little. It seems that the 100-hr has increasingly been providing support. The only exception was a week ago when it sliced through it and proceeded to the lower 100-hr BB before continuing higher.

As a sidenote – I pulled up my LT version of the VXV:VIX ratio and apparently we are approaching a signal range that may lead to another correction. When exactly is unclear of course but this warrants caution and taking it easy here may be good medicine.

Bottom Line:

If we get an IP-L breach toward the EOS I intend to take it with 1/2R – after all we have retested the 100-hour and thus far it remains intact. Putting a stop below 1837.25 puts us below the 100-hour, which is good. However I may add a few ticks just to be safe. This rally is getting a bit long in the tooth and I would prefer seeing a few down days before resuming back to full position sizing.

Otherwise I do not have much to offer this afternoon. Per my comments above I am staying out of Forex for now – at least until I’m seeing more directional patterns again. Nothing interesting on the futures front either, it’s time to lay low and wait for better market weather. Don’t force it folks – the good thing about being independent (i.e. retail or semi-pro) is that you don’t have to trade – enjoy that privilege.

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Cheers,