The Game Of Speculation

“The game of speculation,” writes Jesse Livermore at the start of his book, “is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the man of inferior emotional balance, nor for the get-rich-quick adventurer. They will die poor.”

Quite often I find myself looking at a chart and thinking to myself: ‘What [the heck] would Jesse do?’ It’s my feeble attempt to lift myself and my game a bit higher by standing on the shoulders of giants. Of course, given you have read Jesse’s work, deep inside we all know what he would tell us right now: ‘It’s a bull market, you know!’

True, volatility has now dipped below the 12 mark and a pretty solid support level that has been holding since the beginning of the year. But given the recent gyrations we are not even close to producing a VIX sell signal as the lower BB has dropped to 10.55.

My VXV:VIX chart has us at a possible short term reversal point but let’s be clear that even a touch of the most upper trend line usually precedes price by several weeks.

And true, there is little volume ahead on our profile map, plus the sheer steepness of the advance is making me wonder how much longer this can go on? And just when I’m about to suggest a reversal must be imminent there’s that voice in my head again: “Only enter a trade after the action of the market confirms your opinion and then enter promptly.”

So I must ask myself: Has the tape shown us any indication of slowing down? No, it has not. Has it run on fumes for weeks now? Yes it has! What tells us that anything will be different tomorrow? Nothing. Not just yet.

So I urge you all to be patient and let this thing ride. Never underestimate the power of a short squeeze – I’ve made that point many times since I launched this blog and in the majority of cases it has saved our sorry asses from letting our feelings/opinions lead us straight into defeat.  Or in other words – if you ever feel the pressing need to do something in the face of a complete lack of evidence supporting that action, slap yourself until you come to your damn senses.

Bottom Line: Could this thing embark on a short term correction tomorrow? Yes it could – of course. But let’s not fool ourselves – that possibility has existed for weeks. So if you’re playing the short term then you’re not long here anyway. But if you’re riding the trend and are looking for early signs of trouble then look no further than the 100-hour SMA which has been leading this thing higher. Good enough for ya? 😉

Our early morning setup on the E-Mini worked rather nicely and I’m about to take profits as we’re far outside the upper 100-hour Bollinger now. Which goes to show that boring looking tape can get very exciting in a jiffy – especially when both BBs are starting to come to a point.

Let’s get to the setups – we have a nice collection tonight. I was about to dismiss the EUR/USD inside day setup but then noticed that we’re right at the 1.3 mark and that in my view represents sufficient context to warrant an entry in either direction (based on the inside period rules on our cheat sheet).

Here’s one more for the leeches – crude, also painting an inside day, this time near its 100-day SMA. If you want to play this early you can probably just follow the inflection points as suggested by the hourly panel.

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Cheers,