Your Setups Are Served, Sir!

Good things come to those who wait. After a bit of downtime over the last two weeks, and focusing a bit on options and the educational front, it’s time to snap back into action. I’m seeing some very interesting formations across the board this morning, so let’s dive right in starting with equities.

The spoos are in shake out mode and may retest the 100-hour today. However I think a long position right here near 2060 has a good risk/reward ratio. Should the stop runners catch up with me then I’ll be waiting again near the 2050 mark. Juicy.

The long term panel is looking interesting – thus far the bulls seem to be running the tape although intra-day it’s been looking ugly as hell. Which has been the theme for the past year really except for a few weeks of trending activity. But let’s just forget about indicators, momo measures, breadth, all that jazz. Just look at the price action on the monthly. Quite a bit of range there, which is distinct from anything we have seen throughout this entire bull market. I’m seeing several stick saves there and if nothing else increasing volatility.

So we have more volatility on the short term, medium term, as well as the long term. Personally I don’t think that suggests a very positive long term outlook. Sure, we may churn around up here for the rest of the year as equities appear invincible these days – until suddenly they are not. So heed my words – something will give here eventually, and when it does it will come quickly and it will be ugly. Be prepared for the worst and adjust your trading accordingly, which at minimum means smaller position sizing and wider stops.

An alternative play today incidentally is the NQ which is currently clinging to it’s 100-day SMA. A failure here could actually turn pretty ugly so this seems to be a major inflection point.

Here the long term points toward 4300 being a key long term level. Below it we are back in bear territory, so this could be interesting. As a matter of fact what happens on the NQ may be the canary in the coal mine for equities in general. As a side note you may also keep an eye on the 18,000 mark over in the Dow futures which represents a monthly Net-Line Buy Level and thus far has been acting as resistance.

Actually I can’t believe I’m giving this one away for free. Absolutely brilliant LT context on AUD/USD and I’m long with a stop below the recent spike low.

However what will most likely be remembered as the best setup of this month or perhaps even this quarter has me all me wiggling in my seat. Please grab your secret decoder rings and join me in the lair:

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I think that’ll keep you guys busy for a while. Have fun but keep it frosty – most of all, don’t get over exposed and stick with proper position sizing. If in doubt make use of our forex and futures risk calculators.