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Thursday, March 2, 2017


“Politicians & dealers:feasting on most markets every day!”

Of course, we can thank another Fed Pie Hole [Brainard] late in the P.M. of the New York session last night [after stocks had closed] for the “2 minute wonder” 30 + PIP move up in USDJPY; “thank you politicians for yet again messing with markets and skewing everybody’s behavior for the umpteenth millionth time”. And now that that’s finished, we can spend the next 12 hours in “garbage land” with an HVALUE less than 30 in mindless chop.

The trading environment we find ourselves in is one of political terror; it doesn’t matter what market you are in, traders all over the map are being terrorized by politicians. The reason we are witnessing “speed of light” trading and then … crickets, rinse & repeat, is because more and more traders are refusing to do anything up and until another Pol comes down from the mountain and talks about his musings with the Oracles; the risks are just too great. “One day a Pol Pie Hole says ‘A’ and the tsunami of money takes USDJPY lower in a blinding rush; the next minute or day, another Apparatchik says “B” and the herd reverses, thus trapping a whole host of traders and inflicting the most pain possible. Rinse, repeat, and is it any wonder the folks around the world just want the bleeding to stop … ipso facto they sit on their hands and do nothing”.

Overnight trading in Asia & Europe has totally collapsed; Asia more than likely cuz they got sick & tired of bidding gold higher and losing money practically every night for the last 10 years and have finally wised up or run out of money, and Europe’s elite absolutely paralyzed over upcoming elections in the Netherlands and then France, which ends the E.U.  if Wilders and/or Le Pen win [and both can win, especially Wilders]. That pretty much leaves things up to the New York banks to create as much havoc as they can without getting legally charged and indicted, and of course keeping U.S. stocks higher which is now the official U.S. Federal Reserve Mandate of supreme importance.

Here we sit at the NY open, gold totally untradable and USDJPY with not even a 30 PIP HVALUE; everything crawling somewhere, but you don’t know where really. Volumes very muted, trade flow almost non-existent, and like I said, traders terrified of the next “shoe to drop” and getting caught up in something they can’t possibly make back up in a session; not so much USDJPY, but very much the case in gold where spikes [up & down] have been vicious and come out of the blue from nowhere. Simply put right now in gold, there is no way to quantify your risk in a trade; whatever you think it is, it isn’t cuz it’s much, much higher. So while you think you’re risking $1.50 - $2.00 per Oz., in essence it’s more like $5 - $7 and maybe $10 if it got ugly against you; most experienced traders understand this, and it’s the reason gold is not seeing any kind of “normal” trade flow; traders are backing away from this market in droves. Why would you accept this as a trader? It’s simply stupid; find another market up & until conditions improve.

And here’s the open! … yawn … USDJPY so far deciding not to play.

Over the years of my trading career, there have been times before where trading conditions have either totally stalled and markets have stagnated beyond belief [Summer of 1992], and/or times where political upheaval, geopolitics, and mass hysteria to own stocks ruled the day [1987 anyone?]; and while they generally don’t last very long in the scheme of things [few weeks to maybe a couple of months tops], when you sit in ‘em they feel like they could go a million years. Trust me, they don’t, and neither will this.

Finally, USDJPY gets an HVALUE for the day above 40 PIPS 11 minutes after stocks open in the U.S., and 6 ½ hours after Europe opened … from there … nada … very small, choppy range today thank you very much FED Pie Hole [“I am pleased that for the next 2 weeks going into the March Fed meeting you central planners are in a black out period where you have to buy your own chicken dinner and can’t pick up speaking fees and worthless honorariums from economists dumber than you, and therefore you have to STFU and not say anything … good, about time … how about a blackout period of the whole year?”].

What with shorts getting caught in the melt up from a couple of days ago, and the March Fed meeting 2 weeks from yesterday, any corrections in USDJPY should be limited to 112.75 max, and probably more like 113.35 – 113.54 area on the downside; anything steeper than this will be a surprise. Of course, stocks all of a sudden discovering gravity or some other geopolitical event might bring in some Yen buying, but I think it’s going to be tough sledding for short USDJPY traders the next 2 weeks.

As for gold, again it has morphed into a liquidity nightmare where any size over a 1 lot is treated execution style, and if you are on the wrong side of a stop … “fugetaboutit”! Right now, until the trade returns with volume and ranges that make sense, your risk here is 10X that of USDJPY for the same reward; sorry, ain’t playing that game. This is a market where the bullion banks definitely have the edge over us, and the logistic necessities of buying dips and selling rallies overly exposes the PAMM/MAM to risks that I find unacceptable given the reward and the availability of deeper more liquid markets like USDJPY. While they don’t go “tick-for-tick”, and some days one will do better than the other in terms of HVALUE, broadly speaking they trend the same way and correlate.

Gold never has been a market where your first thought is reward; gold is a market where your first priority has to be avoiding risk, because if you don’t you will soon find yourself up against the bullion banks, and when that happens the universe will be a cruel place. It simply doesn’t matter whatever kind of gain you can make; what matters is the potential losses on spikes, cuz if you have a stop in there look for it at the bottom many $$ / Oz. from where you planned.

Having said this, the version 3 volatility algorithm signals work well in gold; after a move higher/lower the engulfing patterns and/or reversal M1’s nail it very well; that’s not the problem. The problem is you buy a low it goes $1 in your favor, and when it rolls over the spike down fills you $2 lower for a loss, or even far worse than that. More than likely that will not happen in USDJPY; not to say USDJPY doesn’t have its senior “stupid poo poo” moments … it does, but far less often than gold and overall over time they both move about the same. Again, I’m not trading it because there is no money to be made; I’m not trading it right now cuz none of us want to be down 10% - 20% in 2 minutes from getting taken out back and shot in the proverbial head by the LP on a forced liquidation stop or market sell order.

From the European open in USDJPY, there were 2 very good buy signals, both on the break from the high around 114.54 down to 114.23; the first one I didn’t take because it was “iffy” [IMHO], and the range on the M1 candlestick was about 2 – 3 PIPS. The second one wasn’t nearly as good, although if I had hung on … hindsight and all … it was a good trade. All in all, pennies in profit on a day where zero happened after Europe opened … looking around the FX arena, nothing did anything except chop.

Over the upcoming weekend, I’ll be posting on Sunday night the new manual for version 3 USDJPY trading [and by proxy any other pair that has a “net” trading cost of less than 1 PIP of which there are plenty]; until then, you have to know this about any of the FX pairs we now have availability to trade via Turnkey Forex; the algorithm spots the turn of the retracement inside the days trend and most often after moves [up or down] totally “nails” the turn back to the day’s trend. It also spots intraday highs/lows and gets you out near tops and bottoms.

The one thing you have to avoid is falling prey to buying/selling “breakouts”, looking for retail stops to save you or for the trend to continue uninterrupted; many times dealers run the stops by a PIP or two and then reverse the market 5 -7 PIPS quickly. New highs are for liquidating longs; new lows are for liquidating shorts; if you consistently try and pick the bottoms and tops you are going to get caught in a stop “frenzy” that hurts you badly. If you’re going to be wrong, be wrong about opportunity, not capital!

When trading slows, version 3 of the algorithm still spots the opportunities, but it’s easier when the market is moving; nonetheless, the signal parameters don’t collapse onto themselves like prior versions and this is a big plus for our trading. In active markets, we will get many trades during the day, and like today when things crawl we only get a couple. Overall, I’m thrilled with algorithm performance in these slow conditions, something that caused us tiny losses when first starting the PAMM/MAM in the prior version.

I can’t make markets move, but I can assure you that when they do, from the start of European trading through U.S. hours, we’ll be there waiting for signals to capture and profit from the version 3 algorithm. It’s simply a matter of patience & discipline.

I feel so good today, after taking the entire bottle of “anti-putz” pills last night, even the dog wants to be around me today [“well, only if I go to the impenetrable bacon box and get him some bacon”.]. I haven’t once today electrocuted, drowned, or otherwise poked myself with a sharp stick … not once! “I think I deserve, at least, a participation ribbon”! When I told the Mrs. this, she turned around, went into the bathroom and brought me a roll of toilet paper.

PAMM/MAM spreadsheet from today directly below; and with that … I’m outta here … until tomorrow.

[click to enlarge]

Have a great day everybody!


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