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Thursday, August 3, 2017


“When you think your screen is lying, check your phone trading app!”

A little over 150 years ago [1859 to be exact], Charles Dickens penned, It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way—in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.”

This is, of course, the opening sentences in Dickens classic novel of the French Revolution, “A Tale of Two Cities”. Read those sentences above again, and think 1) the manipulative FED, 2) the “Plunge Protection Team”, 3) the sycophant MSM, and 4) the state of markets the world over, but especially the contrast between the DAX30 and the Dow30. Not a pretty picture, is it?

And so, what we are left with in this current political, social, and financial environment of deceit, treachery, despair, hope, and profit, are the “Tale of Two Markets”. One is like Paris, 1797, and the other London; the DAX30 becoming like Paris, and the Dow30 the staid, prim & proper, London. Trading action in these 2 cannot be any more divergent than right now, one being a meth addicted teenager on cocaine, and the other Grandma at the nursing home.

And while we all know Grandma’s routine, the teenager presents us with a daily dose of “random nuttiness” that comes with the territory, today being no exception. Here we are right up against the New York open, and you want to talk about the “Flying Wedge of Death” [FWD] rearing its ugly head again … man-o-man is today a classic FWD screw job of pure pain … how many new lows and new highs are we in for Mr. Market? … and the sad part of this is, once positioned incorrectly on the wrong side, this puppy ain’t lettin’ nobody out unless they pay up on the spike, whether that be up or down. And as I have tried to tell people for what seems like eons, with FWD’s the emotions, losses, and catastrophic decision making only compounds itself as the day wears on, cuz once you get caught on the “yo-yo” that big money has you trapped on, the intensity of the losses exponentiates … at the end of the day, you look up and see not much has happened, and you are almost bankrupt. I’ve seen so many people go through this, if I had a nickel for every time, I’d probably have 10 Grand in the bank, it’s so pervasive. And while I have tried to educate people forever, they still want to believe that “something” simply MUST give way, and that the market will explode one way or the other. NEWS FLASH: “No, it doesn’t have to do anything you want or desire … NADA”!

Today, at mid-morning, the DAX30 has gone to the highs or made new highs, 4 times, and it’s gone to the lows 3 times, all inside about 60 points … get “yo-yoed” in this clusterfark, and it’s got the potential for lights out. And as I have said before, these type of FWD’s, doji’s, and low range days tend to cluster … and then they go away for years … you usually don’t see them on a regular schedule, but clustered around Holiday’s [Monday or Friday], central bank interest rate decision days, NFP Friday’s [like tomorrow], and political events [like elections and referendums], if they come at all.

An hour into this mess, and believe me it’s a mess, the Dow30 & SP500 continue to not want to break at all, just meandering here with small gains but refusing to go down anything of substance. It looks as though the central banks are supporting it again for the 9th day in a row; never mind all the assumptions for sustaining higher stock prices at all-time record highs is delusional. We got no health care, no tax cuts, nada on any domestic agenda like infrastructure, a nuclear toxic political crowd bordering on paranoia and literal hate, and an intelligence community that is hellbent on war with Russia and/or North Korea. What could possibly go wrong? Well, according to the FED nothing!

One of the meanest DAX30 days I’ve seen in a long while … it was nothing but vicious spikes up … a couple of minutes [literally] of sideways action … then vicious spikes down … rinse & repeat the whole day … I am glad I left it alone, cuz I’m not sure I would have come out the other end with any profit at all. I’m left wondering if the “rats” infecting U.S. stock indices had anything to do with the DAX30 action today? OMG, I hope not.

Here in the early afternoon, the Dow30 would be better off closed … most likely it would help anybody attempting to trade the index as well, cuz from what I’m lookin’ at, this market is sick … once New York opens, it can’t rally and it can’t break … consider the spread and RT commissions, and for the risk you take, you are getting zero in return. This is a trading disaster.

Yesterday I mentioned EURJPY as an alternative to the DAX30 & Dow30, and replacing the SP500 … most of the time it correlates inversely with the DAX30, but sometimes for short periods they can move together. Broadly speaking, though, if EURJPY goes up, the DAX30 has a tendency to go down, especially if the cross is being moved by the Euro [which it is now]. As we see yet again today, both the Dow30 & SP500 are untradeable … it’s either 100 higher on the open from “vapors”, or it’s dead and basically unchanged going into New York trading … there isn’t anything else, and the New York session has become nothing short of a total “protect & defend” operation for the manipulators. When trading opens, 5-10 minutes later, you will be lucky to see ± 20 points in the Dow30 up to 3 hours later, with nothing but endless drift and dead-end trading conditions … today is no different. So yes, I’m dropping the SP500 and adding EURJPY as a “quasi stock index” … basically the “Anti Dax30 Index” if you will.

Now, I don’t need anybody to remind me that technically EURJPY is an FX cross, and that most of FX trading is a disaster, and probably will stay that way … I know that … what I also know is that the EURUSD has awoken from its 3-4 year slumber and looks set to actually go back to some kind of trading; for the last 3-4 years, while the DAX30 has gone up approximately 50%, even with the Greek crisis thrown in there for good measure, the EURUSD has basically been a “dead” trading instrument … in other words, the DAX30 got a “free pass” … now with more movement in the last 6 – 8 weeks than its seen in 3 years, it’s not gonna be the “free ride” it was before; now, the stock indices market has to pay attention to FX.

For a very long time I’ve traded EURJPY, since at least the start of around 2000 – 2001, when it first came on to electronic platforms like MT4, with a “tight spread” of 3 – 4 PIPS [yes, I know it’s ridiculous … but back then it was standard]. Now, at Turnkey we can trade this with a 0 – 0.003 spread with $2 per 100,000 notional dollar amount RT commission, which makes our “net” trade cost just about 0.004 PIPS … that’s less than a half a PIP, and the way this stuff trades, that is an awesome advantage we have over others.

From all of my research and studies over the years, and as recently as last year, I’ve always treated USDJPY & EURJPY [for research purposes] as NOT simply FX, but more along the lines of “asset classes” unto themselves, and placed them for “cycle research” right along with the stock indices. Of course, the main problem with stock indices, is that up until this year the cost structure was ridiculous, not anywhere close to the spreads we enjoy with Turnkey. However, when doing Gann research, and modeling my own theories regarding cycles and how the market trades, these 2 FX pairs have always been considered by me as “stock indices” more than anything else.

In the past, I considered USDJPY as a good trading pair; however, the main problem with USDJPY is that it goes into hibernation for 6 – 9 months at a stretch and doesn’t do Mr. Jack Squat. If you are attempting to make a living from trading, this isn’t gonna “fly” with your wallet and a “trader lifestyle”. Oh too be sure, if USDJPY had a guaranteed range every day of 100+ PIPS, I would park my donkey there and never leave … but it doesn’t, and it won’t, and it will frustrate the living crap out of you. The EURJPY cross, with an active and somewhat volatile EURUSD numerator, and even a somewhat slow USDJPY denominator, still produces good ranges and decent volatility … let them get active and volatile together, and you will think you’ve died and gone to trader heaven, the conditions are soooooooooo good. Right now, it looks and feels to me, like we have a very long stretch of volatility in at least EURUSD going forward … and any pick up in USDJPY is like frosting on the proverbial cupcake.

Ok, so I’m treating EURJPY like a stock index … great, what does that mean exactly? First off, it means all of the cyclical indicators via the complex math I use are patterned off of Gann’s ‘Square of Nine’ that I use for the DAX30 in the version 4 algorithm. Simply using the “Kumo Cloud” in the Ichimoku indicator gives me the math code I need and therefore don’t have to “reinvent the wheel”. The values that are found in the “Quick Guide” are all Cardinal Cross numbers on the 90⁰ ‘Square of Nine’, layered in succession on top of each other, and are the values for the “Kumo Cloud”.

Today’s trading is nothing more than “wait for tomorrow’s” NFP report; there isn’t a thing going on anywhere [except EURJPY] in the stock indices that warrants any trading at all. Very early today, after watching and observing the first low, then trip to the high, then new low, then almost a new high in the DAX30 and decided, “well, I need the FWD like I need a hole in my head, and said ‘no mas’ to Mr. Market”, I decided it would be beneficial for most of you to see a day’s analysis of EURJPY. Directly below is the M5 of EURJPY for about an 8 hour period, during its busiest time of the day. Directly below that chart is a table of the values superimposed onto the chart for analysis purposes in a Microsoft Excel spreadsheet [in the spreadsheet, CC is “Cardinal Cross” (red lines) on the ‘Square of Nine’, and DC is the “Diagonal Cross” (blue lines) on the ‘Square of Nine’]. And directly below that is Gann’s ‘Square of Nine’ with the black circled squares the values of the times of the moves [# of M5 periods closest to the center], and the outer black circled squares the prices of the moves.

If you haven’t noticed, all of the black circles are either on or cluster very close to either the CC or DC red and blue lines, respectively, on the ‘Square of Nine’ … these cell numbers were considered by Gann to be the most important in determining both times and prices of swing highs and lows in a market, and you can see from today just how damn accurate they are. The mistake, though, that people make is in trying to “project” the ‘Square of Nine’ into the future by trying to say, “well, the last 2 M5 number of time periods between the high and low were 17 and 34, therefore the next one will be 34 also” … wrong … why can’t it be any cell number on the CC and/or DC?

Its value is looking back to prove to you cycles are at work in a dynamic environment influenced by probability theory; therefore, by utilizing the “Kumo Cloud” cuz it has the math I want, I can create the conditions necessary for a dynamic probability model that moves with the market; add in the SDEV lines for exhaustion in the “bell curve” of normal distribution for all conditions[more on this for the M5 below], and you got the version 4 algo. If you go back up to the chart, you’ll notice all the highs came when the “Cloud” was sandy brown [rising], and all the lows came when the “Cloud” was aqua [falling]; this is exactly what you should expect, and the “Cloud” will be its “DEEPEST” at these extremes … so, when you see the “Cloud” in real time get bigger and bigger, and then you get a spike that corresponds very closely with a CC or DC cell number in terms of time for the move, you tell me what you’re gonna do?

For conservative traders, you can initiate positions utilizing the “Kumo Cloud” breakouts via the M5 with an “envelopes” deviations field of 0.19; since August 1, there have been 9 SDEV line hits, with each time the market backing off from the high or low when hit. For more aggressive traders, use the M1 “Kumo Cloud” and an “envelopes” deviation field of 0.13. In both instances, whether M1 or M5, use tight stops and try and let the winners run … in any event, use spikes up to liquidate longs, and spikes down to liquidate shorts, and don’t worry what happens next … simply wait for the next “Kumo Cloud Cycle” to show up.

It is important to remember that both M1 & M5 “Kumo Clouds” operate on the Ichimoku 4,15,34 parameter settings [90⁰ degree stock cycle]. It is 90⁰ where cycles have their most tension [a/k/a support and resistance in trading], therefore when the “Cloud” is breached on either side, it’s usually good for some kind of move … it may only be good for 5 PIPS, but it can also be good for 50+ PIPS … the point is, you will find yourself “UP” on the trade, and can then decide on a scalp or hold it while it runs in your profit direction. This is what is known as a “free trade” … you hold all the cards. So, EURJPY is officially in the mix, and the SP500 is out.

This afternoon, President Trump announced he’ll have “big news” for the country from tonight’s speech in West Virginia; only God knows what this means, and from that point on, trading in everything has pretty much stopped “deader” in its tracks from before. So, we’ll see tonight … tomorrow of course the NFP numbers from the Department of Unicorns & Fairy Tales, to give us the jobs numbers, and a host of other manipulated data that is totally worthless.

I didn’t do any trades today for the PAMM, simply because there were no trades to do … officially, the DAX30 had 3 trades to make, 2 would have been a toss-up for up/down, and the third would have had a small profit if you acted quickly before the opposite spike kicked in; I wanted no part of this clusterfark. And of course, the Dow30 is a complete  joke … there’s no buying, no selling, no movement of any substance since the open, and I doubt anything will change to the close. So, we simply wait for the fireworks tomorrow at 08:30 A.M. in New York for the fun and games to start in earnest. Onward & Upward!

PAMM Spreadsheet directly below.

And then I said, “let’s go to the beach and get some exercise!”

Time for the beach … the dog and I are out the door … until tomorrow.

Have a great day everybody!



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