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Friday, August 25, 2017


“Hey, what seems to be the problem up there?”

All eyes & ears totally fixated on Jackson Hole, Wyoming, as Grandma Yellen & Super Mario speak at the Best Western Hotel & Lodge and keep us all waiting … again. Predictably, the entire investment world thinks, and more importantly is positioned for, a “dovish” slight softening of tone towards hiking rates, if they address the subject at all. Stay tuned … we’ll see.

I said yesterday, that I’d be adding another indicator to “The Tunnel Method”; that indicator is the relationship between a 5 EMA [LOW] (plum line) and a 9 EMA [LOW] (yellow line). This is as fast an indicator of a resumption of trend you can get without being overwhelmed with “false positives”. A position can be taken long when plum crosses over yellow when the “white line EMA [121 CLOSE] IS OVER THE “aqua line EMA [183 CLOSE]; similarly, a position can be taken short when plum crosses under yellow when the “white line EMA [121 CLOSE] IS BELOW THE “aqua line EMA [183 CLOSE]. Directly below, it should look like this.

Longtime readers will remember this indicator from the old gold algorithm; nothing else works better within a trend when the “tunnels” aren’t getting hit; however, in very tight choppy ranges you must be careful cuz this can create some losing trades due to chop. But overall, when the market isn’t cooperating by giving us “Tunnel Method” signals, and is slowly trending, this indicator will do very well. This weekend I’ll be updating the manual and including this valuable addition. And on Monday, I’ll be implementing this in the PAMM. See this weekend’s “Sunday Update” for details in the updated manual, where I will go into full details.

Turning to today’s market … well, that escalated quickly didn’t it? … “everything, and I do mean everything a gigantic “Flying Wedge of Death” [FWD] … amazing, the FED Pie Holes all say they want “stability”, then go out and create chaotic conditions in the markets, that in some markets like gold today, wiped some folks completely out … first with the buy stops, and then with the sell stops … and then climbing all the way back to the high. Same old bat guano from the faculty lounge Twits that talk out of both sides of their Pie Holes, and get away with it cuz nobody in the financial MSM will call them out on it.

And as crazy as other markets have been today, USDJPY not doing Mr. Jack Squat … high to low only 70 PIPS, not something like 100+ PIPS seen on plenty of other days … but really, once the Bullard & Yellen clusterfark ended, it’s been a range of 109.33 to 109.11, a whopping 22 PIPS the entire day minus the theatrics of gap pricing; so, good luck with that chop, Ok? … and while I get no pleasure from sitting here and watching this 20 PIP yo-yo, I don’t get zip from losing either … from where I’m sittin’ this entire week hasn’t really seen anything but stop hunts and very tight ranges … buy stops north of 109.500 and sell stops sub 109.000, where in both cases the market attempts to go but can’t, and then turns around viciously to the other side, where a whole group of traders thinks “this time for sure” and piles into a trade … only, they’re attempts are being met by the same group of dealer buyers at the bottom and sellers at the top … and the result is trading in the 109.20’s and 109.30’s where “chop” is the norm. Fact is simple: this stuff will move violently when the debt ceiling, budget, & tax plan become clearer than they are now. Big money isn’t going to play the “dealer stop hunt” game that catches most retail traders; they know how this puppy trades and acts, and they got bigger fish to fry. My estimate is that within a couple of weeks somebody will be hitting the panic button. And along with that, what have the stock indices done during this time? Well, nothing … a little up, a little down, but overall stuck in the 2440 -2460 range in the SP500 with zero follow through as the market moves to either side. From August 11th, the SP500 & USDJPY are at the same place now as they were then … 2 weeks of a nothing burger!

Today is trading like an NFP Friday; extremely tight ranges, and then BOOM! … all hell breaks loose … first one way, then the other, and then it’s back to … crickets … traders getting caught playing the “momo game”, and then 30 minutes later everything slows to a crawl cuz the dealer books have been wiped clean on both sides of the market, and nobody has any money left; see today’s M1 gold chart for a classic example of getting annihilated on both sides within minutes, and then ask yourself how anybody makes this back? Well, they don’t. And while I’m disappointed USDJPY didn’t trade well today [a whopping 22 PIP range if you didn’t play “Yellen roulette”], I know better than to wander into a dark building where people are blindly swinging baseball bats in the dark, and then expect not to get hit in the face. And the dirty little secret here, is that by sitting and doing nothing I’m ahead of the game. And, truth be told, at least half of the week’s price action has been during “the dark hours”, where price manipulation, fraud, gap prices from nowhere to nowhere and back, all the while stops being filled, and then it’s back to biz as usual; simply put, the daily ranges are misleading, given Asia’s penchant for trading abuses. All that really matters is Europe to the close of New York … and that has been very tight all week.

Here in mid-afternoon, everybody now waiting for Super Mario to take to the Jackson Hole podium and enthrall us with ECB bullshit; given his history over the last decade of surprising markets, nothing is out of the question … and the way the EURUSD is trading today, if he even hints the Euro is overvalued, or that inflation is disappointing, or that QE isn’t gonna be cut back quite like people think, the EURUSD will be “Thelma & Louise’d” off the nearest Grand Teton cliff out in Wyoming … late in the day on a Friday, this could be a trading disaster waiting to happen. On the other hand, a break through 1.19110 will see buy stops set off in a cavalcade of lurches up that will most likely take your breath away. And the Yen? We’ll see, but the market is short going into Super Mario’s little talk, so buy stops above the market have the potential to be “weekend killers”. No matter what you do here, the reward/risk ratio literally stinks.

Well, whatever it is he said or didn’t say, the EURUSD is en fuego!, up to 1.19400 … “yea, stability, that’s the watchword isn’t it”? … can USDJPY or the SP500 move? … Errr, no … fugetaboutit!, as USDJPY shorts getting “stuffed” as I write … gee, can we break this 22 PIP range we’ve been in all day since “Yellentastic”? … why yes we can!! … by one PIP … God help this mess. Half hour to the close, and I can’t take any more of this crap. No trades today, thank goodness. Onward & Upwards!

PAMM spreadsheet directly below.

Time for the beach … dog and I are outta here … until Sunday night’s update.

Have a great weekend everybody!



1 comment:

  1. Draghi's attempt to temper the Euro went about as well as could be expected. Right now he's proudly giving himself a pat on the back for not sending the Eurodollar straight through 1.25.....
    How does this guy walk three feet without tripping over himself?

    Looking forward to seeing your tunnel method properly in action. Personally I've spent many an hour meticulously studying numerous MA systems in all their variations, all without really finding anything I could confidently trade.
    Would love to observe one that actually works, and holds up to the rigours of today's increasingly deranged markets.

    Have a good weekend!