“Super Mario plays “bad boy” yet again!”
It’s showtime today, and the one thing we are gonna find out is how serious
the ECB is in clamoring for a lower EURUSD … time for the bullshit is over.
If it’s a “dovish” Super Mario, all hell is gonna break loose on the downside
… and with the “Euro Sceptics” winning the Italian elections, combine these
two and it’s gonna be tough sledding for EURUSD bulls. You’ll remember the
December minutes, that was widely credited for kicking up the bull run
momentum in EURUSD into high gear, with the promise of the March
meeting for policy “adjustments” to end QE and possibly signal the start off an
interest rate hike cycle … well, March is here, so what’s it gonna be Super
Mario? Failure to deliver today, like he has in the past, could lead to the start
of a very serious down move … My advice: “Be careful what you wish for
Super Mario”.
The flip side of this, of course, is he takes the “hawkish” view/tone, and
EURUSD takes off into orbit … this would stymy inflation, but right now that
isn’t an ECB problem … question is, where do they really want the EURUSD
to generally be trading at? … upper 1.20’s or below 1.20? We’re gonna find
out today.
“Well, that escalated quickly to the upside didn’t it? … Err, wait a sec … and
just like that, what Draghi giveth via the policy statement, he takes away a few
minutes later with soft inflation & growth prospects going forward into 2019
during the presser… interest rate increases? .... not any longer Skippy”!
That gigantic sucking sound you heard today was the “air” coming out of the
bull run in EURUSD … another “double reversal with range” today [this time
to the downside], the third in the last 2 months, and quite frankly it would be
five if it weren’t for a couple of tenths of a PIP on two other days I remember
… in the previous 10+ years, I remember 3 … remember, what was once “tail
risk” is now normal, and what used to be normal is now “tail risk” … chalk it
up to central banks and their TBTF banking buds.
And quite frankly, the only reason EURUSD isn’t down 300+ PIPS right now
is tomorrow’s NFP report … what matters there is strictly the hourly earnings
& wage growth story … if that comes in hot above expectations, EURUSD is
gonna get “monkey hammered” again, and the bull meme may have played
itself out for now, simply cuz going forward it won’t be a “Euro story” but a
“Dollar story”. Only a very disappointing miss on earnings & wage growth will
save EURUSD, and possibly give it some upside. Problem, though, is that “big
money” is still trapped from higher levels, and every rally from here [low
1.23000 area] is gonna be sold into, making any climb higher a tortuous process
at best, at least for some days or weeks … this is FX, things change, so you got
to be careful, but it feels very much to me like the bull run is over for now.
My bull/bear directional indicator from “The Teacup Handle Turn”, come
tomorrow’s open tonight, will be I’m projecting, slightly plum under yellow
… this is basically very light bearish to neutral, and what I’m going to do
going forward, for at least a little while until a clearer trend emerges on the
daily candlestick charts, is treat each day as its own bull/bear market … on
days EURUSD is higher [green for the day] I’ll be long, looking to buy breaks,
and on days EURUSD is lower [red for the day] I’ll be short, looking to sell
rallies. Quite frankly, I don’t want to be sitting here, trying to play the wrong
side of the market if the bull case in EURUSD sours; you can see in today’s
action, the down spikes are extremely vicious, and being long and getting
caught in one of those is a fait accompli sooner or later if the bull run is over.
If not, and it goes higher instead, we can still be there from the long side
… what’s changed is that I don’t want to be long if price is lower on the day
or under the 50% retracement line … if in fact the market is changing, that
trading decision will lead to losses quickly.
One trade today … PAMM up a couple of dollars shy of 0.1%.
I got long after the ECB policy statement and before Draghi’s presser … and
while I’m in this thing, I’m thinking that the high is in danger of getting taken
out and I want to be there, but as we “tick tock” closer to his presser, I am
reminded that his history of “giveth & take away” in multiple previous pressers
is legendary … do I want to stay long as he opens his Pie Hole and maybe totally
sandbags me, right along with a whole host of others? Do I want to run that risk
… and the answer is a resounding, “Hell no”! … I don’t trust this guy to do
anything that helps me at all … he is not my market friend, but a central
banker looking to destroy retail specs whenever and wherever he can … “Well,
after today, I’d say mission accomplished Super Mario; knowing your type like I
do, it’s always better to be safe than sorry given your track record”. And so on a
spike up I liquidated. A few minutes later after marginally going higher,
BOOM! … down goes Frazier!!
Maybe today is a “one off” on the downside, but the action in the market speaks
to me a different language than we’ve seen in previous down days in this bull
market; I simply think today saw a “sea change” in sentiment, with plenty of
traders still stuck from higher levels … tomorrow will give us a good indication
of how this plays out with NFP, and if wage & earnings growth is “hot”,
tomorrow being Friday could see the bottom fall out of EURUSD … you can’t
discount the possibility since so many are still stuck long from higher prices
… they may have no choice but to liquidate if it looks like the 1.22900 area gets
taken out before any meaningful rally can bail them out … if not, look out
below. In any event, we’ll see what happens at NFP crunch time.
Again today, I’m sitting here thankful to be up a penny, given the scope and
nature of the vicious action seen today … to say a few people got hurt is an
understatement ; more like many got destroyed. And once we got that 60+ PIP
decline off the top in 12 minutes, I knew at once to be long this stuff today
going forward is a losing proposition … that doesn’t mean be automatically
short, it just means being long has no probability advantage, so why do it?
Today was the fourth trip above the 1.24 level for EURUSD ...each and every
time it’s been rejected, this time with emphasis on the lowest of the four trips to
1.24450 …”you ask a girl out 4 times and she says NO, and the fourth time she
even hangs up on you and you don’t even get the question out over the phone; can
you take a hint or what”? Before I turn solidly bearish, though, EURUSD has to
break 1.21500 and stay under that level; only price above 1.24000 will get me
solidly bullish again. Both scenarios would be validated by my bull/bear
directional trend indicator, so if you’re thinkin’ I’m somehow “wingin’ it” with
these 2 scenarios, you’d be wrong.
It’s easy to sit here, after the fact, and say I should have gotten short on the
double reversal in price, but I have never been a trader to switch positions on
the same trading day … I know from long experience, that gets you into trouble
faster than a pork belly spread gone bad. If the market is basically neutral, then
it’s a possibility, but coming into today, EURUSD was in solid bull mode
… that’s no longer the case, but getting short after it’s already got a 100+ PIP
range is another danger signal I don’t want to buck … so, if you’re wondering,
these are the criteria I look at, and if the probabilities aren’t in my favor, I
don’t make the trade … period.
Tomorrow sees NFP @8:30 EST, of course, and the trade is looking at nothing
but the wages & earnings component … unemployment rate and jobs are of no
concern, unless they are multiple sigmas off the consensus … as always, I hate
this damn NFP day cuz it shortens all decision making into a short window
… that usually creates panic with few if any second chances once it starts
moving … you know, like today for instance! In any event, another day of “up
money”, while steadfastly sidestepping the landmines of the market
… tomorrow’s another day of opportunity, and we’ll be there to capture some
of it … until tomorrow mi amigos … I’m outta here … Onward & Upward!!
PAMM spreadsheet directly below.
Have a great day everybody!
-vegas
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