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Friday, May 4, 2018

“THELMA & LOUISE” GOT NOTHIN’ ON CABLE

“Are we rallying yet? … Errr no, just don’t look down Ok?”

“Well, that escalated quickly to the downside, didn’t it”? And there are 3 points 
to this that make for particularly interesting trading analysis, post NFP from 
the department of Unicorns & Fairy Tales; 1) the NFP was a complete “miss”, 
making anyone with one functioning brain cell wonder how the hell the FED 
raises rates 3 or possibly 4 more times this year without causing a worldwide 
frickin’ DEPRESSION, 2) May’s government [Tories / conservatives] did 
much better in local elections in Britain than was expected, and 3) GBPUSD is 
now down 900 PIPS in 13 trading days, with one up day to its credit, with no 
days since the top on April 17th, where the previous day’s high has been 
breached [excluding Sunday’s].

And yet, given all that, Cable tried and failed miserably to rally right after the 
NFP report … “and you know how bad it is when good news [see the 3 above] 
can’t even get you but a couple of PIPS up on the day, before it’s “monkey 
hammering” time … and boy, did they take this thing lower viciously & quickly; 
about 80 PIPS in 19 minutes, and the one “bounce” in there lasted all of a few 
seconds as it tried to rally 10 PIPS, and got it all wiped away in less than 2 
seconds … and the last 30 - 40 PIPS down to below 1.35000 sure looked, felt, & 
smelled like “capitulation” for the longs”.

Of course, it’s too soon to know that, but the market is so negative on Cable 
right now, and the “urge to purge” so prevalent among big money types, that 
they only got one thing, and one thing only, on their collective minds … “where 
the hell can I sell this dog crap”? … which brings me to the following caption I 
saw on ZH the other day, directly below.


As I said yesterday, and have stated before, you can’t try and pick tops or 
bottoms in Cable, cuz when the freight train starts coming down the mountain 
 you may look like a genius for 2 seconds, and before you can bat your eyes, the 
sell stop liquidation box [if you’re long] pops up on your screen with your fill at 
the bottom of a spike that just happened. Having said that, though, Cable isn’t 
going to zero either. What traders need to understand, is that getting long too 
early will dearly cost you, and the way to combat that, is to be long ONLY 
when the market is above the blue square box, and short ONLY when the 
market is below the blue square box, and then follow the M1 algorithm … will 
you miss some massive reversal days off the bottom? … “yup, the ones that 
happen 1 - 3 times a year; the rest that you would have lost money on get saved by 
not doing “stupid shit” … do the math here … and by the way, you’ll need to 
“pick the bottom” of those massive turnarounds to maybe get back to even; good 
luck with that”!

Turning to today’s GBPUSD market … another NFP Friday, where everything 
happens in minutes, and then “that’s it, thanks for playing, come back again 
soon”! And for a second or two, it looked like today might just be the day they 
rocket this stuff up and clean out some buy stops, but when that wagon train 
got steam rolled and it got below the lower boundary of the blue box, after 
waiting for a few minutes to see if it was gonna be another “fake out”, all hell 
breaks loose to the downside, and it was “Thelma & Louise” for 19 minutes, 
down about 80 PIPS … and from there it’s been almost straight up to where we 
are now, around the 1.35400 level, some 50 - 60 PIPS off the low of the day. Like 
I said, it sure smells like “capitulation” selling at the bottom. The Cable 
algorithm M15 directly below, from today.


Only one short trade today … PAMM up a few bucks, nothing significant.

I’m most definitely not selling “in the hole” on the way down … been to that 
rodeo and in the long run it doesn’t work well; yes, today would have seen it 
work, but we only know that in hindsight. What I did do is sell the first rally off 
the low that meant anything, which was about 20 - 25 PIPS off the low, after it 
appeared to roll over from the short covering rally. My fill was good, and I was 
up immediately in the position, and seconds later I’m up more than 5 PIPS 
… and I’m thinkin’, “Ok, keep losing steam here and either make a new low, or go 
test the old low, but don’t show me the bullshit 3 -4 PIP uptick from some order on 
an FX desk, that tells me it’s close to being over” … and sure enough, as I’m 
thinkin’ it, I get the 3 ½ PIP up blast in one tick, and liquidate with a very small 
1 PIP gain … and it’s a good thing I did, cuz even though it went higher, it tried 
again to go lower a few minutes later, but turned around very quickly, and now 
we’re 30+ higher from where I originally sold it.

It’s not a signal to get long, it’s a signal “NOT” to be short anymore, cuz when 
you start seeing the bullshit up ticks coming in after a break, that’s the red flag 
up the flagpole that’s telling you it’s close to being over … not always the low, 
but the real money guys with more commas in their equity run than you have 
zeroes in yours, are coming into the market and buying very [if it’s up] large 
chunks of Cable from the LP’s, and like cockroaches, where there’s one, there 
are more close by waiting to do the same thing.

In so many ways, typical of an NFP Friday … literally kill one side of the order 
book in seconds with a shot to the head, and then turn it around and slow bleed 
the other side the rest of the day. I knew when I sold it, that it was the markets 
only chance at going lower … cuz they either go back to the low for a retest, or 
make another new lower low; both obviously fine with me … however, if it fails 
and goes higher, that’s it cuz there ain’t gonna be any more moves of 
significance to the downside, cuz the market has run out of sellers … in other 
words, the music has stopped and all the fat kids are running for chairs, so 
where does that leave you?

And here we are about an hour to our close at 18:00, and we’re 60+ PIPS off the 
low, and shorts still have nowhere to go, and put another notch on the down days, 
so now we’re 13 out of 14 trading days GBPUSD is lower some 900 PIPS from 
the most recent daily high, with no previous day’s high being breached … and 
that’s if things stay tame ‘till the close of Wall Street … EXIT QUESTION: 
“How many days are gonna be in this string before we see an explosion like today 
on the upside, and buy stops set off on a previous day’s high getting filled like 
today’s sells at the bottom”? With today’s washout, I’m betting a lot sooner than 
the people that sold this morning are counting on, and my hope is that they 
don’t bring this stuff all the way back up … and when that lower opening at 
6:00 - 6:30 comes and then turns around through the blue box, look the hell 
out … may come Monday, may come in 2 weeks, I dunno, only that it’s coming, 
and the longer it takes, the more violent the buy stops when it comes … and 
from experience, I know how it comes … right off the low straight up, with no 
chance waiting for the train to stop and let you on board, and like I said 
yesterday, 70 - 100+ PIPS in less than 35 minutes [usually], and everybody that 
gets caught short gets carried out “toes up” … hence, my real reluctance to get 
to negative on Cable down here, until we see some type of rally, and the  
“Johnny come lately” short position trader crowd get burned something fierce 
on buy stop fills. Until then mi amigos, be very, very careful about being short 
and giving it room to breath, cuz the short side is getting very crowded and 
tight.

So, another bullshit NFP Friday … why should this one be any different from 
the last 400+ I’ve been through? … “speed of light … crickets [shhh!]; welcome to 
trading Newbies”! Next week sees the BOE with an interest rate meeting on 
Thursday … oh, won’t that be interesting … here’s my take; “if they raise rates, 
which incidentally a month ago was a “slam dunk” 95% sure thing, Cable will 
initially jump higher, but then will get literally murdered on the downside … why? 
… cuz it will be considered a “one off” that leads to a recession and the need to 
cut rates sooner rather than later … On the other hand, if they do nothing, which 
is now what is expected, Cable might rally on “buy the rumor, sell the fact” if no 
selling shows up to knock it lower, and wouldn’t that be interesting given what 
we’ve seen these last 2 - 3 weeks”?

Ultimately, it won’t matter, cuz the algorithm dictates our trades, not what I’m 
thinkin’, but if you’re looking for rational justification of price from rational 
economic thought, FX surely ain’t it, cuz what makes sense almost never 
happens. In any event, even if today is some kind of short term bottom in price, 
it’s gonna take a long while to repair the chart damage in pretty much every 
time frame, so I wouldn’t be looking for price to explode higher and then keep 
going … not predictin’, just sayin’.

And while I’m not keen on missing the down move, I got no regrets in not being 
there today for it, cuz in order to capture any of it, you have to do “stupid shit”
and quite frankly, I’ve had my fill of “stupid shit” lately to last until about the 
year 2095, where I’ll be hooked up to a Google machine still trading … until 
then, “fugetaboutit”! I’m outta here … Sunday night sees some website updates, 
so until then mi amigos … Onward & Upward!!

I just got lazy last night, so over the weekend I’ll post updated PAMM 
Spreadsheet results along with other updated archived data, along with a small 
blog post.

Have a great weekend everybody!

-vegas

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