SUNDAY UPDATE: NOTHING IS EVER FREE

“This IS the country YOU have allowed to happen … keep voting Libtard, & wait

and see what happens next!”

Of course, it doesn’t stop at the doorstep of financial markets, cuz the world has

central banks via CNTRL-P and the constant “Brrrrrr” of the magic money

machine … only what dumb asses the world over miss is that hyper inflation is

right around the corner, and who knows if your fiat will be worth the paper it’s

printed on come very soon into the future … quite frankly, and I wish it wasn’t so,

the U.S. as you once knew it, is doomed … no political will, a Godless society,

and down the rabbit hole the country goes … with each passing day, the

headlines get more bizarre & unreal, and you think Sheeple can’t possibly get

more stupid, and then you wake up the next day to see “The Twilight Zone”

unfold before your eyes once again.

Nothing ever really shocks me in financial markets anymore, but I was somewhat

surprised last week to see gold go mental via a full throttled volatility spike with

longs getting obliterated within 48 hours, and FX pairs doing absolutely nothing!

… the last 2 weeks has seen GBPUSD have its worst ranges of 2020 … check out

the weekly candlestick chart below, with commentary.

click on ANY chart or table to enlarge

Not a pretty picture to be sure, and it highlights 1 of 2 algorithm limitations of my

trading model … namely, when markets go “flat”, price movement goes UNDER 3

SIGMA [-3 SDEV or standard deviations from the mean of normal price action],

and the algorithm hasn’t been created or designed with these low movement “one

offs” in mind … why would it, it only happens approximately 3 days out of 1,000

[0.3%]?

For those needing a “refresher”, here’s what I’m referring to directly below.

Over time, the “steepness” or “flatness” of the mean of weekly ranges

[symbol “𝝁”] will oscillate, but the daily or weekly ranges will have the same

shape as above. Over the decades, Cable will see weekly “𝝁” normally between

250 PIPS - 350 PIPS, and the current yearly “𝝁” at the end of this week is at

304 PIPS … the last 2 weeks have seen ranges of 204.5 and 137 PIPS

respectively … highlighting “if you thought the week before was bad, take a

look at the last week”! … clearly more than 3 SIGMA below the weekly mean,

meaning only 3 weeks out of 1,000 weeks of price movement will see this

happen … and that means “to sit”!

On the other hand, gold provided the “flip side” this past week, when things got

out of control on Monday & Tuesday, and daily ranges went orbital via out of

control volatility to the downside … again,, the algorithm isn’t designed to trade

gold with consistent daily ranges OVER $30 - $35 PER OZ. … at that critical level,

the train goes “off the tracks”, meaning spreads skyrocket, slippage on fills

becomes even more ridiculous than normal, and the ranges of the M1’s become

a traders nightmare … even if you are up money on a trade, it means nothing cuz

it can be taken away in a heartbeat with an eye watering spike from hell to the

downside that can easily go $3 - $10 within seconds … get caught in this, and

now what?

This is precisely why I developed & created an “IVIX INDEX” for GBPUSD,

EURUSD, & XAUUSD … the figures for GBP & EUR are for the European session

from 11:00 - 19:00 server time [4 AM EST - NOON EST], and for XAUUSD for the

U.S. session from 14:00 - 22:00 server time [7 AM EST - 3 PM EST] … generally

speaking, the gold IVIX INDEX needs to be 2 times the level of EUR and/or GBP

to be considered EQUAL in terms of trading it … for EUR & GBP, any level

LOWER THAN 55 is a warning sign of potential trouble in the market for a lack

of volatility, and BELOW 50 is a clear signal to “leave it the hell alone” cuz you’re

just asking for trouble … readings of between 60 - 80 are IDEAL, and rarely will

you ever see readings over 100+.

Directly below, the IVIX INDEX daily levels for the latest week ending Friday.

Clearly, GBPUSD should exhibit greater volatility than EURUSD, but for the last

several weeks it hasn’t … this goes in cycles and shouldn’t last much longer,

as BREXIT bullshit and other matters U.K. come to the fore in the days / weeks

ahead … and as you can see, gold has lost its mind [if it ever had one!]

Directly below, the IVIX INDEX WEEKLY levels [5 day MA] for the latest week

ending on Friday.

Here, in the weekly average, it smooths out the daily fluctuations and gives a

better overall look at where IVIX INDEX levels are headed. Directly below, a

handy table of IVIX Daily [last week] & most current Weekly numbers in tabular

form.

Whatever advantage EURUSD had over Cable, it can’t be traded with a weekly

level of 52, cuz there are simply too many warning signs … so, back to Cable for

the start of the week and we’ll see what happens.

Directly below, the current week’s 20 Day Range MA’s for GBPUSD & XAUUSD.

GBPUSD

XAUUSD

And while these 20 Day Range MA’s give us some good info, nothing beats the

IVIX INDEX for what’s really going on as the market trades. I don’t include

EURUSD chart simply cuz it’s a mirror image of Cable, and why be redundant?

… whatever you see for Cable, EURUSD will look almost exactly the same, with

only the grid being different … onto the week … until tomorrow

… Onward & Upward!! 

-vegas

WHEN TRADING GETS PERSONAL

“Doing what needs to be done to solve a problem.”

What’s the definition of a long term “investment”? ANSWER:”A short term trade gone bad”.

I remember vividly, a very long time ago back when I was a “young skull full of mush” gophering for Bert [my mentor] in the brokerage house up in Madison, Wisconsin. Bert was by far the largest commodity trader at the time the brokerage house had ever seen, and some bright MBA in New York got the bright idea that what this stuffy, East coast, WASP-ish, 3 piece suit at all times brokerage house needed was more “commodity business”. And to that end, they wanted Bert to set up satellite branch offices all over Wisconsin to “bring in” farmers & the other rubes who lived out there and trade [mostly hedge crops & livestock] commodities, all the while gaining their trust so that eventually that money that sat in a savings account would find it’s way into stocks & bonds. Bert told them politely, “Stuff it, it ain’t happening”.

Ok, so they went ahead anyway, and in 6 months opened about 12-15 little commodity offices in places like Baraboo, Beloit, etc. Since Wisconsin is a big hog producing state, what they did was offer “hedging” services to farmers; especially those unfamiliar with the futures market and how they, “the big city brokerage house with all the savvy and expertise” could help these poor rubes farmers get ahead and make more money.

And Bert said to me, “Kid, this is going to be a big F-ing disaster; if anybody from New York ever calls you, you don’t know nothing, you ain’t seen nothing, and you’re not even sure what your name is. Got it”? And I’m like, “sure … whatever … it’s got nothing to do with us”. And Bert says, “What? … Are you that F-ing stupid … did I pick as my understudy the dumbest carrot from the bag? … of course it’s got shit to do with us, and if it goes “south”, somebody somewhere its gonna try and pin it on us … that’s why I’m tellin’ you don’t say an F-ing word to anybody … good or bad keep the Yap shut … and especially don’t say anything to Joe [branch manager], who is nothing more than a Class A apple polisher when it comes to the assclowns in New York”.

And what happened was, after some of these guys the brokerage house hired got some farmers to start hedging their hogs, the farmers discovered day trading; they’d sell 2 hog contracts, and 15 minutes later they’d be up $400, and they’d turn around while drinking coffee and eating some donuts in the office and say to the broker, “screw that hedge BS, buy ‘em back and I’ll pocket the moola”. And the broker would do it cuz he wanted the commission and the business. Well, what everybody discovered, and of course what Bert knew way back in the planning stages, was that all of these guys … New York, new brokers in Wisconsin, and the rubes farmers … they were about to discover “investing” just got personal; cuz when that 2 lot sell went up, Joe Bob didn’t want to take the loss, and when the loss got bigger & bigger & bigger and forced Joe Bob to get a loan from the bank to cover the losses, Joe Bob said to the brokerage house, “F you, F the bank, F the brokerage house, and F everybody else in this, cuz it wasn’t my idea anyway”.

And what had Joe Bob really upset, was as futures for hogs kept going up, cash hog prices didn’t do squat; the bank looked at this and said, “Who’s idea was this anyway”? Bottom line was that a whole lot of Joe Bob’s all over Wisconsin got introduced to what happens when SHTF. Bert knew it, saw it coming, and when it blew up and cost the brokerage house millions, both of us were as far away as Tahiti.

And while everybody and there brother will tell you “it’s not personal” when you lose on a trade, unless there is no blood in your veins, part of it is personal. Which in a sense is OK … don’t get me wrong here … nobody is going to start a trading career and never have a losing trade … that isn’t the issue … the issue is how you plan for it, how you deal with it, how you learn from it, and how you move on from it. To that end, it’s important to be able to look into the mirror and ask yourself if it was your fault, your algorithm’s fault, or the market’s fault.

I’ve said before, everything you learned in life that is valuable you learned from Kindergarten to 3^rd grade; since then it’s been nothing but a validation of those things that got brought home to you in spades. Get side tracked by crap you think you learned in college, and sometimes you need to be reminded what a doofus you can be when events take a turn for the worse and you knew it all along, but did nothing about it to change it … and it got personal … and shutup already!

And what makes trading so damned hard … cuz really it’s simple … what makes it so hard is that everything else in your life works on a different dynamic, and switching back & forth between the two is difficult until you can see the problem.

Nothing brings this home better than stock indices, and it always brings a chuckle to me when I see guys … otherwise intelligent guys … over on ZH post articles with chart porn on how it’s impossible for the Dow30 or the SP500 to be where they are at cuz of these 20 charts and these 25 reasons, and that in a “sane” world everything would be 40% lower in value based on fun-der-men-tals. “Ok, whose fundamentals exactly”?

And you can almost feel during the day, that somewhere sits a guy that when the Dow30 upticks an index point, his big girl panties get tighter and tighter and, “how can it keep going up like this … OMG”! And yet it does. Which begs the question I asked yesterday in the comments section to one of these guys, “The inference of your premise is that I’m an idiot for buying stocks or stock indices; what am I supposed to do when my objective is to make money trading? Am I supposed to lose money by being wrong, but that’s OK cuz it makes you feel better? I fail to see why it matters to you what anything I do matters; I’m trading to make money, not make friends. If I want a friend, I’ll go get a puppy, OK”?

Like there is “virtue” in losing money but it’s OK, cuz it was for the “right” reason; “wait … what? Sure, let me run that by the Mrs. when she comes for the ATM card to go to the spa with her gal pals and I tell her there’s nothing there, but don’t worry, I lost it for the right reason”. And if you happen to be in the room on this hypothetical “not gonna happen” day, I suggest you slowly exit stage left ASAP so the shrapnel doesn’t hit you. And so it goes, market participants losing their collective minds and going full retard. I have always taken the attitude, learned from Bert many years ago, that losses are what you pay for valuable information; the key is to make the information worth more than you paid for it. If you examine properly, this will always be the case. 

Turning to today’s market … ECB full retard “Super Mario” presser before the open … big whoop … as he bores the entire world to death with “Yellen speak” cuz nobody has a clue what it means but sounds good. Meanwhile, plenty of short folks getting squeezed harder than a group of oranges at breakfast time; and the dirty little secret is, if the SP500 starts moving above 2401 – 2405, all hell is going to break loose from the hedge funds short option gamma in the May & June cycle; where said funds have massive 1X3 and 1X4 long short option spreads on with uncovered calls from 2425 – 2500 that the only way can be effectively neutralized is by buying futures … and then more futures as it goes ever skyward. At the same time volatility makes the uncovered shorts ever more valuable, thus making the pain when you’re wrong in this strategy more severe.

Outside of political and/or geo-political risk, I don’t see how the “hard and/or soft” economic data can get much worse, that’s going to make everybody all of a sudden turn bearish and want to dump the SP500 or the Dow30 stocks; the far greater risk is if the data starts to turn here, and along with the “oranges” from above, we could see a blow off melt up by the end of June. Not predictin’, just sayin’.

Ok, opening mess @ 13:30 out of the way … a little up, a little down … and crickets … first trade of the day not real excited about cuz it’s not low enough in price, but we did get a bullish engulfing pattern off the low … still, below the opening aqua line so treating it as a scalp up and until we get to lower levels below 20950 [if we can get there … the way the this stuff has been “bid”, I’m not so sure today, but we’ll see]; directly below the trade.

 

At some point in here, we have to start hitting the “tired longs” … we’ve made more than a few attempts to stay above 21000, and it can’t hold … looking for some political scare talk from President Trump on a possible gov’t shutdown tomorrow along with the usual Pie Holes in Congress to add their “2 cents”, and we could get some downdrafts later. The second bullish engulfing pattern @ 14:09, I skipped for 2 reasons; 1) if the high for the day is going to remain at 21015 [Turnkey], then the low below still awaits us at the 20900 – 20925 area most likely, so why get long now, and 2) market is below open aqua line and scalp is my best scenario outside of a reversal day which I don’t think likely. I’ve already had one scalp, and this second leg down should be a precursor for more down; I want something more inviting at lower levels.

The Dow30 is slightly weaker than the SP500 today; something to keep in mind going forward in the day. Although, we are slowly slipping in price, if I was short I wouldn’t be real happy with the pace the market is going, and if I’m long I don’t see the buy interest from the first 3 days of the week when France “saved the world” (snark). Market feels like there is more downside coming; question is will it be a fast “long execution” or more like a slow hanging? I’m wanting the former, especially if sell stops can shove the Dow30 into the lower SDEV line, which should make for a decent long trade.

Second leg down @14:56 got the market below 20950, but the reversal off the bottom wasn’t a signal; close but no cigar so to speak. It simply wasn’t a bullish engulfing pattern; bounce would have been an Ok scalp, but it’s a flip of a coin. Market still needs to go lower on another leg down; haven’t yet reached the “normal” range for the day in the Dow30 of at least around 100 points or so; unless the market suddenly reverses, that means further downside.

Here at Noon New York, here’s the question I have; “so, everybody gets to buy the bottom within 15 index points of the low over the last 90 minutes? Wait … what”? Exactly, lows aren’t lows if everybody can get in to them, especially if you have 90 minutes. However, having said that, the market is being jerked around by … jerks! … “yes, our old buddies in Congress who couldn’t find their collective asses with both hands if they had a Rand – NcNally road map to guide them”. Meaning any and all signals may just be “smoke”, as the rhetoric & BS come steaming and piling high over health care and the budget [gov’t shutdown] from Pie Holes looking for some TV time on cable to show the folks back home just how concerned they are about all of this don’tchaknow? “Excuse me while I puke”.

The market right now is locked into a tight range exactly because nobody … nobody … wants to do anything and then have some asshat like Chuck U. Schumer [Weasel, N.Y.] come along and say something that pulls the proverbial rug right out from underneath your feet. And you know, before we close today something “else” will happen. In my mind, if we don’t get a break to a new low this afternoon, I’d be looking for a lower opening tomorrow morning to buy into the weekend. We’ll see what happens, but I’m leery here of getting blindsided by some Pol; and still the day’s range is awfully tight.

But as is usually the case in quiet markets, especially the stock indices, the shorts are the first ones to always panic; and after sitting the last couple of hours in mind numbing chop that goes nowhere, somebody … short no doubt … absolutely couldn’t take another minute of this stuff not going down and hit the buy buttons, sending the Dow30 up 25 points or so in 9 minutes for his/her efforts. “Thanks, come again”!

Make no mistake folks … and believe me, I know … we have not seen, nor are we in what I consider anywhere near a “normal” Dow30 and/or SP500 market. And while the stock indices present discipline & patience issues, other markets on the MT4 aren’t faring any better while some are far worse. “And look, apparently we can all buy the low over a 90 minute period”!!

SP500 just hit a new high for today; this type of reversal happens less than 5% of the time of all trading days; as I said before Dow30 is weaker today, so it hasn’t hit a new high yet; it remains to be seen if this is just panic short covering on Pol “blah blah yada yada” that goes nowhere and invites the “Flying Wedge of Death” to the party, or if this means further new highs and a blast above 2400 later today and catches more shorts hurting from losses.

So what do we do now? Longs gotta be asking themselves this question, now that whoever puked their shorts in classic fashion has finished and we simply … sit here … doing nothing … ho hum … “another round of beers over here for the red eyes please”! … cuz outside of the person who stepped up to the plate and moved the market, nobody else wants to join them … and that has me skeptical of the move continuing higher yet again. Meanwhile, the apparatchiks at the Fed love this kind of action; anything that kills or maims retail spec accounts is “good” in their book. Once again today, we get nothing off the lows of the day in terms of a buy signal; zip! Granted, the range is tight [thank you Pols], but you’d think we could see something from one of the bottoms after the open that goes somewhere; not today.

And please note; the biggest rally of the day starts and exactly coincides with the HR1 [white line] momentum change from negative to positive. Chart directly below.

 

So, while we sit here waiting for something to happen, in other indices news the Russell 2000 hits a new all time cash high at the same time there are record shorts in the futures market; 72,212 short contracts to be specific … “clearly, this will end well”. Add to this the option hedge funds short call gamma in the SP500, and there simply is no shortage of gun powder to blow the lid off of everything in sight WHEN [not if] the shorts panic here between now and the end of June.

And if you’re in this mess, long or short at this point doesn’t matter, I sincerely hope you got a “Plan B”, cuz if you like flippin’ coins this market right now is for you; and if you’re wrong you got no chance of seeing any kind of movement that gets that loss back. “Double or triple up you say cuz it’s a tight range? Don’t even go there Skippy … don’t even go there”.

It’s a half hour until the close, and once again time to call it a day, with a single trade for the effort and a few pennies to the plus side; once again a pretty pathetic day action wise, with both longs and shorts not real happy with today’s outcome. It is what it is, and we simply move on to tomorrow and pick the action up again.

PAMM/MAM spreadsheet directly below.

 

Day’s officially over and “Fang” here thinks he’s gettin’ some of that smoked roast beef before we go to the beach … not so fast there Skippy.

“Whoa … whoa there Chief, I distinctly said roast beef … WTF is this”?

Now the dog’s really screamin’ at me! … Ok, here’s the roast beef… we’re outta here … until tomorrow.

Have a great day everybody!

-vegas

OUR ‘TURNKEY FOREX’  PAMM/MAM  IS NOW OPEN AND OPERATIONAL; SEE “PAMM/MAM MANAGED MONEY PROGRAM” IN “DOWNLOAD LINKS” SECTION IN RIGHT HAND COLUMN FOR DETAILS [VIEW ONLINE AND/OR DOWNLOAD] AND START YOUR JOURNEY FROM WHERE YOU ARE AT TO “ESCAPE TO SUCCESS”!

 

  

WAITING FOR THE CHICOMMS

“The 800 lb. gorilla NOT at the Xi / Trump lovefest.”

Today, politics & “play nice in the sandbox” are the 2 top priorities for markets, particularly U.S. equity markets, as Xi & Trump get together for a Mar-a-Lago summit in Florida; certainly, Vlad is eating popcorn and awaiting the results. Yesterday afternoon saw the largest intraday declines in the DOW30 since January 2016, as the hopes for anything on healthcare and/or taxes this year pretty much got nixed by head RINO Ryan. Add on top of this cupcake the Senate going “nuclear” on the Gorsuch nomination today to the Supreme Court and Fed Pie Holes “worried” that stock valuations are “high”, and you have all the frosting you need for a mini meltdown of about 200 Dow30 points in about 1 ½ hours into the close.

In the version 3.1 volatility algorithm, all 3 U.S. indices have a 0.13 deviation in the “envelopes” indicator parameter on the MT4; in addition I place an aqua line at the New York open for stocks at 13:30 Turnkey server time [9:30 New York time]; usual buy/sell signals apply from ± 15 index points from the aqua line, although I would be very careful about selling the Dow30 when there is no news that makes selling a “story” for the day; more on this in later blog posts.

Minutes after the open, and not liking what I’m seeing, which is the infamous “Flying Wedge of Death” appear; chart directly below.

Looks you got some people anticipating the Trump / Xi meeting outcome, and maybe some other political stuff in the mix as well. In typical fashion, on days when politics & markets merge, early longs as well as shorts get burned in short order. Too bad we didn’t get a buy signal off the lower SDEV line hit [bullish engulfing pattern, hammer formation, or simple reversal making new low for M1 and closing minute higher; that rally was “rip your face off” if you were short.

About an hour and a half into trading, and you can clearly see a marked slowdown in activity across the trading spectrum as markets go flat and choppy … due in part because both sides got hurt in early action, and also because the focus is now turning towards the Trump / Xi summit today and for any news which will inevitably break … I’d be very surprised if any and all news isn’t “shouted from the rooftops” by the talking heads as very bullish for stocks and we end up with an afternoon rally … optics at things like this are extremely important for the ChiComs, and even if they both hate each others guts and there are heated differences, Xi isn’t gonna do anything today to upset the proverbial “applecart” from “everything is F-ing awesome Baby”!

While we sit and wait things for things to “clarify” themselves in the Dow30, be aware that in the stock indices buying/selling support and resistance breakouts is asking for a losing trade; again, you have to buy on corrections down in up markets and sell on rallies in down markets and use the “spikes” to liquidate. It’s the only way you get good fills.

And since I will now be trading the Dow 30 Index, for those of you “dying” to know how it’s calculated, here’s the formula: DJ = Ʃ of the 30 stocks [weighted by price] / 0.14602128057775 [the current divisor]. If the sum of the 30 stocks in the Dow 30 changes ± $1 in price, the effect on the Dow 30 = ± 6.848 index points. So as you can see, it doesn’t take much to move this thing among 30 stocks where the average can easily go 50+ points in a matter of minutes; at $1 per 1 lot in terms of price change, I can pick the risk profile I want while trading while at the same time [hopefully] “position scale” winners.

And once again, here at about 1:20 PM New York time, you get to see what usually happens to anyone that buys the upside breakout; in this case above 20727, where it scoots up to 36 and then immediately goes back to 26. If I was long, this is the spike I’d be liquidating on as it’s going up, cuz if you don’t you aren’t going to like your fill. The LP in the Dow30 is “light years” better than the gold LP, but give any of them the opportunity and they will most definitely screw you whenever they can; they are in business to make money, not hand out favors or goodies.

At about the 16:44 server time there was a bullish engulfing pattern, but it didn’t come off of any kind of rally correction, it came after hours of chop from right after the open; there were other signals down here much earlier that went nowhere. The key is statistical significance, and coming off of chop isn’t it.

It’s about 2 PM New York time, and whatever news is going to come of this summit more than likely breaks this evening or tomorrow morning after NFP. Not really a good day to start trading the Dow30, but it is what it is, and if Asia moves tonight on news I’ll consider trading it, but other than that I’ll sit and wait for the NFP at 8:30 tomorrow and take my cues from that event going into the Dow30 trading day. No trading today cuz outside of the open, where we had the move off the short term bottom with no algorithm signal, there wasn’t anything to do. That will change tomorrow I’m sure.

PAMM/MAM spreadsheet will be up later tonight, or after tomorrow’s trading and the end of the week; I’m still working on the stock indices format I want to use.

Beach beckons … I’m outta here … until tomorrow.

Have a great day everybody!

-vegas

OUR ‘TURNKEY FOREX’  PAMM/MAM  IS NOW OPEN AND OPERATIONAL; SEE “PAMM/MAM MANAGED MONEY PROGRAM” IN “DOWNLOAD LINKS” SECTION IN RIGHT HAND COLUMN FOR DETAILS [VIEW ONLINE AND/OR DOWNLOAD] AND START YOUR JOURNEY FROM WHERE YOU ARE AT TO “ESCAPE TO SUCCESS”!