SUNDAY UPDATE: CRUDE OIL & CRYPTO SET TO SOAR

 

“Financial markets greet 2022 & the fate of Wile E. Coyote!”

The 2 market sectors I see soaring in 2022 are crypto & crude oil … both share a

common denominator and that’s roaring inflation created & caused by idiotic

central banks [namely the FED] continuing to print money out of thin air to prop

up “Stonks” and global elitists … this isn’t gonna stop anytime soon no matter

what they say, cuz if it does, the whole “house of cards” financial bubble will burst

and Wall Street crashes & burns … if economies generally pick up from whatever

“Flu Hoax” being run by government ‘till they’re laughed out of town, crude is

perhaps positioned like it hasn’t been for a very long time, meaning the

infrastructure isn’t there for added capacity in any meaningful way for supply

… investment in capital infrastructure in the oil world is running about $500

billion dollars per year short of where it needs to be … add to this an idiotic

Libtard puppet of socialism, one “Taliban Joe” and his merry band of misfits

hellbent on destroying the oil industry domestically for a “pie-in-the-sky”

GREEN agenda that is 150% bullshit from top to bottom, and I think it’s pretty

safe to say that the “U.S. of China” ain’t gonna be ramping up oil production

anytime soon … and that spells a potential explosion in crude price if inflation

isn’t held in check, and I see no reason why it should.

Over in crypto, BTC is a “fixed supply” coin and a store of value [SOV] … ETH is

actually performing as a deflationary coin cuz supply is being reduced from

staking and burning of coins FASTER than ETH is being created for the

marketplace … why anybody would trust anybody in any government to be

fiscally responsible and manage that nations money supply for the public good,

is such a joke cuz none of those people exist! … and who’s the worst culprit?

… Nigeria? … Venezuela? … how about the U.S.! … 50%+ OF ALL DOLLARS

EVER CREATED AND IN EXISTENCE HAVE BEEN PRINTED IN THE LAST 2

YEARS!!! … let that metric sink in … it’s genuinely laughable listening to POLS,

& government Apparatchiks bashing crypto as somehow immoral and

contributing to crime, when those in government are the worst hypocrites AND

criminals walking the face of the earth! … it’s simple really, and if you can’t

grasp this concept seek professional help … “they HATE what they can’t control

& debase, with no room for graft, bribery, & theft! … and since they can’t

control or debase it, they can’t tax it effectively either, and that pisses them off

“bigly & yuge” … and yet, they’ll be first in line asking the scumbag banks for

their “skim” from markets to be put into e-wallets via BTC, ETH, or whatever

they choose”!

As for the “Spoos”, it’s hard to say … how long can the overt buy side

manipulation continue and the bubble expanded? … answer that question and

you got your answer … however, from here, it’s gonna get harder and harder to

keep this bubble elevated and expanding and is gonna require more trillions … at

some point, though, the party is gonna end, and when it does it will be

monumental in scope and destruction of capital … could it happen in 2022?

… of course, but I give it a somewhat low probability … but, never underestimate

Joe Biden’s ability to fuck things up royally, and who knows what this demented

piece of political shit will do between naps and groping kids … seriously, he’s a

“wild card” and not in a good way for anything positive! … Libtards got to about

the end of March to figure out if he’s gonna stay or be replaced by the

“Manchurian Candidate” VP … how he goes they could care less … maybe they

give him COVID and hope … maybe they just tell him it’s “time to go to the

home” or else … in any event a transition to the VP would, IMHO, precipitate a

financial crash, and there’s other problems as well, not the least of which is the

Senate would need to confirm a new VP … deadlocked at 50-50, and no VP

available to break the tie, there’s no way she could pick another communist to

fill the slot, or pick somebody like Cankles Clinton … so while it makes for some

fun to think how the Libtards get rid of “Taliban Joe”, most likely they’re stuck

with him to the bitter end of the midterms, and the bloodbath that awaits them.

Can governments the world over continue with Nazi style police state tactics in

attempting to control people via the “Flu propaganda”? … I don’t think so, as

more and more people see right through these Assclowns and come to the

conclusion that “health” is a funny way to spell “ideological politics” … and the

election consequences for those who’ve adopted said tactics [U.S., U.K., &

Australia to name just 3] next time around are gonna be severe IMHO … but who

knows, governments who buy into the mantra of “never let a crisis go to waste”

[which is all of ‘em], and don’t want to see any relaxation of authoritarian control,

can easily create the next health crisis from any number of hundreds of labs they

use for bioweapons research, “and we have no idea how this happened”! … and I

wouldn’t put it past any of them to do just that! … I said from the beginning of the

WUHAN KUNG FU FLU, that it was the ChiCom military that released the virus

… don’t believe me? … go back and check the blogs! … and either they wanted

to take XI “out”, or they did it on his orders to take his opponents out and/or

make dissidents “conveniently” disappear … and we now know that U.S.

scientists knew of the virus BEFORE DECEMBER 2019 [thanks to Glenn Beck]

… which for my money leads to the question of whether or not the Clintons, the

DEM party, and/or ANY OF THE SO CALLED “INTELLIGENCE” AGENCIES

[the U.S. “Deep State”] in the U.S. acted in conjunction with the ChiComs in

starting the pandemic, in the hopes of getting rid of Trump in a national

emergency while he and his team concentrated on reelection? … “YUP, I’m

going there, cuz I know EVIL when I see it”!  

And when that didn’t work, one Cankles Clinton, shifted gears to the “Steele

dossier”, which we know for certain was a Clinton paid for smear … only now, is

Special Prosecutor Durham getting to the “good stuff”, as his net is closing in on

the whole evil episode … there isn’t anything these people aren’t capable of, and

you should know that given 1) the history of the Clintons going back into

Arkansas and the money grubbing, drug dealing with the Bush family in Mena,

and all of the “accidental” deaths they most likely are responsible for

… remember Vince Foster?, and 2) the same types of people in “Deep State”

government had Kennedy killed as well … so IMHO it’s not a stretch at all to

assume they were a part of the pandemic, cuz it’s all about power & money and

who’s got it and controls it … so what if a few million “Rubes” die in

the process?

So, we just have to wait and see how further pandemics [cuz there will be

MOAR!] get played out, and the ramifications on economies via governmental

policies, which I can assure you will not be friendly or positive for anybody

… except the Elites of course, cuz they can do anything they want … “rules are

for the little people” … and as we’ve already seen, with each new headline

comes adjustments in either supply or demand for oil, and the price moves

have been volatile … that most likely will continue in spades!

Directly below, the 20 Day Range MA’s for selected markets.

click on table to enlarge

Quite a drop over the last couple of weeks, as markets in everything simply

STOP, dead in their respective tracks … ETH down $120 for starters, and crude

down as well … not to be unexpected, simply cuz they had little room for upside

growth without turning the financial system to “TILT”!, and they’ve run into the

Holidays and just died.

Happy New Year everybody! …  outta here … “The future’s so bright I need

sunglasses”!!😎 … Onward & Upward!!

-vegas

A CHRISTMAS WEEK LESSON IN “TAIL RISK”

 

“If you don’t know what “tail risk” is in trading, you will soon find out!”

The new “Scalper’s Algorithm” for the less volatile pairs EURUSD, USDCAD, and when it’s not “nuts” cuz of Cable, EURGBP, has posted over in the “Download Links” section, in the right-hand column, and is available for online viewing [any browser or device OS] and/or download to your desktop, laptop, tablet, or phone [PDF]. You need not be a PAMM client, simply a reader who has an interest in better trading and making money. In other words, it’s free.

I think it would benefit everybody if I started at the beginning, and actually defined “tail risk”, from a probability standpoint. While there are all kinds of specialized distribution curves that address specific scientific and business problems and/or application needs, for our purposes, using the “normalized” bell curve [normal distribution] will be just fine. Directly below, the “bell curve.

 

All of the information in the “Summary Volatility Table” [see “Download Links”] for “The Magnificent Seven” FX pairs … all that summary data, either for weekly or 8-hour period [08:00 – 16:00], is data that is right at the top, smack dab in the middle of the bell curve … from there, we can determine our various “tail risk” scenarios, thus hoping to avoid them. Make no mistake, if you can either break even or make some money [any amount] from “tail risk” day’s, you will make millions trading, and simply a cursory glance at the new manual will prove my point, cuz the other types of days “bring home the bacon”.

There are 4 types of “tail risk”, that as traders, we have to be aware of and learn to deal with on a continuing basis; “tail risk” tends to cluster, and then may not show up for years or decades, until once again you hit 3 or 5 days in a row. There simply is no way of knowing when it shows up, so the only effective means of dealing with it, is to learn as much as you can about side-stepping it when appropriate, or even making some money off of it. The other types of days take care of themselves. Besides, what sense does it make to make good money on all other days, and then give it back “in spades” on a “doji” or “Flying Wedge of Death” kind of small range day? Most months, either in USDCAD or EURUSD, you’ll probably get “tail risk” 1 or 2 days out of the 20 trading days for the month.

The first 2 types of “tail risk”, most of you are familiar; 1) ‘bat guano” nuts daily ranges and very high intraday volatility, and 2) the other side of the “bell curve”, where it’s “Rip Van Winkle” in sleepy-time mode. For all 7 of the markets I’m tracking, it’s easy for you to know, at any time or any day, where you’re at in one of these markets cuz of the “Summary Volatility Table”. For example, in EURUSD, I know from the data, that the average, most active part of the trading day [08:00 – 16:00] will see an average range of approximately 57 PIPS, and a median range of approximately 46 PIPS; what does this mean? Well, assume it’s 10:00 server time, and doing some quick math, the range since 08:00 is 85 PIPS … that’s way above the norm, and it means there is a high probability it could be a very big range day. On the other hand, it’s 15:30 server time, and the range since 08:00 is 27 PIPS … now, you’re on the other side of the “bell curve”, and the market is “dead”; why take a position with a half hour to go and nothing is happening? Do any of us get paid for simply making a trade? No, so why do it?

The third type of “tail risk”, is “gap spike risk” against your position … how high or low is the “gap spike risk”, assuming no big reports or news, and if stops are hit off, what kind of risk are you assuming that you don’t know about? And herein lies the problem with the gold market, as Central Bankers have made it a permanent systemic risk with the “Rally Protection Team” that “monkey hammers” gold consistently day-in and day-out, and why volumes in gold futures are significantly lower than in 2011. Currently, this type of risk “infects” GBPUSD, and by proxy EURGBP, and all the other GBP crosses, cuz nobody knows when idiotic “Brexit” rumors will sweep these markets and be the catalyst for sizeable PIP moves in milliseconds … and good luck making back the 70+ PIPS you lost during the rest of the day or remaining part of the week. And it’s all due to a trader’s lack of understanding where his risks lie.

Fortunately, in EURUSD, our “tail risk” in this third category of “gap spike risk”, allowing for no news or reports, is excellent. Traders always need to be aware of “situational risk”, and knowing where support/resistance is on the 4HR, Daily, & Weekly candlestick charts, and therefore where the buy/sell stops are most likely to be found. If you don’t know that EURUSD has resistance @1.20, and that resistance price area has been tested and rejected over the last 6 months numerous times, you only have yourself to blame if you get short @ 1.19970, and with a buy stop @ 1.20070, thinking you’re risking 10 PIPS, the market hits your stop and you get filled @ 1.20455 … “thanks, have a nice day”!

The fourth type of “tail risk” is much more subtle, and very few traders think of it, but it is very real … when I get to today’s trading a little later, you’ll see, that this fourth type hit us today in trading EURUSD.

There are always “non-computable” problems in trading, where no matter how many lines of computer code you have, or math Ph.D.’s on the payroll working 24/7, that aren’t solvable … and the reason they aren’t solvable is cuz we deal in probability wave functions that come and go at the drop of a hat, and every attempt to corral a specific behavior pattern of a market, and then code it, the market changes and foils you … in essence, no matter what your algorithm, or trading model is if you will, all attempts at coding specific price information into it, will only create another probability wave function where there was none before. “The deeper you go down the rabbit hole, the more wave functions you create, and while some will work, others will not, and the Queen of Hearts stands ready to be your judge, jury, & executioner”!

There are inherent limitations of the MT4; 1) we deal in milliseconds, the banks deal in nanoseconds [Pony Express compared to the telephone], 2) our time frames are pre-defined and not programmable, and 3) the visual information on the screen most certainly has slight error factored into it, simply so we can see the damn thing!

There is no better way to illustrate this than thinking about the proliferation of “EA’s” [Expert Advisors] as the “road to riches”, when in fact they get eaten alive by the LP’s. They place their algorithm on the banks computer system … that right there invites trouble, cuz how long do you think the bank is gonna let an EA “pick them off” 300 times a day for a PIP, before they get wise and introduce slippage and/or other forms of monetary destruction? Once the LP bank figures out the “system”, a nanosecond before the “system” goes to buy 1 million stuff, the bid goes up 1 PIP … any guess where the EA gets filled?

The second big problem, is that computers only do what they are told … so, if you tell it to “take a profit” 20 PIPS from your fill, and it goes 19.9 before retreating back to your entry point, what are you gonna do? Well, I’ll tell you … you’ll change it to 19.5 PIPS from entry … next trade it goes 19.3 … you change it to 18 … next trade it goes to 17.7 … by the end of the first month, you’re down to “just get me the hell out with a $1.95 in profit, OK”?

So, any algorithm has inherent limitations, where there will be times where it is “right on the edge” … a fraction here or fraction there, makes the difference in doing or initiating a trade. Today, the first 5 hours 45 minutes [from 08:00] doesn’t even see a 20 PIP range in EURUSD… and then BOOM! … off we go Plum line over Yellow Line for the next 104 minutes and 50 PIPS … no buy signals cuz plum never went under yellow … now, there were 4 instances on the way up, where the Plum line 5 EMA LOW was right on top of the Yellow line 9 EMA LOW; a PIP or two move lower in an M1, would more than likely have given a buy signal … point is IT DIDN’T, and that’s “tail risk” that all of us face no matter how we trade. Granted, it didn’t produce an actual loss, but it was an opportunity cost.

Now, my point in discussing this, is that many traders, when the fourth type “hits”, will immediately start “tinkering” with whatever model they use … problem is, they don’t recognize that just because you might be able to eliminate some losses, how much profit have you given away by doing that? Remember, you don’t get ANYTHING for free from trading!

To recap, type 1 “tail risk” is hyper-volatility; you need to recognize whether you need to either 1) find another market, or 2) cut your trade size and allow for bigger losses. For me, I find another market. Type 2 “tail risk” is a “dead market” … at least 30 % lower than the median for the market … simply accept the conditions and lower your profit objective. Type 3 “tail risk” is “gap price risk” … GBPUSD, and all of its crosses are currently being held “hostage” by the insanity of “Brexit” rumors … best thing to do, unless you like quick, large losses, is to skip it and find “greener pastures”. Type 4 “tail risk” is inherent in all algorithms or models you use to trade … there is no way to eliminate this; simply understand the limitations of your algorithm and know what conditions in the market most often lead to losses.

When it comes to the “Scalper’s Algorithm” for EURUSD & USDCAD, this would be the small “doji” candlestick on the daily chart … it doesn’t “guarantee” losses, only that there is a higher probability on these types of days than others. The example in the manual, from 11/21/2017 saw 7 winners and 6 losers and was up PIPS. However, if certain conditions show up [which they eventually will at some point], the algorithms limitations will lead to a loss for the day, unless you know how to defeat the “doji” day. More on this in future blog posts.

Turning to today’s market, like I said before, almost 6 hours in and it’s a total “sleepfest” … 20 PIPS of up then down, rinse repeat… made one trade, it went nowhere, and the profit was meager; wasn’t thrilled with the entry price [no big deal, but off by 3/10^th’s of a PIP] but got right on the bid price on liquidation] … and then BOOM! … 104 straight minutes of plum over yellow and market goes up 50 PIPS … 4 times price came very close to giving a buy signal, but didn’t do it … Oy! And now, 26 minutes after 16:00, and the end of the trading day unless something is going on with new highs or lows, I finally get a buy signal … the first since 14:06, and I’m gonna get long? … Eh no. Cuz what I know, is that once 16:00 comes, unless there is news, Europe closes and New York becomes a graveyard … what am I gonna do with a position that AT BEST goes nowhere, and at worst starts leaking water giving me a loss, that is gonna be almost impossible to make back cuz everybody else on the planet is doing something else in the New York afternoon? And of course, that’s why I didn’t take it.

I’m a little surprised, given the euphoria in the U.S. equity market, that the U.S. Dollar started to weaken about 90 minutes from the open of the NYSE … and then from its high, EURUSD “Thelma & Louise-d” down 30+ PIPS in half an hour or so. If stocks are rallying hard, shouldn’t the U.S. Dollar be stronger? Second thing is the “Chuckleheads” in Asia bid EURUSD up again late in the Asian session; usually these clowns are wrong, but not today. I still look for 1.17000 level in EURUSD to be tested, probably before year end.

So, we’re in “Christmas Week”, and then New Year’s Week; the good news is that both Holidays come on Monday … that gives us the least disruption in terms of markets. Don’t assume that this week and next have to be quiet; many years they have been quite volatile, with year-end capital flows grabbing the headlines as we head towards the end of 2017. You can’t simply assume that ranges will be small.

While “tail risk” cost us opportunity today, the algorithm did a great job of keeping any trader following it, out of trouble, and those who actually captured the move starting at 14:06, there were a number of valid liquidation points, and it all pointed towards profit. As I said earlier, on “tail risk” days, anytime you can walk away up money, it’s a total victory, cuz the other days are “slam dunks”. And just before I post, EURUSD dumps another 30 PIPs, now under the 50% retracement line for the day; “if this keeps up, won’t tomorrow be interesting”? Onward & Upward!!

PAMM spreadsheet directly below … until tomorrow!

 

Have a great day everybody!!

-vegas

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