DON’T LET YOUR EYES DECEIVE YOU

“It’s why God gave you a brain.”

It’s tough sometimes, knowing that what you see with your own 2 eyes might be deceptive. Today, a classic example in USDJPY with a buy signal early this morning directly below.

On the surface, everything lines up; both aqua and white are sloping up with white over aqua, and the market corrects down to the “tunnel”; question is, why isn’t this a “buy”? SHORT ANSWER: “the market has lost upward momentum cuz it took 21 minutes to go 10 PIPS; the chart deceives because the MT4 fills the price to the screen, regardless of how tiny the price moves. It should have only taken 3 or 4 minutes, tops, to go down 10 PIPS NOT 21. By taking 21 minutes, it tells me sellers are “lined up”, and any subsequent rally has a very high probability of being short-lived”. Not that I’m thinking the market is a sell; hell, this stuff can’t go 10 PIPS to save its life; while gold, EURJPY, and EURUSD are moving, Yen is sitting … it’s the weak link in the EURJPY chain, and the strong correlation with gold is lost today.

And so it goes in markets that move very little; today’s Yen caught between conflicting moves in the SP500, EURJPY, & gold … what to do, what to do? … well, that’s easy, do nothing except “chop”. Today being a perfect example of what I wrote in the weekend update; situational awareness and how to respond to it correctly, cuz when things don’t make sense, simply back away from the table and come back later.

I counted 3 great algorithm moves today in EURJPY … not so in USDJPY and the stock indices, who have decided to sit today out for some reason … I’m left wondering, how many more days USDJPY is going to sit in the 109.20’s and/or 30’s before it moves somewhere significant? The number of times over the last week the market has tried to rally and just got slammed quickly, leads me to believe the next big move is lower in USDJPY. Sub 109, and then 108.610 and the sell stops will accumulate from the longs. We’ll certainly see in the days ahead. USDJPY today, exhibiting the kind of “terror” I have written before, where in 2 minutes when spot gold exploded above $1300, the market gives up in 2 minutes everything it had gained the prior 23 hours … and so we go with “speed of light … crickets” that we are all used to by now. And I’ll say again, if you got caught in that move long, how do you make it back today? [Hint: you don’t]

Meanwhile, over in the U.S. stock indices, it’s feed the chipmunks at the open, go straight down a tad, and now sit in a tight range doing “nada”; the Dow30 locked in a numbing 29 point range the last 4 hours, trading like its proxy USDJPY. Welcome to late August in financial markets, where the world is basically on vacation this week, the institutional desks are manned by the most recent MBA’s while the bigwigs are out in the Hamptons, and strange happenings are the norm.

“Tease, tease, & more tease” … this is USDJPY & the Dow30 today; realizing in the last 10 trading days, USDJPY hasn’t moved 100 PIPS. And with that tease comes our old bud the “Flying Wedge of Death” [FWD], where today we see 1) set the high in Asia, 2) move to low in early Europe, 3) rally to new high in U.S. session to clean out buy stops above 109.40, 4) go almost to another new low down around 109.04, and now 5) as I write rally back to the middle to yet again trap more traders in this clusterfark that simply will not end, in a pathetic 30-ish PIP range. And if you’ve never been caught in the FWD, you’re either a very new trader or not one at all, cuz it’s an account killer.

About an hour to go in New York before the close, and the 2 markets I’m watching are the deadest bodies on the block; the real movers today being EURUSD, EURJPY, and of course spot gold, breaking above $1300 for the first time in almost 10 months. I’m not really surprised at the lack of interest and volume in USDJPY and the stock indices simply because after this week we get into September, and the docket here is full of earth shattering potential moves from a plethora of events. So, why would anybody want to make a major investment move now, with so little information about what is to happen regarding the debt ceiling, and all G3 members having important interest rate meetings? So, keeping things in perspective, late August isn’t exactly the busiest time of the year, or even close to normal trading activity.

So, no trades today simply because there isn’t anything to do … I don’t really want to be in EURJPY at the moment, preferring instead to be in our main stock index proxy USDJPY. Trust me, the very low volatility and small daily ranges will quickly change when the market gets wind of the debt ceiling situation, and word out about the impending interest rate meetings.

As I said earlier, some great algorithm “special indicator” moves in EURJPY today; this is what it looks like when markets exhibit “normal” intraday volatility. Scroll back on your MT4 and check them out, after you read the manual. All we need now are stock indices & USDJPY that moves somewhere, instead of sitting in abnormally low intraday volatility where there isn’t anything but “chop”.  I’ll see what happens in Asia tonight, and if the occasion warrants it, tomorrow I may go into EURJPY as our secondary stock index proxy. About a half hour to the NY close, and it’s time to give up on this crap for today in terms of any kind of move. We’ll see what tomorrow brings. Onward & Upward!

The PAMM spreadsheet directly below.

Time for the beach … the dog & I are outta here … until tomorrow.

Have a great day everybody!

-vegas

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