“GHOST” SUPPORT & RESISTANCE

 

“Learn the trading biz the right way, or go home to Mommy!”

Many traders, both experienced and Newbies, place too much emphasis on 

short term support & resistance levels; specifically, those from the prior day 

or two that can be seen on the M5 and/or M15 candlestick charts. When I was 

on the trading floor, we used to call these “ghost support & resistance”, simply 

cuz they are ghosts in your mind and nothing else … place buys/sells at these 

points without regard to proper “setups”, and you will lose money consistently. 

Short term support & resistance levels change more often than the weather, 

and are breached constantly … granted, on the daily & weekly candlestick 

charts, you will likely see bigger buy/sell stops, and while they can be slightly 

more accurate than the short term levels, just buying or selling cuz there’s 

 “support or resistance” there is nuts … you’re literally asking to give money 

away.

Which brings me to today, where yesterday the support EURUSD got from 

the Reuters headline of interest rate increases starting in Q1 & Q2 2019 at the 

ECB, and rallied EURUSD strongly higher, well … it might as well have never 

been, given the action today of a complete reversal lower, wiping out yesterday 

in toto!

All day yesterday, after the 12:00 server time headline, it was up, up, and away, 

with solid support on the attempts lower at 1.23000, followed by 1.23100, 

followed by 1.23165, followed by 1.23300 … all the way to the close. Asia opens 

and literally does nada almost the entire night, until in the last hour of the 

session, the Chuckleheads ramp EURUSD higher into a new high for the day 

… “and by now, everybody who reads this blog should have that uneasy feeling in 

your stomach given that scenario as Europe opens” … and sure enough, it’s 

“Thelma & Louise” right out of the gate for the next 6 hours and 50 minutes, 

with nary a 5 PIP rally anywhere to save your life if you’re long … “WTF man, 

what’s that all about? … where’s the support at all those levels from yesterday”? 

And my response to those people is, “it was “ghost” support, and without the 

“setups”, the only person that sees support is you, not the market! You should 

never buy/sell simply cuz the day before there was support there … it’s a new day, 

and all that was yesterday is gone”!

Cuz here’s the dirty little secret that is my point in bringing this subject up for 

you: “short term support & resistance are nothing but a mirage … they are 

constructs that others act off and trade … in other words, they simply change 

trading behavior, and it is this behavior “of others” that you can use to your 

advantage, cuz the probabilities are in your favor knowing how the collective is 

gonna react, or more importantly “should react” … and when you don’t get the 

reaction from the market you should be getting, warning flags go up the flag pole 

and you most likely need to liquidate … simply put: you never initiate a position 

off these, but use the collective crowd behavior to liquidate at maximum 

advantage”.

Turning to today’s market … “well, that escalated to the downside quickly didn’t 

it”? And while I’m not surprised EURUSD is lower today, I’m more than a 

little shocked we have a 110 PIP range to the downside, with only 1 discernible 

rally attempt worth anything [and even that was quick & small before it got 
“monkey hammered” lower and wiped out], and more importantly the 800 lb. 

gorilla in the room, the FED, releases their interest rate decision tomorrow 

… go figure this day out.

And all the while it’s grinding lower, I’m looking for some kind of “setup” 

from the long side which can generate some profit … and the range goes 50, to 

70, to 90, to over 100 PIPS … “are you kiddin’ me? … what, we just gonna go 

straight lower all day after yesterday’s rally higher? And apparently, the answer 

for most of the day is “yes” from the market”.

Only one trade today … PAMM up slightly, but making back yesterday’s 

minor loss, plus a couple bucks. Given the scope & nature of the day, making 

anything from the long side is a major victory.

The trade “setup”, I thought was good … we had just come straight down 

from the 1.23350 area, bottomed around the 1.23060 - 070 area, and then 

rallied slightly before a test of the low which failed, and then the subsequent 

 “Teacup Handle Turn” [THT] got me long … and the market did nothing but 

inch up 1/10th of a PIP from my entry … after a minute, I’m up over 1 PIP, 

but there is no “pop” to price … “EURUSD should be up at a minimum to the 

1.23140 - 1.23150 level, so how come we aren’t there? … warning … warning”  

… and I know if I’m even a millisecond “late” to the liquidation button, expect 

to get taken out back behind the woodshed for a “donkey mauling” from the 

scumbag LP which I got yesterday, and so I liquidated … can’t complain about 

the fill, as I sold the M1 high bid … from there, the market never rallied more 

than a couple of PIPS until it was well below 1.23000. And while I was looking 

for something to come off the low and give me a “setup”, there weren’t any 

… “all I got was the 800 number for the law firm of Zip, Zero, Zilch, & Nada”. 

And once the market is under 1.23800, I want no part of attempting to get long 

… from simply a “situational awareness” perspective, unless you are completely 

oblivious to the market’s internal trading structure today, for the last 5 - 6 

hours, any and all small rally attempts end with red M1’s that are brutal in the 

scope of their willingness to go vertically straight down, making

“Thelma & Louise” look like a walk down some stairs … and that means 

liquidating on fast spikes lower, something akin to the financial ebola virus in 

my book … definitely to be avoided at all cost.

For those that haven’t read the “EURUSD Aggressive Scalper Tutorial”, you 

should, cuz in that document I’ve changed the bull / bear indicator for 

determining which side of the market I trade each day, from the 13 & 23 

EMA’s to a specific “Kumo Cloud”, and as you can see from the current daily 

candlestick directly below, with commentary, EURUSD is very close to 

breaking the lower boundary of the “Kumo Cloud”; a close below and I start 

trading the market from the short side on red daily down days.

 

For the last month, EURUSD has been unable to gain any lasting traction that 

can keep price above 1.23800 - 1.24000, and the declines in price on down days 

have been swift and brutal … tomorrow’s FED decision on interest rates will 

be no surprise … a 25 basis point rise is 100% priced into the market … the 

suspense lies in the rate hike “dot plot” for the rest of 2018 & 2019 … if the 

language of the policy statement seems to indicate 3 rate hikes or less, 

EURUSD takes off on the upside, cuz this will be viewed as “dovish” … if it’s 4 

rate hikes or even 5, EURUSD more than likely is headed lower to at least test 

the 1.21500 area, and this will be viewed as “hawkish”. Quite frankly, I can’t 

see 3 hikes, let alone 4 or 5, unless they want the SP500 back under 2,000 and 

cause a world-wide depression, but who knows with clueless Central Banker 

Twits?

In any event, tomorrow’s FED meeting is a watershed event for EURUSD in 

my opinion … “it’s time to fish or cut bait” in terms of price, and the policy 

decided tomorrow is likely to influence EURUSD for the next few weeks at 

least … throw in tariffs against China, political uncertainty, and rising interest 

rates, and it’s a strong headwind for EURUSD to overcome. And of course, 

nothing will happen tomorrow until 2 P.M. EST, which makes the day about 2 

hours long … another day of “hurry up & wait”, and then all hell breaks loose 

at 2 P.M.

I came into today with no expectations after yesterday, but I will admit the 

extent of today’s decline in price is a surprise given the fact the FED meeting is 

tomorrow … I expected a small range of 50 - 60 PIPS with some backing and 

filling, along with position squaring between 1.23000 and maybe 1.23600 

… nothing more than that really … instead, we get straight down 110 PIPS, 

with one rally of 15 PIPS in 9 minutes at around 15:00 server time, and that’s 

it. 

On Sunday night, looking at the week from an “event risk” perspective, 

yesterday and today with a FED meeting decision on Wednesday, almost 

always makes these two days utterly worthless … instead we get 100 PIPS up, 

and then 110 PIPS down … “knock me over with a feather”! No way did I see 

this coming.

So, tomorrow is “money day” starting at 2 P.M. EST … there’s gonna be a lot 

of it made and lost in the ensuing 2 hours … if I had to guess, my gut says FED 

Chair Spicoli is a bit “dovish”, citing softer economic data and more uncertain 

fiscal policy from the White House [read tariffs], and it unleashes a rally in 

EURUSD … but if it’s “hawkish”, who knows how far lower EURUSD can go, 

given the fact the world is long, and what kind of hell there is to pay on the 

downside … we’ll see what happens.

So, as I said, not expecting much from today, and from the long side of the 

equation, we certainly didn’t get it … for my entire professional trading 

career, that spans more years than many of you reading this have been alive, 

I have been telling people not to trade based on being an “analyst” … if you 

do, just cut me the check right now and save yourself the aggravation of losing 

your money to a bunch of faceless bankers … it’s all about being there for the 

“setups”, knowing we can’t ever be 100% accurate in calling the day “red” or 

“green”, but knowing that probability theory has our backs. Onto tomorrow 

and the FED meeting results at 2 P.M. … “it will be a total shitshow, so 

welcome to my world”! Until tomorrow mi amigos … I’m outta here for a cold 

one [“with no change from the $20 I gave him, 3 hours late, the dog comes back 

from the pet store last night with doggy treats and no Corona … would a cat do 

this to me? (Of course)”] … Onward & Upward!!

PAMM spreadsheet directly below.

 

Have a great day everybody!

-vegas

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