“Understand what this really means and make it work for you!”
What does the term “volatility” really mean? … “depending on how you define it,
makes a big difference in how you trade it”. And as today shows, just looking at
the daily range is deceiving in many ways, cuz looking at the range tells you
nothing about gaps in price either from scheduled economic or news releases, or
surprises that hit the market with no warning. “And you’re not finished yet
Skippy, cuz once you define it, you have to use the right style of trading to capture
it … make the wrong mixture, and Mr. Market will show you soon enough how you
“F’d” up, but leave no indication on how to correct the problem … sooooo many
questions, very few right answers”!
On a number of different evaluation levels, Brent crude oil is the most volatile
market going today, and has been for some time. Strip out major Holiday
periods, and the average daily range is above $1.40 per barrel; take all days
over the last 2 years, and it’s $1.38 per barrel. But, does this matter, if the
intraday action is more wicked than the daily range suggests? I’m here to tell
you, I don’t think it does … it’s the action up/down while the market is in its
prime trading hours that matters most … forget the spikes, cuz you can’t
capture them anyway, unless already positioned due to a signal … you didn’t
take a position cuz you were predicting a spike, you took a position and it
happened anyway … big difference.
And all of this begs the question, does trend matter in making money? And
before you think I’ve gone off the deep end, think about what it is I’m saying
… how does trend help your losing position when it’s clearly wrong? Does it
bail you out like everybody says it does? Or, is it a myth? Cuz what I’ve come to
believe, is that big money momentum is masked as trend, and when those guys
stop or turn around, nobody sends you an email letting you know … and in
crude oil, that can be a literal disaster.
So, bottom line in this, is that instead of “following” short term trend and
subjecting yourself to getting “whacked”, be there when it turns and take
advantage of short covering after declines in price, or long liquidation [“profit
taking”, thank you CNBC’s permabull Bob Pisani] after rallies in price.
Recognize that trading physical commodities are not like trading pure financial
derivatives like FX, where the scumbag LP bank’s can leverage amounts of free
money from the Central Banks so vast it would make your head explode … in
this realm, there is a “skew” favoring the long side, meaning the price breaks
are sharper , happen faster, and rally back much quicker on short covering,
than price rallies that fall off and see longs liquidate. And it is these extremely
fast and vicious turns that the crude algorithm is attempting to capture each
day. Remember the reason the banks allow you to trade for such little capital
… “the purpose of modern day trading is for “big money” [A] to make “small
money” [B] do what they don’t want to do, thus transferring capital from B to A
with ease, and all without the vast trader public to even have the foresight to
figure out what’s happening to them and how they’re being manipulated through
price to buy the highs and sell the lows”. The crude algorithm changes all that,
and the unique methods I’ve developed here recently using data that stretches
back years, maps these criteria out for us and thus gives the trade signals at the
turn … and since we have the “skew”, the rules for buying are different than
the rules for selling, cuz we’re definitely looking at an asymmetric market in
Brent Crude Oil.
Turning to today’s Brent Crude Oil market … we had 5 … count ‘em; 5, news
events reported today. Comments on oil production by 1) Saudi Arabia, 2) the
Ruskies, & 3) President Trump, all took Brent price going “Thelma & Louise”
to differing degrees … the first 50+ cents per barrel, the second & third about
25 cent per barrel … so, with no follow through to price going lower, the only
result of all this is longs get killed, and shorts have to eventually cover with
losses … “imagine that, both sides get hurt”!
At 10:30 A.M. EST, we had the API petroleum inventories report, and that
produced a 50+ cent spike up in a nanosecond, on a big draw down in crude
stocks … that move went basically nowhere, with some [not much] price action.
That took us to about 10 - 15 minutes prior to the 2 P.M. interest rate decision
from the FED, where the scumbag LP banks raised the spread in Brent from 3
cents to 6 - 7 cents through the report … interest rate hikes here we come from a
very “hawkish” FED, and prices go lower. However, as is their usual practice on
FED reporting days, the scumbag LP banks won’t drop the spreads back to
normal, so the 20 - 30 cent decline is meaningless to us, cuz I’m not buying
Brent with a frickin’ 7 cent spread. Now, here after 3 P.M., not only is time a
factor, but the spreads are all over the map, between 2 cents and 7 cents
… “screw this, tomorrow’s another day, and hopefully spreads return to normal”.
No trades in the PAMM today.
We had a total of 7 trade signals today … all buys … every single one of them
turned so quickly after the signal was given, I didn’t have more than 1 second
before price jumped anywhere from 5 - 7 cents per barrel on the offer side. And
I’m like, “WTF is that? … can I blink my eyes at last”? The last signal came with
an expanded spread for what it’s worth. Am I surprised? “Knock me over with a
feather Skippy … yea, I’m a little shell shocked it reacted that “Hoover Dam” fast
… wasn’t expecting that at all”. That’s the bad news … the good news, is that all
were winners on the turn. In any event, I’m not chasing Brent price … not
today, not tomorrow, not ever … it’s simply not worth it, cuz this stuff is so
volatile, just sit back and wait for the carnage and then act.
So, while I’m somewhat disappointed our signals today got run over by a
Ferrari, and we didn’t have any trades or profits to show for the day, we didn’t
get “donkey mauled” with the 5 news reports today either, the first 3 which were
not scheduled and were a surprise to the market … if you were long, you were
then gone in less than a millisecond, and it happened three times in a row within
2 ½ hours this morning off up trends in price with zero warning.
Outside the news moves, the rest of the day was a total “chopfest” … and this
immediate loss of volatility showed the algorithm signals generator and signals
totally collapse onto each other … and so, nothing to do but watch and wait
during this time, cuz there aren’t any signals to trade. Tomorrow sees the ECB
interest rate decision with Super Mario … he’s always good for chaos, but I’m
not sure what affect it will have on Brent. As we move closer to next week’s
OPEC meeting, look for more chop, along with more spikes, as members start
using the MSM to virtue signal their oil production intentions … of course, all
OPEC Pie Holes lie anyway, and if you don’t already know that your an idiot of
the first order, but it moves markets so we got to pay attention whether we like
it or not … should be some really good signals coming in the next week.
All told, I’m happy with the algorithm today … not so much for the scumbag
LP’s who pretend to make a market, and/or the complete “scumbaggery” on the
momentum turns with the “jacking” of price. But I’m chalking that up to
coincidence, for the simple reason we had multiple news events and it was a
“chopfest” most of the day … that had a big part to play I’m pretty sure. We’ll
see what tomorrow brings … Ok, with that, I’m outta here for a cold one [or
five] … until tomorrow mi amigos … Onward & Upward!!
Yes, the PAMM Spreadsheet will be updated early this evening directly below. I
got lazy last night.
Have a great day everybody!
-vegas
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