Make Volatility Great Again

“You can never make the same mistake twice because the second time you make it, it’s not a mistake, it’s a choice.” – Steven Denn

Luckily, we can thank President Trump for helping to make volatility great again.
One of the key charts you should be keeping your eye on today is the VIX. In today’s session, we will go through this in detail and remind subscribers what levels to look at and what kind of daily moves will spark alarm bells in this mean reverting instrument. It is crucial to understand these dynamics in days like these and as we enter a key week in the markets.
Despite the fact that we have a lot of data on deck this week along with the RBA and RBNZ rate decisions, let’s not kid ourselves, it’s all only about the US-China Trade War. Most importantly, we will be keeping a very close eye on not only how China responds to the latest threats made by Trump on Twitter but almost more importantly, how Trump responds to their response. This will be the tell… we will also discuss this in detail along with our view on what is going on and how we believe this is going to play out.
Everyone will be focused on USDCNH, expecting it to take a stab at the 7 mark and on general USD strength. However, we feel that just watching DXY could be misleading and that the plays in FX will be a lot more nuanced. No change to our JPY and Commodity currency swings against the USD but we will be focusing a lot more on our view on how the EURO will react and how we would be looking to try and take advantage of these moves.
JPY and Gold were already telling us something on Friday and as discussed, Crude is a mandatory chart to keep an eye on in terms of general momo and flows. Going into the week, the ping-pong zone remains 62.50/60.00 with the swing short very much in play, so no change to our outlook and levels.
Should be a very interesting week. Don’t be greedy and remember that there is little edge in chasing moves. Furthermore, we would also like to offer up a reminder that traders that continually play for sustained straight line moves, very rarely have good long term track records. It’s never surprising but always disappointing to see how many people systematically trade against the probabilities, against the trading Gods, expecting to come out ahead…
For newer readers, it’s always worth catching up on our Trading Reflections post.
If you are interested in a more structured way of tackling the business of trading, attending a live daily morning call or a more detailed discussion on the charts we post / trade ideas, don’t hesitate to check out our Premium content.
Wishing you a great day ahead.

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