Early Morning Update

“Escape competition through authenticity” -Naval

As we discussed in yesterday’s post, we would be scaling out of shorts. The bears have been capitalizing on this ‘trade talk blackout period’ due to the Chinese being off on a one week holiday and the recent reaction to the Manufacturing PMIs.
As far as shorter-term action is concerned, don’t make it harder than it should be > it’s all about the ISM Non-Manufacturing PMI release later on today. If we get another disappointment like we saw on Tuesday, then things could get ugly quick. However, keep in mind that anything that is mildly positive will likely see a decent bounce attempt.
Our base-case assumption is that this is a scale out of shorts / build long zone. As discussed on our RTY trade, we pretty much consider the ‘ sell FOMC and Q3 OpEx ramp into seasonally weakest week of the year’ done.
Unless something really horrible hits the wires today or tomorrow, we expect the market to stabilize and put in some kind of bottom. We are wrong on a weekly close below the 2800 mark.
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Mid-Week Update

“We have a bias toward wanting to be right, which is not objective. The way the brain works, we tend to give ourselves disproportionate amount of credit when we’re right and when we’re wrong, we tend to disproportionately blame outside and external factors. We externalize failure, we internalize success, which is not accurate, which the a priori fact of that is and this is a Freudian observation although these cognitive biases have built a business around the simple fact that as Freud said, we’re not accurate observers of our own behavior, we’re not designed to be.” – Gio Valiante

Our focus today will be on starting to scale out of our RTY short from the FOMC and Q3 OpEx ramp. We are open to anything but all in all, we would expect to see some kind of bounce, especially as China comes back from holiday next week. As we like to say, most traders would do a lot better if they focused on trying to catch 2/3% moves rather than 20/30% moves. it’s simply a function of number of occurrences. Furthermore, if O/N continues to trade heavy, there will be some very interesting trades setting up into the cash open.
The other key thing to discuss and review will be how markets will react to the Thursday data dump especially seeing the misses we saw yesterday. As discussed on Twitter, after those prints, slow and steady, you would have to expect usd longs start/continue to unwind across the board… especially, expect gold higher and yen lower to continue. All about Thursday now.
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Classic Unwind…

“play stupid games, win stupid prizes”…

As discussed on Twitter too, one of the most interesting dynamics at the moment is the unwind in Bonds and Gold. Remember, that these moves make complete sense not only from a technical perspective but also if you factor in seasonal tendencies.
Courtesy of @movement_cap
The above is extremely interesting and important to understand if you are trying to position into some FX trades, possible fading recent moves. Once again, we are at some key inflection points across the board but there is likely little edge trying to stubbornly initiate FX fades as long as this unwind in taking place with the accompanying USD strength…
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Key Inflection Point

Following on from the previous post, Another dynamic to keep an eye on is how FANG+ behave as we move out of the seasonal worst 6 months of the year. As you can see, the buyback desk really need to step up to the plate…
Courtesy of @movement_cap
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Chart of the Week

“You can’t be normal and expect abnormal returns.” – Jeffrey Pfeffer

This week we are going to focus on tactical plays on Crude as well as reviewing the bigger picture / long term cycle view on Gold (detailed video out for subscribers on tuesday).
Remember that China will be off on holiday as of tomorrow and that apart from the usual headline risk out of the Middle-East and Washington, we have pretty much every FOMC member speaking this week too as we run up into NFP.
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How Smart People Make Decisions

Chart of the Day

“I will not allow yesterday’s success to lull me into today’s complacency, for this is the greatest foundation for failure.” – Og Mandino

After FOMC/OpEX/Seasonal plays, it’s time to start to focus on the Dollar. In today’s webinar and upcoming video outlooks, we’ll review the latest corrections in Bonds and Metals and discuss what they mean for various FX dynamics and plays.
Once again, as far as indices are concerned, short-term, bears need to be cautious. There is no change to our bigger picture outlook, however; after the panic sell and apparent nothing burger – especially into quarter end – we would expect markets to make their way back to the scene of the crime.
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Mid-Week Update

OpEX/FOMC/Seasonal short into this week is playing out as per historic stats but would just like to caution about pressing shorts here into quarter end on a trade that has become very ‘public’. Doesn’t mean it can’t play out but would be cautious.
Would prefer to see it fail a proper flush and then bounce into early October. As posted yesterday, full disclosure, flat on all short term plays just holding small swing on RTY.
No crystal ball here. As always, price will tell us what is going on but have the feeling that the Don + quarter end could catch late emotional shorts off-guard. We’ll see soon enough. Play well!
Note for active 50Scouts members: *make sure you read our latest update* and keep an eye on your inbox for a free pass to Friday’s daily webinar session (make sure to check your spam folder too).
If you are serious about attracting Investor Capital/finding Investible Strategies please check out our dedicated Darwinex page.
For newer readers, it’s always worth catching up on our Trading Reflections post.
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Wishing you a great day ahead.

Early Morning Update

“The revolutionary idea that defines the boundary between modern times and the past is the mastery of risk: the notion that the future is more than the whim of the gods and that men and women are not passive before nature. Until human beings discovered a way across that boundary, the future was a mirror of the past or the murky domain of oracles and soothsayers who held a monopoly over knowledge of anticipated events.” – Peter L. Bernstein

If you missed our latest posts, here are the key levels for > NZDUSD AND GBPUSD. These remain two of the most interesting chart for this week.
In today’s webinar we are going to update our outlook on indices and our FOMC/OPEX setup:
As you can see in the above chart, it’s really important to understand context and flows into these events. It’s worth taking the time to study to avoid blindly fighting flows and overall, just making things harder than they should be.
Note for active 50Scouts members: *make sure you read our latest update* and keep an eye on your inbox for a free pass to Friday’s daily webinar session (make sure to check your spam folder too).
If you are serious about attracting Investor Capital/finding Investible Strategies please check out our dedicated Darwinex page.
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 check out our Premium content.
Wishing you a great day ahead.