“I will not allow yesterday’s success to lull me into today’s complacency, for this is the greatest foundation for failure.” – Og Mandino
’18 Thought of the Day
Waiting for the FED
“In essence, if we want to direct our lives, we must take control of our consistent actions. It’s not what we do once in a while that shapes our lives, but what we do consistently.” – Tony Robbins
Here we go with the much anticipated decision. Last meeting of the year and a key turning point as we head into 2019. Remember that the focus will be on how price reacts post the decision and press conference. It usually takes the market some time to really settle down and pick a direction so don’t be fooled by knee-jerk moves.
Clearly, today’s release is slightly out of the norm both in terms of actual implications of the decision but also due to the mounting unprecedented political pressure to stop raising rates. Base-case expectation remains for a dovish hike but we’ll be ready for whatever we get out of Powell.
In terms of recent market action, we continue to see unwinding of risk positions and as expected, rallies continue to get sold. Furthermore, as we have warned, yesterday we also saw markets selling into the usual BS headline resales from Washington when indices trade on the lows. The tape has changed and unless we see something very constructive out of the FED or the White House, chances are that we are still nowhere near the end of this de-risking / de-leveraging phase.
In today’s session we will focus on how prices tend to react on these releases and how we would look to both manage existing positions and/or initiate new ones following the announcement.
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Waiting for FOMC
“In ‘Confessions of a Winning Poker Player’, Jack King said, ‘Few players recall big pots they have won, strange as it seems, but every player can remember with remarkable accuracy the outstanding tough beats of his career.’ It seems true to me, cause walking in here, I can hardly remember how I built my bankroll, but I can’t stop thinking about the way I lost it.” – Mike McDermott (Rounders)
Despite the heightened headline risk across the board, the real focus this week is going to be the FOMC meeting. Remember that we have a lot of other key data out from around the world, including BOJ and BOE but again, it’s all about the FED and the expected ‘Dovish-Hike’.
As we have been discussing in detail, the tape continues to trade in a very heavy manner and we believe that this distributive phase, where we remain positioned in ‘sell the rally mode’, still has to resolve with more downside and and proper flush.
intraday, out focus will remain on keeping a very close eye in the action on both small caps and financials. Unless the market can manage to stabilize these, it is going to be very difficult for indices to hold any sustained bounce attempt.
Remember, historically, December Triple-Witching Week tends to be bullish and a lot of participants will be looking to play this seasonal pattern, along with the much awaited and anticipates Santa Rally.
Once again, this is going to be a KEY week, not only for indices but especially for the DXY. In today’s webinar, we will review current context, possible scenarios and how we will look to position for action into the end of the year and into 2019.
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Into the Weekend
“When the facts change, I change my mind. What do you do, sir?” – John Maynard Keynes
As we have been discussing for months now, economic data has peaked, growth is slowing and liquidity remains a massive concern. Pretty much all asset classes are under-performing cash, credit is in trouble, Banks continue to be unable to catch a bid yet markets remain in a very complacent mode, convinced that the Santa rally is around the corner and that new all time highs are inevitable.
Naturally, everything can catch a bid, especially in this low liquidity algo-driven environment. However, unless something drastic changes, sooner or later, markets will have to wake-up to this reality and reprice. Clearly, this has already started under the surface and we continue to see a lot of selling into recent strength but the wake-up call still hasn’t reached everyone.
Once again, keep an eye on RTY and the Banks. That’s all you need to get a feel for how we are trading under the surface and if any of the intraday rally attempts could have any real chance of sticking.
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Into ECB
“Nothing in this world can take the place of persistence. Talent will not: nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not: the world is full of educated derelicts. Persistence and determination alone are omnipotent.” – Calvin Coolidge
At this stage, we just have to be patient and get through the last ECB and FOMC meetings of the year.
Nothing much has change in terms of our bigger picture view. We still feel that markets are being extremely complacent and that we are currently in a distributive phase of the cycle. Naturally this does not mean that we could not move back higher but our belief is that the risk/reward is still on the ‘sell into strength camp’ both from a tactical and cyclical perspective.
Following on from our bigger picture Pivotal weaker DXY theme, here are 3 key charts that we will be discussing and reviewing:
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Early Morning Update
“Strength does not come from winning. Your struggles develop your strengths. When you go through hardships and decide not to surrender, that is strength.” – Arnold Schwarzenegger
As we discussed, there was absolutely no sign of fear in the markets and expected recent lows to be taken out and we are still focused on unfinished business at yearly lows. Once again, the pivotal bull/bear lines proved to be extremely useful in assisting us and we will continue to focus on them. Naturally we would never play for any market to move in a straight line and even if we get a flush and tradeable bounce, those levels will remain our key strategic guides. Primary downside targets are still 4-6% away on most of the indices for these current moves.
We also continue to expect both Nikkei and USDJPY to catch up to recent moves and expect to see plenty of two-way trading opportunity inside these ranges on the way to the bottom-end supports.
The other key chart going into this week, ECB and the upcoming FOMC meeting will be the DXY. We would be very cautious about trying to be aggressive trying to fade ans sustained move and continue to focus on EURUSD. Don’t forget to properly understand Euro weight in this and remember that in an aggressive risk-off environment, especially in the context of China frictions, AUssie and Kiwi will struggle. No change in our base-case outlook.
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Wishing you all a great day and week ahead.
Early Morning Update
“The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the man of inferior emotional balance, nor for the get-rich-quick adventurer. They will die poor.” – Jesse Livermore
Wednesday, December 5, 2018 has been declared a National Day of Mourning in commemoration of the death of President George H.W. Bush. Remember that many exchanges, including U.S. stock and bond markets, will be closed for trading.
If you missed it, we would recommend going through our recent post where he highlighted some of the charts and dynamics that are on our radar.
We have attached 3 of the key graphs and moves we have been talking about and remember that we sill have to get through NFP this week. Furthermore, we fully expect to see what is likely going to be a lot more drama out of Washington.
Our base case has not changed, we are still looking for equity and ultimately dollar weakness (current thinking). Naturally, if key levels break, we will be very quick to revise and possible reverse course of action. As always, it’s all about price.
Note for active 50Scouts members: *make sure you read out 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 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.
Early Morning Update
“What we can or cannot do, what we consider possible or impossible is rarely a function of our true capability. It is more likely a function of our beliefs about who we are.” – Anthony Robbins
Most gaps from the Sunday euphoria are done. As discussed in yesterday’s webinar, you have to be suspicious when every talking head, pundit and punter is absolutely certain of any given outcome. As a general rule, we have and will continue to fade these situations.
Our main focus remains on price and on how markets react are specific levels. Remember that this week will likely prove to be pivotal in setting the tone for action into year end.
Here are some of the charts we will be updating and discussing today (charts can be loaded by clicking on the bullet title):
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Nikkei and USDJPY breakdown, range and inflection point.
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Bigger picture Bull/Bear lines in ES/NQ/YM/RTY.
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GOLD $ DXY.
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EURUSD 1.13 rotation + seasonal pattern.
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ZB cyclical support inside chop zone.
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SPX still in range.
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NDX key inflection point.
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Crude, the 200WMA and waiting for OPEC.
If you missed our latest update heading into this weekend and our discussion focusing on the possible repercussions on equities and the dxy, you can watch the recording > HERE.
Note for active 50Scouts members: *make sure you read out 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 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
Morning Update
“The whole problem with the world is that fools and fanatics are always so certain of themselves, but wiser people so full of doubts.” – Bertrand Russell