Into FOMC

Clearly all about Jay today and how he manages to navigate through the press conference. We have been wrong before but we are not in the camp of a surprise cut as we feel that there is no reason to make a move until after the G20. More on this intoday’s webinar and also how we would assess the various probabilities and look to position ourselves.
the focus is going to be on the most crowded trade on the board with everyone obsessing over the 2% mark. As things stand, even if we probe below the 2% mark on the 10 Year Yield, we do not expect it to hold below on the first break and still think that we first need to see a shakeout of the stretched positions. Our short-term focus going into the meeting is on playing the extremes and the fact that we suspect the press conference will not deliver an even stronger uber dove-tone than the one that is already priced into the market for now.
On the other hand, we are not in the camp of one one and done. History shows that once we start… there is plenty more to come and politicians and central bankers around the world have been preparing us for a while now for NIRP… it appears that the real race to the bottom still has to accelerate but more on this in the webinars (this is not what we will be focused on today).
No change to what we have been discussing on indices, the dollar and crude. Let’s see what kind of tap dancing show Powell can put on today and what the President thinks of it. Sad but true… DJT a is key part of intraday trading and we have to make sure to factor this into out process and execution.
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Into the Weekend

Yesterday we discussed recent action in stocks vs crude. Again, it’s key to keep an eye on this and understand how this will likely play out and affect other asset-classes and flows. Suffice to say, most will be looking for stocks to catch up with crude but as discussed in yesterday’s webinar session, it’s important to focus on price, fundamentals and context. In our opinion, short-term, participants have to be open to the fact that it may be crude that needs to catch up with stocks and especially given the current geo-political environment, we would definitely not be looking to go into the weekend with short crude exposure.
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Mid-Week Update

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

subscribers and followers will no doubt be fairly content with this recent bounce in indices and correction in the DXY, along with all related trades, However, it’s important to stay focused and unbiased.
Remember that the last part of the move can be the most expensive and that we would always prefer to focus on trying to capture 80% and be in a position to be flexible with plenty of dry powder to take advantage of whatever may arise.
No change in outlook or what we have been discussing but remember that we are heading into ECB and NFP. We consider the % play of the moves we were looking at, especially in terms of velocity of move, pretty much done here and will be waiting to get through these two events before reassessing our views/outlook.
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).
For newer readers, it’s always worth catching up on our Trading Reflections post.
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Morning Update

“The trouble with having an open mind, of course, is that people will insist on coming along and trying to put things in it.” – Terry Pratchett

Click play on the audio player to start listening to the Morning Update
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Early Morning Outlook

“We cannot see our reflection in running water. It is only in still water that we can see.” – Taoist proverb

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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…
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Wishing you a great day ahead.

Follow-Through

“I like to listen. I have learned a great deal from listening carefully. Most people never listen.” – Ernest Hemingway

As we discussed in yesterday’s post, we have a very busy week ahead.
It’s going to be all up to AAPL and then then FED to save the week but as we have been discussing, after Boeing, you now really have to pay attention to the price action in names like Tesla, 3M, Intel, Google, Caterpillar and Apple next… we can’t stress enough how complacent the market is here at highs with all these unicorns rushing to IPO.
Remember to keep an eye on Crude, as it will likely have to join in to see some follow-through either way across the board and on the DXY, where we will still maintain our non-consensus view.
Shorter-term, all about AAPL, then the FED and NFP. As we said on Sunday, real action is most likely stacked-up towards the back-end of the week.
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).
For newer readers, it’s always worth catching up on our Trading Reflections post.
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Wishing you a great day ahead.

Busy Week Ahead

“The first thing you have to know is yourself. A man who knows himself can step outside himself and watch his own reactions like an observer.” – George Goodman (aka Adam Smith), “The Money Game”

Get ready for an extremely busy week ahead in terms of earnings, data releases and central banks.
This week, we will be keeping a very close eye on:
– Start of seasonal weak period in equities and risk assets.
– Tesla, Wirecard and follow through on the SOX index as indices press to and through all time highs but a lot of single name stocks are not looking too pretty.
– we always prefer to privilege healthy market moves/rotations, so we will be looking for some select DXY weakness and focus on action around 98 mark. No real change to all of our bigger picture FX swings, just changing dynamics on the intraday/week plays.
– The nasty weekly close on Crude with the failure to hold above the 65 mark: too obvious or 55 mark attracts?
– Continued o/n risk with GoogL and AAPl reporting after the closes, FOMC on Wednesday and NFP on Friday. All in the context of Japan being off on extended holiday.
– more focus on what we have been discussing in terms of the continued tell on how metals have been performing, despite recent action in indices and dXY.
– And much more..
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).
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 Outlook

“If you are distressed by anything external, the pain is not due to the thing itself, but to your estimate of it; and this you have the power to revoke at any moment.” – Marcus Aurelius

As we head into the end of the the week and approach the end of the month, focus remains on the tech space and follow-through after this recent press through all time highs. Naturally, the squeeze can continue but indices are looking tired and not surprisingly, guidance it not causing any real fireworks.
We’ll have to see what the headline flows has in store for us as we move towards the close but unless Washington can pull another rabbit out of the hat, we would expect to see less as less interest to hold aggressive risk-on positions as we move into the weekend.
Indices: ES, YM and RTY are not buying what NQ is selling… in addition to MSFT, MMM and FB, we’ll need to keep a close eye on action INTC and AMZN.
Single stock event risk: Wirecard (remember it’s a DAX component) and Tesla. These don’t matter and don’t make the headlines until they do… most of you know how these things play out. We would really not underestimate the potential risk here…
FX: still all about the DXY and action around the 98 mark. No change to what we have been discussing. We have had very nice moves, especially in the commodity currencies but it’s time to remember that markets do not move in straight lines for sustained periods of time. Our conviction play remains on the YEN.
Commodities: all things considered, Gold is still holding up relatively well and don’t forget to keep an eye on Crude around the 65 mark. This is going to be key for momo and flows today…
For newer readers, it’s always worth catching up on our Trading Reflections post.
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Wishing you a great day ahead.