“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”
Early Morning Outlook
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.
Post FOMC
“I will not allow yesterday’s success to lull me into today’s complacency, for this is the greatest foundation for failure.” – Og Mandino
It’s all about follow-through now. Even if we know that usually, the best time to fade post FOMC moves tends to be 24/48h after the release, the current context is slightly different.
In today’s webinar we will focus on updating our current outlook and how we would manage existing positions, along with new opportunities. Please make sure to follow along on out Twitter feed for chart updates today as we are too busy on the trading side to load charts onto the blog.
Our current base-case assumption remains that indices have yet to bottom and that the dxy remains in a topping process. We are well aware that this has been an unpopular view and we will continue to discuss and dissect our rational and thinking in today’s session.
Do not be surprised to see aggressive moves in the coming days as we head into the end of the week/year and as participants are forced to react to recent action. Remember that you can always refer back to our Latest Outlook Video.
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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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Morning Update
“Success is as dangerous as failure. Hope is as hollow as fear.” – Lao Tzu
What really matters is what we get out of the ECB and FED, not bs o/n headlines. Naturally, this does not mean that markets can’t move aggressively on these reports, especially in thin o/n conditions but don’t forget to keep the bigger picture and levels in mind.
As we discussed live on Twitter, these squeezes can easily extend aggressively inside the most recent range but the base-case assumption is always that the o/n ramps will ultimately get undone. Usually the tell can be in how the most correlated asset classes are reacting through the pop or drop around key levels and these tend to guide us in looking for the best r/r and quickest opportunity to fade the move.
Remember that markets are still extremely complacent… no fear at all. If anything, you’ll see that come in with a flush and that’s when we’ll have a good chance at setting a proper short-term low.
No big change since our latest outlook video:
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Into NFP
markets managed another miraculous squeeze following yet another host of old headlines but still closed below the key pivotal bull/bear lines. We remain very suspicious of this action and are not seeing this as another key low that will trigger the famous santa rally for a move back into all time highs.
Naturally, especially into NFP, we still see a possible attempt to squeeze these back into proper gap fills but the real focus will be on how we close the day/week and not on intraday shenanigans. Both complacency and headline risks remains very high and we would not be fans on risk-on o/n holds.
The main key chart for NFp will be the dxy. We are still hovering around the 97 mark and unless we see a proper close above 98 of below 96 we will likely continue to see very choppy trading. As already discussed, this is the key piece of the puzzle and we will review our outlook and implications in today’s webinar session.
Remember that even if the usual suspects have been talking about capitulation and reversal, we have see zero panic in the markets. From current levels, unless you see the VIX trading above 30 but really, into the 35s and 40s, this is still pretty much a ‘nothing burger’.
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Early Morning Outlook
POSITIONING: Heron stands in the blue estuary, Solitary, white, unmoving for hours. A fish! Quick avian darting; The prey captured.
People always ask how to follow Tao. It is as easy and natural as the heron standing in the water. The bird moves when it must; it does not move when stillness is appropriate.
The secret of its serenity is a type of vigilance, a contemplative state. The heron is not in mere dumbness or sleep. It knows a lucid stillness. It stands unmoving in the flow of the water. It gazes unperturbed and is aware. When Tao brings it something that it needs, it seizes the opportunity without hesitation or deliberation. Then it goes back to its quiescence without disturbing itself or its surroundings. Unless it found the right position in the water’s flow and remained patient, it would not have succeeded.
Actions in life can be reduced to two factors: positioning and timing. If we are not in the right place at the right time, we cannot possibly take advantage of what life has to offer us. Almost anything is appropriate if an action is in accord with the time and the place. But we must be vigilant and prepared. Even if the time and the place are right, we can still miss our chance if we do not notice the moment, if we act inadequately, or if we hamper ourselves with doubts and second thoughts. When life presents an opportunity, we must be ready to seize it without hesitation or inhibition. Position is useless without awareness. If we have both, we make no mistakes.
365 Tao: Daily Meditations
Deng Ming-Dao
As google searches for circuit breakers and trading halts will likely be spiking today, we will remain focused on price and how it reacts around key levels. Remember not to get confused by velocity of move inside range and that price is always telling you what you need to know.
What really matters today in the equity markets is how we will close the day. Should we close above the pivotal bull/bear lines then, we’re still stuck in the chop range. However, should we close below, expect the selling to intensify and potentially get ugly. We will review this and discuss how we expect things to play out in detail in today’s webinar.
As we discussed coming into Q4, this is where things get really interesting as more strategic and experienced traders get really focused. This is the kind of market where veterans have a real chance to deliver and leverage their experience. May it continue until year end/into 2019 and good luck to all.
Yesterday’s blog post along with all summary links, should serve as a good refreshed of where we stand and our base-case scenario 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).
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
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.
Focus this week is going to be on how the market settles post weekend events. Furthermore, Qatar withdrawing from OPEC also means that we’ll likely continue to see a lot of headlines in an action packed week > China, Russia, RBA, Carney, Draghi, Powell, BOC, OPEC and NFP should keep traders very busy.
Heads up as this week will likely prove to be pivotal in setting the tone for action into year end.
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
Chart of the Day
“Success is as dangerous as failure. Hope is as hollow as fear.” – Lao Tzu
Our latest post with a collection of Key Charts remains very much in play as we move into the last trading week of the month.
Remember to keep in mind that we have a lot of headline risk this week, not only from scheduled data releases but also from Russia, China, Italy, Brexit, Opec and a host of Central Banks.
Don’t forget to keep and eye on Commodities and Credit for clues…
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.
