VIX Smackdown

VIX gapped down at the open. Likely catalyst was a huge liquidity injection in China during the U.S. overnight futures session.

VTI daily held the support. See what happens. Have to watch the MACD negative divergence.

VIX 1hr gapped down at the open and stayed flat.

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Parabolic Moves

The main reason why I set about creating my trading method, was to deal with how to trade on smaller time frames. I tried various methods to trade on small time frames but I could never get a very high success rate, due to the number of false signals.

I now have a very reliable system. I am not a day trader but I want to see the intraday data when there is a parabolic move, and be able to get something tradeable out of that over a few days. I now have a very reliable system for my short term swing trading over a few days. This year has been a huge breakthrough for me in my ability to generate consistent results in any market condition.

I will be doing a video about my trading method over the break. I will show how my whole method works, all the way down from monthly, weekly, daily, 4hr, 2hr, 1hr, 5min.

There are plenty of great looking methods like Gartley patterns, but getting reliable trading results from these is a different story.

ROKU 1hr basic method.

ROKU 5min basic method

This is my intraday advanced template to be used in combination with my basic method.

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Don’t Panic

Risk is always relative. I use the example of these goats that quite happily graze on the near vertical wall at Hoover Dam. To anyone looking at these goats, the risk they take seems crazy, but to them it is not risky at all. The reason they are not afraid, is because they have been doing this a long time and they are perfectly adapted to it.

Yes there is risk in being aggressively long stocks at this point in the market, but it is a calculated risk. I also have plenty of stocks that I am short at the same time. I know I can trust my indicators to take me out if need be. I don’t sit on the sidelines in cash, hoping that one day I can say I was right. The overall direction is only of interest to me if I intend to trade the VIX options or the index it’s self. The overall market has no bearing on my individual stock trades whatsoever.

SQ daily basic method showing a continuation pattern.

SQ 4hr. Notice the first long leg was stopped out. The subsequent three long legs are still going. I average in and then when the stop is hit I exit all the legs together. No need to panic because the market has a few down days.

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Forex Of Interest

The conditions in FX have not been favourable so I have allocated funds to my other accounts. I am not about picking up a few pips when there is easy money to be made elsewhere. The good conditions will return to forex again and I will allocate funds to my account at that time. I am constantly changing my allocation between stocks, forex, commodities, futures and market indices. I am an active trader using CFD’s and options to leverage my buying power while using strict risk management procedures. This is what works for me, not saying it would work for someone else.

A few forex pairs of interest.

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High Yield Weighs On Markets

Junk bond yields have been on the increase as loose central bank monetary cycles start to tighten. This has been having a negative impact on equities but no signs of serious danger levels in the credit spread yet. Have to watch closely after the December Fed meeting.

JNK V SPX daily. The S&P 500 has had a very wide divergence from junk bonds but the correlation is still intact. When JNK is below the blue 15 MA line it is potentially bearish for stocks.

JNK daily down since the start of November.

CCC yield to investment grade bonds spread. Above 10 is higher risk and can be a warning of trouble ahead. Not there yet.

(source:BofA Merril Lynch & St Louis Fed)

VXX on short term template.

SVXY on short term template.

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If you believe the current reports the outlook for Europe is robust. Have to just watch as events unfold. I never like to make long term forecasts. Just take it one week at a time.

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Law Of Attraction

One of my most successful strategies, is to look at my correlation charts and capitalise on any divergence in the correlation.

Nikkei v USD/JPY is one of my favourite correlations. Look at how rich the Nikkei is running from the USD/JPY.

Nikkei daily is about the go counter trend.

EWJ on my short term template.

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China Below Expectations

The data out of China has been soft at best. See article here at Business Insider. What will come of the tyger that burns so bright?

When I think of China it reminds me of this poem from my childhood by William Blake.

The Tyger

Tyger Tyger, burning bright,
In the forests of the night;
What immortal hand or eye,
Could frame thy fearful symmetry?
In what distant deeps or skies.
Burnt the fire of thine eyes?
On what wings dare he aspire?
What the hand, dare seize the fire?
And what shoulder, & what art,
Could twist the sinews of thy heart?
And when thy heart began to beat,
What dread hand? & what dread feet?
What the hammer? what the chain,
In what furnace was thy brain?
What the anvil? what dread grasp,
Dare its deadly terrors clasp!
When the stars threw down their spears
And water’d heaven with their tears:
Did he smile his work to see?
Did he who made the Lamb make thee?
Tyger Tyger burning bright,
In the forests of the night:
What immortal hand or eye,
Dare frame thy fearful symmetry?

~ William Blake

Will China lead or is there trouble ahead?

There is no doubt in my mind that China will lead economically in the coming years. The question is in what direction?

This link is to a video about the prospects of China’s OBOR project that holds so much promise and yet, faces so many hurdles. Belt and Road – China’s Latest Project via RT

OBOR daily ETF. One I follow on my China watch.

Shanghai Composite daily

Hang Seng v Australian ASX weekly. This is one of my correlation charts. To my surprise the ASX has rallied to catch up to the HSI. See how it goes from here.

China’s Gov Bond yield curve

The short end of China bond yield curve is quite concerning and the long end is flattening but not much change in 6mths. Have to keep a close eye on this.

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Tech Watch

Just keeping an eye on the FANG & FANMAG’s. We are seeing signs of a potential retracement. There is nothing to indicate any major downside at this stage. One of the biggest threats to the market is retail investors have turned to passive products such as ETF’s. The main problem with this type of passive melt-up in markets, is people go to sleep and feel that they cannot go wrong. The problems will become evident when there is a sudden need to off-load these types of products. Will there be someone there to take the other side? That remains to be seen. We have not seen passive investments at these levels ever before.

“Bulls don’t die of old age, they die of fright.”

My FANG composite on the left is running rich of the Nasdaq index. Should expect a retracememnt. This would be more healthy for the market in the longer term.

On the right are the FANMAG’s which are flat at best.

NDX daily. You can see the Nasdaq VIX at the bottom of the chart is nowhere near the red danger line at 22. This uptrend has not been in danger for the whole year.

NDX weekly MACD is crossed up but could see a consolidation. Certainly a full bullish look at this time.

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Crypto’s Update

What a week in the crypto’s following the cancelled SegWit2x. Bitcoin sold off and suddenly Bitcoin Cash was the flight to safety play. Mostly Korean buyers. They got in quick and got out again just a fast.

Bitcoin Cash daily.  What a ride! +600% gain 15 days.

Bitcoin weekly in consolidation looking for a retrace back to the support. A break to a new high is unlikely at this stage.

A beautiful continuation pattern going back to late 2016.

Ethereum weekly in consolidation

Litecoin weekly consolidation

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