I see there are some rumors and hot tips being passed around that The Fed is revving up the printing presses for another round of quantitate easing. At the time of this writing, futures are up about 0.32%. One thing to keep in mind is that chasing rumors and news for anything more than a quick, intraday or 1-2 day trade, if that, is usually a money-losing strategy. It does not matter what you or I think of the possibility that more QE will be wildly bullish for the market. All that matters is what the market actually does.
Another thing to consider is that we have yet to see two consecutive closes in the green on the Dow Jones Industrial Average since April. So, the issue then becomes whether a swirling rumor is the reason we bounce, or merely an excuse for a long overdue bounce within the context of a correction. To be sure, trapped longs are going to rely on the rumors to mount a rally. As someone sitting in cash, I am going to see if a morning move higher (assuming we get one) is not faded. If a move higher sticks, I will consider putting on a few pilot, or tester, longs that are smaller in position size than that which I administer in a trending market.
To give you a visual of my analysis, allow me to present an updated version of the chart I showed you last evening of the daily Aussie Dollar/Japanese Yen cross. Remember, in corrections the global markets are indecisive and thus asset classes tend to become more correlated. Thus, it behooves you to monitor a cross such as this one, where the Aussie is considered an excellent proxy for risk appetite, while Yen strength is viewed as extreme risk aversion. Currently, the Aussie is following-through on that hammer candlestick from last Friday. Indeed, a few days of bouncing may be upon us for stocks and commodities. However, as you can also clearly see, the Aussie remains in a firm downtrend versus the Yen. As such, you should expect even bounces to be volatile and far from a guarantee of a durable bottom.
Of course, if the whole move in the futures and risk currencies is faded by the open tomorrow, the shorts are going to be licking their chops as trapped longs will now represent low-hanging fruit.
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then the futures ate 1287.25 like it wasn’t even there my attention was had –
volume profiles look thin to around 1305 on a daily basis – the action in casino stocks particularly has my attention – esp LVS which was 60 before heading into this down move, and which just opened cotai –
that said, my plan going into the week was to be short from 1289 on a bounce –
sure wouldn’t want to be short anything without tight stops right now –
** when – should have said “when”
Great post as usual Chess.
3rd base coach put the squeeze sign on.
This is one reason why I like to look at inverse charts. I am a long bias trader and days like today, w/doji y’day have me getting ready to go long in my portfolio as sitting in cash gets boring. But when I flip the SPX chart, the inverse chart looks like a nice short opportunity is coming, so overall caution still warranted.
Very level headed planning. I especially enjoy the use of the verbiage, “position size…administer”.
Very doctoresque. Thanks