Category Archives: Futures

That was fun

There we have it.

The S&P in moderate panic mode on news (presumably) that a budget deal is in the works. So good is bad for another Fed fix. It’s been a long time since we saw such a smooth ride down. I like this chart, look where we stopped, surprise.

ES Chart

For those of you looking at Fib extensions we have a bit more downside. (Or not…) What was so fun (and profitable) about today’s trading was the failure to find 1800 again and then the breakout under 1792.

These opportunities are rare these days, it was a beauty.

ES Chart Levels

The VIX screamed higher 10% to 15.42. This in itself isn’t so extreme, but if the end of the week shows some follow through we’re in for some volatility. Finally!

The other possibility is we’re going to find a range here 1775 -1805. That also offers some interesting possibilities.

Good Trading.

Selling Vol on the radar.

Johnny Cash

Johnny CashI have no explanation for it. Johnny Cash sings in my head. I don’t think his last name has anything to do with it, but I can’t entirely exclude the possibility.

Driving back to Paris on Sunday, I hear The Caretaker on FIP. Last night a friend in New Jersey tells me he’s coincidentally been on a Johnny Cash hokey-sentimental-reunion-tour, pulling out vinyl.

Maybe it’s the classic lines: The beer I had for breakfast wasn’t bad so I had another for dessert, or the holiday arriving, and A Johnny Cash Christmas subliminally starts to leak back into my consciousness.

I’m off track, and that, thanks to Grant Williams, who is growing increasingly frustrated with the state of the Gold Market. Aren’t we all?

His latest TTMYGH is as good as most, even if you’re tired with his fixation on Gold, you’ll learn something from his (what’s the adjective?) latest newsletter. He deconstructs Gold Price fixing. There is little doubt that 2 times per day in London a mini-cartel, with no legal constraints around their ability to trade or share trades, profits handsomely from their insight into forward prices. No manipulation there… He draws a common sense parallel with the London Gold Pool failure in 1967. Worth the read, again.

Besides Johnny Cash and Grant Williams, I’m intrigued today by the weakness in the S&P index. We’re all looking for signs of a top, might this be it? The VIX is creeping upward, and we see crowded Long Nikkei/Short Yen bets. What would a reversal confirmation look like, in a market that’s been climbing for years?

The chart mavens are calling in sick.

Using the VIX for Trade Entry Signals

With the popularity of the VIX and VIX futures being overly used as a volatility hedge, I’ve been thinking about the signals it might give for medium term entry or exit points. If you chart the VIX and overlay Bollinger Bands (20,2,SMA) and look at the SPX, you’ll notice something interesting. Remember the VIX is forward-looking. The other indicators are price biased, and historical.

When the VIX breaks over the upper Bollinger band, you’ll see a low point directional change in the SPX. This isn’t a completely new idea, I was at a seminar recently which looked at combining this with Chandelier as a trading strategy. I’m going to just stick with the Bollinger Bands, the VIX and ATR. That’s where I see the most interesting information.

I mention ATR (Average True Range) because the 1 day ATR helps confirm long entry points.

Everything is in the chart below. The long signals look better than the short signals.

VIX SPX Bollinger

Good Trading.

Missed Gold Trade of the Day

It’s always good to go back and review your trades, so I hear… This is the trade I thought about, lines drawn, etc. but didn’t pull the trigger on. The RSI was indifferent, telling me nothing at all. When that happens, I sometimes go get a coffee, walk the dog or turn to other contracts. I could have setup buy orders on what eventually turned into a nice breakout. This was staring me in the face and I missed it. C’est la vie…

Have a good weekend.

Gold Chart

Bragging Rights

Semifinals, then buried…  I made one trade that I was proud of and several that I should have avoided. These were my first round trades:

CL BOT 1 105.63 11:07:58 20130920 NYMEX
CL SLD 1 105.54 11:12:10 20130920 NYMEX
CL SLD 1 105.5 11:21:51 20130920 NYMEX
CL BOT 1 105.49 11:30:18 20130920 NYMEX
GC SLD 1 1357 11:44:20 20130920 NYMEX
GC SLD 1 1358 11:46:04 20130920 NYMEX
GC BOT 1 1352.4 12:00:05 20130920 NYMEX
GC BOT 1 1351.4 12:01:00 20130920 NYMEX

I was looking for a breakout based on the support lines, and when the second candle couldn’t get past my support, it was a good signal to sell/reinforce the short. Could have gone the other way, of course, but the RSI was falling, and I was sitting in front of 200 people. The trade felt right, and when I heard one of the other contestants chase/scalp the momentum, I knew it was a good trade.

The Chart for the good trade(s) looked like this:

Gold Chart

So… Next the bad trades.

These were nearly all bad, my second round trades, under presssssuuuurre!

CL BOT 1 105.37 14:32:57 20130920 NYMEX
CL SLD 1 105.38 14:36:32 20130920 NYMEX
CL BOT 1 105.48 14:38:07 20130920 NYMEX
CL BOT 1 105.4 14:39:40 20130920 NYMEX
CL SLD 1 105.25 14:47:50 20130920 NYMEX
CL SLD 1 105.21 14:47:50 20130920 NYMEX
ES BOT 1 1715 15:01:40 20130920 GLOBEX
CL BOT 1 105.42 15:07:31 20130920 NYMEX
CL SLD 1 105.44 15:07:51 20130920 NYMEX
ES BOT 1 1713 15:18:57 20130920 GLOBEX
ES SLD 1 1711.75 15:21:53 20130920 GLOBEX
ES SLD 1 1711.75 15:21:53 20130920 GLOBEX
GC BOT 1 1338 15:28:46 20130920 NYMEX
GC SLD 1 1338.2 15:29:30 20130920 NYMEX
CL SLD 1 105.07 15:34:40 20130920 NYMEX
CL SLD 1 105.06 15:35:43 20130920 NYMEX
CL BOT 1 105.09 15:37:12 20130920 NYMEX
CL BOT 1 105.18 15:37:43 20130920 NYMEX
GC BOT 3 1338.7 15:51:56 20130920 NYMEX
GC SLD 2 1337.9 15:58:24 20130920 NYMEX
GC SLD 1 1337.8 15:58:24 20130920 NYMEX

Just seeing the number of trades you could tell I was chasing. I’m sitting up there with 3 other guys who know how to scalp very well. And I’m thinking, shit… Look at this churn, look at this churn.

Videos of the first round are on youtube. (here and here)

More Downside?

I wasn’t completely blindsided by this pullback, but the head-fake after bouncing off the 50% fib scared me off my short trades. That’s the way it goes. What could have been a beautiful setup falls into the category of live and learn.

Here’s part of the bearish argument; here’s atleast one reason not to jump back in long, yet.

  1. Rising Historical Volatility – the last 3 times we passed this HV level there was more downside.
  2. Testing the 50% Fib, again
  3. The upward channel works until 1600.
  4. That 1600 falls at the 23.6% fib

S&P 500 Futures ChartI’m expecting some churn here, we’ll see.

Good Trading.


Calvin Screaming

Market Manipulation

Calvin ScreamingEvery so often I get thinking about The Manipulated Market. When markets defy logic to such an extreme degree only one of two explanations is possible. 1) Either your understanding of the forces that move markets is so fundamentally flawed that migrant farm work might be more rewarding; or 2) forces are at work which neither the press, bloggers, twitterers, or even Ben Bernanke have the courage to ‘expose’, question, criticize, regulate, or remotely ‘deal with’.

To Big To Fail = Big Enough To Manipulate.

We’re living through a sort of post 9/11 self-reflection while at the same time struggling with the contradictions of rising ‘wealth’ and shrinking disposable income. Capitalism is taking a hit, privacy is taking a hit, and the free market altar seems to be experiencing Alzheimers under stimulus ad infinitum. Some traders make every effort to avoid any and all ‘macro’ inputs to their trading strategy and focus only on: charts, price action, measurable ratios, divergences, volatility, etc. etc. etc. Those traders, presumably investment bank equity desks, and your friendly neighborhood algo are doing well… Very well.

Continue reading