MPB Journal

Orders cancelled. PA too bullish at this stage. Will reassess if we see bearish PA.

We have had lower Daily swing highs in these two charts so stops have been trailed down to above the recent highs.

COT is leaning towards MXN weakness, this may now be reflecting in the price.
Lots of technical reasons to buy this.
Looking to buy a pullback.

Interesting bar here. Bar1 is a classic pin bar and many will want to short this bar which is fine but I want to do the opposite.

Bullish Scenario
If this pin bar fails there could be strong upside. A failed signal is a great entry in the opposite direction.

Bearish Scenario
If this pin bar yield's in the typical sense and moves below 13.25 it would confirm a false breakout however, downside should be contained by the recent multiple lows of about 13.05. There is no where near enough risk/reward in a short here imho.

Bear scenario played out strongly last night.
Long orders cancelled. Will keep and eye on this pair still as its possible to bounce off the trendline it is testing now.

Current Open Positions.

Heating Oil [email protected] - Stop moved up to 3.09. Nice move Friday. Perhaps my partial profit taking was a bit premature?
Gold [email protected] - Stop moved up to 1642. Large Bullish outside bar. This is very encouraging for further upside.
USD/CHF [email protected] - Stop moved down a little to 0.9625.
AUD/CHF [email protected] - Stop unchanged. As much as I want to move it down there is no logical daily swing point to use. Also, I am expecting a sharp pullback at some stage here as profits are taken before resuming down. Keeping the stop this far away from price should help prevent getting stopped out on the profit rally. At the moment I intend to stay short this pair for a while.

AUD/CHF [email protected] - Stop lowered to 0.9850. I like the spot above Mondays high since it gapped down on the open then rallied and failed. Gaps can be harder to trade back through. IMHO it represented hefty selling and panic long covering. Eventually we will get some short covering (rally) then probably more short adding.

These two are looking shaky at the moment.
Both highly correlated (obviously) and both looking like a potential double top may be forming. Combine that with COT indexes at extreme levels and we may have a substantial move to the downside about to take place.

Since these markets could fall very sharply I will play each slightly differently:

S&P500 - Sell a break of Bar2 Stop Loss above Bar1

NASDAQ - Wait for a Daily close below Bar2 Low (to confirm breakdown) and sell a pullback as per normal.

The idea being if we get an absolute meltdown I will be short immediately on the S&P as sometimes pullbacks do not happen when the market is in free fall.

Reasonable targets for the S&P and NASDAQ being 1300 & 2500 respectively.

Wrong.
All on hold now given these two spectacular bars.
I still like the downside but no chance at the moment.
Will keep on my watchlist to see if we get favourable PA to the downside.

Open Positions

Heating Oil [email protected] [email protected]
No change in Stop orders, this trade is still hanging on here. It is looking toppy though.

Gold [email protected] [email protected]
Stop moved up below Sep3 Low, large moves happening in this market atm. Nice to be on the correct side.

USD/CHF [email protected] [email protected]
Stop moved down a tiny amount. Large move down Friday.

Closed Positions

AUD/CHF [email protected] - Exit @0.9850
Spiked up to 0.99 and fell hard forming a classic pin bar. I still think there is plenty of downside for the AUD so will be looking to sell below the Low of Bar6 with SL above High.

Stop moved down to 0.9500 just above the September 10 High.

I forgot to post this chart. I did get short the break of Bar6 with SL above the High (Sep 10)
Not looking too flash at the moment though.....
I still like the AUD short despite the recent strength.

Heating Oil [email protected] [email protected]
Stop moved up a little further to below Sep5 Low.

Gold [email protected] [email protected]
Stop moved up below Sep13 Low. A huge Bullish Outside Day. More profit locked in.

Open Positions

Heating Oil [email protected] [email protected]
No change in stop orders over the weekend.

Gold [email protected] [email protected]
No change in stop orders over the weekend.

USD/CHF [email protected] [email protected]
Stop moved down to above the 13th Sep High.

AUD/CHF [email protected] [email protected]
No change in stop orders over the weekend.

The following markets have my interest for positions once the current trend turns:

Long
Coffee
Sugar

Short
CAD (Long USD/CAD or similar)
Cocoa
MXN (Long USD/MXN or similar)
Cotton
S&P500
Soybeans (maybe)

Will post charts if these ever get interesting.

Stop hit overnight in what was quite a volatile session.
I also noticed that Crude (highly correlated) reversed pretty heavily at the 100 mark. There may be a bit of a correction in the 'oil' markets.
I'm on the side for now.

Stops moved down a little today. Chart is looking more bearish now (as well as the USD/CHF)
Stops at 0.99.

This is a market I have been waiting to sell for a long time. The drought in the US has kept the grain prices up for some time now. So selling into this strength would have been devastating. I was tempted to jump on Long as a fade trade but could not bring myself to do it.

Anyway we may have price action showing us that a top may have been put in. I say MAY because this is a scary market to get short given the recent relentless strength. That said COT data has been favouring a Bearish move for quite some time now. PA commentary below:

Bar1 - Highest Weekly Low
Bar2 - Next Weekly Low (lower than previous)
Bar3 - First Daily Bar to close below Bar1 Weekly Low
Bar4 - Optimal Entry Short below the Low of this Bar after pullback (brave and very speculative)
Bar5 - Large Trend Bar Down, closing below Bar2 Weekly Low.

The Bar5 is a very good looking bar for many reasons. For one the market closed Limit Down yesterday. Closing below Bar2 Low it has produced a lower low that followed a lower high (Bar4). This is the definition of a downtrend. None of the prior Daily PA (from June on anyway) produced this Lower Low & Lower High pattern.
I think it has shown its hand here and I am looking to sell a pullback assuming the Bar4 High remains intact.

I am looking at adding new setups to my method. This is based on what I have observed and read over the last while.

I am of the opinion that:
i)Great technical setups can occur in the absence of fundamental triggers
ii)Great fundamental setups can occur in the absence of technical triggers

Below are the basic definitions:

1) Fundamental Setup - Current
The COT gets extreme, trend changes and I open trades in the direction of the new trend and hold as long as possible.
New setups:

2) Technical Setup - New
I use an oscillator on Weekly chart to tell me when price is vulnerable to a trend change, let the trend change and trade in that direction as per normal.

Note: There is a situations when both of the above setups happen at the same time. This happens quite often but not always. This situation certainly adds overall weight to the setup.

3) Fade Setup - Work In Progress
When either the Fundamental or Technical (or both) have triggered there is an opportunity to 'fade' this setup. It 'can' produce great results. This is something I will investigate down the track.

Also, as always discretion is the vital filter for all these setups. Some markets setup but look awful from a price action point of view. In which case I would pass on the setup. This is a very important point as I would probably filter out half of the setups I get purely by eyeballing them. This is because any indicator (COT Index, or oscillator) has drawbacks and only 'work' in certain market environments. As they say:

"Good traders know their rules, while great traders know the exceptions to their rules"

I am not claiming to be a great trader by any stretch but I believe in the concept so moving on now, these are my setup rules:

Fundamental Setup (Current)
1) The Commercial COT 78 week Index must be >= 80 for a Long Setup or <=20 for a Short
2) Any 1 week change in Commercial 78 week index of >=15 points is a possible Long or <=15 points is a possible Short

Technical Setup (New)
Weekly CCI(20) must be overextended (<= -100 for Long OR >= +100 for Short), then all other rules from trend breakdown to entry are as per normal.

I will post a current (open position) and potential trade example next.

Apologies if this appears a bit 'after the fact' however, this is a real trade and there are others that I am looking to take for the same reason.

I got long the GBP/CAD on 28th August based on the 'Technical Setup' as described earlier. It is the first time I have executed a trade based on this setup and although going OK at the moment it may close out as a loss. So be it that's trading. Below are the charts and commentary that lead to the entry.

Technical Setup Triggered by Weekly Chart closing oversold as of week beginning 30th July.

Daily Bar Commentary:

Bar1 - Recent Weekly High
Bar2 - First Daily Close Weekly High
Bar3 - 1st Pullback (Lower High) - Now trail buy stop orders down until filled
Bar4 - Lower High
Bar5 - Lower High
Bar6 - Lower High
Bar7 - Entry Bar with previous day High taken out

This trade has just hung in there after being tested on Sep 11.

Subsequent to entering this trade due to the "Technical Setup", the CAD has now been triggered as a "Fundamental Setup" Short in the COT data (or a Long XXX/CAD). The Commercial Index now reads 0. There was also a rapid change in positioning when the 78w index changed from 27 to 0 in one week. These large jumps in positioning can be interpreted as 'new important information discovered' and can lead to large moves also.

So I am already positioned for this Fundamental CAD weakness in a cross pair based on the technical setup.

I also now like the traditional USD/CAD pair for a trade (correlated to this trade I know) and will detail this next.