Equities have jumped up to new highs, and we were stopped out of our short SPY trade that we entered last Thursday. That trade was purely a play on a potential aging daily cycle, but now the market has given us a different set of signals. Our risk was extremely low, and now we can formulate a new game plan going forward. On the other hand, our GLD long mean-reversion trade continues to proceed and our IBB trade is breaking out. The dollar formed a swing high overnight, and could be moving into its brief cycle low or consolidating sideways. Continue to watch the market develop and keep your risk management tight. There will be some very good opportunities in the near future as some of the extreme ratios and stretches that currently exist finally exhaust themselves.
Good trading all.
Steve Chapman, TRI
The “sell AAPL, GDX, XME, VXX and buy everything else” carry trade continued to dominate the market action today, and at this point it is the only game in town. We removed ourselves from the GDX trade last Thursday because of the price action, and miners resumed their plunge to multiyear lows from the open onward. GLD did nothing today as the large participants continue to rearrange themselves in the paper futures market. Equities made another attempt at new highs as expected, floating well above VWAP at the close. Our short entry has a close stop as we wait to see if SPY is in a new daily cycle or a rapidly aging one. UUP finished slightly down as it waits for its short-term MA’s to catch up to price. Our new IBB trade did well today on its breakout to new highs with momentum supporting it. Here are today’s updated charts:
SPY
XIV
UUP
GLD
GDX
IBB
Continue to be patient and allow these trades to develop. There are certainly extremes out there right now and the trades are getting very crowded and complacent. We don’t tell the market when to make a change in direction, but we hop on for the ride when it does. Keep your stops close and your risk/reward in your favor. If the market differs from our outlook, we simply readjust, because this game is not about being right. Unlike horse racing, we don’t have to pick the winner before the race begins, we can place our bets once we see who is in the lead. Until the market reveals its hand, we wait and invest in other important areas of our lives.
Good trading all.
Steve Chapman, TRI
As we continue to patiently watch the market, let’s go over our positions and projections. We took GDX out of our portfolio last Thursday on our mean-reversion trade as it moved under the high volume lows of Feb. 20th…for risk-management purposes, we have to respect the price action. GLD continues to hold above the Feb. 20th lows, and we will continue to wait for a move to the 50 MA unless price breaks down and we step to the sidelines. Our SPY short entry from last Thursday continues to play out as the market is slowly losing momentum, and should be moving into a daily cycle low a few weeks from now.
Looking forward, we continue to wait for an entry into XIV at the next daily cycle low on our expectations of a move to new highs in the $SPX. In GDX, we will look for the next MA Envelopes mean-reversion trade or capitulation volume day followed by a swing low for an entry. Until ABX, GG, and NEM show signs of a reversal the bears will continue to dominate the miners. Every day that precious metals fail to rise in price is another day that the margins of the miners will get squeezed further. Think of the miners as a car on a hill without the parking brake on – when the price of gold jumps, it is like putting gasoline in the tank. Otherwise, that car is rolling backwards as ore grades decline, labor and energy costs go up, and geographic/political risk increases. The longer the precious metals bull fails to awaken, the faster that car will be rolling backwards at a continuously accelerating rate. Trade appropriately, and manage risk intelligently.
Good trading all.
Steve Chapman, TRI
I have received many questions regarding this new site, and while I continue to finish the programming, content, and infrastructure I have decided to temporarily open some of the posts up to the public for the next few weeks. The charts, strategies, and member posts will remain protected content, but feel free to browse the posts in the meantime as I finalize the format.
I am not in the game of predicting the future, as the market will humble anyone that tries to do so, although everyone likes to throw their hat in the ring at times. I am more interested in managing risk, finding high probability trades, and working within my T.E.M.P.O.S. framework to give me the flexibility to adapt to constantly changing market conditions.
My goal is to provide content that is educational, entertaining, and self-motivating, because in this game we ultimately have to take responsibility for the decisions we make, but it helps if someone is there to give us an encouraging push.
All the best to you and your families. Good trading all.
Steve Chapman, TRI
