In a sideways range, you want to fade extremes, right? What is more extreme than the rally we've observed off this year's low? Vix has declined sharply, in a steady pace, making fresh quarterly lows, a strong level of complacency is observed, whilst the price action in the daily confirms we're due for a correction in equities.
This is clear in many large cap stocks, as well as observable in oil, which had led the market into this climb, after a coordinated effort to prop its price higher, weakening the dollar, which was weighing heavily on earnings and after the Fed's attempt at normalization of interest rates, created a heavy correction accross the board. Currently, the short interest remains elevated, and we have signs of weakness in lower timeframes.
I'd reccomend going short, either via options, buying volatility, yen, bonds, or shorting SPY or S&P500 futures (or CFDs). The stop loss and entry, I will reserve for my signals group for the time being. As a general guideline, when in doubt, go by volatility (ergo, use Average True Range to determine your stop distance). If you have a suitable technical strategy to trade into this move, feel free to do so if you agree. Downside is very appealing, considering the minimal upside risk we have here.
Good luck,
Ivan Labrie.
PS: Check my profile or pm me for information on trading signals or tuition.
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One comment, timing for the correction can be anywhere between 1 and 10 months. (I'd estimate we'll see a violent move, which would wash out any kind of bullish sentiment from the masses, and then reverse up!)
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So far, deleveraging thesis is proving to be correct. Crude and Nikkei were leading, then Dax and now S&P500 too. We're in for a heavy correction.
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As expected, nice downside here, let's see if we break lower.
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Correction might be unfolding now.
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We've formed an 11 bar mode here, no downtrend signal spotted yet.
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archiki
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DOWT seems to be leading the way down again.
IvanLabrie
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Yes, also IBB was in bad shape all this time...and Yen underperforming S&P500, warning of deleveraging.
It seems we've seen a short squeeze rally.
Let's see how it goes from here onwards.
Are you short equities, or long yen?
archiki
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Short equities sir :-) playing the pops before the drops tho :-) and dabbling with gdx.
IvanLabrie
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Cool.
Seems like China can retrace a bit now.
moneymaking
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Already topping, damn it. Come on man, no more fuel left in this rally. That sucks, hehe, LOL, just kidding. Thanks mate for sharing your outlook, always appreciated :)
IvanLabrie
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Just what I see on the chart.
Also matches my intermarket analysis.
What do you think of the yen pairs?
moneymaking
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Yeah, yeah, 100% agree with you, that was just a small version of my inner rant, hehe LOL.
All yen pairs in ugly consolidation, I am waiting for a pullback to the broken level on usdjpy, to go short. Might not get there really, after seeing the market being stuck in ugly range. I am short on audusd, will close half of the position before the cash rate news today. What do you think, is it better to leave it all open or cover some profit and run? hehe ;)
IvanLabrie
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AUDUSD? I'd be careful, my bias is overall bullish but correction is due to occur.
If you have reasons to short, it might work, but yes, RBA tends to create quite dangerous situations.
I'd rather short yen pairs.
moneymaking
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Yeah, that's what I was thinking too. I will close majority of my short position, leave a small amount of it behind. Short yen pairs at their current levels or you waiting for pullbacks?