Bulls only getting started!

They can push this a lot more

Oct 13, 2024

This week is anaemic regarding tier 1 economic data or indeed anything of note to happen. Monday is Columbus day in the US however it is not a market holiday. Focus will be on Thursdays ECB interest rate decision, US initial jobless data, Philly Fed manufacturing and US Retail sales. The 13:30 auction should be the most volatile of the day

I have spent the last hour looking through a lot of back test and pattern data across equities, metals and energy and the charts have been super interesting. In simple, with equities, I see that we can have a tiny reopen dip to start the week and then rally hard. $6000 is oh so close in ES right now.

I think we will see it this week. Just when you think things can't rally any harder, this is exactly when equities pull away and get incredibly overvalued. I have published a series of the 30 year lookback data forecast charts here. Premium subscribers only I’m afraid as this is incredibly valuable data.

I think in energy, given the seasonal effect at this time of year, refiners and retailers of energy have most of their inventory done now to bring them into the new tax year and new stock. So I expect broad weakness from these market participants. However, Oil will price in any handbag swinging between Israel and Iran. It is 100% impossible to accurately forecast what may come. All we have is the technically cheap and expensive areas on the market on any given day. So with this, lets get to the charts.

S&P500 ESZ24.

The Chinese government was due to unveil another round of bumper stimulus to the tune of 2 trillion yuan ($280 million) on Saturday, however this was a let down for the markets as nothing came of the meeting. It is not hard to see that equities markets may have gotten out front of their skis regarding impending cash injections from China. Utilising data gathered about ES and how it moved each day over a 27 year lookback period, I would say that there is a lot more room to rally.

The data we have on inflation, jobs and GDP up until last Thursday was goldilocks. The Fed was firmly shifting focus to jobs and away from inflation. This is what we got from Wednesday's FOMC Minutes. We then had a Thursday/ Friday where CPI and PPI were beats on expectations and initial jobless jumped slightly 258k on 225k expected. The markets bought it, bought intraday dips and up we go!.

If we can buy that dip and close high on the week- then we have teflon markets. Nothing can stop them. Stay long.

Recommending buying of dips to MVWAP +1 $5819 and MVWAP $5783

Gold GCZ24

Friday was a good show of strength in Gold where the context of IB up on the month was held. I am still of the view that I would like to buy dips rather than sell rips. Again looking for Q-PVAH $2593 for longs. However if we get the market movement shown in the 30 min chart below, I will take shorts at MPVAH $2657.8. I got so turned around from poor sleep on Friday, I didn't take the longs on MPVAH $2657.8 and lost out big time, with some of the younger bucks in Duggan Capital taking that trade and making money. Well done guys. To say it again, the arrows on the chart are not so much what I see the market doing exactly to the tick, but more so, the type of movement that I would want to trade. Please make this adjustment in thinking when looking at the charts. When we get completely different movements than what my arrows show, I have to update this in realtime and we discuss this in the room live.

So I would like to see selling on Gold come in early and us trade to Q-PVAH ealy in the week. The 30 year lookback data is available in this post so you can see what Gold has done exactly on average over the past 30 and 15 year lookback periods.

WTI OIL CLZ24

We will be rolling in about 8 days to the Z contract. Please be aware.

As mentioned above, the markets are awaiting a response from Israel to the Iranian rocket attacks, which themselves were a response for the Israeli bombardment of Lebanon. The Israeli war cabinet response is needed as the next step for not only the markets but indeed the world. I think the risks are nothing but tilted to the upside. With that as the base case, it is best advised to be active about buying on dips rather than be a seller of rips.

We saw such a buying of dips come in on Wednesday Long Y-PVAL $71,58s. This is the chart I posted last week- you can double check if you like. I was posting about this in notes also at the time and on Twitter. Deep value in oil. We are currently +$4 ticks up from that low!.

This week, I see more of that buying reaping rewards from the deep value. IF WE HAVE TO REVISIT $71,58s I fear it will not hold and we will trade Q-PVAL quite fast. This would be th next deep value price $69.90. So I will step out of the way on $71.58s until we get down there. But I prefer to stay long $71.58s. And stop out for scratch.

NAT GAS NGZ24

At this time of year gas injection for the remainder of 2024 is all but done. I see broad weakness to come in across the gas market through end of year, however there will be snaps of upside to come over the next 6 weeks as we dive deeper into winter. Predictions are for a 7% colder winter than last year. I think a rally from QPVH $2.531 is a nice looking spot.

I talk a lot about edge and the need to have an edge. We need to respect that edge as your GPS when it comes to trading. IThen we place a risk framework around that edge.

I had a conversation with a younger trader during the week where he was stuck using an inferior type of edge that he appeared to have gotten from watching a lot of youtube videos. I expressed my opinions on this edge (which were not good) and tried to steer the conversation towards having the ability to technically know where markets are cheap versus expensive? Where is the average value right now? Where is the average value for the month, week, year?? But it was in vain. I was told that everything there is to learn about markets is on youtube. Thanks for my input and goodbye….. Well FUCK! I must have not gotten the memo. All I needed to do all this time was look at youtube videos. I didn't have to learn anything from 3 top tier trading firms or from years of trading. What a waste of my time……..

Okay, yes I'm mad. But I'm also afraid for people. If you honestly think that all there is to markets is what is on youtube? Then you are going to learn the most expensive way possible. If you seek out a true, tested edge and understand that there is a lot more detail to trading that you think, then you are on the path. The only thing you need is a growth mindset and humility.

Waiting is trading

Trading is waiting.