Mean Reversion in NZD/JPY

I have been waiting a while for this.  I was probably stopped out twice

So the entry was based on the premise that we are in a series of lower highs and lower lows.  I was able to capture a short entry based on some level of "sell the rip" into 80.172.

The other Yen based names are getting stronger on the Yen side slightly USD/JPY etc

It is only a matter of time until the 50 period simple moving average catches up to the shaded rectangle at 78.5 and price reaches my target so I can cover this short position.

I will update posts based on other factors like adding size and if I need to reset targets. 

The First Segment

Chart of SPY from 2003

The first vertical line cutting through the longer bodied red candlest cik from mid-January marks where technically the rally weakened and began a  sell off

But from the pool of data we have, on 3/3 was the first date when the signal "Market in Correction" was published.  It then proceeded to slide harshly until its bottoming candle formation and the follow through that happened on 3/16 and 3/17 [3/17 was when it was officially declared over]

The focus of these posts is to correctly identify turns in trend and how to make money on them. 

A different view of the Vix [Futures]

The only reason why the trendlines are on this chart are to show the rate of decline and the amount of time in terms of months from cycle bottom to top from the 2008 era and this current market cycle.

The lowest print (the cycle low for all the data given in this set) was put in place in December of 2007 at 10.1 total value of the futures contract, it then took 23 months to reach its peak for this cycle at 69.4 in October of 2008

So here we are now 11 years after December of 2006 with the lowest Vix value printed given the data available here and it has been 111 months which is 9.25 years with a 86% decline.  This is of course using the data from Vix index futures. 

I don't know if the bottom was put in, and I also don't know where it will be if its coming in the next year or 3 years but one thing this chart does tell me is that it has spent a long time coiling, consolidating, tightening before another suggested breakout, the direction could be much higher because the total range in every one of these past 7 months has been between 2.8 to 5.5 and chances are if it does lead to any type of bullish activity in the Vix underlying the ranges can expand to 3x or 4x what they have normally done in this endless quiet period

To express my opinion I thought I would leave it only as here is a value proposition and just that.  It is low, its so cheap!  It can continue going on in the same direction (down) until something changes that, but for now objectively speaking it can be on of the greatest trades going forward into 2018 and beyond. 

Dark Cloud Cover [Candlestick Formation]

I made this one extra large for today to show the ES e-Mini S&P 500 futures daily chart 

What brings me to this chart today is the formation of Dark Cloud Cover, it happens when the real body is long and placed high above the "indecision" candle and could be a reversal.  Bearish reversals almost always need a confirming element like following bearish candles and follow through


The chart examines the extend of this most recent facet of the rally the line measures everything from 9/26 to today's height at 2665.25 ES, the 6.75% advance came after this short contraction from 9/21 to 9/26 its the tightest range of slightly bearish action, from there the red candles were fewer and even some had a shallow amount of downside penetration. 

"Wave 5 Somewhere" denotes the levels where it appeared the trend was starting to end, but it was quickly overtaken by last week's daily ranges which varied from 9 to 46 points, but counting waves with the Elliott wave format has not been working well for most people over the years

The range in total was 31.5 points and was a commanding sell off where the gap overnight was clearly overtaken as if the pop never happened. 

The expectation if the sell off takes hold is that the range expansion would lead to similar price swings that happen with the same kind of magnitude and depth.  There sure are plenty of good buys to be uncovered if the market would only correct and discover value. 

Overdone in Short Volatility Shares - A Potential Scenario; 21 points

There are two charts which make up this post.  The first is of the XIV and its respective trading range for these past 4 daily sessions. The topping doji/congested candle printed on 11/28 was merely a pause in the uptrend before what looks like the beginnings of a major reversal

Here are some observations about what the charts saying

The measured range in light gray take into account the entire drop from top to bottom of this week's range

• The swing from 121.38 to today's intraday low of 102.82 is a massive decline of 18.56, that magnitude of decline only happened during brief moments in the summer and other fleeting declines in the equity markets.
• The powerful origins of the September rally coincide with where my projected target ends.  
• Gaps and their tendency of filling means that it may take longer than I think, but there is a chance that the downtrend can pause at just below $81

21 points is extreme, but XIV was trading at an extreme for this week and prices tend to mean revert.  They go back to their longer term moving averages.  

When put in perspective a bigger percentage decline is not so exaggerated when compared to the advance since early November 2016

The 9 to 16 Confinement of the Vix

The Vix Trading Range at Unprecedented Complacency

1. 

The first thing that would catch your eye about this chart is that the range highs and lows are subtle, as in saying the red rectangle above features some temporary highs where price might cross 15.5 and 16 and just break above for a few hours and then retreat.  Indeed that was the goal of this analysis to show that Vix in this era of massive complacency has a tendency of trading between a low of 9.5 (on average) and 16 height. 

Until the 16 barrier is broken we are still stuck in this confined area of lows and highs

There was a conventional belief years ago that the Vix normally would trade between a 20 where its very complacent and 40 and the Vix is overly cautious.  In this environment that is much different.  But here's what is different about this week, so far since it is only Tuesday the Vix has already printed some positive action.  

Another intense aspect of these declines is that they generally tend to fizzle out (the slide stops) between 40 and 47%

The steeper angle of this second image shows the opportunity still here in Vix.  It is always good to prepare.  The rises higher only happen less often but when they do, it typically lasts 5-7 days and the result is a much highly pointed angle with fewer days in its range.  

Zetetic Philosophy

Dimensions of the Rally - Dow Jones Industrial Average

Many traders have been climbing this wall of worry, that there would be a reason to fear an imminent sell off, but its a good thing we have technical analysis

1. The contraction from 11/9 to 11/17 [contained in the green shaded surge higher] was not enough to trigger its own frame in my model

• For example, the two swift slides from the late summer into mid September were just 3-4 day events which had no staying power, but they were deep enough to cause a more dramatic series of lower low price prints
• In our more recent example of price action, the decline from 11/6 to 11/17 was just shallow and impotent

 The current rally state changed dimensions from 22,250 to 23,847, a whopping 1,597 points

• Before today's long candlestick the highs were still contained slightly above 23,500 but were well overtaken by the charge higher regarding tax reform and other news related optimism.  

The greed machine has leveled up and for our sake complacency [Vix index] become even more out of balance.  Time will tell what this will bring, but if totday's action is any indication of the state of the rally it is still fully intact and resumed its winning position for the time being