Weekly Market Overview July 5, 2021

The second quarter has come and gone, leaving with it, what appears to be any of its indecision, at least for the Nasdaq $NQ.

Since late March the $NQ has spent a lot of time sideways, giving us some excellent mean reversion trades as you can see by the FBOR labels on the chart. In fact 3/4 winning trades or a 75% win rate, which is very common when the market regime is neutral, as it was. 

Last week the $NQ revealed its hand more clearly failing to fail (LOL). As I always say:

"When the best looking sell setups fail, that's the market telling us it's bullish"

In hindsight it is obvious and easy to recognize that price action has been trading as if $NQ was in the Bull Quiet market regime. The main characteristics of the Bull Quiet market regime are:

• Prices drifting higher unspectacularly
• More higher closes than lower closes
• The best looking sell setups fail
• ZeroHedge (et al) constantly complaining about prices going higher
• Buying dips work
• Buying breakouts work
• Buying because the last letter of that day of the week ends in Y

Using the SQN Indicator (the histogram on the bottom of the chart) we can see that the indicator suggests we are in a Neutral Market Regime, and the big characteristic of the Neutral Market Regime is that mean reversion trades work. 

Additionally $NQ spends 48% of its trading lifetime in either Bull Quiet or Bull Volatile market regimes and a full 88% of its life in the more broad Blended Bull Regime, most notably characterized by price trending higher. 

In the Trading Lab last week we got long $NQ and will continue to add to our long position as this "campaign" plays out. 

Our strategy is to increase our exposure as the risk reduces, by way of increasing profits and further evidence of higher travel for the Index. 

Commodities continue to be a big focus with our long positions in $XLE (Energy ETF), $NG (Natural Gas Futures) and $DBA (agriculture commodities ETF) all continuing to trend higher. 

Currencies have moved into mean reversion trading and the FVBO and FBOR are ideal strategies in this environment. We have only two directional trades in Forex right now with a short position on $AUDCAD that we've been in for a few months now and recently re-entered $GBPJPY to the long side. 

And finally to the crypto's...

I honestly have nothing new to report here. We stepped out of the way in May and have bought back in with both hands since. 

We expect the rest of the summer to be somewhat tame performance, however with the EIP 1559 being implemented in $ETH and Chinese $BTC miners moving, things could fire back up quickly. 

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If you have any questions just shoot me an email.