Weekly Market Overview June 20, 2021

After a year of pretty easy BTFD action in equity indices, the last quarter has been a bit more painful for those who want to take big directional moves up (or down) on the indices. Just as a major move up sucks everyone in to believing that things are all "fixed" in the world and we should be off to the races, we make that brief new all time high, then markets turn on a dime and head immediately in the opposite direction. 

This forces all bulls to stop out of their positions, why? Because every new buyer since April 2021 is by definition a new buyer and also a weak hand. Their hands are weak because they bought so close to new all time highs and there is perpetual bearish fear reinforced by markets taking 20-30 days to recover from each selloff little by little, while selloff's from top of range to the bottom only take a few days. 

"Markets take the escalator up and the elevator down" as market wisdom reminds us.

When you sit in a position for months only to barely eek out a new high, and get face palmed back to where you started from (or lower) so quickly, it's easy to see why these new buyers are weak hands. 

There are far better places to have your money if you are looking to catch nice trends. 

There are much better ways to use your money if you understand mean reverting markets and have an appropriate strategy, like the FVBO/FBO/FBOR strategy, to trade them.  

$NQ has printed Winner after Winner

$ES clearly shows this

$YM very obvious range

$RUT - The poster boy for mean reverting range bound trading, one after another.

$NKD- While everyone was calling for the Nikkei to break to new all time highs, the momentum buyers are slowly unwinding their long positions hunting for excitement elsewhere.

While Gold and Silver were taking off in strong bull "campaigns" the first (of more?) leg of that rally ended last week. 

Remember a few weeks ago when we talked about reacting the action..."Reaction to Action".

Last week our Gold and Silver campaign came quickly to an end. 

The "action" started on Friday June 2nd, with a big down bar, only 2%, but still big on the chart. Our job is not to act, like every other noob trader out there, our job is to wait and watch for how price reacts to that selloff. 

The following week, the price was weaker generally, but not alarmingly so. 

Then this past week on June 13, a Monday, Gold spiked lower and immediately was bought up. In any market, that is very bullish. When bears have control and can't capitalize on it, this is the market telling us something, or as I like to say...

"When the best looking sell setups in the world fail, that's bullish!"

So now we wait for a buy setup to form, using proper entry techniques, waiting for the market to pull us into the trade vs just smashing the buy button like a middle skill trader.

And this is where it got interesting, no buy orders would have been filled. 

When the best looking sell setups fail, and the best place to get long can't seem to pull it together, this is the reaction, this is the market telling us that bulls were in control there, they had everything in the world going for them, every advantage in the world, trapped bears, freshly stopped out bulls looking to get back in, a strong trend and price action in their favor. 

Then the bulls dropped the ball on the 15th of June, and our entire long position was exited, using a trail stop and locking in all of our profits, in profit. 

$GC Gold

We know statistically that Gold spends 87% of its time trading in bullish regimes, so when we find it in a bearish regime we start looking for low risk reasons to get long.  

When the SQN moves to bear quiet (red histogram), we are alerted that we need to find low risk reasons to get long. 

The Failed Breakout Retest FBOR, which is simply a double bottom where the low get's taken out, price spikes lower and aggressively reverses higher. The price action trolls everyone out of the trade because people on CNBC and Twitter always think that when a low is taken out that it is bearish. Obviously that isn't true in every instance. 

By taking small positions early on, and adding to them as the best looking sell setups fail, we can add exposure to this trade so that when we get to the end of a move, like happened this month, we can still walk away with profits. 

If you want to be able to trade like this, we dig in to this every day in the Trading Lab, live-streaming Monday to Friday. We have hundreds of videos to reference and learn from. 

Lab Members have full access to the Trading Lab Trading Course, which is a full course teaching the different trading strategies, market regimes, how to get funded in prop trading, mindset, habits, how to backtest, Reaction to Action, Trading FVBO/VBO/VBOAdd/VBO2 and stacking them into one strategy, a 2 minute scalping strategy and campaigns. 

Lab Members have 24/7 access to these videos as well as our Slack Community with a bunch of members, like you, who are in the trenches day in and day out as a team. Everyone helps each other, shares their knowledge and works as a team. 

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Just like the end of Q1 in Forex, (first vertical line) the end of Q2 shenanigans are back for more. 

All of the Yen pair trades have been trail stopped after making nice trending profits higher, much like how we played Gold. Adding all along the way higher and raising our stops along with it. Here's how $GBPJPY performed, while $EURJPY, $AUDJPY, CADJPY all traded similarly.

This is a blended Monthly chart of all 7 main Yen Pairs (with Yen as the long currency). You can clearly see that trend down (opposite in GBPJPY EURJPY AUDJPY CADJPY where Yen is the short currency). Notice that sharp and steep move lower on the Yen Blend  which we caught the vast majority of in 2021. 

The monthly Yen Blend has fired off an FVBO long trade, which suggests a 5-10% move higher from here.

This means short setups in GBJPY AUDJPY CADJPY NZDJPY CHFJPY EURJPY and no mans land for USDJPY, why?

FBOR (Failed Breakout Retest) on $DXY suggests at least a 3% move up from here and 6% higher is also attainable.

US Dollar has power reversed off of support and quickly turned the FX market over.

As for cryptocurrencies we are 100% long $BTC with no other exposure to any other crypto. 

While the world is screaming and yelling about a random crossing of two moving averages with a scary term like "death cross" in it, all the weak hands who bought at 30, 40, 50, 60k have run away or moved on to dead alt's hoping for a mega pump to save them. 

But Twitter does love a good "Head and Shoulder" maybe even more than they love a Death Cross and we find ourselves with one, stacked on compressed volatility, cooling off after pretty massive volatility in May. When everyone is off the train before it leaves the station (many are), this provides a massive amount of buyers to step in and support the rally. 

The measured move target higher from here is 94,895 for this next leg higher.

When the Bitcoin train leaves the station, it will suck the oxygen out of all other cryptocurrency projects. No matter how much you want to believe your new fancy side chain with smart contracts wrapped in fields of farms named after porn stars and food, is going to pump 64,000% this week, if Big Daddy BTC gets moving, it's over for everyone else. 

What do you need for a market to pump? A lot of people who "need" to buy is a pretty good example, as shorts need to "buy to cover" to exit their short positions which creates frenzied buying. Exchanges are exceptional at automatically liquidating positions so many of these short positions are YOLO'ing short with forced liquidation as a stop loss (you'd be surprised at how many of these exist). 

Notice, very high short interest in BTC correlates to a major market bottom. Not every time that we get massive short interest, do we get a major market bottom mind you, but when a major market bottom was put in, massive short interest was there.

And here we are! (Apologies for the width of this chart, I needed a lot of space)

And one of the more important tools I use to analyze Bitcoin is on chain metrics. Today I let the outstanding on chain analyst Willy Woo @Woonomic handle the heavy lifting for us.

Notice the circled pattern from Covid and now, Imagine if you were buying those lows from March 2020. From 4k to our current 35k, those who bought that dip aren't even too worried about a dip from 60k to 35k. 

If this same pattern plays out, you might be watching a dip to 90k from 150k highs with mild amusement. 

As alway feel free to shoot me an email with any thoughts or questions.