Asia Threw The Tantrum, America Shrugged, And The Poppers Still Won

Market Snapshot

Asia did all the heavy lifting overnight, the bear charge and then a 4.1% bounce, while the US indexes barely twitched. That is the story in the futures this morning: flat to mixed, with the VIX settling back from yesterday’s spike.

• ES (S&P 500): 7,451.50 / +0.08% / flat as a pancake
• YM (Uncle Dow): 52,027 / -0.19% / a shade lower
• NQ (NazQuack): 29,833.50 / +0.27% / nudging up
• RTY (Uncle Russell): 3,002.7 / +0.13% / back near the highs
• GC (Gold): 4,094.2 / -0.84% / slipped under 4,100, no read today
• CL (Crude): 71.89 / -1.59% / grinding toward 65
• VIX: 19.11 / -1.90% / settling from yesterday’s spike
• BTC/USD: 62,554.81 / -0.14% / grinding, neckline popped

Premium Poppers

The headline drama belonged to the overnight session, but the Premium Popper ORB system quietly went to work and pulled a few winners out of a day that, in the US at least, went nowhere.

SPX gave us a clean breakout that we exited on time decay, which is yet another reason to love credit spread trading: the position timed out to profit while price just meandered. RUT offered the same ORB trade, this time with a fast move higher and a nice little VWAP entry to go with it, a full stack on the day.

Best of all, these day trades somewhat de-risk those ill-fated bull swings from Monday. The system does not need the market to go anywhere dramatic to do its job.

Winners from a nothing day; the day trades derisk Monday.

SPX Analysis

Over on the swings, patience was the right course of action, not jumping in feet first on a knee-jerk reaction. We did see a new bull swing entry, which could well take me higher and let me manage that ill-fated bull from Monday. A move below the lows will trip the flip, and then I can start thinking about a bear swing, in which case I would have to write off the bull and let it expire off.

Patience paid; below the lows trips the flip to bear.

RUT Analysis

RUT is similar, and nearly offered an opportunity to scratch with a fast early rally. Now that price is once again inside the prior range, I am inclined to wait it out again and wait for the breakout in either direction.

Back inside the range; wait for the breakout either way.

Crude

Crude continues to deliver the goods. Plain sailing, and I keep selling those rallies down toward $65. The small head and shoulders pattern I commented on has now reached its target. There is no real momentum in this move, it is just grinding slowly lower.

Target reached, no momentum, keep selling rallies to 65.

BTC

Bitcoin is also grinding away, and what so far looks like a head and shoulders, the same way it played out on crude oil just over a longer period, has popped its neckline. It is not quite dropping just yet, assuming it drops at all. We need to start seeing some movement, and then we can lock in the name of the pattern, if you choose to. It is still a consolidation no matter what it is called. $50k is the next stop, just as soon as we clear the hurdle at $58.5k.

Neckline popped, not dropping yet; 50k after 58.5k.

Expert Insights

The Stoic philosopher Seneca had a line for nights like the ones I just described: “We suffer more often in imagination than in reality.”

My afterthought today was a list of worries, the seasonal crash window, the thing that might be moving under the surface, the correction that may or may not come. Most of those will never arrive, and the few that do will not look like the version I rehearsed at three in the morning. That is precisely why I trade the setup in front of me rather than the catastrophe in my head. The poppers won today not because I predicted the chop, but because the system acted on what was actually there, and patience on the swings paid for the same reason. Worry is free and infinite; a defined-risk setup is finite and real. Trade the one you can measure.

Fun Fact

Since I am fretting about a September or October crash, here is the patron saint of that particular worry.

The “October Effect”, the market’s habit of saving its biggest crashes for autumn, with 1929, 1987 and 2008 all obliging, is named after a line from Mark Twain’s 1894 novel Pudd’nhead Wilson. He called October one of the peculiarly dangerous months to speculate in stocks, then listed the other dangerous ones as July, January, September, April, November, May, March, June, December, August and February.

In other words, every single month. The joke being that for the speculator, the calendar is never really the problem.

[Source: Mark Twain, Pudd’nhead Wilson (1894); the “Mark Twain effect”, via Wikipedia]