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  • $SPX holding support, 40m to go until the statement support, prior res $ES $SPY https://t.co/ag2rIYRfPz https://t.co/lFFODhoin4
  • ...I don't believe the markets will ever be okay with the Fed bowing out of stimulus. As market sentiment normalizes, speculative exposure increases proportionally, meaning there will always be a market premium to contend with. A form of the sociological 'normalization' effect
  • Equities pull back from session highs as traders eye the FOMC meeting at the top of the hour $ES $SPX $SPY https://t.co/nI3lIr8xVc
  • ...that is my take on the panic around tapering. I'm not advocating for expediting rate hikes, but to continuously punt easing back on stimulus by even a marginal amount only compounds the market's dependencies - increasing moral hazard.
  • 'The economy and markets are so strong that we can't reduce the $120 billion per month asset purchases. Further, if only we can continue this path for an indefinite future, the market will absorb the external risk on its own.'
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  • Here is my FOMC scenario table going into the rate decision. While a delay in the taper call seems feasible with the market wobble, there will always be wobbles before and the existential threat of a mkt tantrum. Always a hostage? https://t.co/MIDk28lQBS
  • Gold prices are pushing higher so far this week and the FOMC is waiting in the wings with their September rate decision. Get your market update from @JStanleyFX here:https://t.co/rVrJnq0Rgh https://t.co/td0i0PTQZz
  • RT @CEOAdam: SO FASCINATING! Dogecoin Poll was by far my highest ever read tweet. In 24 hours, 4.2 million views, my most ever retweets, mo…
  • Just checked the Fed's website to see if they accidently release the SEP (Summary of Economic Projections) early by accident - happened once before. Nope, not live yet; but this will be the link when it is: https://t.co/GcANEDVowq
Volatility and Trend are My Two Gauges for Trading

Volatility and Trend are My Two Gauges for Trading

John Kicklighter, Chief Strategist

Volatility picked up this past week - though not evenly - and pushed the markets towards developing serious trends. Heading into the new trading week, volatility and risk bearings are key to establishing both direction and momentum for trends.

Over the past months, we have seen numerous swells in volatility cannibalized by short-term speculative interests looking for quick opportunities to 'buy the dip' or 'sell vol' (same thing, different market jargon). If this recent spurt of fear is destined for the same, there are a number of weakened risk-sensitive pairs that can use trendlien tests as meaningful springboards for returning to trend - USDJPY above 101, EURJPY above 140 and GBPJPY above 169.

In a long yen cross position, I would prefer the USDJPY. All three have high-profile trendlines, but USDJPY has held the line despite a uniform drop for the greenback across the board - while the euro and pound have done well elsewhere (that suggests a more animate candidate on a turn).

For the alternative - risk aversion. the other two pairs are my preference. A technical break and confirmed risk aversion theme are my primary confirmation, but I will also be wary of scheduled event risk on the docket - particularly UK inflation stats Tuesday. If the price pressures back off, the sterling will be pitched into a decline of its own.

If weak data does inflict the sterling I will look at GBPUSD once again. A timed break of 1.6700 on the data may make for a decent short-term scenario, but my real interest is the 1.6500 break - still a ways off. Yield forecasts are very aggressive for the UK and they have recently been battered for the US. A moderation (which can happen in low volatility too) could pull this pair back.

The same moderation from the dollar may not cut it for EURUSD. A higher yield and capital inflow is keeping the euro elevated. But the closer we move on 1.40, the more on-edge the market is and the more likely it is the ECB makes a move. This is not a precise situation and will thereby be difficult to trade. I may just wait for a more serious bearish move at lower levels.

Carrying forward my positions, I still have my EURAUD and GBPAUD shorts as they slowly play through on their head-and-shoulders breaks. The Aussie has wavered recently, but it hasn't confirmed a bullish break of recent channels. I'll keep my stops trailing though. Also, my longer-term (and lower leverage) USDCHF and AUDNZD long positions are progressing. The former is in the red with the euro's rally, but my doubts about EURUSD and the EURCHF 1.2000 floor offer strong support. My AUDNZD long is in the money, and I'm monitoring yield forecasts for the RBA as the market tries to divine the first hike.

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