Your game plan

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January 15th

Update: important for next week.

The upside reaction to "positive" data not sustained and market sold off hard afterwards. If by Monday, the sell off has not recovered, this will become a strong indication of likely continued bigger picture selling. (Currently, the big picture is 6A is in a significant up trend).

Also will need more information as this is more akin to rumour than fact. May find out more over the coming days.

Observations

Biden first address, so in 15 min prior will suit inventory trading as a likely rotation at recent transition 0.7782 to occur. As address nears, covering will occur so need to be flat BEFORE scheduled address.

Value on the rise, as traders accept prices beyond 0.7782 but not acceptance at 0.7800, leaving trapped longs STILL TRAPPED. They'll get caught after a second failed attempt by price to put them onside.

Trapped longs between 0.7791 and 0.7808 while on inventory inspection, recent short initiating between 0.7785 and 0.7790 is smart money. If sellers dominate Asian session, longs will liquidate all the way down minimum 0.7770.

Themes

Note: with so many concurrent themes, it is critical to review previous day notes.

Increased volatility, as evident in the moves beyond two standard deviations in CME VWAP.

CME VWAP continues to be the dominant volatility tool for reversion plays, not session VWAP. Extensions of this range have contracted. "Naked eye expansion" on 100T is once again effective as a reminder to check short term lack of fuel to continue/outcome known.

Fast moves early into HKE session. Yesterday was delayed due to high impact trade balance pending data, so theme still intact.

Less program trading dominance as increasing quantity of relative value institutional players return.

Micro directional skew that experiences and abrupt break out of three times the micro ATR on minimal liquidity followed by positioning of institutional player (see size print). Take same side as dominant player and use this theme to time entries with their position additions.

Hypothesis 1 as per bold notes (inventory play)

Hypothesis 2

A-grade trade (scale up opportunity)

Short taking other side of trapped longs as per observation points, particularly having seen now two failed attempts at 0.7790.

Hypothesis 3

With likely smart shorts at 0.7790, and significant long inventory at transition 0.7780 all the way down to 0.7770, look for another short move if transition 0.7780 doesn't hold.

Hypothesis 4

Fast break HKE session move (current theme) to US session VWAP close (current theme).

Note, very recent high acceptance (line of trading) at 0.7725 to move through (likely to experience two sided trading in this zone).

Hypothesis 5

Covering weak-hand shorts (we go long) into the close of ASX

Cue was large likely partial (smart money) short cover or new buyer at two standard deviations from VWAP knowing the covering play given weak-hand shorts that have initiated at recent lows.

Wait for evidence of shorts covering, and pace of market to initiate longs. Note, at max a move to HKE acceptance with a view to cover into pre 0.7769

*Trade helped along only due to data reaction. Flat now and wait for market liquidity to return. No mistaking luck with skill. Mostly luck that pushed the market hard upwards.

Hypothesis 6

After the reversal on positive news, now waiting on liquidity to return.

Note buying outdated LT PROFILE acceptance as per yesterday's research (highlights importance of reviewing previous days’ research)

Therefore, continuation to downside in line with valid areas (yesterday's prep) with a view to no longer be short at 0.7742.

Require "miscalculated" buying to create the fuel for the downside move, followed by evidence these longs are covering.

The buying has commenced, likely to require more. Also note the time. We have some similarities currently to the recent theme of a directional change at 17:00 AEST. Clock event is close.

Dow futures off 160 post Biden. Most of what he mentioned has been known and priced in. This could be a classic case of buy the rumour sell the fact.

Witnessing more positioning from the large seller, will continue siding with this participant. We are currently however just waiting on more long inventory to initiate to provide fuel for the next move down.

Hypothesis 7

A-grade trade (scale up opportunity)

Bigger context of course is the overall weakness today with sellers dominating 6A.

Trap into London open. We witnessed earlier in the week a strong move to the upside of 24 ticks on virtually no liquidity at the same time of session. The behaviour started repeating, and then stalled to produce sideways action. We will catch out those looking to make the same trade as earlier in the week. Be prepared to enter short on any failure to break above session VWAP as that is currently in play. Note the wall of selling at 0.77450 which we must break for this trade to build greater momentum. If we can't break the wall, it's a clear message to cover (not instantly reverse!).

First attempt failed (wall) but a failure to move beyond session VWAP sets up second attempt.

Update: second attempt produced an outlier sized trade with numerous scale-in opportunities.

Summary: The significance of identifying the smart selling in size early into Asian session plus failure of price to return to the large picture up-trend on fundamental news underpinned the success experienced today.