Rules of Engagement
The standing rules for when to engage a market and when to stand aside, and why regimes do not change without a splash.
Rules of engagement, outside strategy rules.
“Critical for every good investor and every good trader, is for him to keep his sense of proportion, and never losses site of them to be pushed into not playing his game.” Jack F. Cahn, CMT and Contrary Thinker.
In the Contrary Thinker Strategies Newsletter and the Contrary Thinker Trader’s Community, I talked about rules of engagement. They are big and obvious signs to have a fresh look at what systems you are trading or to pull back and stand aside before you reengage under a new Regime.
These macro events only occur once every seven to ten years, sometimes longer, if you use Japan as a recent example.
The relevancy here is that Regimes do not change without a Splash. For Example, the widely broadcast event of the Greek Election came and went without a clear and notable change in the market, a big splash.
The Euro has been crashing for months, if the Greek Election is a Major change to the Euro structure, a panic and reversal would occur in the very near term.
From recent experience, here is what I mean, since the big splash in March 2009, the Federal Reserve stimulus policy has favoured the financial markets and a slow growth economy. So until recently, the market context, its environment, has been the same.
Until now, as the Fed unwinds QE, the change is to a strong USD dollar Regime, which the markets have not seen since the Clinton era ; and the markets have not reacted to, at least not yet.
In fact, the change seen in a strong dollar is so forceful that USD denominated Gold price is holding up relative to inflation partners the CRB, the Euro and the Crude Oil.
An economic change is being discounted by the markets. The multiple cross currents, Asia up one-day USA down and Europe up big and worse intraday whipsaws seen in many months all looks like frustration before a change.
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