Thursday -- False Breakout, Turtle Soup, Loud & Clear Seasonals

ES Futures:
Down but continue to look corrective.

News:
The only news that matters to me today is that the S&P closed below the previous 2125.92 high, a "false breakout" in technical parlance, and a potential for "Turtle Soup."

FX:
Quiet today but for GBP which is showing strength on the back on Cameron's hawkish immigration comments and strong UK retail sales.

Treasuries:
Still seeing weird, non-definitive play here.

Energy:
WTI crude and NG seem to be taking a breather ahead of the long weekend -- unusual for crude which loves to get pumped on oft-cited BS about Memorial Day being the kickoff to the "summer driving season." Whatevs.

Metals:
Gold has decided to turn lower after yesterday's strong impulse down. Watching this.

S&P Outlook:
There is usually a pre-holiday upward bias to the markets, but with yesterday's false breakout -- which is about as big a deal as a breach of the 50dma to large traders -- there is a real possibility that "Turtle Soup" could come into play.

Turtle Soup is short for "cooking the turtles" and became popular in the early 90s when the Richard Dennis' group of trend followers known as the Turtles got blown out in 1992 due to the lack of breakouts. One of them, Russell Sands, resorted to teaching the highly secretive Turtle method of trend following. As other traders and especially institutional trading desks began to learn when, where & how the Turtles traded, it became great sport to trade against them. The false breakout trade became one of the favorites. Yesterday's action, so far, is almost textbook.

Today, entrepreneurs keep the Turtle dream alive by selling books and webinars that present trend following as the Holy Grail. Trends are persistent today because the Fed has been persistent in managing them, and it seems that everyone's a trend follower now. Even Paul Tudor Jones calls himself one. And a "nationally ranked" options trader that used to trade high-gamma options (aggressive counter trend) now calls himself a trend follower.

As the Fed's trend support wanes, "followers" begins to sound a lot like Lemmings to me, but perhaps not yet.

How do I ride trends? Very carefully. I scale out on the way up rather than add. And rather than add to the position at breakouts which increases my cost basis and leaves me prone to a massive drawdown in a normal correction, I add on retracements and so do with smaller increments. I also trade around the position aggressively and use hedging.

Regardless of all this, I still feel higher highs are on the way, but the gap below and coincident volume shelf make great targets too. I would love to be a buyer there -- 2098.48 and 2100.

If the wedge is correct 2085 or lower could be in play. But for now, there is pre-holiday seasonal strength to deal with. However, if the seasonals don't hold, that will speak loud and clear.