AUD/JPY and risk assets generally have had an off day — I will be annoyed if I have been stopped out on a short-term low-volume spike. A non-farm payrolls report tomorrow is expected to be very strong because of hiring for the US census — but it has also been thoroughly well leaked in advance.

I have spent the day in bed — not because I am ill, but because I started work when I woke up and didn’t want to stop. It has been quite an interesting day for research. A friend suggested an indicator for trading the S&P 500 which turns out to be remarkably successful, and I have been playing with different types of breakouts to see whether I can improve a breakout system in a simple way. It isn’t at all easy!

I keep wondering whether there is anything special about a breakout level or whether a breakout is most useful as an indication of the trend. A way to test this would be to buy on pullbacks after breakouts and see whether that improves the system. I am also wondering how a “breakout” as defined in my systems — i.e. an n-day new high — is a better or worse signal than a true breakout from a support or resistance level. The only way to test this is manually, since the computer is not very good at spotting levels. One day I will have to set aside the time to go back over old charts and work out the success rate of breakouts from a decent support or resistance level (though there is a danger the success rate will improve over time as I get a better eye for a good level).

Lastly, natural gas is breaking out to the upside from a tight consolidation range after a long down trend. I am wondering whether to trade, or to wait for an up-trend to get established. The cause of the breakout seems to be hot weather and the hurricane season in the US. The fact that everybody is short natural gas makes me more inclined to take the trade.