Running Like A Hare

The tape that is – at least for the past few weeks. Gaps at the open galore followed by systematic squeezes to the down or upside – it’s a pretty nasty January we’ve had ourselves here. Which is kind of strange as on a daily basis things are looking a lot more tranquil. Once you zoom out a bit you get an idea what I’m talking about:

It’s been a nice 120 degrees hill climb since mid December. When I see intra-day noise coupled with long term tranquility I usually take notice. But what really puzzled me as of late was the small signal range on the hourly Zero and the Zero Lite. Which is reflected on the TOS version of my hourly Zero – see above.

Now, I started to think about what the implications could be here and whether or not things could continue to bubble higher alongside minimal participation like this. The answer to my question was delivered when parsing for prior occasions in the past. In particular take a look at the highlighted sections on the daily Zero chart ranging from May 2010 to September 2010. Back then we got a pretty thorough correction and then the signal went flat. I still remember a lot of bears getting very excited in August 2010 – which of course turned out to be the bear trap from hell. The daily Zero was spot on throughout I may add and kept us out of a boat load of trouble.

Now, as Mark Twain famously said – history does not repeat itself – but it rhymes. Very smart man and it’s a good lesson when it comes to trading as well. Look – a significant correction here is not impossible. Obviously bullish sentiment is through the roof and the ongoing correction is still a bit shallow and seems to attract intrepid dip buyers. On a very short term basis I would fade equity charts and stick with the currencies. But on a long term we continue to look very bullish here. The daily Zero is not painting any divergences and even more so – has gone flat.

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More charts and cynical commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero or Geronimo subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.

This was one among several divergent charts I presented a few weeks ago – we are looking at advancing vs. declining NYSE volume. Given a major divergence at that time a medium term correction was on the horizon. It came late in the game, which I pointed out would be an harbinger of a weakened velocity to the downside. And accordingly the bears have not been able to properly leverage their one opportunity thus far. Perhaps we’ll get Scott’s Retest Variation Sell – and that would be sweet. But even if we do I think the downside potential is limited at this point.

I think my timing on ole’ bucky wasn’t too shabby. It seems to be holding on its 100-day SMA and as long as it doesn’t drop below we ought to be holding here. Of course – if it does then it would give the bulls quite a bit of headwind – so I would watch this chart like a hawk. The hourly panel is rather interesting right now as we are sitting right at the 100-hour SMA.

Silver is sitting at daily support right now and may be a great opportunity for a reload. Pretty low risk setup as you can set your stop below that 100-day SMA.

My call on copper wasn’t too shabby either. We are now sitting at the very first support in the form of an NLSL near 3.76. A breach here gets us to 3.65ish. However that hourly seems to be holding up very well and was able to stop some pretty nasty red candles. So if you are long here I would hold with a stop below that daily NLSL or below that 100-hour BB line.

Bonds – the 30-year is looking mighty bullish and just hit a NLBL near 144’14. The only problem here is that we have some pretty mighty resistance looming not too far away starting near 145. So it’s tough to be long right now – I’d rather have it bounce its head a few times and then get a sense of what it’s up to.

Ditto for the 10-year – now running into resistance. Those BBs are going to start lifting however and even if there’s a pull back 131’065 ought to hold and may be a good jumping board for a trend continuation trade.

Corn appears to be sitting right at an inflection point – we have both the 25-day and 100-day SMA converge. As you can imagine a breach above would be one sweet long opportunity as there’s nothing but air above. I’d say watch that hourly support I have pointed out and be patient as this thing may flail around a bit before it makes up its mind.



Clues – I Got Clues

Interesting thing happened today… we tried to go down, and reversed painting a hammer candle, which as we all know is bullish.

Now we are at major trendline resistance, the move is long in the tooth, and to my eye it looks like a simple short squeeze without attracting fresh buyers. That is the big question… did the short squeeze from the breakout of the triangle pattern bring in enough fresh longs to achieve escape velocity?

Everything changes from here if we go up and stay up. Its long all the way if we go a little higher.

Given that the high is unretested, and the hammer candle which by definition represents a failed attempt by the bears, the odds OVERWHELMINGLY (like 80% IMO) favor an ATTEMPT to drive the market up.

Here is where it gets interesting. This trend looks ready to stop right here right now. If we go up today, WITHOUT making fresh highs, that would paint a RETEST VARIATION SELL (look it up). That would be an OUTSTANDING short.

As an intraday play. I would look for a reason to get long early (a small gap down would be a good play) and hold it until we get a zero lite divergence.

If you want more clues, look at the way bonds turned before equities. Now take a look at the story each days price action is telling.


Nice Little Bear Squeeze

Well, that was a nice little bear squeeze we got ourselves today – almost textbook I may add, featuring the early morning wipeout followed by a systematic run higher. If you paid attention to the charts I posted last week then this morning’s support zone should have come to no surprise to you:

Those two Net-Line Sell Levels (NLSLs) at the psychologically important 1300 mark proved too much to overcome, which frankly was not a big surprise to me. There is simply no confidence in the tape – one way or the other! For the entire month of January I have maybe seen one or two quick spikes beyond the Zero’s +/- 1.0 signal range. A twenty handle drop at the open usually comes with a bit more juice to the downside and lack of participation/momentum simply means that the tape can turn at any moment – and that’s exactly what we got.

If you are wearing your bear hat then please don’t get your panties in a bunch until we see a breach below 1285 – or even better 1280. Now that could open the door for a more pronounced correction, but until I see that happen let seasonality, momentum, sentiment, etc. be damned! 😉

But I really don’t care that much for equities right now – not until we get a strong move in one direction or the other. The FX side is a lot more juicy IMNSHO – very very nice setups today:

AUD/JPY – similar pattern as the spoos but there is a whole cluster of support sitting below plus we have a rising and fast encroaching 25-day SMA which should be good for some support. I would watch out for a breach of the 81 mark – if we get that plus a push above the 25-hour SMA then say hello to 81.80.

Alright the best ones below for my intrepid subs:
More charts and cynical commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero or Geronimo subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.

USD/JPY has fallen from grace in a huge way and is now scraping support. I would love to see a touch of the 76 mark at which point I’d want to be long. Either that or a breach above that 76.42 hourly NLBL – not sure we’re going to get that one that one though as we’re running out of time.

Next runner up – USD/CHF – excellent excellent setup. Because either this is a last kiss goodbye (i.e. shorting opportunity before a drop) or we make it above those hourly buy Net-Lines plus that 100-hour SMA and we are golden to the upside. Play this sucker either way but be disciplined with not jumping the gun too early.

EUR/AUD also at an inflection point – it’s been taking its merry time but we do have a bonafide floor pattern here. I’d be long above 1.25 – assuming it can overcome that 25-day SMA plus the NLBL it’s pushing its head against right now. For your stops consider the support on the hourly I have highlighted.

And there is more! EUR/JPY – sitting right at the 100 mark – psychologically important and it’s a NLSL – you know what to do. If this thing turns to the downside then consider that there’s a bunch of support below – I personally would only be interested in a long trade here into 102.5.

And last but not least – the NZD/USD, which bounced against a bit of resistance. I told you guys last week that this thing has the potential to keep running – the force is strong in this one! Hey – I get one Star Wars reference a month, okay? The short side is tough to trade right here unless we get some kind of RTV Sell or an inside candle. But I would be long again on a breach of today’s high with a stop below yesterday’s lows (for the lack of a better stop point – sorry, the best I can offer right now).


There you go – tons of good setups on the FX side. Did I promise too much? Happy unbiased trading (to quote Volar).


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