Not Business As Usual

The dynamics have changed and clearly we are not in the same type of market as we’ve become accustomed to in the past five years. We have seen a few banana peel slips since those lows in early 2009 but every step on the way it has always paid to give the bulls the benefit of the doubt. Contrast that type of market sentiment with what we have been observing over the past two months – instead of bullish surprises it’s been the bears who have been serving them up.

2014-10-14_spoos_briefing

Last night the E-Mini was were trading near a very important inflection point above the psychologically important 1900 mark. A bounce here was almost baked in – well, almost. As I had pointed out – should the bulls drop the ball here we are going quite a bit lower. It doesn’t matter if we suddenly drive higher from here – I wouldn’t be surprised to see a bounce now, after everyone has been faked out by yet another drop to the downside. But it’s immaterial as technical damage continues to accumulate after a solid weekly sell signal.

Bottom Line: Volatility continues to climb and a bounce can happen here at any time. However, if you are short right now there is no reason for you to take profits yet – you cannot ride a big move lower if you try to accommodate every small correction to the upside. Remember we are in SKEW month – and I’ve been warning you all that anything can happen in October. On average markets rarely fall apart during this month but when they do they do it in a spectacular fashion.

2014-10-14_USDZAR_briefing

Setups – talking about SKEW and tail risk – here’s a speculative one: USD/ZAR. It’s in a pretty good spot right now to throw 1/2R at a long with a stop a few pips below the 100-hour. Which is still dropping a little and that’s why I’m not playing a full position.

More below the fold – please step into my lair:


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You have been briefed – now have fun but keep it frosty. See you guys later this afternoon.

Cheers,

Time For A Breather

I see a lot of guesswork in the comment section and it’s time to take you guys out of your misery. Many of you are feeling bullish right now and after last week’s drop the odds for a bounce here are good but not guaranteed – we are literally sitting on the edge of a sell off. Which is often where some of the best setups happen – but we have to remain nimble and not jump to conclusions. So let’s try to shed a bit more light on what’s going on:

2014-10-13_SPX_daily

Exhibit number one – the BB configuration on the daily chart supports at least an obligatory bounce here. Because if we drop further from here we are not stopping until 1800 or lower – so the bulls have a vested interest in holding this level. Not saying it can’t happen but we’re talking odds here – a bounce would relive some of the oversold conditions and perhaps prepare us for a stab lower.

2014-10-13_zero

The Zero shows us almost non-existing participation down here. You can interpret that as a lack of buying pressure – yes – but what’s more important on the way down is whether or not there is selling pressure and I see none here.

2014-10-13_UVOL

See what I mean? Complete flat line – the bears aren’t interested down here and this gives the bulls a chance to catch a breath and wait for further instructions.

2014-10-13_VIX

On the VIX we’re also pretty extended – I don’t think we proceed directly to 25 or 30 from here. We haven’t seen volatility like that all year and there will be pushback.
More crucial evidence looming below the fold – please step into my lair:


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Please login or subscribe here to see the remainder of this post.

Cheers,

Prepare to be confused

We have the stunning reversal on Thursday and further weakness on Friday. The Bull case is weakened substantially. In fact, the more aggressive among us could make the case that the bulls are fucked.

My spidey sense is tingling though, the complete absence of a bullish stick save, or even attempt thereof, leads me to believe buyers are holding off for better prices. In my post last week I outlined a “dip buying zone” which we are fast approaching. I would not be buying yet, but lightening up on shorts might be prudent

Note the lower bollinger tag.

The future is not certain at this point. Don’t believe anyone who tells you otherwise

Scott Phillips





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    1. I Robot
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    4. The End Of The Beginning
    5. Not Business As Usual
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    8. Major Technical Damage
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