Major Technical Damage

Wednesday near the close of the U.S. session I really thought the ole’ Yeller had us all by the balls. If there has ever been an opportunity to squeeze the bears into oblivion then this had to be it. In yesterday’s musings Scott confirmed my notion that the series of lower lows and lower highs was still intact (barely) and that the bearish case was on the edge of extinction but still had a small chance of resuming. The odds were pretty minuscule IMO and early yesterday I kept checking the tape waiting for the invariable second shoe to drop.

But then suddenly something very curious happened:

In the last 20 minutes, someone has placed/canceled a 666 contract order in eMini 26 times $ES_F

— Eric Scott Hunsader (@nanexllc) October 9, 2014

Someone at Nanex reported a surge of selling orders (yes, I did find it on ZeroEdge – bite me) and the tape suddenly caved in as all of the other bots followed suit. And the world for the bulls will not be the same again – at least for a while, most likely not for the remainder of this quarter.

2014-10-10_spoos_volume_profile

Unless – yes unless we see an immediate surge right here TODAY the bulls will be toast for a while. I’m not saying we drop like a rock from here – there will be bounces. But in order to wipe a major stain off the bullish case immediate action is needed.

2014-10-10_spoos_overview

For we are about to paint an official double sell signal on the weekly E-Mini (and the SPX cash as well). We have a breach of the 25-week SMA as well as a breach of a weekly Net-Line Sell Level. That is bad medicine for the bears and today is the day to somehow make it all go away. In order to accomplish that feat a push above 1950 will be needed – 1960 would be better as that’s where we find the 100-day SMA right now. Bear in mind that both the 25-day and 100-day SMA held up for the fourth time now – that in itself is enough to cast some serious doubt as to whether the bulls are still in charge here.

2014-10-10_VXV_VIX

Not to count out any last minute Fed-sponsored Hail Mary’s but market makers seem to be agreeing with me that trouble looms ahead. Here’s the VXV:VIX ratio and it’s pointing straight down. I would keep an eye on this one today for early signs of divergences – also mind the VIX:VXO chart on the short term side.

2014-10-10_spoos_correlation

Our GBP/JPY equities correlation (based on carry trade activity) is also pointing in the same direction.

2011-06-05_AVG_seasonality

Now someone in the comment section pointed toward the final quarter as being a traditionally bullish period. And yes, he was absolutely spot on about that – that’s usually where the bulls rule the day.

S&P_percent_positive_monthly

And we may still see that happen but let’s look at October specifically. Contrary to common believe it’s actually a very bullish month – the numbers do not lie. But that’s not the whole picture – because it just so happens to have a little SKEW problem…


More charts and 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 subscriber you get free access to all Gold posts, which gives you double the bang for your buck!

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

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

Cheers,

STFO Wednesday Morning Briefing

Yes, it’s that time of the quarter again – today we will be graced with another FOMC interest rate decision and as usual we should expect a lot of snooze followed by wild gyrations around 2:00pm EST. By the way FOMC stands for Federal Market Oracle Commission, they just swapped two of the letters.

Imagine a group of  financial high priests in silly costumes locked into a room without food, water, ventilation, or a toilet for two days meditating on how to best to destroy our currency. Which explains a lot of what has transpired over the past two decades. Anyway, whatever happens today – for me this is a ‘stay the fuck out’ day. I won’t touch anything with a ten foot pole until after the announcement.

Unfortunately the spoos have dropped overnight – if you partook in yesterday’s jump higher then you have been robbed of a valuable profit buffer. Obviously it would have been more helpful if we had stayed near the 100-hour overnight. I don’t enjoy exposing myself to wild swings without having some profits under my belly. If we drop from here then it’ll be fast slicing through all support clusters – same on the long side of course.

If you are long I suggest you leave your ISL in place – but there is a good chance it’ll be taken to the woodshed during whatever swings we may see around 2:00pm. Alternatively you can lower it and also reduce position sizes. Whichever way this resolves – we may see a stab in the opposite direction first – you know how the game is played by now.

Bottom Line: Every quarter we have to endure this ritual and in most cases unfortunately only the boyz on the inside get to be positioned in the right direction. It sucks but it is what it is. Remember, we cannot worry about things we have little control over. So if you are playing either direction today then do it with a 1/4R position size and expect to get ridiculous fills if you get stop-run. This way if you happen to sit right you still bank coin and if you are on the wrong horse you won’t lose more than 1R.

Good luck! ;-)

It’s not too late – learn how to consistently bank coin without news, drama, and all the misinformation. If you are interested in becoming a subscriber then don’t waste time and sign up here. The Zero indicator service also offers access to all Gold posts, so you actually get double the bang for your buck.

 

Only The Paranoid Survive

And once again the Mole has saved your rodent asses from drowning in your own pools of blood. Didn’t I suggest the real and present danger of distribution within the recent 20 handle volume island I have been reporting on all last week? Stay the heck out I told you. Don’t get positioned without the benefit of actionable technical context I implored. Did you listen? Of course not! :-)

I present Exhibit A – the spoos today as hapless participants (that is you) once again are being shipped to the woodshed. Don’t say I didn’t warn you.

And here’s Exhibit B – the little stink bomb that triggered it all. As you all know I don’t trade the news. Why? Because like you rats I’m on the outside and thus don’t have the benefit of getting friendly phone calls ahead of big announcements (cough – SAC – cough cough). As a little side note – it escapes me how Lockhart’s comments are relevant as he’s not a voting member until 2015 – but what do I know. Anyway, that speech was on the roster ahead of time and I can’t help but wonder if some folks weren’t aware of the general message beforehand. I for sure was not one of them. And besides, if I was I certainly wouldn’t tell you guys!

What I do know however is iffy tape when I see it. And that has kept us out of trouble more than once over the years. You’re welcome! Anyway, I’ve been working on fixing some messaging bugs on Heisenberg all day (Murphy’s Law and all) which by now has completely drained all blood from the vestiges of my cerebral cortex. Which means I’m not trading and that means no setups today. See you guys tomorrow morning as usual.

It’s not too late – learn how to consistently bank coin without news, drama, and all the misinformation. If you are interested in becoming a subscriber then don’t waste time and sign up here. The Zero indicator service also offers access to all Gold posts, so you actually get double the bang for your buck.

Cheers,





    Zero Indicator


    Darth Mole Alerts

  1. poll

    • What is your average spread on the EUR/USD?



      view results

      Loading ... Loading ...


  2. search warrant


  3. recent misdeeds

    1. Muppet Time!
    2. Hurdles Ahead
    3. Elvis Has Left The Building
    4. Mad Monday Morning Briefing
    5. I Robot
    6. FEAR
    7. Falling Swords
    8. The End Of The Beginning
    9. Not Business As Usual
    10. Time For A Breather




  4. yes we can!



    NinjaTrader
    Kinetick