Better Triptych Than Cryptic

I can literally see you guys scratching your collective heads, so let’s precede the charts with what the heck a ‘triptych’ is supposed be. Here you go – lifted right off Wikipedia: A triptych is a work of art (usually a panel painting) that is divided into three sections, or three carved panels which are hinged together and can be folded shut or displayed open. It is therefore a type of polyptych, the term for all multi-panel works.

2014-08-29_spoos_update

Well, I guess that cleared it all right up then, didn’t it? And you’ll be happy to know that all triptychs presented today were painstakingly hand-carved by yours truly. That’s right – we spare no expense here at Evil Speculator! (RIP Richard!)

Alright now seriously – it’s the end of the month and since the tape is diddle daddling around the 2k mark, pretending that it has any real meaning, this is as good a time as ever to revisit a few of our long term charts. And guess what – we’ll do it triptych style, meaning we look at the daily|weekly|monthly panels side by side. This way we are able to better discern where potential inflection points are present.

2014-08-29_spoos_triptic

Starting of course with equities here we have the E-Mini futures – purists would insist on charting the cash but on the long term side I think it’s acceptable to use them as price differences sort of wash out. As you can see there is – well, actually there’s almost nothing to be seen here in terms of upside resistance. I see a truck load of weekly and monthly support, for that matter. For instance there’s the brand spanking new NLSL on the weekly backed up by the 25-week SMA. On the monthly we’ve got the diagonal from hell which has been frustrating the bears for several years now. And every month higher produces another stepping stone for the bulls per the Net-Line rules (see the cheat sheet).

So we are looking at a solid trend here folks and if you cut out all the noise it’s never been really threatened this year, despite the little drop we recently played quite effectively.

2014-08-29_DX_tryptic

This chart paints a big smile on this lowly expat’s silly face – old bucky finally got its groove on and there’s really nothing holding it back until about 83.5. That is where I expect to be scaling out of those long positions which have been adding much ill-gotten gains to my trading account.

More non-cryptic triptychs below the fold – secret decoder ring required:


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Well, it’s been a fun and most of all – very profitable – summer for us steel rats. If you played along then you pad yourself on the shoulder and reward yourself with generous helping of your favorite malt beverage. Your mileage may vary but you know what that means for this old market megalomaniac :-)

german_beer2

Prost!

So Far So Good

Apologies for my relative absence today – for one until now there was little to add to yesterday’s perspectives, and second I’m running a bit thin on time today. So let’s cover the basics:

2014-08-28_spoos_upate

If you recall – I pointed at the 100-hour SMA as our inflection point for a drop toward the lower Bollinger. That very scenario played out overnight and since then we’ve bounced back and are in the process of recovering the SMA.

2014-08-28_uvol_dvol

It’s possible that this was simply a little stop run to shake out some weak hands. The UVOL/DVOL ratio seems to suggest just that. If you look closely the previous sessions ran pretty much on remote control but last night’s sell off took a few folks by surprise (strangely) – at minimum it triggered a series of stops. Now we need to hold the 1996 mark in order for the party to continue – if we drop back below and the cash closes in the red then we probably are looking at a more extended correction. In which case I may consider closing out some of my NQ longs – thus far they’ve barely broken a sweat.

2014-08-28_copper_setup

Nothing of substance on the setup side today – except copper which is looking like a pretty good long here. Now don’t read this the wrong way – I’m not saying that copper has high odds of jumping higher. Actually, it’s more of a 50/50 scenario - however we are sitting on double support and that puts the odds in our favor IF (and only if):

  • We close above the NLSL and SMA today.
  • We hold that mark into tomorrow.

So I am taking a calculated risk here near a potential inflection point – 50/50 odds right now but it’ll increase rapidly the more time we spent here. All that translates into a potentially high payout for a small risk (i.e. my stop is but a few ticks away). Ergo I’m attributing 1/2R here and then will add 1/2R if not stopped out by tomorrow after the NYSE open. If she holds here then a jump higher in the coming week would have very good odds.

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Long Term Perspectives

Equities are bubbling higher with the ES futures touching the 2k mark for the very first time (the cash did it yesterday). Since there’s not much to be said on the trading front this is a good time to run through a few long term perspectives. Now that another major milestone is in the bag the question once again returns to how long equities can keep this pace up!

2014-08-26_spoos_update

Let’s start with price and our volume profile on the E-Mini futures. If you ever entertained illusions of possessing any clairvoyance in regards to the market’s direction then think back to early August when we were in the midst of what looked like a correction with legs. Since that time we’ve seen one of the most profitable reversals of this bull market.

2014-08-26_PnF

Actually there was a very similar one earlier this year in February. Looking at the P&F the setup and ensuing resolution looks almost identical to the one last winter. What followed was quite a bit of sideways churn and plenty of guesswork which lasted all through June. It’s possible that we’ll be entering a high volatility sideways period in a few weeks from now, so enjoy the getting while it’s good. However, that said – I don’t think any correction (sideways or down) would drag out for months again as we usually see more directional tape in the last quarter.

2014-08-26_JNK_TLT

If you recall from a few weeks ago – I was getting quite nervous about the discrepancy between the JNK:TLT ratio and what we were seeing on the equities side. We did get our correction but what’s remarkable is that this chart hasn’t moved an inch while equities were driving higher.

2014-08-26_JNK_LQD

So what gives? Well, it’s a complicated story and quite frankly I’m not a bond expert. But part of the answer may lead back to this chart – a cross between JNK and LQD (investment grade corporate bonds). Seems like bond investors are piling back into corporate bonds and unless we see a significant divergence on this chart there is little standing in the way of this raging bull market. Which unfortunately most retail traders have completely missed out on.

More LT perspectives below the fold – please step into my lair:


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.

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