Divergences

I’m seeing some divergences as we are approaching some daily resistance on the S&P 500. Admittedly this is a very soft edge but let’s explore it as our risk is pretty limited here. First let’s look at what caught my attention this afternoon:

The VIX:VXO ratio basically contrasts the price of the 1-month option chain vs. the strikes near ATM. Divergences in pricing usually are subtle hints that market makers are preparing for a quick shake out. May be nothing but that was a rather steep drop this afternoon. And then there’s this:

Here’s the GBP/JPY, a popular carry trade pair, vs. the spoos. As you can see they usually pretty much move in tandem, or at least have been in recent weeks. Today however we’ve got them dropping – obviously Carney’s announcement to overhaul how his central bank is run threw some jitters into the GBP pairs. Again, could be ignored but let’s look at the spoos now:

As we are pushing higher we are approaching the NLBL at 1869. I would love to see a close right below which would put me in a speculative short position (1/2R). My stop would be very nearby at 1870, perhaps a few ticks higher for good measure. If we close above the NLBL today or tomorrow however then we have a long signal.

More goodies below for my intrepid subs:


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Setups Galore Tuesday Morning Briefing

Welcome to our morning briefing. Here we are reviewing short term setups ahead of the NYSE opening bell. If you are a scalper or swing trader then these setups may be of interest to you. As usual keep in mind that these are short term setups although they could be used as early entries for more longer term positions.

The spoos have advanced higher overnight and perhaps this ship has sailed. However IF (and only if) we see a retest of 1852.5 then I would be long here with a stop below 1850.

However the NQ looks good right here and now – I’m long with a stop below 3654. Yes, a bit speculative – only playing 1/2R.

VERY nice potential reversal pattern developing on copper – still a bit young but the risk is pretty contained. You can play 1/2R with a generous stop below the diagonal.

Event risk on all GBP and CAD related pairs today – so watch your butt in the coming hours (the times are in EDT).

But we’re only getting warmed up – quite a bit more waiting below the fold…


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Cheers,

Return Of The Market Mole

Late last night I returned to Valencia after having enjoyed the tranquility and beauty of Sevilla. If you ever have the chance I strongly recommend a visit as it’s one of the most stunning and welcoming places I have ever had the fortune to experience. And don’t get me started on the food – it will take me weeks of hardcore weight and endurance training to shed the pounds I have accumulated over a mere four days.

But now it’s back to work and frankly speaking I have been very much looking forward to it. No matter what you do with your life, here’s a good test. If you go on vacation and dread returning to your job on Monday morning then stop right now and find something else to do with yourself. Not to sound trite but our days on this soil are numbered – do your best to embrace every single day as if it were your last (like Robert Prechter you will be right exactly once).

When I was meandering the streets of Sevilla I couldn’t help but wonder if many of the low paid staff working at the restaurants enjoyed a better quality of life than the ‘professionals’ climbing their way to the top of the food chain in inhuman urban sprawls like New York, Los Angeles, London, Hong Kong, etc. Most of the folks in sleepy Sevilla seemed rather happy and content with their comparably meager existence. And how could you not be, surrounded by so much beauty, good weather, good food, well dressed and relaxed people. What came to mind was the story of the fisherman and the businessman – in case you haven’t:

There  was once a businessman who was sitting by the beach in a small  Brazilian village. As he sat, he saw a Brazilian fisherman rowing a  small boat towards the shore having caught quite a few big fish. The  businessman was impressed and asked the fisherman, “How long does it  take you to catch so many fish?” The fisherman replied, “Oh, just a  short while.”
“Then why don’t you stay longer at sea and catch even more?” The businessman was astonished. “This is enough to feed my whole family,” the fisherman said.

The businessman then asked, “So, what do you do for the rest of the day?” The  fisherman replied, “Well, I usually wake up early in the morning, go  out to sea and catch a few fish, then go back and play with my kids. In  the afternoon, I take a nap with my wife, and evening comes, I join my  buddies in the village for a drink — we play guitar, sing and dance  throughout the night.”

The businessman offered a  suggestion to the fisherman. “I am a PhD in business management. I could  help you to become a more successful person. From now on, you should  spend more time at sea and try to catch as many fish as possible. When  you have saved enough money, you could buy a bigger boat and catch even  more fish. Soon you will be able to afford to buy more boats, set up  your own company, your own production plant for canned food and distribution network. By then, you will have moved out of this village  and to Sao Paulo, where you can set up HQ to manage your other  branches.”

The fisherman continues, “And after that?” The  businessman laughs heartily, “After that, you can live like a king in  your own house, and when the time is right, you can go public and float  your shares in the Stock Exchange, and you will be rich.” The fisherman asks, “And after that?” The  businessman says, “After that, you can finally retire, you can move to a  house by the fishing village, wake up early in the morning, catch a few  fish, then return home to play with kids, have a nice afternoon nap  with your wife, and when evening comes, you can join your buddies for a  drink, play the guitar, sing and dance throughout the night!” The fisherman was puzzled, “Isn’t that what I am doing now?

Before we get to our charts I would like to thank Scott ‘The Convict’ Phillips for committing a complete brain dump all last week. He claims that it was literally all he knows but he’s too humble and I can assure you that you have only seen the tip of the iceberg. There’s a lot more below but like fighting or fishing it unfortunately cannot be taught via literal instruction – it has to be practiced and experienced. And that is what we do here every day. As Scott already mentioned – all of what has been shared in the past week will be covered here repeatedly moving forward. It’s one thing to read and understand something but I consider it my job to continue drilling it into your retail rodent brains.

The Mole’s vacation curse still seems to be live and well – for the past few years the going joke here has been that every time I take a few days off the market starts tanking. So I just popped up my charts in expectation of being able to suggest some impending support levels but quite frankly we have very little context here. And that is okay – one of the hardest lessons to learn even as a seasoned trader is to know when NOT to trade.  No matter what ‘lens’ you use right now – there’s not much to hang your hat on, no matter how hard you look. So don’t waste your time – instead wait for better weather.

The ES futures rolled over on Monday but we are decidedly back in a high volume zone. And that means we may bounce around here for a while until the tape decides where to go next. Don’t make the mistake of trading your book or your opinion right here, market makers love configurations like this and they will send you to the woodshed three ways until Sunday.

On the weekly panel we just completed a rather long inside week candle. Given what I’ve shown above I think we may be looking at some tough tape ahead, at least until we breach below 1824 or push above the recent highs. So this week may pave the way to what lays ahead this spring – the inside week candle will produce either a buy or sell signal on a breach of its high or its low. If you’re a skilled short term swing trader then you may have a lot of fun in the coming days. Especially if follow our Zero indicator – it offers great signals in sideways tape.

There is however fun to be had – join me in the lair for some juicy short term setups:


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.

Cheers,





    Zero Indicator
  1. recent misdeeds

    1. The Squeeze Is On!
    2. Return Of The Market Mole
    3. We have a potential long setup here, but it sucks
    4. Start of the week
    5. Scott’s market update
    6. TARDIS Trading Techniques
    7. Thursday Morning Briefing
    8. So Far So Good
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