Inflection Points

Equities are now beginning to accumulate sufficient context, allowing us to consider various inflection points where the odds either support continuation lower or a reversal toward the recent highs. Let’s review the daily context first:

In order to simplify it for you guys I’m hereby resurrecting an old tradition of mine – the Soylent line up. The volume profile chart show a pretty shallow volume hole near yesterday’s highs, just below ES 1940. The bounce didn’t have much meat in it but it may just have been a first foray into lost territory, perhaps leading to continuation either today or tomorrow.

Below us we of course have a bit of bearish wiggle room until about 1917, after which you can see a gradual drop off in the volume profile terminating in a textbook volume hole around 1900. That’s obviously a psychological line in the sand the bulls will want to hold. If it fails we’re going toward 1850ish – our current point and figure price objective on the P&F.

  • Soylent Green: At this point being long above 1940 is a pretty decent play if the GBP/JPY correlation shown below holds up. If breached a ride toward 1960 is in the cards and based on velocity/momentum/participation we’ll have to evaluate once/if we get there.
  • Soylent Orange: The highest odds right now are continuation lower toward 1900 unless we breach 1940. It does not have to be a black & white approach – watch the Zero indicator after the open for signs of increasing buying interest (or lack thereof). I think today is an excellent day to follow the Zero Lite for clues.
  • Soylent Red: Only applicable if we drop straight through 1900 without much of a bounce. If panic selling ensues a drop through that mark leads us toward 1850. The odds for that to happen are very slim right now. Recall what I showed you on the LT VIX chart on Friday.

The spoos to GBP/JPY correlation is pointing upward right now. That’s positive for the bulls and why I wouldn’t count the bulls out just yet. But equities need to follow higher now – the onus is once again on the bulls to draw the line here before major damage is incurred which may threaten the medium term and perhaps even the long term trend.

On the price side here’s a bit more detail. You can of course trade the E-Mini or the Spiders, or your favorite ETF, what have you. The 100-hour SMA is near our 1940 inflection point, so I think we have a pretty solid ST guide here.

I would however play the short side via the Russell futures – at least 50% of my exposure. After all it does make sense to short the weakest index and buy the strongest.

Which brings me to the NQ which still looks weak but should we see a reversal today then here are your long triggers and the stop. This may change as the day unfolds – so watch this chart as it may paint a nice diagonal higher under which you can place a stop.

Once again I found a ton of juicy ST setups this morning. Here’s gold which I want to buy on a push above that diagonal I painted on the chart. A short position is definitely possible here until that happens – in that case put your stop above 1295.

Quite a few more goodies are looming below – please meet me in the lair:


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Anyone? Damn it, I don’t get no respect… (you have to be a sub to get the reference)

 

Light Summer Setups

Equities were in shake out mode this morning but we are near today’s daily trigger again. Let’s review the situation and follow up with a handful of light summer setups.

This is a hammer long in an uptrend plus it’s an Retest Variation Long. Your stop will be below yesterday’s lows which is more than generous. If you want to tweak it you can also use that NLSL at 1962.5 – actually that’s what I’ll be doing.

Gold is back below its two daily SMAs – this may be a last kiss goodbye configuration but I’m open to both directions courtesy of the inside day candle. You know what to do.

ZB futures – another RTV – this time short. But it’s also an inside day candle and if it closes like the chart a hammer long. So various reasons to justify an entry here. This may take a few days to finally resolve but with gold you need to bring an extra helping of patience.

Cable – big move there yesterday and it now has to pick a direction. I would prefer the long side courtesy of that NLBL but we also have an IP with a long trigger right on top of it. Got to love that one – plus we have the 25-day offering potential support from below. I’m mostly interested in trading with the trend here.

 

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Cheers,

Eyes On The Hourly

The suspicions I shared this morning were confirmed by price later in the session. And as suggested the 100-hour SMA has been holding the fall as of right now. And that is pretty much all you need to know on the equities side as we currently have little context to work with:

Judging by the daily panel that 100-hour better hold as there’s nothing but air lurking beneath. Which is the downside of low volume short squeezes – you better not overstay your welcome. As you know I started to be pretty skeptical over a week ago but thus far magic buying interest continues to show up.

Same picture on the YM – 100-hour holding as of right now.

And here is the NQ – not looking bearish really. This one may have decent odds to hold the line.

Short side momentum is looking tepid as usual – the grizzlies apparently gave up sometime late 2011 – hehe :-)

I don’t see a pressing reason to sell here. However, there are a few bearish signals buzzing in my trading lair – please grab your decoder ring and have a look:


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Cheers,





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