End Of This Campaign

Well it’s been a profitable campaign but today my position was closed at the 2R mark to which our stop had been advanced last Friday. That doesn’t mean equities won’t ride any higher from here but the rules are the rules:

That early morning dip lower did us in – it was a bit of a pain as the Zero Lite suggested that it was nothing but a quick Monday morning shake out. Thus the odds for a bounce back were high.

However, as you can see we’ve gone pretty flat here since and participation is dying out (right panel).

The SPX:VIX ratio is also pointing to some possible monkey business. In case this chart confuses you – the drop of the line means that VIX has been pushing higher wile the SPX painted a new all time high. The SPX managed to climb above 1800 while the spoos missed it by one tick. It’s possible this divergence is due to tomorrow’s VIX option expiration but I still don’t like it. So perhaps today’s stop out will be for the better.

Since we’re talking VIX – last Friday we closed one tick above the lower 2.0 BB. Had we closed one tick below it we would be two steps into a bonafide VIX sell signal today (relative to equities). You lucky bastards!

Congrats to everyone who participated in this campaign :-)

Nice early morning entry on the ZN futures. I think it’s worth holding this campaign as we are pretty close to getting above that monthly NLBL which was failed earlier this month.

Copper is painting a juicy inside day candle. Both of those triggers are interesting as copper just failed its 100-month (not day) SMA – thus a failure or a bounce here will probably have long term implications.

Soybeans is presenting us with an RTV-S setup – entries will be valid after the session close tonight. I also love the context here as the 25-day is meeting the 100-day with prices right on top. This is a good one and although it’s not a popular contract it’s worth considering a small position.


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Channel Surfing

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 are in the process of forming a falling flag and depending who you ask this may actually turn out to be bullish as well. Either way I’m more interested in the inflection points which are now 1763 (hourly NLBL and diagonal) on the upside and 1755 on the downside. As pointed out yesterday I remain pleasantly surprised but at the same time highly skeptical that our short entry near 1770 will resolve lower. But the rules are the rules and I continue holding with a stop above that daily NLBL – recall that it’s good until Friday.

By the way the VIX is now sporting a rapidly contracting Bollinger bubble – it has shrunk to a window of only two handles and either way we’re going to get a breach on one side soon. Which would start the count on an inverse VIX signal – i.e. a VIX sell on a drop below 12.35 and a VIX buy on a push above 14.23.

I know, it’s a bit confusing – a VIX sell means you would want to be short equities and a VIX buy means you want to be long equities. This one has served to confound retail traders since the dawn of humanity (i.e. we presented it here several years ago). So if you’re the inquisitive type – the rules are explained on our cheat sheet.

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A Few More For The Road

Equities are holding steady as she goes in the last low volume pre-holiday trading session. The Zero has been flat as a flounder since Monday afternoon, thus suggesting very limited participation – and clearly there has been little resistance on the way up. I suggested last weekend that the current spot near the NLBL matters but I also suspected that we wouldn’t see true resolution until after the long holiday weekend.

It’s quite possible the VIX may register a third close outside the 2.o Bollinger today. Usually that would be bullish sign but I can’t give it too much weight just yet – let’s see what happens Monday or Tuesday when everyone who matters is back at the desk. In any case – if we close outside yet again then our VIX sell signal count resets back to 1.

Now despite the holiday churn the picture is actually rather clear right now as we have the benefit of inflection points across various charts and time intervals. Let’s start with the E-Mini profile which yet again shows us at right smack middle ‘thee ole’ volume hole’. Overcoming this once and for all will require a bit more energy than just one or two low volume candle paintings.

The Net-Lines and BB chart indicates that the 25-hour is still in the running. Looking positive right now but this may be retested early next week. Now I have drawn a green line at 1400 which pretty much exactly is where we are seeing a concentration of prior touches over the past few months. If we overcome the volume hole and push higher from here then 1400 would be the final bastion of resistance which, once overcome, would lead the way into a Santa rally.

Here’s a little zoomed in view showing the E-Mini seemingly having little problem overcoming the daily NLBL. Again we may see a retest next week as this one won’t expire until Monday. But it’s looking positive thus far.

Now let’s zoom all the way out – the final perspective I would like to share is the weekly chart, which elicits a much more significant hurdle at the 25-week SMA. We are right below it and this adds another layer of importance to what happens here at the volume hole and the daily NLBL.

Botom Line: After a predictable push off the lows equities are now facing overlapping resistance across various time frames, except for the monthly panel. What happens here and of course at the psychologically sensitive 1400 mark will be the gateway to what happens in the final weeks of this year. If the bulls fail this test then the much coveted annual Santa rally may turn into a write off. For the bears this is the last opportunity to take back the reigns but thus far I have not seen much selling interest.

Public Service Announcement: I am planning on finally taking a few days off, hence this will be my last post until my Monday morning briefing. Obviously Thanksgiving is not being observed over here in Spain but we’ll somehow try to dig up some pumpkin pie. Believe it or not  - much to my chagrin the all but ubiquitous turkey meat as we know it in the States is but impossible to find here on the Iberian peninsula. But rest assured that I’ll be enjoying my days off all the same – I’ll just have to do with tapas and a bottle of Rioja. Perhaps I’ll mix in a few spices and some cinnamon ;-)

Which only leaves me to wish you a most relaxing and pleasant Thanksgiving holiday! I hope to welcome you all back safe and sound (and probably a few pounds heavier) next week!


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