Bear Pörn

I’m not feeling so great today and I hope the few of you who are not on vacation can forgive me if I make this one snappy. On the equities side not much has changed since the overnight ramp and from a trading perspective the current tape is rather uninteresting. I’m sure you’ve got better things to do and so do I. The futures and forex side look similarly lackluster – so instead I decided to indulge in a bit of bear pörn today. Which however comes with a disclaimer: Price continues to point upward and the LT bullish trend remains unchallenged – so take the following charts with a x-large helping of salt.

On a short term basis I’m seeing a healthy divergence on our GBP/JPY equities correlation chart. Thus far gravity remains suspended and the E-Mini has happily bubbled higher. If I was ST long I would probably take profits here in anticipation of a little shake out.

Long term I have been watching this divergence on the VIX:VXO ratio – as you can see front month ATM premiums have dropped quite a bit in comparison with the remainder of the front month option chain (thus pushing the ratio higher) and we are now seeing a little correction which started early this month. So far price has not responded and per prior examples it may be delayed. If this divergence continues I would get very cautious on a 1-week forward looking basis.

However a similar divergence is seen on the VXV:VIX which compares quarterly implied volatility with front month IV. That one should make anyone exposed to the long side a lot more nervous – and again if it keeps dropping then price will most likely respond eventually. However here I would expect a multi-week correction, once it happens.

A bit more subtle but supportive is the formation we find on the SPXA50 vs. the SPXA200. It seems breadth is diminishing after having reached a reversal zone near the 1.0 mark. Again price has ignored it this far and that’s not unusual given prior context. I wouldn’t worry too much here yet but keep an eye on this one. On its own it only has limited meaning but if the two prior charts remain in correlation over the next few weeks then we do have enough evidence to warrant caution on the long side. After all it has been while since we have seen a thorough medium term correction.

Bottom Line: If you are long then there’s nothing to worry about just yet – stick with price and trail your stops as your system dictates. We need to see more extreme measures until we would switch the bullish case into Defcon 3. But early signals are flashing and we ought to keep an eye on them. I leave you with this:

That’s right – no more Mr. Nice Bear!

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Cheers,

Monday 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.

It’s officially summer now and quite out of season things are heating up across the front. Damn it – shouldn’t you guys be at the beach by now? Here’s the spoos plotting against the GBP/JPY (the carry pair we are tracking), the latter of which is pointing downward. So prepare yourself for the possibility of a little down cast – bring an umbrella. The NQ and TF are near their short term SMAs (e.g. 100 and 25 hour) so look for possible support there should we drop lower.

Otherwise there are no glaring signs tempting me to be short. The VIX:VXO ratio showed an abnormal spike last Friday but remember that it was quadruple witching day and it may just be an aberration. I suggest you keep an eye on the Zero indicator throughout the session to be alerted of any possible shake out attempt. Thus far at least the trend higher on the equities side continues unabated.

Setups – here’s crude which looks like it may gain traction via its 25-hour SMA. It’s a buy above the hourly Net-Line Buy Level at 107.36 – put your stop below the SMA.

Silver is looking rather ripe here as we have a juicy bollinger compression. The idea is a long above the NLBL.

I think the EUR/USD is a good swing trading vehicle right now. Obviously once we see a breach outside the sideways triangle things may accelerate. Be aware that it’s not uncommon to see a false breach first followed by a run in the opposite direction. When in doubt stick with the daily trend.

More goodies below the fold – grab your decoder ring and meet me in the 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.

Here’s the daily Forex spread spike controller from Dukascopy. Look at those and compare them with your current broker. As a matter of fact I would appreciate if you would post screen grabs of your own b/a spreads. We need to start collecting a list of favorable brokers.

Cheers,

I For One Welcome Our New Robot Overlords

As I’m currently living outside of the U.S. I was blissfully unaware of the fact that we’re heading into Memorial Day weekend until just earlier today. I really should keep a U.S. calendar handy so I can plan my trips around them. Anyway, this explains some of the tumbleweeds I’ve been seeing in the comment section, although some of you guys may just wind up kicking yourself….

It’s not unheard of for important inflection points to be breached during low participation periods. Whether or not our RTV-L entry winds up surviving the weekend remains to be seen. I have decided to keep it in play as I’ve accumulated a nice buffer zone. We do have a whole session ahead of us tomorrow but I don’t expect much action to be honest.

The VIX now touching its falling diagonal support line again. Yes a bounce here is a possibility but it may just slide it down slowly and steadily – see what happened last time before it jumped back higher.

UVOL/DVOL on the NYSE – let me just say that I for one welcome our new robot overlords! Which seem to be kicking in every time we touch that new rising diagonal on the spoos (see first chart and it’ll jump at you).

On the bearish side we have the TF kissing its new nemesis which is the 25-day SMA. Has been trying to overcome it for weeks and has continued to fail. I would be short here but given the long weekend I’m not going to bother.

Given my current long exposure I’m also not exactly thrilled about what I’m seeing on the VIX:VXO ratio. Short term that could mean we’re looking at a little shake out tomorrow. Well, it is what it is and given that this is a daily campaign near the highs I decided to stick by the rules. Jumping in/out will most likely lead to missing the bus entirely.

Gold update – yes, I’m still stubbornly long since that IP candle – what, almost a week ago? But if you consider the context then you know why. I do like the 25-week SMA offering potential support. Naturally I would be willing to flip sides if we drop below my current stop at 1280 (which was well placed IMNSHO).

Platinum – not sure how many of you grabbed that ST long but hell, it did pay off once it got out of the gate. I’m cutting this one now as we’re kissing the 100-week SMA and that’s just too much for me to worry about ahead of Tuesday. This was a nice run though and I’m not pushing my luck.

I don’t expect many of you will be trading tomorrow but if anything interesting happens I’ll be sure to chime in. Either way I’ll probably post a quick update with some general sentiment before we head into the long weekend. See you then.

 

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

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