Transfer Of Power

After marching twenty million fellow citizens in lockstep for the last few decades fellow megalomaniac and fashion trend setter Lil’ Kim (a.k.a. Kim Jong-Il) is getting tired of the game and has decided that it’s time to initiate the rite of succession. Which is bad news for his youngest son Kim Fatty (a.k.a. Kim Jong-Un) who had to give up his X-Box, get a company haircut, and toss his Diesel jeans for a North Korean military outfit. We will all dearly missed you on COD Modern Warfare, I-Will-Nook-You#Western_Bitches!

Thanks to my new Korean language skills I was able to crash the recent party gathering (see pic above), and mingle with the new powers to be. Although things got a bit out of control after I got wasted and decided to climb up the 160 meter high flag pole in Propaganda City – in my knickers whilst waving a bottle of Cristal and singing ‘God shave the Queen’. After that little stunt I had to concede that state controlled media does have its advantages, especially since I couldn’t carry a tune in a bucket.

Similarly the markets seem to be in the process of a slow (but noticeable) transfer of power. The bulls were able to use some clever overnight futures games to push the tape over 1150 this morning, but yet again we snapped back to whence we came. It’s time to look at a few charts to see if it may be time to risk some negative delta.

I posted my SPX:VIX ratio chart the other day and thus far the divergence seems to be increasing. Now, whether or not the SPX will obey and follow to the downside remains to be seen. Maybe next week, thus far that mysterious dip buyer is always there to save the day.

Similarly that divergence on the RSI_EMA also seems to be increasing. But careful – take a look at what happened in late April: We saw a similar divergence and then the tape popped up one final time. Which of course is impossible to predict – I grant you that – thus if you take your chances here don’t be surprised if we see one big blow off top, maybe to 1170.

The stochastic on the AUD/JPY finally managed to drop below the 80% line. But prices are not following suit thus far and I remain skeptical. We could just go sideways here and burn off some overbought conditions. If there is a drop in the works then it should happen fairly soon, preferably tomorrow once the end-of-quarter painting is in the bag.

Most of my other charts look the same. The DXY dropped to 78.41 (near my 78.22 61.8% fib line) and then bounced a little. But again, no ‘bottom pattern’ just yet – could just be lower lows and lower highs.

Due to rampant manipulation I stopped talking about gold about two years ago. Plus it’s mostly a bitch to trade, but that’s a different story. Anyway, most recently gold has gone exponential and you couldn’t find a gold bear if your life dependent on it. Which is why a top may be near – most preferably one would want to see that 80% mark breached on that stochastic however. As you can see we have done a bit of an under curl and after than we pushed higher. Textbook psych! fake out and we may push to 1350 before we see a top. Same story as with currencies – the trend is the trend until it’s over. If you’re playing the ‘call a top game’ then I recommend you keep tight stops as your best friends.

Bottom Line:

What I’m seeing as of late strongly points toward distribution and clandestine selling. But we need more time here and the bulls may just have a little surprise in the works before a transfer of power gives the bears a chance to benefit from vastly overbought conditions. Whether or not they’ll actually step up is another story – just like Kim Fatty they don’t seem to be too eager to grab the reigns and get serious.

Pappa Prechter Update

Before I run – here’s a recent Yahoo News update by Pappa Prechter. I know some of you have become a bit disillusioned about Hochberg’s STU, but let’s not fall prey to swinging to the other extreme either. He is making good points here and although that right shoulder may extend he may still be proven right in the end. If you ask me, it doesn’t hurt to download his free report and then decide if the old grizzlie has a point or not.

(Note: This interview was originally recorded on September 20, 2010)

Cheers,

Mole

The Black Hole

Alright, despite the title nothing kinky this time – some folks seem to have taken offense to the kinky bear I posted this morning. Folks – it’s a teddy with a pouch in the front – let’s not overreact please. Last time I checked it was the 21st century. Besides, I have been posting scantily clad women here since the inception of this blog – ask yourself: which is really more offensive? ;-)

I see excessive violence on television all day, guns galore and people being beat to a pulp on late afternoon shows. But show a half a booby or teddy bear with a vagina pouch in the front and the Spanish Inquisition is coming after you.

Anyway, not an argument you can win, so we’re moving on…

Seems like ole’ bucky just can’t find a floor – is it turning into the black hole of all currencies? Here’s what I see on the horizon for both the DXY and EUR/USD.

The DXY kept dropping – which is what I suggested over on the Slope a few days ago. Always remember – currencies stay in their trend until they don’t. It takes a significant reversal to stop a trend in its track. Anyway, next stop is the 78.22 mark – considering that we are probably at 3% Dollar bulls when that is being touched it’s not a bad place for a handful of long positions – after we see a bottoming candle preferably.

Similarly the Euro pushed near 1.36 (as suggested – cough cough) where we’ll probably see some resistance. But whether or not this is the top is still questionable. For starters I would like to see a divergence on that stochastic and drop through the 80% mark that actually sticks. None of that happening just yet, so don’t step in front of a speeding bus.

Cheers,

Mole

Some Teddy Pørn

In the past few days I started to sense a disturbance in the force which should not be ignored. After all – we are not bulls nor bears – we are stainless steel rats, and as such we always keep our little rodent brains on high alert. Therefore I am forced to expose my unfortunate readers to some disturbing images – please brace yourself.

I mean, that’s just wrong – is nothing sacred anymore? I am particularly offended by the suggestive use of the word ‘oversized’ – leaving very little room to one’s imagination as to the utility of this monstrosity. And to add insult to injury there’s a Houston Texans sticker on what serves as this aberration’s foot. OUCH! I mean was losing to the Cowboys last Sunday not painful enough? Somebody is obviously messing with Texas in a big way here ;-)

Before we get to the charts let me please remind everyone that anything presented here today are nothing but ‘early alert signs’ – meaning cracks in the tape we should be aware of. That does not mean the SPX is going to plunge to 600 next week, alright?

Simple long term chart – I am running an RSI_EMA against the SPX. Which has in the past been showing us nice divergences around meaningful tops or bottoms. Maybe this will be corrected in a day or two but it seems that we are in the process of building one right now.

Mr. VIX has been plotting sideways for months now and my 2.0 Bollinger is now in the process of contracting. Which means at some point we’re going to either get a VIX buy or sell signal. I think considering that we’re at 22, the latter is more probable (relative to equities).

Now, I have made it a point to not jump to bearish conclusions as of late (especially considering the daily Zero still hovering above its mark) but this chart is getting outright ridiculous. There are three scenarios that I can think of:

  • The TNX drops below the 20% mark on my stochastic and after some final bottoming pushes above it, followed by a reversal. If equities continue to ignore any further downside then it’s fair to assume that a rising TNX would provide additional wind in the bull’s backs.
  • Equities finally catch up with the TNX.
  • The TNX and equities meet somewhere in the middle.

Pick your poison – I have no clue as to what’s going to happen. But it’s disturbing (just like that teddy above) and traditionally equities always revert to the TNX.

I posted this chart a few days ago – for the noobs, it’s my home brewed SPX:VIX ratio chart on top of the raw SPX. The histogram on the bottom plots the delta between the raw SPX and the ratio – the one in the middle has been smoothed a little.

This chart is obviously interesting in the context of that VIX Bollinger chart I posted. Seems that market makers are starting to price in a little more risk here, which may be a harbinger of at least a little correction. We have been pushing up for while now after all.

Hourly Zero Experiment

I tried something interesting over the weekend. By accident I switched the daily Zero into an hourly and that produced the chart above which has a smoothed panel as well, again just like on the daily. Now, I kind of like what I see but without influencing you in any way I would like to gather first impressions. What do you guys think – do you see anything of value on that center pane?

Cheers,

Mole

P.S.: My apologies to any Houston Texans fans – not even I would stoop so low.





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