Pointy end of the knife

We are at an inflection point. The whole bearish thesis relies on us making lower highs and lower lows. Unfortunately, the internals arent weakening, but strengthening, and each successive push down is gaining less and less ground.

Its clear the market is not happy going down, which is always a prelude to the larger trend kicking in.

Right here we have a move up, which first stalled at the 20 EMA, then that EMA became support. Right now we are butting hard up against the 50 EMA. If we breach that support, the squeeze effect should be enough to push us to the daily highs, which *should* cause a bigger squeeze and get fresh longs on board.

Its worth watching es futures for the next few hours of European session open. It gets decided here.

If you are watching now that 60 min Hammer candle at the end is a *very* high probability trade on break of the high :)

This entry was posted on Thursday, February 24th, 2011 at 6:42 pm. Both comments and pings are currently closed.



  • Zero % forever

    scott !
    great commentary as usual. As most jpeg are self explanatory (buy/sell-1 R stop).I have saved all your recent posted charts in a file as a ref.
    Today weekly option expiry.I dont know what the big boys have in mind.Buy penny options in their personal/related a/c's and run the index with company money and keep the small change themselves!
    Long IWM ,SPY ,OIH,GDX and many energy issues options.

  • Bob the Horse

    The odds here clearly favour the correction being over. The scenarios always were a) correction in bull mkt (favoured) or b) something more serious. Yesterday we basically got to the point where there was a clear decision point and the mkt took a).

    As ever, we never know what will happen today but you just have to play the odds. The chance of someone looking at the following list and deciding it is a good short is low:

    1. Long and strong up-trend since Aug not broken.
    2. 1300 false break
    3. over-bought condition worked off
    4. hammer patterns in oil/equities

    talking my own book of course but short squeeze looks on the cards. Again.

  • MA72

    Futures now over 1312 for a while – short squeeze here we come.

  • http://thefxspeculator.blogspot.com Onorio

    System issued a EURCHF buy signal…risk is on baby. Long @ 1.2800

  • amokta

    When the price of caviar doubles, is that a sign of inflation?

    Anyway, looks like we get pullbacks, but all the markets (so far) seem to relentlessly trend upwards
    Now there are three reasons that may contribute to this:
    1) pure sentiment/speculation,
    2) inflation (?QE effect, currency debasement)
    3) increase in real value, in that economy/real GDP improving, profits up etc

    (should i apply for Nobel Prize in Economics?)

  • volar

    wow what disconnect btwn DX and ES

    Ben ben ben

  • Bob the Horse

    I see the AAII Bull Bear spread has come right back to the middle of the range. It's amazing how quickly people turn bearish on this mkt. It basically confirms what I think the default positioning is: people are bullish but a) not fully invested and b) hyper nervous. That is not what tops are made of. What you need is people being a) bullish, b) invested and c) complacent.

  • finansreven

    I tried the USDCHF again this morning. Third time lucky?

    Also having a small long SPX after being stopped out twice from my shorts yesterday.

  • volar

    my sentiment index is nuts.. you need more than one survey BTW

    Index

    http://content.screencast.com/

    Change in sentiment
    http://content.screencast.com/

  • Bob the Horse

    ideally you need data that goes back before 2004 as that look a fairly similar period on the sentiment indicators.

  • volar

    Ya I have II and AAII back to 04. Also Put call ratios…

    I have never incoporated Consensus Inc. or Market Vane, however. As i dont have the data.

    http://content.screencast.com/

    http://content.screencast.com/

  • ds2

    Looks like the long is setting up well. By end of today we should have another VIX buy signal unless this gets ugly.

  • ronebadger

    buy what?

  • ronebadger

    never mind, just kidding

  • Bob the Horse

    buy equities, it is a VIX spike set-up that sucks in shorts and provides fuel for a rally.

  • skynard

    DX rocket! I like!

  • finansreven

    Closing my SPX long, moving USDCHF stop to BE and going to England to watch Aston Villa beat Blackburn. Nice start of the weekend.

  • skynard

    1319 SPX is 50% retrace

  • OldChicago

    Yeh! BUT, so is equity. short-covering? is that bullish?

  • ds2

    Buy anything!!! : )

  • Bob the Horse

    At the moment yes – the key driver has been oil spiking which is $ bearish and equity bearish as it is supply-driven, not demand driven (in which case it is $ bearish (sometimes) and equity bullish.). So now that oil is coming back (or not exploding higher at least), that is coming out so it is a $ bullish/equity bullish move. When equities go up and the $ goes down, you will know that the whole middle east thing is over (as far as mkts are concerned).

  • skynard

    If this is the real deal it may be time to back the truck. Have dry powder ready. To many sell signals to ignore.

  • ds2

    Scott / Mole – Have either of you done a post on how you adjust stops? Your initial posts show the buy and stop for a trade, but I'd like to hear how and when you adjust. I usually use Fibs which I am not great at but served me pretty well in my last set of trades but I am sure I have something to learn here. Bernie's Pyramid calc maybe?

  • finansreven

    Watch out for dollar retrace. May push equities hard.

  • skynard

    Stops moved to lock in profit.

  • fisheggs

    There are some posts from Scott, I have PDF'd em on my laptop, will look and post later.

  • fisheggs

    This is one from memory http://evilspeculator.com/?p=1

  • SW6

    Can someone explain the gap up in the dollar index?

  • http://wetorp.blogspot.com/ Wetorp
  • SW6

    Thx, long term trend line support.

  • Bob the Horse
  • rg64

    This is what I was looking for

  • rg64

    Notice how this can stay way over liked for a long period of time. We might be just starting?!?

  • skynard

    ???

  • ds2

    Thanks

  • skynard

    ZN showing strength here

  • http://evilspeculator.com molecool

    Tons of posts on that…

  • volar

    I think you will actually see divergence in sentiment at “the” top. Just like the RSI (weekly). There is much room to run IMO

  • Clint

    A guy on CNBC just said U.S. stocks are a bargain here and should be gobbled up right here by folks who have been waiting on the sidelines to get in. – Anybody out there agree with that ?

  • DarthTrader

    I agree that lots of people have been waiting for a pullback to get in

    But

    I don't believe they are a bargain just that as a trader I bought AAPL yesterday in anticipation of such a rally will flip my weekly AAPL call next Monday or Tues

  • BobbyLow

    Certainly can agree with the writer's assessment. However it would have a lot more credibility if it wasn't written by the “Virtuous” Henry Blodget of Dot Com Bubble fame. This guy hurt a lot of people back in the day and since then he's been trying to restore his image. But for me, it's kind of like “two peas in a pod” or “pick your poison”. :)

    http://en.wikipedia.org/wiki/H

  • BobbyLow

    I am soooooooo grateful that I've been able to permanently ban CNBC from my life. Not because the people on CNBC are for the most part the “T and A” of the Financial Industry, but because over time, they have proven to be dangerous to my financial health. :)

  • Clint

    Very good…that worked out nicely for you. But yea….this dude was talking like people with substantial money sitting in the bank should load up with stocks for long term holding right here.2yrs ago..I could see that being good advice. A lot of stocks are 3 & 4 times, or a lot more, than what they were 2 yrs ago, and central banks are holding the lions share of those paper profit gains from the shares they bought from the QE/Bailout money…so they are 'key' to what stocks do from here I'd say…so who's to say. Of course there was zero risk for them(banks)…and even if they were to lose 20% here they would walk away with a fortune in profits.Always good to be on the 'inside'.

  • Clint

    I hear ya. I usually have it on just to watch a couple of the CNBC female anchors like Amanda Drury….with the mute button on.But you're right of course…the commentary from that show is a disaster and is more harmful than helpful to traders.

  • MaxPainMan

    went long /CL @ 97
    tight stop

    targets: 100, 103.5, and 110

  • raised_by_wolves

    Thank you for the explanation.

  • Bob the Horse

    Right – I'm off. Flying to LA tomorrow and will be there for a few weeks. Good luck all with your trading. Just remember – if you have a bias, better make it a bullish one. It's better for your health!

    I won't be very visible on the site until I am back at work. Cheerio!

  • raised_by_wolves

    Check out Bob's explanation based on fundamentals too.

  • http://pulse.yahoo.com/_SJUE5A5AFWLTZA7GHTPNICEKFQ Matt

    This day is kinda like yesterday, the fundamental breadth and vol aren't that strong to the upside – could reverse, although not likely, but yesterday was the same way.

  • amokta

    Im long oil/spx/silver
    not sure about the oil one though
    (any views on oil folks?)

  • MaxPainMan

    i'm in it… tight stop

  • http://pulse.yahoo.com/_SJUE5A5AFWLTZA7GHTPNICEKFQ Matt

    Oil is consolidating gains, likely limited upside/downside in the very short term pending some “shock” event.

  • amokta

    targets – are they not a bit ambitious, if the only reason for the recent rise was a few punch-ups in the Middle East :-)
    Seriously though, if the economy of world isnt that sizzling (despite sotcks being up), then thats a deflationary on oil price (unless fiat/inflation is acting in predominant inflationary on price of everything)

  • amokta

    What about if no shock, everything fine – it could head down to $50 ?

  • amokta

    If silver decisively break 33.0, then what?

  • MaxPainMan

    /ES target: 1384

  • amokta

    I like it, but over what time frame!

  • BobbyLow

    True, but without Wage Inflation you can not have True Inflation. You can have commodity inflation as we are having now but eventually either Wages will have to rise (I can't see how with the over supply of labor) or commodity prices will come down.

    Even the Stagflation we had during the early 70's had wage inflation. So much so that Nixon put in Wage and Price Controls.
    Things were pretty screwed up back then as well.

    http://en.wikipedia.org/wiki/S

  • DarthTrader

    Silver market marking time like yesterday . . . perhaps waiting til after trading in the pits is over for the week (1:30) and the Europeans have lost interest and headed out to the Cafes and Pubs. Yesterday Silver started moving at 2:10

    We'll see

  • skynard

    If this were corrective would we not of had 3 waves down? Something to think about!

  • http://twitter.com/RoastBeeph RoastBeeph

    Taking some long TF profit off the table…slight divergence in Zero.

  • http://pulse.yahoo.com/_6FCTHZELNVH7XBHT6OP3DAX5K4 Pretending2fail

    What about last November?

  • amokta

    Thanks BobbyLow, good to get a historic perspective/macro view!

  • http://pulse.yahoo.com/_SJUE5A5AFWLTZA7GHTPNICEKFQ Matt

    Back to the low volume ramp, just like in AF last night (and every night for that matter).

  • MaxPainMan

    oil broke out of wedge….
    next stop $100 ?

  • skynard

    Don't know, that's the market. Just saying in this case I count 5 waves down or we are in wave 4. That's all.

  • jigdaddy

    hi mole, is today considered a VIX buy signal?

  • http://twitter.com/RoastBeeph RoastBeeph

    Very nice breakout of the wedge. Good job.

  • gsavli

    you have to wait untill the EOD to see.

  • skynard

    Agree that we are gaining strength on the 10 min, bullish crossover.

  • http://twitter.com/RoastBeeph RoastBeeph

    We are close to the time when silver dropped dramatically yesterday, 2:15 EST.

  • amokta

    Will not happen, i control the silver market :-)

  • OldChicago

    what about 1500? Bulls has No fear, no shame!

  • http://twitter.com/RoastBeeph RoastBeeph

    lol it's trying for a repeat..pretty weak effort so far though.

  • skynard

    Don't commodity trade very often, wicked!

  • http://evilspeculator.com molecool

    ¤ø„¸¸„ø¤º°¨¤ø„¸¸„ø¤º°¨
    ¨°º¤ø„¸ N E W „ø¤º°¨
    ¸„ø¤º°¨ P O S T “°º¤ø„¸
    ¨°º¤ B I T C H E S ¤º°¨
    ¸„ø¤º°¨¤ø„¸¸„ø¤º°º¤ø„¸

  • jigdaddy

    i figured as much but i dont see a crash to make vix skyrocket out side the

    band…

  • ZeroPower

    $35, then, your guess is as good as mine (higher, of course).
    PM bull market going on – don't be silly and be short for anything more than a trade.





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