Today’s session could be used a good example for a textbook chapter on waning momentum. Early in the session I started to see strong signs of distribution and after a complimentary blow-off top things started to fall apart quickly.
I think the Zero Lite shows it best – despite the early morning ramp to above SPX 1500 it was painting a complete flatline. That doesn’t always mean we turn but it usually puts me on extra alert. It remained above the zero mark and thus there was nothing to do but to watch for signs of a top. Then as soon as VWAP fell and the Zero Lite went negative the cattle prods came out quickly. Nice Mole signal on the bottom near the lower standard deviation by the way – that’s how we like it.
Here’s my SPX:VIX ratio and that’s what I mean by distribution. The writing was on the wall when the ratio remained flat in contrast with a fast rising E-Mini.
In terms of support there’s not much on the daily right now – our next NLSL is at ES 1470.5. However the hourly term panel above shows us a possible ST support cluster between 1483 and 1487.
Since I deem myself a benevolent market megalomaniac I am going to throw this goodie out for free. It may be the most important setup on my wall right now, so leeches rejoice! ZN is testing the ole’ diagonal and has been holding up thus far. Meanwhile we have it tickle the 100-hour and maybe, just maybe, this is a quick shake out before a blast higher. I think it’s worth a few longs here with a stop below the hourly SMA. Pretty good setup with little risk if you don’t waste time.
More below for my intrepid subs:
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This entry was posted on Thursday, January 24th, 2013 at 1:55 pm. Both comments and pings are currently closed.