Contrarian Exhaustion

Steady as she goes. I’m starting to see a bit of exhaustion here – not over in equities, mind you – but on the sentiment side. Let’s call it contrarian exhaustion – it’s all over the financial blogosphere, in particular when I go slumming over at some digital caves populated mostly by perma-bears. After four years of receiving a repeated ass-whopping at every crucial stage in the game I’m actually surprised that there are any of them left! But the really sad story about most bears (as well as most retail traders) in general is that almost all of them will have been vanquished when it’s finally time to start dipping into some short exposure. Yup, the market is a cruel mistress and she doesn’t dig folks with an opinion.

So let’s talk about strength! Here’s the E-Mini which has not breached one single daily Net-Line Sell Level (NLSL) for over two months. Let alone has been anywhere near its 25-day SMA – there is absolutely nothing wrong with this market right now! Tape like this should be shown in a pertinent textbook under the keyword ‘bullish trending market’. Enough said.

This is usually what really traps the average bears – they look at something like stochastics, RSI, or a MACD and decide that the tape is overbought and most definitely absolutely invariably will have to make a u-turn tomorrow. Unfortunately (or fortunately for naughty speculators like me) things don’t always play out like that in the real world. The weekly for instance has been embedded above its 90% mark for weeks now – a bit unusual to see it so sky high for that long but it’s been known to happen. As you may recall this chart has predicted major corrections rather nicely for us – but our trigger is a breach below the 80 mark. And even then it could be a fake-out – but I digress.

On the daily side it’s been emotional today. Some of you asked me about a Zero signal divergence near the top today. I used my best microscope and couldn’t find one. BUT if you step back and don’t focus on the trees then you may pick up that monster bullish divergence we got at the bottom today. Now that’s what I’m talking about and I hope you scaled into some longs there.

I have been talking a lot about the Dollar and it’s not just because it keeps pissing me off when visiting the ATM over here in Spain. Although it’s gone nowhere fast in the past few months we should take note of the respective resistance and support levels that it seems to be bouncing around in. Somewhere in there is that 100-day SMA which I think remains valuable as an inflection point. Not having much hopes regarding that daily NLSL holding but I must remain long until it has been breached – short below that 100-day of course.

Quick update on soybeans – you may recall the setup near the 100-day SMA and if you were around then you hopefully slipped into some shorts as it failed its Maginot Line. We’ve seen a pretty consistent sell off since then and it’s passable to start taking some profits at this point. I’m going to keep a few contracts running into 1380.

Bonds – I’m really fascinated about bonds right now and have been pimping this chart here repeatedly. We got another short setup a few days ago and the sawtooth pattern along that diagonal continues downward. Many many opportunities to get short here and I trust some of you took advantage.

I’ve got nice FX setups tonight – please join me in the lair:

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Cheers,

This entry was posted on Wednesday, February 13th, 2013 at 2:16 pm. Both comments and pings are currently closed.



  • Pervergence

    Closed ES short……..took profits SI short…….still in GC s

  • http://ibergamot.blogspot.com/ i Bergamot

     Here is another picture of “bullish trending market”. Disregard PF target, methinks its a bit too much. But who knows – just obeying the red line.
    Something else strikes me as odd:
    yesterday market was mostly up, but most of my positions where somewhat down (no big losses)
    today market mostly down, but all my positions are up or flat (with only exception SCTY -2%, but since i’m up 25% on it – no complains here)
    Does anybody else sees anything of a kind?

  • http://dartht.blogspot.com/ Darth_Gerb

    2pm selloff.  Wheeeeeee.

  • Pervergence

    l ES on divergence

  • Skynard

    /NG attempting to hold 3.3, if it breaks bombs away:)

  • Pervergence

    a sign of life on the positive side of ZL……lets see what happens

  • bullregard

    NG is a bitch… could it not drop orderly, like GC?

  • Pervergence

    Just right…

  • http://dartht.blogspot.com/ Darth_Gerb

    *close it up*

  • Pervergence

    out at VWAP

  • bdoone

    SPY couldn’t get over 80M. dismal.

  • Skynard

    It is a wild one, been trading it a few weeks now and somewhat use to it now.

  • http://ibergamot.blogspot.com/ i Bergamot

    Everybody at my office are up in arms about this minimum wage increase.
    What do you guys think?

  • bullregard

    Been pulled into something else, left short over night on NG… there goes my sleep.

  • Skynard

    Nice trade, took half off upon formation of that div, it was a doosey.

  • http://evilspeculator.com molecool

    My 2015 – sheesh – by then the Dollar is going on the brink of falling off the plate. They’ll need to do this because by 2018 you’ll be paying ten bucks for a loaf of bread ;-)

  • http://evilspeculator.com molecool

    I think I’ll have to make it a video.

  • http://ibergamot.blogspot.com/ i Bergamot

     Already.
    hand made fresh daily russian loaf – 8.99
    Its really that good, but I keep it with price label down

  • Skynard

    Yen, first weekly greeny in 3 months. Curious here at the test of 2010 low.

  • http://dartht.blogspot.com/ Darth_Gerb

    yeah, but who spotted the volume yesterday, eh?
    http://stockcharts.com/h-sc/ui?s=YCL&p=D&yr=1&mn=0&dy=0&id=p95354146166

  • 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„¸
    ¸„ø¤º°¨¤ø„¸¸„ø¤º°º¤ø„¸

    (you don’t deserve it but at any rate ;-))

  • http://evilspeculator.com molecool

    You must be living in L.A.

  • http://dartht.blogspot.com/ Darth_Gerb

    same sh!t different millinieum.
    check 1990.
    http://www.infoplease.com/ipa/A0774473.html

    money eventually becomes worthless.
    avoid the drama.

  • http://ibergamot.blogspot.com/ i Bergamot

     Thanks DG
    This is even worse than I expected

  • Skynard

    Hum, yes. Enjoy your work:)

  • http://ibergamot.blogspot.com/ i Bergamot

    nah, east coast





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