The Other Shoe Just Dropped

Yesterday I mused that the onus was now on the bulls to push the spoos above 1997 and that an inability to do so may lead to grave consequences sometime next week. It seems like my concerns were justified but the situation escalated a bit earlier than anticipated:

Don’t get confused if 1997 is suddenly a mile away – we just rolled over into the December futures contract and thus fair value is at its most extreme. Basically 1990 is now roughly yesterday’s 1997. And that’s almost exactly where the bulls fumbled today and the rest is history as they saying goes. There seems to be a support line on the hourly which now points toward ES 1970. I would not entertain any long positions unless that one gets touched.

Because of the roll over our profile volume chart is not exactly spot on right now – it’ll take a few days for things to settle properly. But adjusted to the new contract it seems that 1970 represents a volume peak and it’s smack middle in our recent congestion zone. Oh joy… haven’t we suffered enough? 😉

Just a few days ago I wasn’t too concerned about a correction beyond a touch of the 25-day SMA. But things have shifted a bit – more specifically the VIX is now building a diagonal support line which is slowly pushing volatility higher in a systematic fashion. That may look innocuous at first but it’s a lot more dangerous actually than a fast emotional spike higher.

So unless we see a very quick and violent reversal – preferably today – it’s very much possible that this one will touch the 100-day SMA mark on the SPX which now awaits near 1940. As you can see we are at the 25-day and that’s basically ‘containment territory’ – a drop below it will trigger a bit of panic selling.

Not much to report on the campaign front today. The EUR/USD has triggered a long now but I’m not sure it’ll get out of the gate. Which is surprising given how compressed the hourly Bollingers are. Something’s got to give here soon. Well, I’m long with a stop below yesterday’s lows – system is a system.

The 10-year bond campaign however is progressing very nicely and it’s time to take 50% off the table as we’re approaching the 3R mark. I’ll shift my stop to the 2R mark in hopes that we’ll touch my target zone at 123’3.

And that’s all I have for this week. Be advised that I’ll be absent Monday through Tuesday morning. But no worries – Scott graciously volunteered to be on point and if needed defend the fort from invading hordes of bear-barians. I will probably put up a quick post Tuesday near the close – see you all then!

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Cheers,