Time For A Breather

I see a lot of guesswork in the comment section and it’s time to take you guys out of your misery. Many of you are feeling bullish right now and after last week’s drop the odds for a bounce here are good but not guaranteed – we are literally sitting on the edge of a sell off. Which is often where some of the best setups happen – but we have to remain nimble and not jump to conclusions. So let’s try to shed a bit more light on what’s going on:

2014-10-13_SPX_daily

Exhibit number one – the BB configuration on the daily chart supports at least an obligatory bounce here. Because if we drop further from here we are not stopping until 1800 or lower – so the bulls have a vested interest in holding this level. Not saying it can’t happen but we’re talking odds here – a bounce would relive some of the oversold conditions and perhaps prepare us for a stab lower.

2014-10-13_zero

The Zero shows us almost non-existing participation down here. You can interpret that as a lack of buying pressure – yes – but what’s more important on the way down is whether or not there is selling pressure and I see none here.

2014-10-13_UVOL

See what I mean? Complete flat line – the bears aren’t interested down here and this gives the bulls a chance to catch a breath and wait for further instructions.

2014-10-13_VIX

On the VIX we’re also pretty extended – I don’t think we proceed directly to 25 or 30 from here. We haven’t seen volatility like that all year and there will be pushback.
More crucial evidence looming below the fold – please step into my lair:


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Cheers,

Short Term Opportunity

Forgive my absence this morning, as you may imagine I’m still recovering from my back injury. However, I have not been completely useless as I’m actually working on a very cool surprise for you guys. I’ll explain it all either tomorrow or Monday, depending on how fast I get it done. In the meantime I have been observing the recent gyrations on the E-Mini and given the ES 1903 retest a little earlier I think we have ourselves a juicy short term setup opportunity. That is IF we wield the iron while it’s hot!

You may recall that 1903 was yesterday’s low as well and it tested once again today. I cannot guarantee you that it’ll hold, we simply have to wait things out. But we do have a rare opportunity right now for a long campaign with a stop just a few handles away. Get long here and put your stop a few ticks below 1903 – that’s it. Don’t play options as vega squeeze would rob you of most of your profits – stick with the futures or if you want your favorite ETF (short term they are fine).

That’s the view courtesy of the Zero indicator – over the past three sessions the hourly panel has been producing a pretty distinct divergence. Again, that doesn’t mean that the lows cannot be breached but until this happens (and we drop through 1903) there are decent odds down here for a bounce and perhaps a little short squeeze. Below 1903 Lucifer awaits and all bullish bets are off.

UPDATE  1:49pm EDT: As I’m typing this we are right below VWAP at 1912 – a push above it before the close probably seals the deal on a little bounce higher. If VWAP cannot be breached then it’s fair to hold any long (futures) positions beyond the NYSE close but make sure you are around to manage them. Now let’s grab the popcorn and see what happens.

UPDATE  EOS: The bulls didn’t have the mojo to drive the tape higher. This may get ugly and turn into Soylent Red. We’ll watch the tape but we won’t be trying any long positions until a bullish or bearish inflection point has been reached.

See you guys tomorrow – have fun but keep it frosty.

It’s not too late – learn how to consistently bank coin without news, drama, and all the misinformation. If you are interested in becoming a subscriber then don’t waste time and sign up here. The Zero indicator service also offers access to all Gold posts, so you actually get double the bang for your buck.

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Is It Summer Already?

Temperatures over here in Spain are slowly crawling higher and the locals are busy preparing for the annual onslaught of UV deprived Northern Europeans (and a few Americans as well). Down here at the lair air massive air conditioning units are running in overdrive as my charting/reasoning abilities degrade inversely with every degree Celsius higher on the scale. There has been very little activity here yesterday and the tape did its best to keep everyone bothering to pay attention bored to tears.

However when the bus is empty it often winds up picking up speed. Although I’m getting concerned on a medium to long term basis equity futures are looking solid here on a short term. If you are ever looking for a textbook example of a clean diagonal with nicely separated touch points then look no further than the E-Mini futures today. If I don’t wind up heading to the beach or gym then I will probably grab a long position if we retest that diagonal.

What I like about it in particular is that the 25-hour is merging with it right now and that gives us dual support. Put your stop a handle below and don’t play more than 1/2R – if it pops it’ll be worth the hassle. However if we wind up gyrating sideways again don’t waste your time – you’ll probably get a pretty good idea of where we’re heading in the first hour of the NYSE session. If in doubt consult the Zero indicator, which by the way was flatlining most of yesterday.

The NQ dons a similar pattern and although I would follow the ES it may be worthwhile to split your 1/2R between those two. It’s always good to see those two get into alignment when things are looking bullish.

EUR/USD – I’m going to play a tiny position here (1/4R) with a stop below the recent low. It’s a speculative entry – a bit of a lottery ticket based on an early formation. Those patterns either take off like gangbusters or die in their cradle – we should know soon.

Believe it or not the damn ATM here in Valencia has starting to print derogatory Dollar jokes on my paper receipts. We expats get no respect over here!

A few more Forex goodies waiting below the fold – please step into my lair:


More charts and commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don't waste time and sign up here. And if you are a Zero subscriber you get free access to all Gold posts, which gives you double the bang for your buck!

Please login or subscribe here to see the remainder of this post.

Have fun but keep it frosty – also expect low participation tape banging which means don’t be too stingy with setting your stops.

Cheers,





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