Equities On Cruise Control

Unfortunately my physical condition hasn’t improved much so please forgive me if this will be a really quick update – I’m obviously not trading today. At the danger of pointing out the obvious I would however like to warn any of you to step in front of this slow motion melt up.

I think the hourly SPX chart shows the point I’m trying to make – markets rarely move in such an orderly fashion and this has been going on for five sessions straight now. The whole situation reeks of bot driven activity and when they throw things into reverse is anyone’s guess. Actually I strongly caution you to not even think about this as there is no context and most likely your imagination would be tempted to fill in the void.

On the hourly Zero indicator we are seeing very muted participation – especially when compared with the early phase of this particular leg higher.

A little bit more content below for my intrepid subs:

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Thank you all for the kind words in the comment section as well as the emails – I hope to be in much better shape tomorrow.


The Mole Smells A Rat

Let me cut right to the point: I don’t trust this tape further than I can throw the average NYSE market maker, and if you’ve been there then you know that most of those guys aren’t exactly underwear models. Whatever is the source of your paranoid suspicions, you ask? We barely have three down candles and you already getting antsy, you say? That’s right – once again the Mole is smelling a rat. Let’s observe:

Exhibit A: The tape has been dropping (thus far – we ain’t seen the close yet) but UVOL is clearly outrunning DVOL. Rather suspicious and that’s putting it mildly.

Exhibit B: NYUD clearly in ‘meh’ territory. There is no selling pressure and this is all for show. Perhaps it’ll change by the EOD, but for now I’m not seeing any angry bears taking advantage of a clear inflection point as the SPX is pinned below its 25-day SMA .

VIX:VXO – on the rise already and that divergence on Friday before the close looks rather iffy (especially given the late Friday drop). Perhaps EOM artifact – possible – but even then today’s ratio does not suggest MMs are overly worried here.

The only one that’s doing what one would expect is the VXV:VIX ratio. Provided here as the Mole believes in ‘fair and balanced’ charting practices ;-)

The Zero Lite isn’t exactly screaming bearish either here. But again, let’s not jump to conclusions and wait for the close.

In the absence of any daily/weekly/monthly resistance levels I would keep my eye on the 25-hour right now. It held up well this morning and I expect it’ll be the decider here.

Remember one of our prime directives – it’s not the first sell-off that counts, it’s the follow up. The Mole is watching in eager anticipation.

Bonus Chart!

I would be remiss in not sharing this prime rib AAA rated EUR/USD setup with my intrepid steel rats. It’s bumping against daily AND weekly resistance, of which the weekly is rather pronounced (i.e. 25-w and 100-w right above). Excellent inflection point for the Euro and if it hops the fence(s) it’s going to be one cold summer for the greenback.


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Diminishing Effervescence

The cork has popped and after a six month period of unparalleled bullish exuberance we are now on watch for signs of diminishing effervescence. That doesn’t necessary mean buying pressure has depleted completely, but when endeavoring to trade the markets and survive to tell the tale one has to develop a sense of timing as the game of musical chairs always comes to an end at some point.

As of right now I remain on the fence as price yet has to show signs of weakness. Various doors have opened over the past few months and equities have steadily marched in the opposite direction. I can practically see Old Turkey cock his head, lean over, give me a fatherly smile and say, “You know, it’s a bull market!”

Something that caught my eye whilst browsing through my collection of momentum charts was the CPCE  which sliced through an established support line and dropped quite a bit lower while price continued higher. In the past a touch of that support line has been a harbinger of a meaningful correction but at the same time they have been getting smaller and smaller. What’s technically puzzling is that we have barely moved after such a spike lower.

A similar phenomenon can be observed on the NYMO (here smoothed via a 5-day SMA). A pretty solid support line, a touch of which once again has in the past been followed by a correction. However they are getting smaller and smaller every time. Since the NYMO is a breadth indicator (advancing – declining issues) this means that more symbols are participating but at the same time they are dropping less. So we have depleting (shorter term) breadth in the face of shallower/shorter corrections?

Here’s the SPXA200R – as you can see we have over 90% of stocks trading above their 200-day SMA. The signal is tightly embedded and that can go on for quite a while (the same happened on the downside in 2008 but it’s more common to occur during market tops)

The ratio between the 50R and the 200R has us once again near a roll-over point. Will the ‘magic buyers’ once again flood in to pull this one out before a deeper correction can gain momentum? I’ve seen the inverse on the Dollar side as it has been stomped on every single time it has attempted to rise above its 84.5 inflection point.

The weekly stochastic – one of my simplest but most trusted charts. It’s has been denied a breach in April and we are back across the roll-over point. Similar thoughts apply here – another door has opened but given recent market conditions we cannot be sure that the bear will go through it.

Quite a bit more waiting below – please step into my trading 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.


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