Hurdles Ahead

We have come a long way in the past three sessions but the easy part of the journey is now nearing its end. For there are hurdles looming ahead plus I’m seeing some signature signs of short term shenanigans flashing all over the place. Let’s start with where we are right now:

2014-10-21_spoos_update

Quite a climb since that is and there’s probably room for a few more handles. But bear in mind that we are now facing a trifecta of previously tested moving averages – at least per my lens and more often than not they have been observed.

2014-10-21_NQ

On the NQ things are looking quite a bit more bullish – AAPL definitely had a thing or two to do with that. However daily resistance is right ahead and we’re about to smack into it. On the weekly panel we’re however above the 25-week SMA, so that’s pretty positive.

2014-10-21_UVOL

Today’s session looks like it’s been on cruise control – the Zero also suggests that the bots are driving this one higher.

2014-10-21_VXV_VIX

Quarterly volatility has eased off quite a bit along with the VIX and the ratio has been leading the advance in the past few sessions. All good and given that we’ve got more than a week of trading ahead of us it’s not impossible that the bulls may actually pull this off and close the month above the NLSL.

So much for the good news – now let’s talk about some of the concerns:


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Cheers,

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,

Major Technical Damage

Wednesday near the close of the U.S. session I really thought the ole’ Yeller had us all by the balls. If there has ever been an opportunity to squeeze the bears into oblivion then this had to be it. In yesterday’s musings Scott confirmed my notion that the series of lower lows and lower highs was still intact (barely) and that the bearish case was on the edge of extinction but still had a small chance of resuming. The odds were pretty minuscule IMO and early yesterday I kept checking the tape waiting for the invariable second shoe to drop.

But then suddenly something very curious happened:

In the last 20 minutes, someone has placed/canceled a 666 contract order in eMini 26 times $ES_F

— Eric Scott Hunsader (@nanexllc) October 9, 2014

Someone at Nanex reported a surge of selling orders (yes, I did find it on ZeroEdge – bite me) and the tape suddenly caved in as all of the other bots followed suit. And the world for the bulls will not be the same again – at least for a while, most likely not for the remainder of this quarter.

2014-10-10_spoos_volume_profile

Unless – yes unless we see an immediate surge right here TODAY the bulls will be toast for a while. I’m not saying we drop like a rock from here – there will be bounces. But in order to wipe a major stain off the bullish case immediate action is needed.

2014-10-10_spoos_overview

For we are about to paint an official double sell signal on the weekly E-Mini (and the SPX cash as well). We have a breach of the 25-week SMA as well as a breach of a weekly Net-Line Sell Level. That is bad medicine for the bears and today is the day to somehow make it all go away. In order to accomplish that feat a push above 1950 will be needed – 1960 would be better as that’s where we find the 100-day SMA right now. Bear in mind that both the 25-day and 100-day SMA held up for the fourth time now – that in itself is enough to cast some serious doubt as to whether the bulls are still in charge here.

2014-10-10_VXV_VIX

Not to count out any last minute Fed-sponsored Hail Mary’s but market makers seem to be agreeing with me that trouble looms ahead. Here’s the VXV:VIX ratio and it’s pointing straight down. I would keep an eye on this one today for early signs of divergences – also mind the VIX:VXO chart on the short term side.

2014-10-10_spoos_correlation

Our GBP/JPY equities correlation (based on carry trade activity) is also pointing in the same direction.

2011-06-05_AVG_seasonality

Now someone in the comment section pointed toward the final quarter as being a traditionally bullish period. And yes, he was absolutely spot on about that – that’s usually where the bulls rule the day.

S&P_percent_positive_monthly

And we may still see that happen but let’s look at October specifically. Contrary to common believe it’s actually a very bullish month – the numbers do not lie. But that’s not the whole picture – because it just so happens to have a little SKEW problem…


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You have been briefed – now have fun but keep it frosty. See you guys later this afternoon.

Cheers,




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