The Falling Sword

I was just finishing to get suited up, locked and loaded, and before I know it the damn battle is already over. May have been better this way as the tape was leading us through mine fields today. Continued drops across the board except for the VIX, bonds, and the Dollar of course. Here we go – equities first:

2015-01-02_spoos_volume_profile

What started as a low volatility slide in late December picked up a bit more steam today as it filled that volume hole near 2050. We’ve got plenty of participation below that and thus far it’s acting as buying interest. Should that change then I think we drop to 2020, perhaps a few handles below.

2015-01-02_spoos_update

Early signs of trouble were two failures to overcome the 25-hour SMA which eventually resulted in a fast slide lower. Personally I have little desire to buy anything here just ahead of the weekend. So let’s just be patient and keep our powder dry for next week.

2015-01-02_crude_update

Bow to the dominion of the falling sword – my condolences to whoever was foolish enough to step under this one – word has it plenty of fund managers got manhandled here in the past week. Another text book example why you should run for the hills if you ever hear the words overbought or oversold.

No. Such. Thing.

It doesn’t matter where it’s been – all that matters is where it’s going. And right now it’s going DOWN. Deal with it – accept it – embrace the pain. Let price tell you when it’s ready to produce a floor. Sure, it may turn on a dime – but you really think you’re the one making that call? ;-)

One more falling sword example below the fold – please join me in the lair:


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Cheers,

 

Wrapping Up The Year

And here we are – the last trading session of 2014. It’s been an exciting year to say the least with plenty of nasty traps along the way. But we made it through just fine, consistently banking coin all year, by simply sticking to our guns (i.e. charts) and of course by persistently honing our game. Trading is a constant arms race and stagnation equals slow death – the sharks are constantly circling. I for sure am a better trader today than I was last time I drafted my final post for the year. I am glad you all were along for the ride and hope your accounts are better for it. Now let’s wrap things up Evil Speculator style – with an exhaustive long term perspective of where we’ve been and what the new year may hold in store for us.

2014-12-31_crude_LT

We have a lot of contenders but the most salient chart of the year clearly was crude. Rarely have I witnessed such a concerted and systematic sell off, even in futures. I say rarely because if you look back it has happened once before in 2008 in the midst of the financial crisis. That drop took us from over 140 all the way to 40. But this time was completely different in that we didn’t see any major market dislocations and in my mind this clearly was a message to Putin from our friends at the State Department.

2014-12-31_WTC_PNF

Which makes it a bit harder to propose any technical support levels – many have tried and failed over the past few months (I wasn’t one of them – knowing the cost of engaging in long term predictions). However there are inherent dynamics in the production and supply chain of crude which suggest that prices below the 50 mark would be difficult to maintain for extended periods.

Our P&F chart originally suggested a price objective of 82, which has been far exceeded. So technically speaking we don’t have much to hang our hats on and it’s quite possible that we may see an exhaustion spike lower before crude is ready to paint a floor. Plus we just triggered a bearish triangle break down two days ago and that’s not the time you want to start accumulating long positions. Remember that markets can remain ‘irrational’ a lot longer than you can remain solvent – that rule applies to both the up and downside. By all means buy the fear but make sure you have at least some technical context to back you up.

2014-12-31_ES_LT

It’s not been an easy ride in equities this year and by all definitions we are in the late stages of an historic five year bull market. But it’s those late stage that often prove to be the most treacherous, as they are paved with increasing volatility on both the up and down side. The 25-week SMA was tested five times this year but the bears only managed to breach it once. It was the most serious medium term correction we had seen since late 2012 but the counter response speaks to the more volatile market conditions we should also expect for 2015.

2014-12-31_SPX_pnf_b

A few weeks ago I posted this P&F chart and mused that the rallies proceeded faster and more violent than the preceding corrections. Usually, meaning 95% of the time, it’s the other way around and there’s a reason why they call it the ‘wall of worry’ and the ‘slope of hope’. Medium and long term bull markets grind higher and then eventually correct relatively quick. A contrary situation implies that we are indeed in the late stages of a bull market. So I don’t think 2015 is going to be an easy year for equities. Now for us evil speculators this may actually be good news as there will be plenty of opportunities to play the swings. To all you investors however I suggest that you prepare yourself for rougher waters ahead.

Quite a bit more waiting below the fold – secret decoder ring required.


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happy_new_year

And with that I would like to wish all my readers and in particular all my intrepid subscribers a very happy near year. Prosperous? Well, that goes without saying, after all that’s what we are here for. Scott and I will be continue to work hard to steer you through the coming year, banking coin as always, and most definitely enjoying a few good laughs on the way.

Cheers,

The Squeeze Is On!

And as we all suspected – the squeeze in equities is officially on. In a little over a session we went from dangling by a thread near lows to threatening a daily NLBL. Unfortunately it was not a setup we felt comfortable taking. The tell tale signs were there and we reported on them – in particular divergences on the NYSE volume ratios plus a monthly NLSL had been touched and reverted. However Fed announcements are times when I stand aside – I’ve been through this game in 2007/8 a few times and then swore to stick with the easy tape.

2014-12-18_spoos_briefing

I did try some lottery tickets near the very lows but unfortunately got stopped out on that last late day drop on Tuesday. Yes it sucks but that’s how it goes. And you know the saying by now: Better wishing to be in a trade than wishing to be out of one.

Look at that NLBL on the daily panel – if it can be conquered today then the bulls are in much better shape. Not out of the woods just yet but they’ll have a pretty good chance to at least fight their way toward 2050. Let’s see if we can get there.

2014-12-18_ZB_briefing

Opposite situation on the bond side and it’s quite possible we’ll slide off the plate here. That hourly Bollinger is clearly threatened and if we don’t see green here soon then momentum will start kicking in.

2014-12-18_DX_briefing

The Dollar is scraping new highs – no setup here but it’s pure chart p0rn for this lowly expat :-)

2014-12-18_crude_briefing

I did however get to keep my crude longs. Of course those haven’t budged very much – just my luck ;-)

But they are still looking in good shape and I have now moved my stop to the break/even spot near 56.


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.

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

Cheers,




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