Right out of Wikipedia: Cognitive Dissonance is a discomfort caused by holding conflicting cognitions (e.g., ideas, beliefs, values, emotional reactions) simultaneously.In a state of dissonance, people may feel surprise, dread, guilt, anger, or embarrassment.
When looking at my usual suspects this weekend I could not help but feel a bit of cognitive dissonance of the confused kind. A lot of things just don’t make sense right now and you don’t have to be a seasoned trader to sense that something’s rotten in the state of Denmark. For starters – we should be climbing up right now – not gyrating around the 1200 mark – what ever happened to our Santa Rally? Let’s try to make sense out of what the charts are telling us right now.
This will be our core chart for today’s post – as the general confusion I sense is reflected in volatility. If you are a sub then you have seen this chart a few times in the recent past. We are looking at volatility ratios and the name of the game is to pick up divergences against the SPX as well as against each respective ratio. In case you are a noob or simply forgot what each symbol represents then you are in luck as I have provided rough summaries on the SPX panel. Subscribers may refresh their memories via my ‘Volatility For Dummies‘ post I put together earlier this year.
Alright – if you are not used to ratio (or FX) charts then this may be a good mental guideline: The first symbol is the dominating one – meaning if the signal line pushes up it is gaining against the second symbol. Ergo the second symbol moves inverse to the ratio – if the line drops then it is gaining, if it climbs then it is losing.
Now let’s review these respective ratios and then try to make sense out of what they are telling us:
More charts and cynical 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 or Geronimo subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.
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Public Service Announcement: I have an early Christmas gift to reward all you well behaved Zero subs – over the weekend I implemented the ZeroFX spike alert notification system and even tested it earlier today.
This is the email I received:
Extreme signal condition detected on 5-Minute EURUSD panel:
White momentum signal UP spike to 3.77 – possible buying momentum exhaustion!
Blue participation signal UP spike to 1.9 – possible buying participation exhaustion!
Everything seems to be working as expected and thus I decided to turn it on for everyone. Please make sure to have alerts [at] evilspeculator.com in your contact list. Merry Christmas and enjoy!
This entry was posted on Sunday, December 18th, 2011 at 10:08 pm. Both comments and pings are currently closed.