Ill-LQD 2.0

3:00pm EDT: Apologies for my long absence but I had a half dozen issues to deal with this morning plus I had to attend two phone conferences. In the meantime I see that we’ve been treating water around VWAP since the open with a slight bias to the upside.

The one chart that however keeps fascinating me is LQD. To see a second consecutive down candle like of that magnitude is very significant and indicates that bond traders are rushing out of risky assets. The big question is whether or not this will continue to have an impact in equities – but let’s not forget that bond traders are (usually) a lot smarter than their equity trading cousins.

Thus far the lower channel border is holding. I’m not sure yet if we are sub-dividing into 2nd waves here or if something else (i.e. more worrisome to the bears) is going on. If we run up from here I would have to completely revise the wave count of the past two months as an a-b-c at this stage would violate the {i} wave of late August. We need of course be open to this – the labels we attach to waves in development are not chiseled in stone and it’s always good to not get locked into a mental framework. Unfortunately however we cannot second guess the process either – at this point nothing has happened that would violate our blue scenario. If we breach above 1069.62 then we know for sure – in the interim any rips continue to be short trading opportunities. I know that sucks as said move would suck the life out of any of our puts – but that’s life in the fast lane – if you try to get in early you will have to sweat through these limbo situations. And the bulls will do their very best to test our resolve – prepare head fakes. Not saying that it will happen but when you enter into a trade the word ‘hope’ should be erased from your vocabulary.

3:53pm EDT: VWAP breached on both ES and NQ – very very cool – let’s see how far this thing will go.

3:57pm EDT: The fight for battle bot supremacy has begun: