The modus operandi in equities seems to be set to maximum shake out today. Although I see only minimal participation on the Zero indicator the E-Mini has produced some wild swings and leaves everyone guessing as to where things will proceed next. Not an unusual occurrence given that we are curling around an important inflection point.
Compared with yesterday’s signal range we are practically flatlining today. But we have seen that in the past: A spike in activity followed by a resting period which either sends stocks tumbling or via sideways gyrations positions large buyers for another leg up. You may recall my earlier post on market weather which would qualify the current period as a honeypot. We are not in technical limbo but a shake out now separates weak hands from the real playaz. Maybe it’ll breath renewed hope into bears who were losing on a way up and may now feel tempted to double down.
If you look at the overall picture then it couldn’t be clearer. The volume profile chart shows us plenty of available volume near 1405 and the 100-day SMA breach is what separates us from another glorious Santa Rally. On the very short term panel we are also enjoying the aid of the 25-hour SMA, thus affording us a possible early alert system should things break down here. As long as this SMA holds and keeps on rising the bulls continue to be in good shape, little shake outs notwithstanding.
In the end however price speaks clearly and is never wrong. Yesterday’s inside day following an outside period (or you could call it an outside day) suggests that the bears do have a fighting chance here, even if it’s just for a quick shake out back to the 1377 NLSL. But the official daily short trigger does not take over until 1395 has been relinquished.
As you probably have learned the hard way – when it comes to trading there are never any guarantees. However there are times when the picture is rather clear (again I invite you to catch up on my market weather post) and this happens to be one of those times. Don’t let the tape fool you – we are at an important inflection point and all the pain incurred now will most likely pay off handsomely once this thing turns into a rocket (in either direction it decides to break).
Now this morning I suggested an entry in natgas, which I got after some obligatory whipsaw. If you are a sub then you may be holding a few long contracts yourself and probably know it’s not been an easy trade. The pain may pay off – the basic idea here was that the daily NLSL and the daily SMA would serve as additional support. This is a good example of how a short term trade may turn into a medium term setup. But if you missed this entry then don’t dispair – it just happens that we are getting another technical setup on the nutty stuff today:
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This entry was posted on Tuesday, November 27th, 2012 at 1:48 pm. Both comments and pings are currently closed.