Only The Paranoid Survive
You all know my motto: Just because you’re paranoid doesn’t mean they’re not out to get you. We are at an interesting junction here and I am seeing signs that point toward possible short term shenanigans on the horizon. Let me show you what I mean:
This is the setup – after a two week short squeeze the E-Mini has bumped into another volume hole and apparently is in the process of gathering strength to overcome it. After all we are heading right into the annual EOY Santa Rally, right?
Except that the VIX has been creeping upward all day. And the rate of ascent does not match the sideways action we are seeing in the spoos, so something is definitely up.
Also noteworthy is my VIX:VXO chart – the latter is a measure of implied volatility calculated using 30-day S&P 100 index at-the-money options. So basically ATM vol is on the rise in comparison with vol across the option chain. In plain English this means we may be seeing a short term shake out next week.
That puts me in a bit of a bind as I’m long the E-Mini right now with a stop below the 100-day SMA. For now I will keep that trade in place but my I will advance my stop below the 100-hour SMA now.
Meanwhile our GOOG trade is still looking pretty good – we got a great entry near the SMA and my stop is still below. If we get a shake out next week that one may be retested, so be prepared for that.
Here’s a little freebie to appease the leeches: AMZN has been riding up hard and is now painting an inside period two days after an outside period. You know what to do and I think both directions are good to go come Monday. If you are confused about the rules then please check our cheat sheet.
A few more goodies before we’ll call it a week:
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This entry was posted on Friday, November 30th, 2012 at 2:24 pm. Both comments and pings are currently closed.