Pass It Around

UPDATE 11:09am EST: POT is taking it up the rear this morning – nice!

Remember I posted this chart a week ago, and what’s interesting is that it stopped right on that downward diagonal. Let’s see if we get a bounce here – another reload? 😉

UPDATE 11:18am EST: I’m back with my favorite Yen/ES correlation chart:

Observe how the Yen just dropped like a rock but the bounce in the ES has been listless thus far. Not a good sign for equities – we’ve seen this happen several times in the past few weeks and almost every time equities got murdered once the Yen snapped back. Now, before you start loading up on puts – it’s quite possible we won’t see the Yen push above the 25 line today – there’s a lot of action in the FX markets and a lot is riding on a weak Yen right now. PPT is probably on standby.

Also, Zero signal has not degraded thus far – if you’re already delta negative this is good news. If you are not – well, this is not the time to load up on puts IMHO. Yes, we the bottom could give any moment in equities but the risk/benefit ratio is tantamount to a crap shoot. Be patient – let the market come to you.

UPDATE 11:32am EST: The Empire State Manufacturing Survey just came in:

Either I accidentally flipped the chart or this is very bad.

UPDATE 12:00pm EST: It’s only noon and I feel like I worked a whole day already – LOL

As you all know stochastics are lagging indicators. However, they do give you an idea of upside/downside potential if you know how to read them. Right now my grid shows all main averages pushing down again as expected last night. Yes, we might snap back (like what happened in January marked in orange) but remember that as long as the signal line stays below about 20/25 it can keep going for a while. I usually only cut my short positions once I see either a divergence or a swing above that lower line.

UPDATE 12:16pm EST: Since a lot of people are fans of Eric’s XLF chart I’m posting his latest rendition:

Yo, Eric – can you make it more square? 😉