Right now neither side seems able to deal a knockout blow. 2 days ago the bears were ready to get some long anticipated payback. An after hours globex squeeze morphed into something more serious, and then the bearish mojo was spent. The bulls really should have been able to slaughter the bears today. But they didnt.
Lets keep things simple. The conclusion is EVENLY MATCHED. This thing could go either way, but IMO the highest probability option is that a top is either in or close. Further strength just failing to beat the old highs (or pipping them and falling) would not surprise me at all at this point, so I would *not* be in a hurry to get short right here. Let PRICE CONFIRM YOUR VIEW.
This chart is my starting point for looking at the whole situation. Its quite obvious that we are retesting the lower trendline after potentially breaking the bearish rising wedge. That retest could FAIL OR WORK, its still inconclusive. Its choppy because its f***king around at that trendline, deciding if the wedge is broken or not. The odds favour the wedge being broken, but as usual, if something obvious doesnt happen, expect a BIGGER move in the opposite direction.
The thing I’m really watching is this weekly pattern. This makes it very simple. Long if it goes up, and if it goes down we have a high probability of the fix being in for further downside.
It really is as simple as this setup. Though it has to be said that IMO there is a reasonable probability of an upside breakout which fails. I wouldnt call the long weekly setup a significant edge at this point.
As for today, lets look at EXHIBIT A – A tick chart of the $tick, the cleanest unfiltered data there is. 90% of the time under the zero mark for the first hour, means that BUYING PRESSURE IS NON-EXISTENT. A potential bearish trend day. At this point you should have GOTTEN OUT OF LONGS, and gotten short.
Now it sure looked like a bearish whitewash. But as we know its only a *potential* trend day, and that price will *attempt* to stage a rounded reversal, which may or may not be successful. In this case it was successful, and the clue was the tick divergence at the lows at the 3rd attempt to drive price down. “If a market tries to do something 3 times unsuccessfully, it will probably do the opposite” – Al Brooks
As an aside, in a trend day or potential trend day we should be looking for bearish setups between the 20 and 50 EMA’s as being pure gravy. In this case the first time got to between the EMAs it posted a sweet 5 min inside candle with only 2 handles of risk.
Lets look at the 5 min chart for clues.
What I conclude from that was that the late day ramp was due solely to technical factors and we didnt get fresh buying from the sidelines into the close, in other words, a squeeze, nothing more. And there was the bearish tick divergence at the end of the rally.
Where does that leave us? IMO it leaves bears again with the advantage, though its slight. Basically whenever bears have been short squeezed there is no follow through from the bulls. If you are looking to go short here is the setup. Its a BEAUTY! If any kind of sustained market weakness the russ-hole is going to get taken to the cleaners.
I’ll do another post later with metals, bonds and currency setups, which *abound* right now. The thing to watch for the current week is DX, and I’m eagerly anticipating new poster Volar’s first attempt.