Alright, let’s talk about what exactly happened yesterday when equities effectively fell off the plate mid session after which the plunge protection quickly stepped to push the tape back into politically correct levels. Of course I’m kidding: If you’re looking for conspiracy theories, innuendo, or rumors then please move along. We only concern ourselves with technical evidence and bad humor here at Evil Speculator.
You’re looking at the SPX on the lower bottom panel and the NYSE UVOL/DVOL plots on top.
Blue Square: What’s apparent right from the get-go is how selling volume was comfortably leading buying volume after the bell. Equities pushed sideways for a while but then started to drop.
Red Square: During the lunch break selling volume accelerates while buying suddenly dries up. Equities continue lower and pick up steam as participation/liquidity dries up.
Green Square: Dip buyers are starting to stream in but buying volume only manages to catch up near the end of the session, which is usually to be expected due to profit taking and the expectation that mean reversion is kicking in after selling exhaustion. Plus sellers are fickle and nimble these days after consistently getting stomped for eight years.
Not surprisingly our trailing stop on the E-Mini campaign was touched and I’m glad that I had tightened it up in anticipation of some monkey business. Fortunately I/we managed to lock in a bit over 1R, so that’s better than a kick in the shin.
Of course none of this occurred in a vacuum. I kept mentioning to my Zero subscribers (if you are not a member then sign up now) that participation was pretty low recently and of course it’s vacation season which never helps. What did catch my attention two days ago however was the formation I highlighted on the smoothed hourly panel which suggested that a correction could be in the works.
And of course then there’s this post last Tuesday in which I said, and I quote: “consider whether portfolio risk protection may be a good investment at this stage. I’m thinking OTM long term puts but be creative.” Any questions?
But we are supposed to be talking about silver which is looking rather compelling right now.
On a long term basis it is looking BEARISH wearing a fur coat. Just look at that beautiful weekly NLBL test just below 100-week SMA. It’s also still below its 25-month SMA which has been tested extensively from above before silver wound up dropping through it.
However on the short term side I’m seeing very bullish panels, which puts us in an interesting position. For one there is NO WAY to predict which direction silver will pick – it may to some extent depend on the trajectory of the U.S. Dollar. But given where we are I decided to take out a very small exploratory long position of about 0.25R – ISL goes below 16.292.
If this one goes into the woodshed then I’ll be watching for continued bearish tape and most likely sell the first spike high after a retest. FYI – we would have to see a pretty strong sell off in order to disqualify that stack of daily NLBLS that have accumulated over the past fe weeks.
While we’re talking precious metals – my gold campaign barely snagged its trail yesterday and I’m out at ~0.7R. Not bad for two day’s work and I’m not too upset as I was looking at having to roll the contract today anyway. So depending on what happens here I’ll be on the look out for a re-entry.
Another reason why I’m not too upset about getting stopped out in gold is that the USD/JPY is starting to look like it may plot a temporary low. Gold is still kind of ignoring it and perhaps the USD/JPY will continue lower. We’ll see. Of course if I’m right with the USD/JPY then that’s not really supportive for my new silver campaign. Hey, who ever said life as a trader was easy? 😉
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