The Day After

If you’ve been coming here for a while then you probably are familiar with one of our main directives: A big trend day is usually followed by some choppy action aimed at shaking out some weak hands. Any fool who chased the tape down yesterday was easy pickings for the vultures this morning. And in almost textbook fashion equities opened gap higher – since then price action been actually a bit more positive than I would usually expect. More often than not you get the gap followed by a little drop that lures some of the sour losers back into the fray. Just to be taken to the cleaners a second time. Yes, Mrs. Market can be a cruel mistress and she enjoys toying with the opinionated and feeble minded.

Besides the blatantly obvious I do however have three positives to report: One, the E-Mini has reversed the daily NLSL it sliced through yesterday. Two, it touched a weekly NLSL sitting at 1539 early this morning and snapped right back.

Three – we are two steps into a VIX buy signal (noobs: that’s relative to equities) – all we need tomorrow is a close below today and we should see some equities head higher in the course of a week. Once again the blue pill erection yesterday was so exaggerated that it suggested bullish implications. Or in other words – the bears continue to shoot their load way too early and usually get killed in the ensuing dip buying frenzy. How about a bit of foreplay and perhaps candlelights with some smooth Jazz? The brute force approach is not how you seduce Mrs. Market into a sell off – especially not in a world saturated with cheap QE cash across the Western hemisphere and of course Japan. We’ve seen the same script for four years and counting now – will the bears ever learn? Moving on…

I’ve been watching the EUR/USD run like hell all day – much to my chagrin. Not because I’m sitting in a bad position – mind you – but my exchange rate over here in Spain is once again flushing down the toilet. However on the good news front I’m seeing a possible long play tomorrow. Today’s short term action suggests that we may see a little drop which could get us back to the 100-day SMA which incidentally is backed up by a stack of NLBLs. So you know what to do – on a retest be long near the SMA with a stop below those Net-Lines.

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Cheers,