Faites Votre Jeu!

That was a nice ramp this morning which single handedly killed Soylent Blue dead. Now the remaining question on the table is how bad Soylent Green is going to get – as in how far is wave (c) going to extend up? Well, I am hesitant to make a short term call here as things have turned absolutely crazy in the past two weeks as the NYSE is considering to install one armed bandits in their pits (the two armed ones are getting worn out). Trying to guess where we going to open tomorrow is like throwing the dice in Vegas – only that at the Bellagio the odds are a bit better 😉

Faites votre jeu!

But I digress and philosophical musings won’t help you guys make a trade. Plus we are not gamblers – we are traders and despite there being a resemblance in approach (i.e. odds) there is a big difference. So, let’s bring on a chart or two to make sense of what’s going on right now:

Full disclosure – Chris Carolan uses this chart quite a bit and I stole it from him. Actually I won it in a poker competition and it was between Chris’ first born and this chart – he chose wisely. Anyway, the volume oscillator is one of the most valuable indicators one can use when it comes to trading the futures intra-day. And what I’m seeing on the oscillator is the exact opposite of what one would expect. Meaning diminishing volume on the way up early in the morning and increasing volume on the way down.

Does that mean we are going straight down? Nope – not really – but it shows us the ‘characteristic’ or ‘underlying nature’ of what’s going on here. The bulls are playing their game – and the bears will play theirs when the time is right.

You all know this chart by now and coincidentally (or not) equities started to drop right when the EUR/JPY started to break underneath its 80% stochastic on my kick ass 5-min chart. We could however curl around this mark for a while – the reading on the Zero Lite is a bit too uncertain to get too married to any downside today.

Despite all the craziness the wave form is lining up just nicely. If we push higher into my Soylent Green target around 1090ish wave (c) would roughly equal the length of wave (a). Besides, if we go straight down from there it would be one strange looking thing. LOL – I know what you are thinking – those leading diagonals are just too delicious to pass up! But they happen rarely, so let’s focus on what is right now.

2:00pm EDT: I think I should clarify how I approach the short term volume oscillator on the ES futures. As a matter of fact I don’t really trade it per se as it obviously does not give you much of a pre-warning and thus no entry before a turn happens. The way I approach it is as a short term oscillator supporting my medium to long term views. Today is a good example for instance: The tape is blatantly bullish and I doubt we have seen the end of this ramp. But the volume oscillator flattens  every time there is a ramp up and pushes up when there is a drop. So to me this suggests the big boyz are getting out of positions, not into them. Maybe one of you guys with L2 access or a in shouting distance of the pits will be able to confirm (or dispel) my argument.

Cheers,

Mole