Some Teddy Pørn

In the past few days I started to sense a disturbance in the force which should not be ignored. After all – we are not bulls nor bears – we are stainless steel rats, and as such we always keep our little rodent brains on high alert. Therefore I am forced to expose my unfortunate readers to some disturbing images – please brace yourself.

I mean, that’s just wrong – is nothing sacred anymore? I am particularly offended by the suggestive use of the word ‘oversized’ – leaving very little room to one’s imagination as to the utility of this monstrosity. And to add insult to injury there’s a Houston Texans sticker on what serves as this aberration’s foot. OUCH! I mean was losing to the Cowboys last Sunday not painful enough? Somebody is obviously messing with Texas in a big way here 😉

Before we get to the charts let me please remind everyone that anything presented here today are nothing but ‘early alert signs’ – meaning cracks in the tape we should be aware of. That does not mean the SPX is going to plunge to 600 next week, alright?

Simple long term chart – I am running an RSI_EMA against the SPX. Which has in the past been showing us nice divergences around meaningful tops or bottoms. Maybe this will be corrected in a day or two but it seems that we are in the process of building one right now.

Mr. VIX has been plotting sideways for months now and my 2.0 Bollinger is now in the process of contracting. Which means at some point we’re going to either get a VIX buy or sell signal. I think considering that we’re at 22, the latter is more probable (relative to equities).

Now, I have made it a point to not jump to bearish conclusions as of late (especially considering the daily Zero still hovering above its mark) but this chart is getting outright ridiculous. There are three scenarios that I can think of:

• The TNX drops below the 20% mark on my stochastic and after some final bottoming pushes above it, followed by a reversal. If equities continue to ignore any further downside then it’s fair to assume that a rising TNX would provide additional wind in the bull’s backs.
• Equities finally catch up with the TNX.
• The TNX and equities meet somewhere in the middle.

Pick your poison – I have no clue as to what’s going to happen. But it’s disturbing (just like that teddy above) and traditionally equities always revert to the TNX.

I posted this chart a few days ago – for the noobs, it’s my home brewed SPX:VIX ratio chart on top of the raw SPX. The histogram on the bottom plots the delta between the raw SPX and the ratio – the one in the middle has been smoothed a little.

This chart is obviously interesting in the context of that VIX Bollinger chart I posted. Seems that market makers are starting to price in a little more risk here, which may be a harbinger of at least a little correction. We have been pushing up for while now after all.

Hourly Zero Experiment

I tried something interesting over the weekend. By accident I switched the daily Zero into an hourly and that produced the chart above which has a smoothed panel as well, again just like on the daily. Now, I kind of like what I see but without influencing you in any way I would like to gather first impressions. What do you guys think – do you see anything of value on that center pane?

Cheers,

Mole

P.S.: My apologies to any Houston Texans fans – not even I would stoop so low.