Wicked Wednesday Wrap Up

Today’s tape wasn’t pretty, which is why I told all subs to stay the hell out. I sincerely hope everyone heeded my caution as this was one mean wood chipper.

As you can see the bears reasserted themselves today and at the height of the drop the ZL signal pushed well below -8.0 before closing around -4.0 at the 2:15pm EDT candle. There was one attempt to save the day by pushing it toward VWAP. I then mused on the chart that breaching VWAP was key, otherwise this was nothing but a continuation of lower highs and lower lows. As you can see that attempt failed and the medium term bearish case is gaining momentum.

Geronimo has disabled itself as VIX pushed above the 30 mark. If you are a Geronimo subscriber you will be switched over to evil.rat automatically if VIX remains above 30 for more than a few days. In the interim please I will count the inactive days and tack them on to your respective subscriptions – so no worries.

Public Service Announcement

Please take a peek at the right sidebar – I have put up a new poll. Basically, I have spent the last week coding ZeroFX and it’s been a mountain of work. I think that I am about 50% through at this point as I have to basically recreate a ton of market metrics unknown in the FX world. So, before I keep plugging I’d like to know what the level of interest would be and if there are enough subs to justify the effort. Of course I want ZeroFX for myself as Scott and I both believe that the easy trades are all over on the FX side these days. But please vote anyway as seeing sufficient subscriber interest would give me additional confidence in continue climbing this particular mountain.

I have two important chart for the subs – and I think both are key in understanding the medium term picture:
[amprotect=nonmember] Charts and commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.
[/amprotect] [amprotect=1,9,5,2]

As mentioned on this chart – this is not an Elliott wave count. What I’m showing here again is the May 2010 scenario which may be a good script on how the current drop may play out.

Considering what happened back then we may see a short squeeze any day now. But unless that produces new highs the odds at this point favor a continuation of the medium term bearish scenario. IF I was still counting waves I would basically say that we are in the process of finishing an A wave which would be followed by a B up and then the final shoe dropping in the form of a C wave 😉

Either way you count/call this pig the complete lack of bullish mojo has been alarming. Especially considering this:

As you can see there is a boat load of POMO cash available – plus if you check the Fed open market operations calendar you’ll see that there is plenty more to come.

Which gives us two main paradigms:

1. The longs are patiently watching this as a pig slaughter was long overdue. Once we drop to a critical level Banana Ben and his primary dealing cronies will swarm in and launch a short squeeze of historic proportions.
2. All the king’s POMO and all the king’s men. Couldn’t put Humpty together again. If that is true then the longs are in big big trouble. Yes, this is the kind of scenario Prechter and friends have been betting on for the past eighteen months or so.

Frankly, I am not convinced either way yet. The daily Zero remains unimpressed – pointing to scenario 1. But the damn thing could be wrong of course – we just cannot know. The easy trade right now is a short trade once we see this thing push higher and then run into serious resistance. The Zero will be extremely helpful in assessing whether or not the eventual ramp higher (which will come at some point) is either fake or part of a continuation of what has thus far been a two year bull market.

Cheers,

Mole