Bear Trap!

I hope you heeded yesterday’s warnings as that was one nasty bear trap. In case you don’t recall – here is what I said in my Tuesday post:  “Odds are the tape is dropping because a few large players want it to head this way, not because anyone is being forced to cover. Which means this could change at any moment, so keep an eye on the Zero for hints of buyers becoming ‘inspired’ again.” And if that didn’t sink in then perhaps the title should have been a hint 😉

The Zero did grant us a divergence at today’s lows but I’ll be the first to admit that it was easy to get caught here. If you’re reaching for the vaseline then your lesson of the day is to not get lured into bad trades during low signal periods. This is the type of tape engineered to inflict pain and today certainly was no exception. Look at the Zero Lite signal of the past two days – what do you see? Exactly – absolutely nothing – not until things really started to accelerate and head toward the 1400 mark today. No surprise to see a bit of panic there and that’s usually when you look out for divergences.

As I’m typing this the spoos are still tinkering with the 100-hour but I think it’s fair to say that the daily NLSL was nicely defended today. That outside period candle certainly makes a statement – which is: bears, don’t screw with us! Let’s just be grateful to the Fed that all that new POMO cash is being put to good use.

My volume profile chart however shows us another snag on the way to Santa’s bag of goods. There’s still the matter of that volume hole at ES 1420 – it should be our last serious hurdle until about 1445.

Natgas – had to flip this one this morning as it busted across the 100-hour SMA. I felt a bit tentative as that one was still descending, which is why I only grabbed a handful of contracts (that and because natgas scares me!). But lo and behold – it immediately switched into overdrive and I strongly recommend you take ST profits here as we are running into resistance.

Again, this was a short term trade but if we close above that 25-day SMA then this may actually turn into a medium term trade. Today’s push above the daily NLBL is a good start. As I’m typing this things are looking pretty positive, so if you’re game then put your stop below the NLBL and be done with it.

GOOG is looking pretty juicy right now. Its current daily NLSL was almost touched – the 100-hour managed to catch the fall. I would want to be long once it pops above the 25-hour SMA. There’s also an hourly NLBL which ought to be good until the end of the session.

Crude – I’ve mentioned that one to my subs recently and it’s been on our radar. There is a soft diagonal support line in the daily and I’m waiting for a push back above the 100-hour SMA. We have been seeing a lot of consolidation here lately and the hope is that we’re going to get some movement on the daily. Truth be told – it’s not my favorite chart right now as there’s too much drama on the hourly panel. Should you choose to accept this mission I recommend a sidearm and only a handful of contracts.

Gold back at the 100-day SMA as well as its 25-day SMA. That ought to be good for some support and I am tempted to grab a long on the condition that it manages to heave its battered corps above the 25-hour SMA. Yes, even I have standards!

I don’t have much else to offer – our FX setups seem to be in good shape and I don’t want to get over positioned. Let’s see if things can start trending again – I don’t particularly enjoy honeypot periods.

Cheers,