Let’s Have A Quicky

Yesterday’s session was rather intriguing in that my early suspicions of distribution near ATHs in equities were proven correct. How so? Look no further than our trusted Zero indicator which continues to provide us important guidance since 2008 and counting.

The session started fairly lackluster with more sideways vapor churn. However after a breach of the spike low near 3112 gravity suddenly set in (as in sell-side bots kicking into overdrive) and we quickly found ourselves 20 handles lower.

The mid session lows of 3090.75 has been attracting a growing number of dip buyers evidenced by a steady gyration higher. The question ratting around in your mind of course is this:

Can it be trusted?

Well, as much as the preceding sell-off I’d say. Which means not at all. Reason being that participation on both sides has been minimal and I don’t even have to look at the NYSE volume chart to know that there is plenty of monkey business going on.

Let’s do it anyway. See what I see there? That little dipper mid session barely made a dent in the UVOL signal. You look at this chart in isolation and you’d think we’d have had a rally day.

Option traders are sufficiently freaked out after this, and were already on guard since the beginning of the week (i.e. SPX:VIX was dragging lower – I posted this earlier this week for my intrepid subs).

Talking about mexed missages. So what to do?

Let’s Have A Quicky

I for one am grabbing a bit of long exposure for the following reason: NOTHING IS MAKING SENSE. And that usually means things are not unfolding as most participants anticipate.

IV is still at a large discount and I already bulked up on some MT protection on the option side. So a vertical call spread here is available for less than a lap dance at the Body Shop (ah, how I miss my old hunting grounds).

Alternatively grab a few ES contracts around here with a stop < 3090. But be aware that we are screwing around here without much technical context at the upper layer of the stratosphere. Another take down will probably bring us back to the 3050 mark and a revisit of 3k is not out of the question.

Shameless Plug

By the way if you’re not a Zero subscriber yet then head over to the sign up page right now to gain access to the best market sentiment oscillator in the industry. A Zero subscription also includes Gold which means you will also have access to all private content reserved only to our members.