Access Denied

I can understand that many of you are scratching your aching skulls after today’s rodeo clown disaster. Where we go from here is anyone’s guess but I do know that the bears wasted yet another juicy setup and instead got handed an ‘access denied’ notice.

It has been the theme for 2009 and it increasingly seems it may also become the theme for 2010. The jig is not over just yet but the next two weeks will be crucial in determining whether or not we see any significant downside in the final quarter of this year. I personally think the bears blew it – but remain open to a last minute surprise party.
[amprotect=nonmember] Charts and commentary below for anyone donning a secret decoder ring. The rest of you guys will have to wait until tomorrow – sorry. 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.
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In case you guys didn’t get the memo – no matter what anyone else is trying to tell you: According to the rules the VIX sell signal (relative to equities) died today – may it rest in peace. No, there are no ifs or buts – we needed one more close above yesterday’s and we didn’t get it – period. That doesn’t mean equities cannot fall from here – it’s just that the setup is blown and the odds are a lot lower based on purely statistical measures.

The second little detail here is the fact that we also got an ‘inside candle’ on the VIX and that in itself is very interesting, as a breakout will most likely determine the direction of the medium term trend. The rule for trading inside candle breakouts is to open a trade in the direction of the break. If the breakout is at the low you sell, if it’s at the high you buy – it’s that simple.

I felt inspired tonight to start working on an updated wave count. The only reason I bothered was that I had some ideas as to how a bullish scenario (Soylent Green) could play out and how I would probably count it. This also entails the possibility of an inverted H&S pattern – the right shoulder of which we may produce around 1070. The target would then be 1170 as projected by the length of the head. I must point out that Soylent Green is strictly hypothetical for now – for one we could just bust higher from right here and although I would color that scenario green as well it would not involve an inverted H&S. For that latter to come into play we need to fall straight down from here – a possibility that is still in play at this point.

Clockwork Orange however has worn out its welcome and must proceed to resolve itself in a very short order. We can keep re-labeling sub waves until the cows come home but we have come up as far as we should and the final jig is up at 1130, after which the bulls will literally crush any remaining bears. A breach of 1070 would be a very nice start but I will try to suppress my yawning until 1040 – a push toward 1010 would actually get me excited again.

One final note regarding Soylent Green: Even if we proceed straight up from here and then breach 1130 we would again complete the neckline of an inverted H&S – a much bigger one this time, with much more serious implications (bad ones for the teddy bears – what else is new). Yet another reason the grizzlies cannot afford any more hemming or hawing – or may I call it an ‘incentive’? Let me be crystal clear: Down she goes or there will be a big price to pay.

And that’s all there is tonight – I could post more charts but the theme is the same: At some point an extended period of sideways tape turns into a sideways correction and we are now at an inflection point at which the bears either decide to shit or must get off the pot. If they keep missing opportunities the bulls will swarm in and take them to the woodshed. You can bitch all you want about those bulls but they clearly do know how to close a deal and in the past 18 months have rarely wasted a juicy setup – unlike the grizzlies I may add.

Cheers,

Mole