Bounce It

The magic pendulum swung back the other way and Friday’s decision to take partial profits (according to system rules) managed to lock in at least 50% of the profits accumulated on the way down. Of course the question rattling around in your retail rodent brain right now is whether or not this is just a temporary bounce to shake out a few weak hands (i.e. you) or if this thing manages to squeeze higher.

If you want my advice – just bounce it all. You should always always know what your campaign will do at each step of the way – ahead of taking entries. Remember that the game always has and always will revolve around pressing your emotional buttons – and there’s a wide range of keys available – take a look:

You think of yourself as a rational person? Well, think again – 90% of what we do is steered by habits and emotions. Just look at how much of your brain is actually devoted to emotional interpretations and responses in comparison with rational analysis and the exercise of judgment. So if you are still exposed to the downside all these sections of your brain are most likely feeding you a party mix comprised of disappointment, fear of losing more of your prior paper profits, temptation to double down and sell the rip, doubts about your prior analysis, anger at not taking full profits last Friday, etc.

Mind you this is NOT the time to second guess your system (if you have one) or to react as opposed to simply act. I think this is an essential maxim every trader should be print, frame, and hang on the wall facing you during your trading activities:

ACT – NEVER REACT.

The hourly and daily price panels are looking pretty bullish at this point. However we are at a short term threshold which will determine if this leads higher. Notice how the BBs and SMAs on the hourly are starting to slightly swing higher – if this continues into the close then the bulls take this one home and probably squeeze things higher. So watch the next two hours – the bears need to act now in order to prevent a massive squeeze to the upside. Accordingly I have put my final stop near the 25-day SMA which is probably more than generous.

Weekly – the bulls definitely won the first important battle. That NLSL and the 25-week SMA held up like bosses and unless challenged early this week it will henceforth act as additional support.

Let’s take a look at market internals – the SPX:VIX ratio is looking a bit suspicious as it’s trailing price. This may be nothing but I am sharing additional considerations below the fold.

The Zero super flat today – no participation. Which leads into two charts that grabbed my attention – please get your secret decoder ring and join me in the lair:

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UPDATE on Ivan Krastins – I am happy to report that I just received notice from someone in contact with Ivan. Apparently the old buzzard managed to survive a category 5 cyclone wearing his Chinese wok as a helmet and by chaining himself to a boat anchor. He has no electricity or internet and his computers have been damaged. But he does have phone access and I wouldn’t be surprised if he’s calling in futures orders as we speak. Well done old chap – if you need anything please don’t hesitate to ask – we’re here for you. Unfortunately Scott is in Bali right now otherwise I’m sure he’d be on a boat by now. I have an old MBP I could ship him or perhaps someone closer to Ivan could help him out? Getting things over there will be difficult for the next few weeks and any Aussies or Kiwis please steps up – he needs our help.

PUBLIC COURTESY ANNOUNCEMENT: I am heading to San Diego for a day and am scheduled to return to Los Angeles tomorrow early afternoon. I won’t be bringing my lappy as I’ll be on my feet most of the time down there. This means that tomorrow’s post will most likely be after the market closes. Thank you for your understanding – I am doing my best to keep the blog flowing during my time on the beautiful West Coast. By the way the weather here has been fantastic – super sunny with dry heat – just like the Mole likes it 🙂

Cheers,