Congestion

If you look at the tape of the last week we’re seeing fast moves in both directions. Unless you enjoyed the advance warnings courtesy of yours truly then odds have it you were at minimum rattled a few times or perhaps even lost some coin in the fog of all that emotional turmoil. I think we’ve done exceptionally well throughout those gyrations and for that we should be thankful.

Looking forward we are now approaching a make or break point on the equities side. The reason for that is that congestion periods mixed with high volatility in volatility (see wild swings on the VIX) are opportunities to force the completion of a trend. We had fast moves on both sides, as opposed to a fast drop followed by a slow crawl reversal higher. In that case I would be actively looking for a Retest Variation Sell at this point – Scott’s post earlier this morning did mention an alternative scenario and I agree with him that this trend is obviously slowing.

I am however not sure that we are done here just yet – there may be enough mojo left for a final leg higher. Although the volume profile doesn’t show us any meat above 1525 we have seen equities push through shallow volume patches without breaking out much of a sweat.

Which brings me to exhibit B: The NY Fed’s POMO schedule for March – which has us pumping another $45 Billion into the hands of preferred financial institutions over the course of the next month. You recall a similarly looking roster last month and we know how that turned out.

All that said and done – there may come the day when cheap Fed cash just won’t do the trick anymore, hence we look at mainly price to guide our way. Technically speaking the bulls are very vulnerable here. If we can’t make it over 1524.5 today or Monday at the latest gravity could easily start dragging things lower in a heartbeat. At minimum that 25-day SMA at 1508 needs to remain intact, so set your watches, comrades!

At this point we are sitting a bit in limbo as this does not feel just like a honeypot period – if that doesn’t mean anything to you then check out my post on market weather. We do have pretty clear inflection points here, so let’s use them. Right now the onus is on the bulls to push things just a little bit further – if they are unable to do so the grizzlies may seize the moment. And if that happens POMO cash may not be sufficient to save the day as things could drop like a rock in a matter of just a few days. Starting Monday watch the VIX for divergences – I’m also going to make sure to check my VXV:VIX and VIX:VXO ratios.

Crude now officially a sell as it dropped through its 100-day SMA. As you can see it will also complete this week well below its weekly NLSL. That is medium term bearish and you may start wondering why gas prices at the pump keep going up and up and up… (answer – you are being ripped off as usual – reduce your driving and see the market respond).

Platinum update – our last kiss goodbye trade is really picking up steam now. What you may not be aware of is the weekly panel which also had triggered a sell signal at the same time. As of right now the weekly target roughly matches that of our daily panel.

USD/CHF – if you took that long entry a week ago then it’s time to scale out. It’s been a great ride but that daily BB will now start putting up some resistance.
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A few setups before we call it a week. The AUD/CHF is running into daily and weekly resistance – great inflection point around 0.965.

Natgas hugging its 100-hour and that’s a great setup given that it’s battling with its 100-day right now. I think the hourly SMA will point the way – if that daily is to be conquered then the 100-hour needs to lead it higher. This setup is probably good until the end of Monday – later than that and prices may get stuck between the hourly and daily.

Gold still at its NLSL which is a probably the last point for the longs to make a stand. A drop through here today will most likely follow through to the downside. 1569.3 is your inflection point – I’m long right now with a stop below but would flip it for a short if she drops through. Caveat on the short side is the second NLSL at 1554.3 which is good until Monday night.

Enjoy your weekend everyone!

Cheers,