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Daily Zero Update

by The MoleFebruary 4, 2011

I saw a few inquiries related to a developing pattern on the daily Zero today, so I thought I’d do a quick post on the subject.


[amprotect=nonmember] Charts and commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Zero member then don’t waste time and sign up here.
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Scott also pinged me today wanting to know what I thought about the current divergence. I had to really think about this for a while to be honest. Look – in the old days the types of bearish divergences I have outlined would have led to a healthy tumble. May have taken longer than expected but after a few weeks of short squeezing equities would eventually take a turn to the downside.

These days however we all trade in a post-POMO and post-QE environment. Which means that divergences not only unfold on long term stochastics, MACD, RSI, and other indicators, but also on the daily Zero. So, what good is it for us then? Good question. For once it helps us get positioned on short term drops as the signal continues to zigzag within ranges. The panel on the bottom (i.e. the raw signal) also affords us the opportunity to recognize fractal patterns that precede an impending short squeeze. I have posted about this in the past and if you are new then don’t worry – if one transpires I will let you guys know for sure.

As per the current divergence? Well, we are overdue for a correction – this can’t go on forever after all. So the setup is there but we should not waste too much time on betting on downside as long as the trend continues up. Once we see a real drop then let’s use the DZ to assess the possibility of a snap back. And if that first drop precedes a much bigger one I have a feeling that the DZ will give us advance warning, just like last time.

Hope this helps a little.

Cheers,

Mole

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About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at the usual social media waterholes.
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