Enjoying The Ride?

I promised you volatility and the market delivered – in spades* I may add. And that’s all I’m seeing right now, random dips and rips but at the same time an equities market that refuses to roll over and die. Until now that is, as a drop below ES 2580 would force longs to start covering all the way into ES 2400. What seems to be keeping things aloft thus far is a  shallow volume hole right below yesterday’s spike low near ES 2590.

Which is a classic make or break pattern for the bulls as a dip through it would invite continuation of a developing series of lower highs and lower lows on the daily panel.

Wave wankers would call it a series of 1s and 2s while more sane contemporaries simply look at it as a support cluster, which once broken would be difficult to regain in the near term future.

Now I’m not going to sugar coat it for you guys. The bulls are having a real problem here. See that dip below the -25 mark on the ROC panel below the VIX? That represented a low in realized volatility that was expected to correlate with a new low in IV and of course a new high in the SPX.

Which it did but on both ends the recovery had been too shallow and as that meant that the bears started to smell blood, suspecting that another take down attempt may be successful. Which it has  of course.

And emotionally the bulls have been taking quite a bit of a beating. It’s mostly psychological of course as price has stubbornly remained > the ES 2600 mark. But keep in mind that most market participants at this point consider 50 handles down on the SPX to be the epitome of a raging bear market.

On the other hand ZeroEdge and its ilk have cried wolf so often since 2008 that nobody really believes in a real bear market anymore. So it’s a bit of a mixed bag of cognitive biases going on here. Low pain threshold based on recency bias paired with general complacency.

I’m very tempted to be long here and what irks me the most right now is the UVOL:DVOL signature during yesterday’s late session punch higher.

The Zero on the other hand produced a very nice looking bullish divergence and I hope some of you guys caught that one. Just glancing over the comment section over the past two days it feels like I’m on SOH or something.

It was fine to be short at the launch of yesterday’s session. But I have no understanding how one could miss two consecutive stacked spike lows accompanied by a Zero signal like the one shown above in the right panel. Don’t trade the market you want to see – trade the one in front of you. Did I stutter?

It seems like the current Dollar rally may be heading into it’s last phase or may already be over. Having entered near 89.4 it’s been an amazing run and at my count the best campaign of this year thus far with already 9R plus in profits.

If only all campaigns would run so smoothly, but I guess then it would quickly turn out to be boring. Okay, we actually have a ton of entries today, so let’s get to it:

I really don’t want to take out a long position here based on what I presented above but I cannot pass up a spike low like that until (and that is important) major bullish support has been breached.

Until that happens I will continue to favor the bullish scenario, which puts into a long here with as top below ES 2606. I give this one 50:50 odds at best, so my position sizing is only 0.5%.

I’m also grabbing a long in copper with a stop below 3.043. Beautiful formation on the short term panel and although it’s a whipsaw market from a daily perspective a run into 3.2 is a possibility.

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* Thanks to Darrel for pointing out that it’s ‘in spades’ as opposed to ‘in spates’.