Eye Of The Storm
On Tuesday I hinted that the then ongoing sell off may be nothing but another low participation post holiday bear trap. And sure enough, my skepticism was rewarded by a massive short squeeze that spanned the entire session yesterday. Proving once again that just because you’re paranoid doesn’t mean they’re not out to get you!
I saw some of you Zero subs chat about a ‘bearish signal divergence’ and if by any chance you felt a burning sensation in your cheeks then it was me using black Mole magic to virtually slap you a little for completely misreading the signal.
A session that starts with a positive signal which only builds and only dips lower marginally without retesting VWAP is not a day when you should be looking at contrarian entries. Cross session divergences are only valid on the hourly panel (left side) and if they are pronounced. Right now I don’t see anything pointing lower, so curb your bearish enthusiasm.
Remember, trading equity futures without the Zero is like bringing a knife to a ray-gun fight. If you are not yet a subscriber then stop wasting time and sign up right now – you will find more details here. I for one would never trade the E-Mini without it and I’m sure many of its loyal subs would agree.
Okay, moving on – per the title of this post I wanted to employ some simple tape reading skills to help us navigate this treacherous period in equities. Clearly we are now back in the eye of the storm of what henceforth shall be know as the ‘Six Months Of Hell’. When we come out of it – who knows and I may have to change it to seven or eight unless the bulls finally get their act together.
What works in the bulls’ favor however are two things, again from a pure price perspective:
- The churn zone above the center line (also remarked by the 100-day SMA) is clearly a lot more compressed than the zone below it, and thus should be much easier to overcome on a push higher.
- Looking at the candle action almost all of the big wicks pertain to the bearish side, indicating that the bulls are increasingly willing to defend key levels. That alone has produced a ton of technical context that make a drive lower more challenging.
Of course none of this guarantees a move higher which is why I’m currently holding off on long positions after not being able to take advantage fast enough after Tuesday’s lows.
For all you leeches I have two setups today which however really boils down to one. As you know I’ve looking for an excuse to get long gold and I decided to grab a long position now that it finally rolled over into the August contract.
As you probably also recall however the Yen is once again starting to look bearish (and thus the Dollar/Yen bullish). And that perspective probably runs inverse to a bounce in precious metals. Short of having a crystal ball at my disposal I have thus decided to also short the Yen by going long the USD/JPY assuming it’s able to heave itself > 109.12, breaking the series of lower highs and lower lows.
Two more goodies below the fold for my intrepid subs:
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