Fishing In The Dark

I must not neglect to point out that the timing on dropping the big shoe on equities was nothing less than exquisit. Let’s review: Wednesday after some very carefully crafted comments were released into the wild all hell breaks loose and market participants expecting another ‘shoo-in’ find themselves bend-over with their pants dangling below their ankles. Of course here’s the segway to one of my favorite subjects – that of market psychology. The bulls who just got royally reamed are now looking for the ‘obligatory’ bounce here while the bears (most of who missed yesterday’s wipeout – recall my point regarding capitulation) are looking for clues as to whether this thing may have legs.

Now, let’s take a look at the Zero Lite for some further insights on how this game was played. First up, for the uninitiated, take a look at the Zero Lite signal range (right panel). We’ve got a 2.0 before all the drama, which is respectable and we have a -1.5 during a concerted sell-off which is barely outside what I would consider a median range of participation.

Of course today we get (drum rolls) absolutely nothing – sideways churn designed to keep everyone guessing ahead of a three day weekend. Forget about tomorrow’s session – anyone who’s anyone made their money yesterday and are probably already heading for the Hamptons. And that’s how the game is played, folks – there was no panic selling – this was market theater at its very finest. I hope you didn’t play the part of the pawn.

Now what I’m seeing on the setup side does not really matter as I wouldn’t want to touch equities with a ten foot pole right now. Taking on positions before Tuesday is tantamount to fishing in the dark. You’ll be trapped during Memorial Day weekend and there’s no telling what may seep out Sunday or Monday night causing your positions to blow up in your face.

If you decide to test your luck right now then I suggest you keep an eye on that 25-hour SMA which was were the spoos ran into a wall. The fact that we’ll most likely be closing right near the 1648.25 inflection point leaves the gates open for all kinds of creative shenanigans.

Here’s the YM which managed to tickle its 100-hour SMA but didn’t find her very receptive to allow a jump over the fence. Similar situation on the daily panel – we are stuck in limbo and I would be rather surprised if we see clarification ahead of the long weekend. Call me cynical but that’s usually not how the game is played.

Crude is at an interesting stage across several timeframes right now. Short term still pinned below that 25-hour SMA and now also below its 25-day SMA and a NLSL. The weekly has it scraping some long term support – the 25-week and 100-week are colliding and prices are sitting right on top. This could be good!

Quick update on soybeans – I doubt many of you took that early morning entry the other day. But if you did and managed to hold all the way to here than I probably don’t have to tell you that now would be a fantabulous time to call it a trade and count your blessings 😉

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Cheers,