Good Things Come Those Who Wait

Across equities the 25-hour SMA this morning turned out to be a brick wall that yet could not be breached. Fortunately we didn’t fall prey to bottom picking and thus will get to enjoy entries at lower lowers. Once again good things come to those traders who learned not to fall prey to their own opinions and instead wait for technical evidence. That said – let’s see where we are and if it makes sense to start looking for long positions.

Things are getting quite a bit simpler now that we’ve dropped toward the 100-day SMA. On the spoos we have two significant hurdles the bears will have to breach in order to draw prices lower. First there’s the 100-day SMA which is currently plotting near 1760. Then there’s a weekly NLSL at 1750 which is good until Friday. For us that means that entries near that cluster should be pretty well defended. However, we do not have a technical entry here yet – for that I would prefer to see an inside candle or RTV-L.

Short term we may be able to sneak in early – tomorrow morning I will pay very close attention to the 25-hour again as that’s the one that has been proving to be rather solid in recent days. Of course if you are fishing long then pay attention to the noted support below and then perhaps pyramid yourself higher as price goes your way. You may want to use Bernie’s Pyramid Calculator to sort out the triggers.

A few early signs that a bounce may be on the horizon – here’s the GBP/JPY vs. the spoos and it seems that the former is pushing higher while the latter are still in a world of hurt. Again nothing I would base a trade on – in the end price on the equities side needs to show me some signs of a floor.

Our Zero Lite indicator is starting to plot a smaller signal when compared to the range we experienced during the Friday sell off. But that doesn’t exclude a final stab lower. I would prefer to see some spikes above the VWAP and the zero mark on the Zero Lite.

Finally the VIX:VXO continues to point higher suggesting that this is a short term correction. Compared with 3-month IV the 30-day IV appears to be pushing higher. The divergences usually resolve within a three day time frame. Either the ratio will start falling along or price will push higher – I’m keeping my eye on both.

Bottom Line: Things are looking quite a bit more interesting at this point and although I’m not ready to bottom fish yet I am willing to consider some evidence. However a more sustained downside correction is certainly possible but in order to lead lower medium term support as shown above would need to be breached. So we are talking 1760 and then 1750 – if both go then we are going to see some panic selling par excellence.

But wait – there’s more – juicy setups waiting below. Please follow me into the lair:

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Cheers,