Gravity Setting In
The first two sessions of week #50 have followed the statistical downside bias I presented on Monday. We’ve lost roughly 30 SPX handles in 2 sessions which – based on the historical change % stats – is pretty much in line with what we should have expected. So let’s see where we are and if there potentially is more downside ahead of us:
Technically speaking we don’t have too much to work with at this point. I would call that 25-day SMA touch more or less coincidental as it hasn’t been observed since late summer.
The volume profile chart presents us with a narrow value hole between ES 3040 and ES 3060. As long as we remain above the center (ES 2050) I think we ought to be okay but a drop below it probably takes us to around ES 2980.
NYSE down volume has been slightly leading up volume but just like the Zero indicator signal over the past two sessions shows us lackluster momentum.
Something that irks me a bit more on a medium to long term basis are the rapid swings on the VIX. A jump from 12.5 to 17.5 comes out to about 30% and we did that 3x over the past two weeks.
And I would call the SPX:VIX ratio exactly confidence instilling either. That’s quite a drag lower here on both Monday and Tuesday. Meaning CBOE option traders are still pricing in downside risk.
Watch your six. This is not a week to take on big risk or to place trades based on opinions/hunches. Keep it small, keep it clean, stick with your system.
Saint Nicholaus dropped by the lair on the 6th (celebrated in Austria where I grew up) and since I’ve been [mostly] a good boy this year he delivered a special seasonal goodie for my intrepid subs:
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