Head Fake!

I know you bears are all sick of the rally that just won’t quit – well, I got some good news for you – I just saved some money on my car insurance! Okay, bad joke – and no, I can’t promise that this is the end of Primary {2}, but I have an inkling that the bears will get a nice downswing and an opportunity to recapture some of that old glory in those puts you’ve perhaps been hanging on to.

That 10-day MA is really growing on me as it uncovers extremely interesting pattern on various charts. Look at that fractal above – it’s almost identical, even down to the time it takes to resolve. Downward that is by the way, as it should when the market keeps getting ahead of itself.

I have shown this CPCE chart before – last time was on November 2nd, take a look what I said that day.

This, my dear ladies and leeches, is how distribution looks like. And it’s happening on dropping volume – actually it’s much better than that – take a peek at this goodie:

What do we have here? Rising volume on the drops, flat or now tanking volume on the rips. Meh – this is probably sheer coincidence – after all Cramer is the master of the universe again and can’t be wrong.

The Zero is spiking a classic head fake – chart on the prior post. Will it resolve this week? Probably not – after all, every single holiday week this year was an excuse to ride the tape higher in low volume. But let’s see what next week brings. The bulls want their coveted 10,500 mark – let them have it if that’s what it takes.

On the wave count side I see three possibilities – yes, anything is possible in this low volume holiday week – sorry:

Blue Kiss Of Death: We just get it over with and make the bulls happy by handing them their coveted Dow 10,500 mark. A bit too simplistic – MMs have the opportunity to burn a lot of theta this week plus drive the VIX further down – perhaps even have it touch 20 – my poor long term puts (sigh).

Orange Bear Biscuit: We drop from here and don’t bounce until we touch that lower border on that expanding diagonal. Also doubtful, especially since we are so close to that lower channel border which again held up. The poor bears didn’t even get a fake out drop below – what an ignominious defeat.

Green Churn From Hell: I don’t count a valid bullish EWT triangle here but I think a nice churn followed by a rocket burn into new highs might be what market has in store for us.

Moral Of The Story

So, what to do? If you’re not already in the market this week just stay out – trust me, it’s not worth it – spend time with your family instead – you will thank me later. You can of course play the swings if you’re good at that – but be nimble and be cautious as this morning’s open should have taught you. BTW, that spike was sold fairly quickly – again, the news are usually only good for some short term gyrations. Never ever trade headlines, news reports, economic news, etc. – all you need to know is in your charts.

Geronimo News

We updated the Geronimo stats today – please take a look. Also, there have been some changes/fixes/improvements as of late:

• First of all the dreaded empty alert issue has been fixed. I even managed to figure out the original bug in NinjaTrader, a bit late of course as it’s now been ported to Multicharts.
• We reduced the stop size to about 20% without impacting performance.
• We added a ‘steep drop filter’ which prevents false alerts on sell off days, so far it’s been working quite well as Geronimo kept performing well all last week, even on the down days.
• Finally we are planning to introduce additional signals over the coming weeks which are based on new observations of market behavior (i.e. the games the big boys are playing). We will roll those in as we see fit – some of them will be short signals as well.