Humpty Dumpty

As the tape is not giving us much to hang our hats on let me tell you a little story which in my not so humble opinion rather ominously describes the situation at hand.

I maintain that the bulls are not simply getting out of the gate. For months all we’ve seen are two steps forward followed by three strides back. That may have been permissible during the Aug/Sep/Oct churn but just like German humor it’s no laughing matter when it continues during what is seasonally a traditionally bullish period.

Just look at this chart – or even better, if you have a six year old show it to him/her and then ask the spoiled little bloodsucker where that bouncing ball is going next. I tell you what I’m seeing – the bulls seem to be able to resist gravity within high volume regions but when presented with real hurdles (i.e. volume starved regions) they fail every single time. The only exception was that October spike through our ‘Gobi desert of volume’ which I recall being a bit more pronounced back then. But 1300 turned out that brick wall that Humpty Dumpty wound up falling from.

What’s next? I’m not entirely sure – seasonally the bulls maintain an advantage. But do you remember those times a year or two back when it was the bears’ turn and they simply couldn’t get out of the gate? Just to get clobbered with the pain stick as soon as the bulls saw an opportunity? Do you remember all the bad news back then? Didn’t matter at that time, did it? Well, it feels like that right now again – but this time it’s the bulls who continue to drop the ball.

The tape is weak and continues to act corrective. Yesterday’s super spike on the Zero may actually be supporting evidence to that effect in that a seven day consecutive sell off ahead of a holiday weekend is expected to produce a volatility swing. Except that it didn’t – we went from 34.47 to 32.13 – big deal.

This is how I see it: Unless we push above 1240 by early January I think we are going to close January on a pretty ugly candle. This is the time for Santa to bang the tape higher in preparation for some mid January shake out. The fact that it’s not happening is bad news for the bulls and adds insult to injury on top of the technical damage already endured.

Here is our short term perspective on the spoos. We almost touched our second NLBL today and then dropped back to below 1199. That 100-day SMA is expected to produce resistance and if we somehow can climb above that one plus the 25-day SMA then we may just make it above my magic 1240 mark.

Let’s also take a peek at AUD/JPY short term chart again – plus we are going to visit the evil lair’s futures pit:
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AUD/JPY – is heading into resistance. That NLBL promised a push into 78.75 and given two entangled SMAs I would be out rather quickly here.

30-year treasury futures – at a rather interesting configuration. Yes, there has been a bit of downside lately and the hourly panel looks bearish. But look at the daily chart – that 124’26 NLSL was breached but got reversed right at the 25-day SMA. Now since I took that snapshot ZB pushed up to that hourly 143’18 NLBL – so far so good. Let’s envision for a moment it can climb above 143’27, which happens to be the 100-hour SMA, and we should be good to go for a push higher.

This is the long term chart – the weekly shows us tested support at 141’14 – everything on that chart is pointing up. So is the monthly – admittedly looking a bit exponential – I know. But the recent shake out gives this a fair chance to continue higher. If it fails then it probably will do so either right here or at 145’20.

As a second reference here’s the 10-year treasury futures contract – ZN. It’s currently at 129’290 – above that hourly NLBL. If that hourly resistance ahead can be cleared then I think we are good until 131’050. In case you wonder – the numbers after the apostrophe are fractions divided by 320.

It has been a tough fall for soybeans futures – literally. But there are signs of life and I think that 25-hour SMA at 1123 is important for the current bounce attempt. Confirmation of a reversal would be at 1155.75 but admittedly we are quite far from that.

Long term things are looking pretty bearish and if the bulls fail here on a short term basis then we may just slide all the way as there’s nothing but air below on a weekly and monthly basis. Which in itself is a bit of an incentive to keep things at bay right now. So this makes this a pretty interesting setup in both directions. I would currently be long here until we breach that 25-hour SMA – a few more ticks below that and I am looking to the down side for what could be a big money trade.

On that note – it’s also possible that we push a bit higher and then retest 1155.75 – I would probably try to a short position there and only go long once I’m stopped out to the upside.

I concede that today’s setups are not the simplest I have posted and if you feel unsure about playing along here then either risk only a tiny amount of coin or stay out until we see easier tape.

Cheers,