I Can’t Believe I’m Bullish!

Let me be on record that every fiber of my being is resisting my very uttering of these words, but I have no choice but to consider the clear and present bullish entry opportunity right on front of us this morning.

Which kind of stinks as I was really looking forward to a good ole’ fashioned wipe out, but per Evil Speculator rule #1: Trade the tape in front of you, not the one you want to be trading.

The bullish case has a few things going for itself right now. One: it seems that the loser bears remain incapable of breaching the ES 2550 mark. Second: momo divergences are popping up all over the place (see below). Third: A most beautiful spike low is now in place.

Our Zero indicator (you are a sub aren’t you?) continues to point up but swung downward a few times during yesterday’s sideways session. For now I’m sticking with the hourly perspective (left panel) which doesn’t show me anything worrisome.

Let’s do a quick momo update because we need to. The VIX:SVXY is a new addition to my IV roster and it continues to point down after a bearish signal a few days ago.

SKEW vs. the VIX is pushing back > its lower BB which in this direction is a buy signal. I have been a bit cautious with this one over the past few weeks as the BB needed to normalize a little after those wild swings. I’m now cautiously pinning a buy signal here.

One more IV chart – the VXV:VIX – one of our favorites. Once again we’re plotting it inversely in order to more easily trace BTFD opportunities. Here as well I would cautiously pin a buy signal based on the push > the lower BB and the divergence between the ratio and the SPX.

Bottom Line:

All that means I have to be long here with as stop below 2598. I hate it, especially on a Friday, but I have no choice until Ms. Market tells me otherwise.

Caveat

The bears are not out of the game by any measure. A failure here and a drop < 2550 unleashes the flood gates. This is the entry I should be taking but I cannot yet as of today.

We had a few stop outs since my last campaign update. One is copper which exited at break/even after producing an exhaustion spike above my 1R mark.

By the way a re-entry is possible in the near future assuming we get a nice spike low and a push above the 100-hour SMA. Let’s just call it the 3.05 mark on the May front month contract.

The other one is Litecoin which looked like a perfect break/out candidate but then suddenly fell back into depression and stopped me out at break/even.

In case you are unaware my golden rule most recently has been to advance my stop to break/even after my campaigns reach an MFE of 1R or higher. Has kept me out of a ton of unnecessary losses over the past few weeks.

In the past I used to wait until the 2R mark but that rule does not work in highly volatile markets. When the market environment change we and our systems must change with it.

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