It’s Allliiiiive!!!

The unspeakable things I do in my evil lair led to an unholy revival of Soylent Green last night:

What do you know – despite yesterday’s head fake Soylent Green was not taken out as we never breached the Thursday high 1209.36. We even got two steps into a potential equities buy signal to which for some reason nobody out there quoting me seems to understand the rules. So let’s do it again.

For a $VIX confirmed signal you need 3 events:

1. A close outside of the 2.0 Bollinger Band (20-day SMA)
2. A close back inside the 2.0 BB – this issues the signal
3. A higher close (sell) or lower close (buy) than the close of the day back inside the 2.0 BB – this confirms the signal.

Once you get those 3 events a major reversal usually occurs within the next week. The sell signals are far more accurate than the buy signals.

Quite obviously we most likely will fail to produce the confirmation today – unless for some reason we ramp up massively and Mr. VIX drops by about 30% – not very likely.

Okay, let’s forget about the count for a second – what we care mostly about here is the wave form, assuming you buy into that kind of stuff. In terms of scenarios there are actually more than what’s on the chart and they all revolve how one would count the subdivisions from the very top.

Fair enough to expect a little bounce here. But be careful – if this is a third of a third we could easily drop quite a bit further today and tomorrow. Which would also mean that the downside target might extend into 1130ish. We shall see. What the bears don’t want to see is 1186.32 to be taken out as this would violate the ‘no-cross rule’ between the first and fourth wave.

Some astute readers may wonder why it’s 1186.32 and not 1184.59 that needs to hold. Quite simple – if this is a third of a third then it’s permissible for fourth waves of subdivisions to cross above a higher degree first wave. But we can’t cross the low of the first wave of that subdivision. If that happens then most likely this push down is done and over with and we’ll see Soylent Blue. Hope this makes sense.

Talking of Divisions – I feel bad for the bulls today. Maybe this cheerful song will improve their mood a little:

No? Oh – I’m sooo sorry! What is it – the lyrics?

CLUB ZERO UPDATE 1:33pm EDT: Interesting pattern devloping on the Zero Lite.

I am seeing a bit of a bullish divergence here. Let’s keep an eye on that lower trendline I drew on the Zero Lite signal. If we breach through that we see lower lows for today. If we climb it we may cross the blue line which would most likely lead to ES catching a bid. Most likely this is also where we would cross the zero mark on the ZLI.

Stay frosty and don’t over-think it today.

P.S.: CREE – well – shit happens sometimes. I am holding this trade as my stop has not been tripped yet plus my momos do continue to tell me that this thing is oversold on several time scales.