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Let’s Wait And See…

Let’s Wait And See…

by The MoleJuly 11, 2011

Volar’s post was a good representation of the ambivalence that Scott and I are having for the current tape. And yes, today we did indeed see some follow through on Friday’s drop. We have now arrived at a point where I would expect some support and emergence of dip buyers on the equities side:

Now, if we breach 1320 – which incidentally was the level I suggested last week then we drop toward 1300, which of course is a psychological number the longs will want to hold (plus there are stops looming below at 1298). I’m giving each scenario 50/50 odds at this point which I know is not much help to you guys. So let’s peel the onion a bit further.

Mr. VIX tickled both its 100-day and 25-day BB and for now recoiled. I don’t think it’s impossible that we’ll see a close a bit higher but I also recall the volatility game the big longs played on everyone over a week ago. A further drop in equities accompanied by a close below the VIX 19 mark may be evidence that dig buyers are already getting positioned to put on a big squeeze.

But there is a lot more going on underneath the hood today, so let’s take a look at the real meat:
[amprotect=nonmember] Charts and commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.
[/amprotect] [amprotect=1,13,9,12,5]

The view on the 1hr/1d Net-Lines combo is quite fascinating. On the daily chart we are nearing support at 1312.5 and a close below would probably get us to 1300 on the SPX (always remember the PREM delta). On the hourly side I see a very nice setup – first we were outside both Bollingers are now barely inside the 25-BB but we also might have ourselves a variation buy setup here (perhaps Scott can chime in when he rolls out of bed).

Crude has been dropping along with equities – now nearing support at its NLSL. A close below may get us to around 91, so keep an eye on that level.

Over the weekend Scott and I both kicked ourselves over the big move we missed on the bond futures side. This is the 30-year and today it even busted higher. Seems to me we’re pushing to 127’00 here.

Currencies – the AUD/JPY is in a similar situation as the spoos – not as much support on the daily panel but a counter push here is possible. If it does not happen then remember Scott’s rule – if something is supposed to happen and doesn’t then we’ll probably see a violent counter reaction (i.e. a drop much further). So holding the current line is rather crucial and will most likely affect what’ll happen on the equities side. Recall that AUD/JPY and equities are highly correlated.

The daily setup on the EUR/CHF is quite delectable – the money shot would be a close above the hourly NLBL as indicated on the chart.

The EUR/JPY is not as extremely stretched but could also paint a nice buy setup, assuming we close above the NLBL shown on the hourly.

I’m closing this post with a long term perspective – this is my trusted RSI_EMI chart which now appears to be painting a beautiful channel, which is slightly shifted below my traditional 20%/80% extremes. Based on this the possibility of a continued drop is there but as shown above, we are now at support levels that would first have to be taken out. If that happens it’s quite possible we push a bit lower, but let’s not jump the gun right here and right now. Let’s wait and see.




About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at the usual social media waterholes.
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