Meanwhile At The Woodshed

I hear bearish calls all around but continue to be very skeptical about any meaningful retracement right here and right now. Some intrepid rat wrote me the other day stating that everyone he talks to is waiting for a retracement right now. And you may recall the old expression: What everyone knows is not worth knowing.

On the other hand, I do see bearish signals abound – and strangely due to a constant influx of POMO cash I also see bullish signs. So let me share a few charts and we’ll try to make sense of this mess:
[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.
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Let’s start with bullish first. Unless all hell breaks loose in the next 90 minutes Mr. VIX will be two steps into a bonafide equities buy signal. I know that this bounce around can’t continue forever, but it’s worth noting, in particular if equities close higher tomorrow.

UPDATE 4:45pm EDT: Okay, I’m officially on notice today. Second screw up in a row. According to the rules the VIX must close outside the 2.0 BB line – not just push outside. So, no VIX buy signal – just a regular snap back with lesser odds – sorry.

It was time again to update my POMO chart and on a long term basis the picture is pretty dim for the grizzlies. I just can’t fathom any meaningful retracement as long as this constant influx of cheap cash continues.

Now for some bearish exhibits. This is a risk/safety composite that RBW hacked together a few weeks ago. And based on that we’re painting quite a nasty divergence here, which should be long term bearish.

Copper seems to agree as it is showing a pretty clear divergence right now and has not been able to breach its early January highs. So, it’s quite possible we’ll see a drop in equities early February but I think it will contained – until I see new (and more bearish) evidence I still believe that SPX 1173 will hold.

Adding fuel to the fire is the DXY which breached 77.97 (marked by the blue line) yesterday and again today. Unless it pushes up firmly and that soon very bad things may happen as it may be taken to the woodshed shown above. And evil things lurk in there, believe me.

Bottom Line:

I have not the slightest clue. Which means to me that I hunker down and let the market present me with more conclusive evidence so that I feel comfortable taking positions. If we get that VIX buy signal tomorrow and the DXY drops some more than I think getting into long at the next dip is pretty good medicine. Until then taking anything but intra-day positions is a bit of a coin toss and I have never been much of a gambler.

P.S.: If you can believe it – I had to write this entire post twice. Somehow I pressed the wrong key and could not get any of it back – very annoying. But I think I captured the energy of my first keyboard finger dance quite nicely.

UPDATE: I’m adding my daily wrap up to this post as I just put it up:

The spoos ran like a hare today and even with the Zero it was rough cruising. We got a textbook divergence early in the day, which got us to VWAP. Then I thought we had a second one but someone must have dumped a lot of contracts as the tape suddenly turned on a dime. The ZL however called the last divergence which finally pushed us above VWAP and all the way to the standard deviation line at 1287. Don’t thank me – thank our money printing friends at 33 Liberty.

Geronimo did rather brilliantly today as evidenced by today’s screen grab. One sub wrote me stating that he missed the second entry as the tape was moving too quickly for him. These things can happen but I can confidently say that missing a trade due to a delayed notification is rather the exception. If you’re on Google mail and in particular if you’re using SMS alerts (free with Geronimo) then you usually have plenty of time to take an entry – even if you get in a tick or two too late. But there are times when things simply run to fast and the best thing you can do is to be ready – meaning, have your trade app open and ready to pounce. I would also recommend you read the tutorial as I explained how getting into a position and setting the stop can be automated with one click in TOS.

Cheers,

Mole