Monday Wrap Up

Today we saw some extremely strange readings on the Zero Lite:

In the early morning we got a monster signal but it started to degrade right after the first candle. I saw some divergences develop and tried three times to short the tape – I was lucky to get the timing right and got out with some small gains as we dropped a few points – factoring in the first two attempts I ended up modestly profitable. After that I left for breakfast and when I came back I saw the tape had pushed even higher, which was extremely strange. And that’s the theme we saw for the rest of the day – Zero Lite stayed more or less flat – especially compared with that early morning signal.

Some of the subscribers were wondering why the Zero didn’t like this rally. Pretty simple – it did like it this morning when we got those huge readings but after that the tape went ‘thin’. What do I mean by ‘thin’? Lack of participation – meaning the small specs at this point are driving the tape up, the big boys had their fun in the morning and are now waiting on the sidelines. There is something else going on though and it has to do with human perception. When we got that huge spike this morning it thwarted everything else we had seen in the past week or two, thus the indicator got scaled accordingly. After that all of our Zero Lite readings looked tiny. Now if we cut off the morning spike this is what our chart looks like:

So, I guess human perception does play a role here and we should not forget that indicators should be digested with some healthy amount of relativism. That said however – it still is quite a strong rally for such weak tape and I won’t debate that. I for one am glad that I stayed out for most of today as I’m not the gambling type.

If you took the early morning ETA/VTA and stuck it out then congrats to you. This obviously was a good day for the Primary Zero as the signal never even hit the zero mark until the closing bell – nice. The Lite didn’t know what to think of it and I wouldn’t be surprised to see a large pullback looming. Nevertheless, I would not recommend loading up on puts unless we see a clearer signal.

Cheers,

Mole