Not Trusting This Tape

This tape is looking a tad iffy today. Call me paranoid but a drop like this during a low-vol holiday Friday seems a bit questionable at best. By all means do not feel tempted to chase this sucker to the downside. Let’s review where we are:

Spoos sliced through their daily NLSL – in theory bearish but there is a pretty good chance at a retest on Monday or Tuesday. But even if we don’t get it and continue lower there is no edge in chasing this down today. The risk of a snapback clearly outweigh the benefits of riding this lower. What I would want to see of course (not that anyone cares) is a last kiss goodbye next week – let’s see if that’s in the cards.

More long term we are still above the weekly NLBL and we are closing this candle today.

Also giving me pause is that  Mr. VIX is not keeping up with the SPX – that ratio (inverse to VIX) should be following down. Again, given this is a holiday week this chart is not exactly easing my suspicious nature.

Ole’ bucky is also right at target – which is a last reminder for you hold outs to take profits. Obviously the potential of a little correction on the Dollar side may also benefit equities next week.

Three setups for the subs and then let’s call it a week:

Cocoa – possibility of a bounce back here – I would watch that 100-day SMA. If it stays below then I think it makes for an excellent short trade.

EUR/AUD – inside day plus NR4 – I know how much you like those 😉

And then there’s the AUD/JPY with a possible long setup here – little stop risk below the NLSL. Since the AUD/JPY is our nearest correlation to equities I’d say we should watch what happens here closely. A close below would be bearish of course – watch the close but if you take any sides then watch this puppy starting Sunday night – we don’t want any monkey business. I would also recommend hedging yourself a little until the Sunday open – perhaps with the spoos.

That’s it – enjoy your weekend!

Cheers,