Once The Last Bear Has Left The Bus
Just yesterday morning as we were scraping all time highs I suggested the following: After a three week melt-up the bears are feeling pretty crappy right now – there’s very little desire to short this rally and in combination with yesterday’s doji we may be due for a small correction. Apparently the last bear had finally left the building and after some consideration I believe we may be getting more than just a little dip lower – let’s review:
Let’s start with the obvious – as you recall the GBP/JPY was pointing down strongly and gravity has finally set in on the equities side. Some prefer to follow the EUR/JPY which actually is looking even more bearish.
This is the ratio between the SPXA50 and the SPXA200 – this refers to NYSE stocks above their 50 and 200 day SMA. The ratio shows us inflection points when we should expect normalization – i.e. medium term corrections. Since about early 2013 the 1.0 mark (i.e. par) appears to be where we should expect a shake out and we have pushed a bit beyond it last Monday.
On the volume profile side we never had much to work with since about 1890 – remember how long it took to overcome this? I see us either holding right now and right here in which any of the below becomes moot. Or we drop to 1925 for a bounce. There again we either hold or slide quite a bit lower.
Here’s the hourly SPX – I always like to look at the cash which guides my activities on the futures. As you can see we finally gave up the 25-hour SMA and now it seems the 25-hour Bollinger is being breaches as well. Again, unless we see a recovery here late today we are probably due to visit 1925ish (which lines up with what we see on the volume profile chart – nice!).
The Dollar meanwhile is pushing against its 100-day SMA and I fear that the buck literally stops here. A continuation higher would be very positive as it not only would get us above both SMAs but also interrupt a sequence of lower highs and lower lows. I would very much welcome such a move but call me skeptical.
But we’re just getting warmed up – I have a few more goodies up my sleeves plus I’ll tell you how to best get positioned here. Please step into my lair:
It's not too late - learn how to consistently trade without worrying about the news, the clickbait, the daily drama and misinformation. If you are interested in becoming a subscriber then don't waste time and sign up here. The Zero indicator service also offers access to all Gold posts, so you actually get double the bang for your buck.
If you ever called me an idiot you may be on to something. I don’t know why I bother trading complicated setups. I should just go long on three consecutive green candles and short after three consecutive short ones. I mean is this the easiest futures contract ever? Literally a trend trader’s wet dream. We should consider trading with the trend here on a regular basis. I think I actually pointed this out in the past – this is a very well behaved contract. However it’s thin and you probably get a bad fill so it’s not something to jump in/out in – be in it for weeks at minimum.