Only The Paranoid Survive

You all know my motto: Just because you’re paranoid doesn’t mean they’re not out to get you. We are at an interesting junction here and I am seeing signs that point toward possible short term shenanigans on the horizon. Let me show you what I mean:

This is the setup – after a two week short squeeze the E-Mini has bumped into another volume hole and apparently is in the process of gathering strength to overcome it. After all we are heading right into the annual EOY Santa Rally, right?

Except that the VIX has been creeping upward all day. And the rate of ascent does not match the sideways action we are seeing in the spoos, so something is definitely up.

Also noteworthy is my VIX:VXO chart – the latter is a measure of implied volatility calculated using 30-day S&P 100 index at-the-money options. So basically ATM vol is on the rise in comparison with vol across the option chain. In plain English this means we may be seeing a short term shake out next week.

That puts me in a bit of a bind as I’m long the E-Mini right now with a stop below the 100-day SMA. For now I will keep that trade in place but my I will advance my stop below the 100-hour SMA now.

Meanwhile our GOOG trade is still looking pretty good – we got a great entry near the SMA and my stop is still below. If we get a shake out next week that one may be retested, so be prepared for that.

Here’s a little freebie to appease the leeches: AMZN has been riding up hard and is now painting an inside period two days after an outside period. You know what to do and I think both directions are good to go come Monday. If you are confused about the rules then please check our cheat sheet.

A few more goodies before we’ll call it a week:
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Silver has been scaring the children and fortunately we didn’t take that ST long position this morning as we dropped quite a bit lower. We are now near a daily NLSL which has already been tested. I want to be long here with a stop below today’s lows. Easy setup and if she goes then I’ll flip it for a short.

Sugar looking good thus far but I sure wish it would get out of the gate. The 100-hour seems where things keep failing and we need to see a breach here sometime soon.

Cotton is also looking very attractive as it just popped over its 100-day SMA and is painting an inside period at the same time. Great setup and if you want ST support look no further than the 25-hour SMA.

The old greenback stopped out my tentative ST long this morning and we’re even back below the 25-hour. This thing couldn’t get a bid in a Siberian prison holding a fistful of pardons. But at least it’s painting an inside day setup today and you better hope it’ll breach the upside or I’m going to charge you guys in Euros! 😉

USD/JPY has apparently been in shake out mode and now finds itself at a daily NLBL. The first stap higher has been punched back below and today’s close determines our trading direction – at least for now, the NLBL is good for another two sessions.

The GBP/USD is proving to be a handful – I got sand in my face when my original long setup got stopped out this morning. But as I’m tenacious I would be willing to try another one if it manages to pop above that 25-hour SMA. Depending on how we close I may however also look at some puts starting Sunday night. So keep an eye on this sucker – that diagonal resistance line should be good for some ill-gotten gains.

Before I let you go another friendly reminder that you can now also follow my posts on Google+, so please add me to your circle if you haven’t already. That’s it – now it’s Hefeweizen time! Have a great weekend everyone – I’ll see you Sunday.

Cheers,