Patience Is Key

Public Service Announcement: I’m going to be working on a project this weekend and thus my Sunday forecast will be very quick and dirty. Which is why I plan to dig up more charts during the remainder of the session and present evidence as I come across. So, if you are a sub please continue reloading this post about once every 30 minutes or so.

The ever diminishing negative momentum on the Zero Lite has finally caught up with the bears. In typical OPX Friday fashion we jumped from a NYSE A/D ratio of 0.05 yesterday to a current reading of around 3.5. Schwinggg!! And not before pushing the tape down below the May 6 lows just enough for weak hands to cover in panic.

Wow, I gotta give it to those market makers during option expiration – they don’t take prisoners – gotta respect that. First you screm them bulls, then you screw them bears – everyone is getting some of that cattle prod today 😉

[amprotect=nonmember] Charts and commentary below for anyone donning a secret decoder ring. The rest of you guys will have to wait until tomorrow – sorry. 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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Of course leading the advance is the EUR/JPY – my new best buddy. As you can see the stochastics are now pushing to levels where we should expect an attempt to push it into overbought territory (either 80% or 90% per your definition). This could easily propel this thing to the 116 cluster and 118 is not impossible.

I am not sure this will result in an equally strong move over in the crazed world of equities – we shall see. But yes, I fear at least for a few days the fun time is over for the bears. Time to regroup and to find a new resistance level.

FWIW – I found today’s push down encouraging as it officially killed Soylent Green as we know it. However, just for the record, there is another bullish scenario – let’s call it Son of Soylent Green – which reads the recent drop from the top as an a-b-c zigzag correction, which then would be followed by a veritable bear carnage period pushing us above this year’s high.

The main reason I’m bringing up this scenario is my CPCE 10-day MA chart above, which quite frankly is a cause for concern. Yes, I hate having to spoil the party guys but we are at readings now which could at least produce a deep retracement, maybe even more. Market tumbles happen in deeply oversold conditions, granted – but are we really there yet? Frankly, I don’t know – which is why I will simply hang on to my long term puts and ride this thing out – for the better or for the worse.

The NYSE Adv/Dec Volume chart is finally painting that divergence we have been waiting for. But wait – not so fast! The stockcharts grab only shows closing prices – thus the long spike down on May 6 is not on this map (which is why I drew it). Based on that there may only be a slight divergence and we may still be in the middle of a move. Plus we snapped back by quite a bit already, a lot of energy is being exerted on this OPX Friday. Nevertheless, we are closing lower than on May 6th today – so we should take this chart seriously. If you are positioned short term I suggest you take profits today. Again long term I’m sticking with my guns – plenty of time left on my theta ticker.

One more for the road – TRIN 20-day SMA chart is pushing into very extreme readings. We are around levels that occurred during the 2008 crash – remember those days when we actually saw some real downside?

Listen, if I’m wrong and we drop like a rock from here, great – that’s the overall plan, right? But if I scale out right here hoping to reload at somewhere further up I may find myself missing the train altogether. It’s a worry something the bears constantly have to deal with and I won’t take that risk until I am more confident that Intermediate (1) is nearing completion.

So, is Mole getting bullish? No, not at all – but I am considering the possibility of a more meaningful retracement, that could ‘possibly’ turn into something else. Which brings me to the ‘patience’ part – and the statement I keep repeating over and over again: Anyone who claims to know how exactly this thing will play out has a bout of extreme mythomania. We may go straight down from here or we may bounce around for a while and then suddenly drop. In case you haven’t noticed yet – things are quite volatile and will remain so for the next few months.
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Cheers,

Mole