Quick And Dirty

The whipsaw lower continues but I’m seeing a promising looking entry opportunity on the equities front this morning. So let’s dispense with the formalities and personal musings and jump right in. As you may have guessed we are looking at a long entry here, which of course is contrarian to the medium term trend and thus carries a good amount of risk. Please remember that if you consider participating here and adjust your position sizing accordingly, i.e. keep it < 0.5% of your total assets.

So here it is – I’m considering a long position on a breach of ES 2859.5 with an ISL < 2815. We basically have a spike low followed by a retest which is now on the verge of breaking out higher.

Bear in mind that a similar attempt has failed just two days ago, although I should point out that the current formation looks quite a bit more supportive.

Anyway, the reason why I am waiting for a breach of the previous spike high is that price needs to commit as to reduce the probability of yet another bear trap. We avoided a bunch of them courtesy of being cautious and clearly the onus is on the bulls to show that they can muster enough mojo for a reversal.

Nevertheless the odds here are 50/50 at best as the leg lower on the daily still looks incomplete.

The Zero indicator remained in positive territory all session and the E-Mini didn’t as much as touch VWAP after it got out of the gate post opening bell. That’s not a guarantee of continuation but I did mention yesterday that one of these days the overnight sell off bots will reverse direction and burn the shorts.

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Also worth noting is the VIX Buy signal which just became official last night. For a confirmed signal we need three specific events:

1. A close of the VIX outside of the 2.0 Bollinger Band (20-day SMA).  
2. A close back inside the 2.0 BB. This issues the signal. 
3. A close below the previous day inside the 2.0 BB. This confirms the signal. 

Once you get those three events a major reversal usually occurs within the next week, and one may already be one in the works. Why is it called a VIX Buy Signal? Because the ‘buy’ part refers to equities and not to the VIX. I concede it’s a bit confusing but let’s not get entangled in splitting hairs and instead focus on the task at hand.

Happy hunting and keep it frosty.