Red Wednesday

It was about time to see some red candles, after all it’s my favorite color 😉

Not because I’m biased in a particular direction, no sirree. Rather, when things pick up momentum to the downside banking coin can be a lot of fun. Because the bull market you have experienced in the past two years really does not exist. Well, it does obviously, but not without a lot of help by our friends at 33 Liberty.

Anyway, if you are a bear and you are licking your chops, then let me caution you:
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I am sure many of you remember my long term RSI_EMA chart on the spoos, which started to paint a monster divergence in the past few days. So it’s very much possible we’ll see some follow up in the next two days. However, we are also near an important support line and there’s not much downside momentum left.

Doesn’t copper usually precede a meaningful correction in equities? Well, it’s not impressed at all right now – as a matter of fact it’s not even blinking. However, I do see a stochastics divergence here and it’s dropping through the 80% line. But prices do need to follow up pretty soon or it’ll probably just turn into a short squeeze.

The bulls have played this game over and over again in the past two years. We get an equities sell pre-signal, which then immediately turns into a quick sell off, thereby burning off most of the distance remaining in our 2.0 BB bubble. So, what will happen when we breach 18.5 and dip buyers see a VIX buy signal?

I could be very wrong here and this may be the big sell off we expected earlier this month. But my charts are telling me to remain cautious and to lock in profits fairly soon.

Cheers,

Mole