Sensing A Trap

Catching entries and holding them for more than a day or two has been increasingly difficult lately, in particular since the beginning of June. Not only are we in a seasonally bearish period during what still continues to be a late stage bull market (until proven wrong), but intra-day volatility also appears to be in a cycle of expansion. Originally this post was supposed to feature an early summer lottery ticket but upon further consideration I had to (once again – yes) err on the cautious side. Call me a chicken but I think a more conservative approach has kept us out of a lot of trouble recently.

Let’s start with the Zero which shows us very little participation during yesterday’s sell off. The signal range is tiny on both the early morning ramp and the late session sell off which effectively go us nowhere.

Of course the current formation in the E-Mini is extremely tough to pass up and even though it is Friday I may have been tempted to drop a teeny-weeny position into my early summer lottery ticket. But it is not to be…

For what irks me the most right now about equities are the ongoing divergences between our three main indices. Here’s the NQ which is suddenly showing signs of life and its own juicy looking formation after lagging the other two all week.

However what ruins the party for me is the YM which used to be the most bullish of the bunch until most recently and is suddenly in sell off mode.

Bottom Line

Nothing makes sense right now in equities and once again I’ll have to say no to what otherwise looks like a great entry. Given the ongoing divergences across our three indices and the current level of intra-day volatility it’s quite possible that we are witnessing distribution across the board.

There are however two setups I am very much interested in:

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