Slippery Jim Digriz Tape

I’m making this post free for everyone to make up for Thursday’s DWP trainwreck – leeches everywhere rejoice! Well, the tape in equities is tough to grasp at this point as there is very little to hold on to – I’ll show you why. In order to produce a mental reference let’s start with our volume profile treasury map:

So the Million carrot question here is why this thing turned right here and now. Wave wankers would most likely refer to some fourth wave and that may be so as in terms of volume there is plenty to support a push into 1300.

A slightly different perspective on the spoos – no meaningful resistance of any kind, which leads me to believe that it may just be shake out time before we push higher. Always remember that weak hands (late buyers) here will be very nervous and quick to exit after a few red candles. Medium term our target areas are 1300 and 1320ish.

AUD/JPY – very same picture. Short term I would look for a close above the hourly 80 NLBL.

Copper is often a good guide as it has been leading equities in the past few years. The daily shows us looming resistance but there is still a bit more territory to cover.

Long term copper is actually quite interesting and I wonder how this may affect equities at large. I see strong weekly and even monthly resistance near the 3.75 mark. Almost perfectly lines up with the 100-day SMA, so I would want to be short here.

Anyway if you are expecting a major reversal in equities you may be disappointed. If you recall my MMMR triggered a reversal warning two days ago:

But just when Curly tried to think – nothing happened! I see a similar occurance earlier this year at the end of June leading into early July. It eventually rolled over but not before the shorts got squeezed quite a bit more.

The VIX back then was also in a similar configuration (not shown on this 3-month chart) – it was touching the lower BB but wasn’t breaching it. So I think the game here is similar – as you can see we touched that lower Bollinger but the longs are smart enough to pull back a little before the close. This way we don’t trigger a VIX sell signal (relative to equities) and the squeeze goes on. Which I call Slipper Jim Digriz Tape 🙂

So until all of this works itself out and we have support or resistance lines to hang our hats on let me shift your focus to a future setup that has entered my periphery:

Cocoa – the other coffee. And it’s been taking to the woodshed lately – I think I actually posted this as a poster child trend day trade a few weeks ago. Can someone perhaps dig up that post?

Well, it’s looking pretty oversold at this point – but before you get any ideas let me warn you: Commodities do not move like stocks and you never ever call a bottom unless you have a damn good reason to do so – and even then it may take a few entries to catch a reversal. As a quick side note – look at the daily panel and note how that lower Bollinger line was touched but not breached – this is an extreme example of what we are seeing on the VIX right now. Nicely played!

But as ever so often the real picture reveals itself on the medium and long term charts. Boy – the sell off in cocoa over the last year has been absolutely brutal. We are now outside both Bollingers on the weekly and the 25-month BB on the monthly.

So, this is what I am thinking. For right now there’s nothing for us to do. I’m not going to have you step below a falling knife and who knows how low this thing is going to go. But keep an eye on this thing and as soon as we see early signs of a possible floor, e.g. an inside candle, a retest variation buy, net-lines buy, etc., that is when we should take note and try to step in with a small position. BTW, a weekly inside candle would be my favorite setup by far.

Perhaps we’ll get stopped out once or twice – but I definitely want to be long here when this thing is switching into short squeeze mode – and it will – we’ll just have find a good entry when it’s good and ready.

Have a great weekend!

Cheers,