That Time Of The Year Again

Things were going nice and smooth for a while and the bulls enjoyed a six month hard-on courtesy of free blue pills dropped from helicopters by Fed & Friends. But alas – it was not to last – and from one one day to another Mrs. Market turned from a promiscuous Dollar burning mistress into a raving razor blade slashing bitch.

Hey, don’t blame her – it’s not her fault. It’s just that time of the year again 😉

I’ve got to be honest with you though – it’s good to see a bit of volatility. Although an eternally rising market may be catnip for equity investors it’s a scourge for us stainless steel rats. Especially during times when everything moves up in unison – and in an unnatural pharmaceutically induced fashion. Of course some us may have gotten more than they asked for, so always be careful what you wish for 😉

Personally, I can’t complain – we banked a lot of coin and I even managed to piss off some ZH muppets in the process – all in a good week’s work. Time to look forward again – the setups right now are not as sweet as last Friday but these are the times to gather intelligence and to prepare for future assaults on hapless retail piggies. This is what we do best:
[amprotect=nonmember] Charts and commentary below for anyone donning a secret decoder ring. 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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For some reason very few people are talking about bonds right now – Chris Carolan may be the exception here. Now, you may remember this chart – last month I drew this diagonal on TLT and TBT expecting some kind of reversal. I also pointed out that if it did not happen we would see quite some acceleration upward on the 20-year – which is exactly what happened. Now, long term the inverse H&S (see the blue squares) appears to be in process and I am now expecting a little shake out – not unsimilar to what we just witnessed in equities.

This is why – we are now pushing outside the 100-day BB and whether or not we continue upward it’s time for a little reversal. This may not happen right away but I think it’ll happen later next week.

Silver dropped a little further today and then snapped back – as I expected that lower 25-day BB line would hold for now. What I’m seeing here is the potential for a little squeeze into the 40 region. If we get there I see the potential for a nice setup:

This is what I’m talking about – the net-lines buy level starting Monday is 42.325 – if we push toward 40 I would want to be short with a stop a few ticks above that level (and I would trigger those stops at the EOD, which you can do in TOS). The risk would be minimal as a close above that mark means we probably resume higher – if we fail we probably drop toward the 30 mark or much lower.

Similar situation in crude – just a lot higher up – but keep an eye on 111.22.

Yesterday night after the close I mentioned that we didn’t get our VIX buy signal but that this didn’t mean that we would not get it at all. Now, I don’t have a crystal ball but we are again scraping the upper BB line again – and if the spoos keep dropping as they are right as I’m typing this we may get that coveted close outside after all.

The spoos retraced almost half of the drop today and then fell back, which paints a very bearish candle. So it’s quite possible we see some continuation here and that the current support line will be taken out. I would love to see a drop to 1300, with VIX painting a buy signal. Now that would be a good spot to take on some long positions. I expect you symbol hunters to be ready for duty and to parachute out of B52s if we are lucky enough to find ourselves in that setup.

The easy money in the EUR/USD has been made – nice follow up drop today but it puts us too close to my preliminary target area of 1.42. The recent high of 1.49394 also happens to be the next buy level and I have a feeling we’ll have to wait a while until we see this again. My recommendation is to sit and wait – if we drop toward 1.4 then a long position may be warranted.

Cheers,

Mole