The Bad Boy Buy Bots Are Back!

Something caught my attention last Thursday, exactly a week ago. You may remember the UVOL chart I shared with you that showed a red sell interest curve that to at least to me appeared a bit unnatural, if you will. It appeared that selling pressure was constant and highly organized – thus suggesting that it was driven mainly by bots and most likely not human traders.

Well, guess what – apparently the bad boy buy bots are now having their turn – as a matter of fact they appear to have been rather active for the past three days. Take a look at the chart above where I highlighted the days when selling pressure was constant with very minor intra-day retracements.

Of course you may wonder why we would care, right? Does it matter if the bots are buying and not humans? I think I do because what really drives the tape these days are automated strategies and not human beings. Just look at the buy curves on down days – they don’t look very organized to me. As a matter of fact the curves are quite a bit more random which suggests that some people got squeezed out of their positions and had to sell their long exposure. The sell curve however looks smooth and organized – coincidence? I think not.

If you want to develop a better feel for what drives this market then you need to pop open the hood and take a peek at the engine. How it runs is as important as to where it takes you. Perhaps the bulls simply pulled over a few days ago deciding it was time for an oil change 😉

On the spoos we are now approaching the 25-day SMA and a NLBL – we have about 15 handles to go and whether or not we get there today, this is where I expect some type of resistance. On the weekly side we are peeking over that NLSL – if the bulls manage to close above it tomorrow it would be a small victory as it would reverse the prior signal and also give us a nice weekly hammer with a tail touching weekly support at the 25-week SMA. But I want to be clear that the bulls are NOT out of the woods just yet. Failure at the 25-day could easily swing this thing back lower – so don’t get complacent.

Excellent setup on silver today after a pretty nasty sell off yesterday. I’m still holding some short positions and have now moved my stop to the inside day’s buy trigger. If you’re not exposed here yet then play the ID as you always would.

USD/JPY – popping over its 25-day SMA and if it can hop over the weekly NLSL at 98.57 we would have confirmation that the long side is probably the way to go. Again, I showed this yesterday already and the converging daily SMAs were a perfect inflection point.

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Cheers,