Tickling The Dragon’s Tail

So we’re going to do a momo update today and I think it’s going to blow your mind. But first let me briefly explain what happened this morning which led me to look at those momentum and volatility charts in the first place. If you may recall yesterday’s lottery ticket on the E-Mini went bust by just a tick or two after which the SPX actually ended up bouncing back.

So I look at UVOL and it looks pretty damn bearish except of course for the late session candle painting pump. So of course I’m starting to wonder if we may be sloping over in the near term future, because with the Dollar heading into Italian Lira territory we should have busted higher to grab that new flag.

I guess you may agree that this formation looked too juicy to to pass up. Of course in retrospect my stop ought to have been a bit further below that 100-hour SMA. My bad.

Market Breadth

If you’re a noob – no it has nothing to do with halitosis (google is your friend – actually strike that). If you’re already familiar with this chart then you recall that we have long been expecting a price reaction but to our credit didn’t jump the gun ahead of price actually exhibiting weakness. Yes that’s right the stainless steel rats have learned their lessons over the last decade.

Anyway, so here we are again tickling the dragon and with equities basically heading straight up I don’t think it’s unreasonable to expect at least a small obligatory dip lower? Taking one for the team so to say?

Sentiment And Money Flow

Our old favorite – the CPCE Deluxe. The Count is running out of fingers at this point (he’s got four – I checked) with yet another spike higher and no price reaction whatsoever. I am the first one to admit that bearish signals are a lot more unreliable in this bull market but if you review historical record we ought to have gotten at least get a wiggle lower. This is completely unprecedented.

Here we are looking at high beta vs. low volatility stocks. What we want to see is a juicy divergence as the high beta ones usually get hit first when things start weakening like in the past day or so. But NOTHING!

FAGIX is a high income fund which obviously means it’s composed of mostly junk bonds. And it seems investors can’t get enough of them.

I hope you’re sufficiently warmed up because what’s below the fold is going to boggle your mind…

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