Uncharted Territory

The price action in equities today reveals renewed imperviousness to gravity which is a bit surprising given the chasm we are facing on the volume profile panel. I am a bit conflicted up here – there are reasons to be bullish and reasons to be bearish.

As a trend trader there still are no reasons to pull positions. But as a discretionary daily trader I am a bit uncomfortable following the bulls higher as we are heading in uncharted territory – and that at the onset of the vacation season when participation is expected to fall.

Let’s take things from the top. The more medium term SPX P&F panel (by P&F standards) shows us a fulfilled bullish price objective with a lonely spike higher that just begs to be corrected.

The already mentioned ES volume profile chart shows us eleven consecutive higher closes with as it’s heading into a chasm of participation. Do I really want to be long here? Statistically speaking at least one or two down days are very likely.

The weekly ES managed to bust through two Net-Line Buy levels and then closed a few ticks below a third one. Today we’re above it but obviously the week is still young. If we close above it then that would be bullish – but if we close below it then this opportunity would be lost for the bulls as this NLBL expires on Friday. We use that 5-period expiration for a reason as price either rejects or conquers within a statistically valuable time period – IMO price action beyond that is mostly unrelated to Net-Line inflection points. Obviously this is not an exact science.

The regular daily chart has us in the middle of nowhere – what is useful however is the fact that the VolStat indicator shows us falling volatility. And that often is what drives late stage rallies (assuming we fall from above the 1.0 Bollinger). The implication here is that we could see a continued short squeeze fueled by – well, low participation summer tape. Market turns require counter participants, not just lack of continuation.

Bottom Line: I’m pretty comfortable being neutral on the equity side right now. I’ve said this before and I’ll say it again: better wishing you were in a trade than wishing you were out of one.

We have a ton of great setups today so roll up your sleeves, folks. I need to pimp gold again – which is playing hard to get at the 25-day SMA. Once again I will be patient and follow price through sideways churn (i.e. a good reason to play futures and not options here). Short until that SMA is breached.

Many great setups on the FX front again – AUD/USD painting an inside period right on top of a NLSL. Good stuff and that entry will be ripe for the plucking tonight after this session ends.

It's not too late - learn how to consistently trade without worrying about the news, the clickbait, the daily drama and misinformation. If you are interested in becoming a subscriber then don't waste time and sign up here. The Zero indicator service also offers access to all Gold posts, so you actually get double the bang for your buck.

Please login or subscribe here to see the remainder of this post.

Cheers,