Volakility

Let me apologize in advance for any system or iPhone melt-downs that may occur as this is going to be a veritable browser buster, we have a lot of charts to dig through today. Since it’s a brand new year and all and I promised Mrs. Evil to hit the marketing drum I’ll make this a freebie, so leeches rejoice! Anyway, I’m seeing possible signs of volakility on the horizon. In case you wonder – yes, it’s a made up word of mine (I have many) describing the possibility of a volatility trap. For the uninitiated let me elaborate a little:

Let’s start with the easy stuff. First of all we are now once again scraping a pretty well established diagonal support line. Which doesn’t mean we have to turn right here today or tomorrow but you want to ask yourself. Do I feel lucky? Well, do you punk?

Now here it gets a bit more tricky but bear with me. This is a ratio between the VIX and the VXO (a.k.a. the old VIX). The latter measures mostly at the money option volatility where as the former covers the gamut of the option chain (simplified explanation – Google is your friend). That drop today is making me a bit nervous and so it should you.

The more long term view also reveals that we enjoyed a pretty steep spike above the 2.0 BB yesterday. So a drop today is not a big surprise and that opens the possibility to a short term shake out. You have been warned.

Out of fairness – long term we seem to be okay as market makers don’t seem to be nervous about the next three months ahead. I beg to differ but need to go by the charts for now.

NYSE advancing vs. declining volume – also a pretty steep drop since yesterday – let’s see where she ends up today.

As I said yesterday – there’s not much to hang our hat on right now, except on a short term basis where it seems that the 25-hour SMA is providing support. As long as it stays that way I’ll be your huckleberry…

Before we get to the setups a quick update on sugar. Some of you may have followed me into that short trade yesterday and if you did then please send me a picture of the big grin on your face right now. Anyway, I would recommend to start scaling out here for obvious reasons.

Forex:

Cable looking interesting as it may hold here on the 25-day SMA – I would be long on a breach of that 100-hour SMA however as there’s not much to hold on to yet. Not interested in a short here right now.

USD/CHF – simple, a long with a stop below today’s low as the SMA is still falling.

The greenback is now approaching a daily inflection point (yes, again). Most likely it’ll fail us usual which is why I’m short with a stop above. But if I get hit by lightning in my evil lair, or less likely, it manages to crawl above the 100-day then I’d be happy to get long.

Stocks:

BIDU – I’m waiting for a touch of the 100-day SMA – expecting turbulence there.

CLF – long if it holds the 25-hour SMA. Possible support on the daily side, bummer I missed that breach. Would be great to get a retest, so if we go down a little we may get a second opportunity.

FB – hate the company but love the setup. Possible long here with a stop below the 25-hour.

CHK – used to be one of my favorites in my stock slinging days. Great long here with a stop below the 100-hour. Short of course on a failure. There will be blood near the daily NLBL, so be prepared for that.

NOK – long with a stop below the hourly SMA. Play it small here – it’s a jumper.

DECK – inside day. Please check the cheat sheet on how to trade those if you don’t know.

Commodities:

Crude – I’m long here with a stop below the 25-hour SMA. With some pixie dust it may hold that vertical support/resistance line on the daily. Yes, short on a failure – of course!

Gold is officially a short now – stop above the dropping 25-day SMA. I am prepared to go long if we run back up. A breach of the 100-hour SMA would be confirmation for the bears.

Inside day on silver – a breach of either trigger line tomorrow may actually show us the direction for gold as well. At least in theory, but it seems to be attempting to build a floor here. I admit that prior ID’s have been less then perfect. But we keep trying.

Last but not least – bonds!! I actually was looking at a reason to long ZB but couldn’t find any. The ZN however has a NLSL which it may overcome if we see a bounce (big if – I know). Anyway, it’s a great setup if we see that scenario – until that happens be patient as we may see downside continuation.

I’d call this a pretty solid kickstart for the new year. Have at it but keep it frosty – obviously things may take a quick turn out there if my paranoia turns out to be justified.

Cheers,