Bulls On Thin Ice

I’ll be quick tonight as I had a rough day and am about to fall into bed. Looking at today’s tape the words ‘bulls’ and ‘thin ice’ are coming to mind.

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[/amprotect] [amprotect=1,9,5,2] My quick take on today’s session: No follow through to yesterday’s bear gut wrenching crystal meth induced bull stampede up – volume was miserable – momentum unconvincing. A/D ratio closed at 0.7 after a 5.7 reading yesterday.

We keep seeing the same pattern over and over again: A fake out move down on suspect momentum (see the Zero Light chart on the 11th and the 14th) followed the next by a surprise gap up and a stop run on steroids. This is good for a few whipsaws and for faking out the weak hands but it won’t usher in a new era in prosperity and long term bullish conditions – I just don’t see it. At least not yet. Maybe by tomorrow sometime it’ll all change and I wake up to something else than a repeat of the Twilight Zone.

The bulls are skating on thin ice at this point and I give this rally to 1130 most likely and 1150 maximum. For these resistance levels to be breached we would need to see a more consistent pattern. There is nothing inherently wrong with an occasional 0.7 A/D during an uptrend – just for the record – but on the heels of a 5.7 reading the prior day I wonder where all the buyers went today.

Something to also keep an eye on is this divergence in copper in the context of the SPX. I also like that expanding triangle down – it’s not really a pattern I can put a label on but I can’t see equities starting to make major strides upward unless copper breaches this pattern and pushes up from here.

Long term our EUR/JPY chart is telling a similar story. Yes, equities might run for a while – maybe a bit more up – maybe sideways for another week or two to shake out some weak hands. But I don’t see correlations right now that strongly benefit equities. And those record spikes on the TRIN or the A/D ratio are typical whipsaw patterns ahead of historic bearish patterns. I can’t tell you it’ll happen tomorrow (I wish) but this market is running on fumes and will need some serious road side assistance by the time this summer is over.

Finally, my count. Green suggests that the pattern has completed – we should be so lucky. Orange hasn’t changed and I do have this inkling the bulls somehow push this thing towards 1130 before it’s all said and done. We could go to 1150 as I said but the bears will start growling up there and it will take some real strength to overcome these levels. Yes, you can run these quick surprise raids during the summer on a triple witching OPX week – but that doesn’t give you a free pass to the upside – not under these market conditions.

Patience is key – this pattern will take its time to unfold and we need to let it do its thing. You can’t outsmart this market – not with those daily gaps and wild whipsaws. We know what the long term technical signals are telling us – let’s focus on that and let’s not get emotional and jump to conclusions. It’s easy to give in to fear or greed (the former being a version of the latter) – but unless this market tells us that we are wrong there is really not that much to do.

The bears will get their day – until then let’s stay frosty. Just stay off the ice 😉

See you guys tomorrow.

Cheers,

Mole