Wedged In

Equities have managed to run circles around even the most sagacious traders over the past few months. We’ve been able to grab a few favorable entries, but constant whipsaw fueled by contradictory musings from central banks on both sides of the Atlantic has effectively turned directional trading on its head whilst offering ever more fertile conditions for swing traders and nimble scalping aficionados.

Which is not everyone’s cup o’ tea of course. However all that noise has been slowly accumulating and just like a Van Gogh painting is starting to make a lot of sense if you step back and let the intra-day gyrations fuse into a pattern. The daily panel on the right above for instance is looking more and more like a sideways wedge that’s currently terminating near the lower 25-day BB.

The long term view is even more compelling but here we are facing two opposing trend lines. On the downside we have the mighty 100-week SMA near the psychologically important 2k mark which is now pushing sideways in the context of an increasingly narrowing 100-day Bollinger. Quite significant support and in my POV it represents the first bastion of defense the bulls are attempting to establish in order to launch a final leg to the upside (which they have failed to do now for over a year).

On the upside look no further than the monthly panel which shows us a beautiful diagonal trendline currently terminating a little below the 2100 mark. So for all intents and purposes we should consider 2100 as the big inflection point on the way higher.

Which leaves us basically with 100 handles of breathing room, assuming the June contract on the futures but the SPX is close enough given that we’re rolling into the real spoos soon. Now timing the resolution will be next to impossible. We could be still swooshing around within this range a month from now or we could be trading at 1800 or 2200 a week or two from now. I know this isn’t exactly the type of ‘analysis’ you’re looking for but by accepting noise into our reality we are better prepared to remain objective and get positioned when the odds suggest a slight edge in our favor.

And today that means a small short position for me after the open until about 2060 after which I am entertaining a long entry if the Zero is supporting a move higher.

UPDATE 10:27am EDT: I don’t think I will pick up that short position until I see weakness on the Zero signal. Thus far the bulls are running the tape – best to wait for a push higher.

CAD/JPY is not an entry yet but it’s on my close watch list. What I would love to see here is a spike low on the short term panel, suggesting a low is in place. However the setup on the daily is looking suspiciously clean and so it’s possible that we’ll see a bit of mocking about first.

Not much on my plate today but I did find one more juicy setup I couldn’t help taking:

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