Where The Rubber Meets The Road

This was supposed to be a routine update on the current advance in equities but one chart quickly changed my perspective. Plus Gartman suddenly went bullish, which triggered alarm signals all over the place down here at the evil lair. Okay, I’m kidding about Gartman but I’m serious about seeing trouble on the horizon for the bulls:

What I’m referring to is the volume profile chart which shows us some rather strange volume patterns, in particular yesterday when we ended the day higher but with sell volume apparently far outrunning buy volume.

This is indicative of potential distribution and if you look at the daily panel below then it’s clear that we are once again due to at least a small correction, perhaps even more.

As you can see we are about 80% through the 100 handle volume hole I talked about on Monday, which terminates around 2625.

Which is almost exactly where we’re currently seeing the 100-week SMA pushing sideways, plus the 25-month SMA is also just a few handles away. Well, if that ain’t a coincidence?

I was originally just going to trail at about -1R MFE but have decided to lock in a few more gains at around 1.25R. Not a big win but given what I’m seeing in realized volatility I have decided to err on the conservative side.

Also IF I get stopped out today then I’m pretty confident I will be able to find another entry opportunity once I see a promising floor pattern on my hourly chart.

Bottom Line

So far the possibility of a mere dead cat bounce remains the highest probability scenario and based on my lens a breach of ES 2025 is where the rubber truly meets the road. Which implies that this may be a great STFR opportunity should we experience further degradation of the current rally.

I am not in the habit of jumping in and out of whipsaws willy nilly as that can become hazardous to one’s account principal, but if I see more bearish evidence and the Zero starts signaling lower I would be tempted to consider short positions.

For now I’m holding long with my trail a bagelthrow away.

No luck with gold as anticipated yesterday morning. Stop out at ISL and the way it’s heading there may be more downside on the way. I would consider another long entry should it manage to retrace all the way down to GC 1265.