Week Nov 15th - Thursday Update

As expected in Sunday's post, Mkt has had its gasp up into exactly 212.00.  Last gasp? Not sure.  Yesterday I thought there was a 20 % chance for a new high this year.  Today, I still see it only as 30 % - basically due to the generally positive sentiment.  Still, The move off of the high as a nice 5 wave decline with an ending diagonal finishing just above the 198.65 break out a few weeks ago (bullish).  The rest of the move has been another 5 wave move up - which makes me think there may still be some more upside in the next few weeks.  But, again,  I still do not see a new high.

Still like the put spread combo with short calls; 270 call vs 190/180 put spread.

Tradflow - finished right at the 211.95/ resistance and near the 62 % retracement.
The fall was more impulsive than this rise and more volume with the decline.
OI has fallen from 150 k to 130 k in 7 trading days.
Weekly and daily slow stochastic sell signals.

.... let's see tomorrow's OI report.

Week Nov 15th - OI update

Mkt did put in a nice performance today as expected, but needed/needs to get through 209.00 (vs H11).

Delayed open interest report was a little mixed for me.  While it may support a little upside in the short-term, I am expecting a sell off shortly. Report vs last Tuesday (Dec @ 217.05) vs. today at 206 is hard to compare.   I am expecting Friday's to look much more bearish. Some of my indicators are moving into extreme over-bought readings (these take a while to develop and why I like them - less whipsaw).

I would recommend initiating a short position if you have not already.  Given the volatility, some combination of short calls, long puts would be a low risk strategy. Again, the 270/190/180, short call vs put spread might be interesting.  As mentioned yesterday, I still expect one last gasp up this week; so there may be another good opportunity tomorrow or Wednesday.

Tradeflow ( H11 )- was expecting us to get into the grey rectangle today.  Tomorrow needs to.

L/S Index - I think the 2008 levels were a bit of an anomaly and that current levels indicate a sell opportunity.

Other index - extreme and hooking back = selling opportunity.

Ratio - would like to see this indicator hooking up too before initiating a short.  However, given market after Tuesday, I expect it will.

Note: GCA Stocks fell 319 k. Should be supportive tomorrow.

Week Nov 15th - "Carrot or three course meal?"

I think many people - myself included - were expecting the funds, after reaching the 218 high, to dangle a "carrot" in front of the roasters; that carrot being a little dip from the high into the 212 area, then yank it away (buy it back up), creating panic buying into FND.  So far, they have given them a three course meal in the form of 3 consecutive down days with Dec settling at 200.45. Still, I think we do get that last dash buying spree, maybe getting us back into the 212 area again, but not too much higher. As noted in Wednesday's update, London was an ugly key with considerable follow through selling after failing to breach the May 2008 support/resistance of 2096. That combined with massive negative sentiment (sugar giving up 23 % at one pt) made in nearly impossible for further advance.  Coffee then broke the 209.25 and fell beneath 200.

Some trade house did a similar trade to the one I recommended last week; sell overhead calls and buy a put spread.  Their strategy was a H11 240 call vs 185/165 put spread.  A bit aggressive for me and I think overshooting the downside. I still like the 280/190/180 combination; low risk/high probability.

As open interest will be published tomorrow, I'll wait to give an opinion with more conviction.

60 min - i've redrawn the channel (previous in blue).
Holding the 198.65 breakout was important.  Still leaves open this last leg up as 3rd wave. I'm not betting on it, but worth noting that once we close within that, the odds increase dramatically that we see a much steeper sell off.

I think if we can get above the 206 area early on, it should provide support for further upside.

Brazil is on holiday tomorrow  and thus removing some selling pressure.  Basically 4 effective days to fix vs Dec and little appetitive to roll to Mar.

Weekly - bearish shooting star candle and slow stochastic showing some divergence in overbought territory.  Last week's high was off the up trend line.
Long term (next 1 to 2 years) is up.
Medium term, still looking to retest 170/180, worst case 150.