Overnight support holds...

The lower channel was tested for the 2nd time in the /ES last night. I believe if support was going to give way it would happen in the after hours session. I expect a 5-10 pt move higher in the SPX today.

/ES 4 Hour

/ES 5 Min

no change in expectations

Today's late sell off seems to have lots of folks talking about another 3-5% of risk being in the market. First of all, I don't think that is likely, in the short term. I think we're a seeing a classic set up where the retail trader sells into the close only to wake up tomorrow and see the futures up 5-10 pts. The chart below shows what I expect to transpire over the next few trading days. The support level shown should hold the market up over night. I expect some stabilization tomorrow and the market to move back over 1685 by Thursday.

/ES 4 Hour Chart

Important Ratio at Support

SPX/VIX ratio is another indicator flashing a ST buy signal. As you can see, it is trading at support. However, you will also notice the divergence that is currently happening. While I think the market bounces here, that divergence is not favorable in the intermediate term. I suspect there will be one final divergence after the market rallies.

SPX/VIX Ratio

Nothing has changed in the short term

This morning's gap lower has done nothing to change my short term view. If anything I am expecting a few extra points profit before the next pullback. 1695 is where we're headed next and that is where I will unload longs and take a short position. I will determine my holding period based off of market action around that level. Even though I expect 1720 to be a ceiling I can't say I would be surprised if that level is breached at some point this week. The quicker we get some sort of political resolution, the sooner the intermediate term top can be put in. I expect one of two things to happen over the next couple of weeks. The market trades to a new all time high in anticipation of a budget/debt ceiling deal or a deal is announced and we spike into the vicinity of the Sept. highs. Whichever occurs it makes no difference to me. The point is that whatever happens it will probably be looked at with a "full speed ahead" type of mentality from the financial media when in fact, it will be anything but.

60 min /ES

Farmers Will Be Driving Lamborghinis

First of all, let me state that if you don't trade futures then I'm only going to give you a very tiny spot in my head space. Trading futures might be the last bastion of true american capitalism and a little bit of the wild west. It is truly a zero sum game. I'm motivated by imagining that some rookie Goldman Sachs kid is on the other side of my trades and gets fired at the end of every month because I am personally crushing him every time he places a trade against me. Having said that, there are very few, if any large money managers positioned for the upcoming run in commodities and commodity stocks. While some of these stocks have already made a good sized move off the lows, there is much more to come in the months ahead. I don't think the outperformance will become glaringly obvious until early next spring. Be ready, because it is time to put the Jimmy Rogers trade on in full force. The two charts below give you a microcosm of why I believe this shift is underway. Make no mistake, we are still all fucked in the end. Are you prepared to get Dennis Gartmaned? And btw, for full disclosure, I am long your rich aunt's house worth of VALE and I bought more GDX today. However, my favorite stocks are in the oil space, as long as they are not XOM.

Widening the Net for Sun-Mon...

Unfortunately, we didn't get filled on our sell orders late in the afternoon but that's ok. I've learned that in trading, just like life, sometimes things happen for a reason. As I've stated before, I believe that we are going to continue to see the market grind higher over the next 5-10 days without trading above the "no taper" spike high. The back and forth should provide some some nice trades on the short and long side. The 10 /ES points above these levels contains some nice entry points to scalp to the short side. After re-examining the charts you can see where I've designated the 2 different points to leg in to the short side. We should get a spike on Sun evening that will allow us to get filled. 87.50 and 91 are where I will be placing my orders. Make no mistake, after this circus of political drama plays out, the ghosts of May 2010 and August 2011 will come back to haunt the markets. The 3 long term charts below show the resistance that these markets are trading against.

Nasdaq 100

S&P 100

Dow Jones Industrials

VST Short set up is close...

I'm looking to short the market @ 1687.50 while simultaneously selling out of all my longs. This is the first legit sell set up that we've had since the lows yesterday.  This is vst in nature and I will not overstay my welcome. I'm looking to bank 5-10 /ES points.