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Monday, November 28, 2011

The "Thin Ice Zone"...YM, ES, NQ & TF

Below are 4-hour charts of the YM, ES, NQ & TF. I've marked the high and low of August 5th (white horizontal lines), which was the day that Standard & Poor's downgraded the U.S. credit rating. Since that time, price has repeatedly tested levels above and below the high and low, with a lot of gaps occurring at the market open inside this zone...it's become a level at which market uncertainty has accelerated.

I refer to this zone as the "Thin Ice Zone," and I've written about it in previous posts. It  has, basically, been a price magnet and has become a trendless zone. Until the markets exit this zone once and for all, with convincing volumes and any gaps filled in, it will remain this trendless and friendless, messy zone, inside which anything goes. At the moment, these e-mini futures indices are, technically, in a Death Cross bearish market formation on both this timeframe and the Daily timeframe. As such, they are subject to further bearish pressure until such a pattern is reversed, with conviction. Today, they advanced up to the 50 sma (red)...whether they continue upward remains to be seen.

Today, the Fitch rating agency affirmed its U.S. credit rating at AAA, but the outlook has been revised downward from stable to negative, as noted in this Reuters' article:

Below is a 1-day 1-minute percentage comparison chart of the S&P 500 Index with the VIX. After spiking down this morning, the VIX spiked back up to close the day in positive territory above today's open...a move higher (from the open) of around 0.64% on the day versus around 1.35% on the S&P 500 (a ratio of 47:53). Whether or not this is indicative of growing interest/accumulation in puts is something I'll keep a close watch on over the next days/weeks.

Below is a 4-hour chart of the VIX. Price closed just below the triangle uptrend line and October and November's TPO Profile POC, as well as the triangle apex that I mentioned in Friday's post...it ended a bit on the bullish side of things, compared with Friday's bearish move higher...however it is still trading well within the August 5th high and low (broken horizontal yellow lines), and, as such, is still producing huge intraday uncertain volatility...will see how this unfolds over the next days/weeks.