Back To The Starting Block – November 17, 2011

[Billy]

Forum Clusters 111117.xlsx

IWM closed near the robot’s initial entry and therefore is back to the extremely strong floor support ranging from Semester S2 (72.33) to Monthly pivot (70.36). This cluster is more than 5 times stronger (strength = 27) than the first resistance cluster (strength =5) which only includes weekly pivot (73.88) as a significant level.

The multi-pivot methodology is based on a purely news-neutral environment and of course a decisive breakdown below such a powerful support that includes the yearly (71.84) and quarterly (71.25) pivots would really mean that supposedly discounted catastrophic macro events have been widely underestimated by the market. This would offer an extraordinary opportunity for shorting and I am confident it would be confirmed by the 20 DMF and the robot.

But we are not there yet. However uncomfortable the choppiness can be , the odds and reward-risk setup remain objectively tilted to the long side. Here’s another chance to buy the lower band of the recent trading range. Today will be another important POMO day and the same intraday pattern as the one experienced on Tuesday can be expected with an upside reversal around noon after early weakness. Note that next week’s Tuesday will be the date in November with the largest cumulative Fed liquidity injections operations.

Normally, lower volatility is indicative of rising bullishness from institutional players. Volatility as measured by ATR is diminishing slowly day after day for IWM and fast for GDX which saw a serious tightening of the ranges of its clusters today. But the GDX robot still remains neutral.
Billy