Happy New Year!

I won't be blogging much probably this year.  But will try to post the BEST patterns, like today.

Today was a sweetie.

 After last year's construction project, having multiple tenants at my place now, AND starting up a new practice as a professional fiduciary, I'm busy!

But this blog was fun to do.  For years, day in and day out, there were great patterns to talk about and it's nice to have a permanent record of them here on the blog.

But with VIX just bouncing off of major lows, there is not enough movement for me to engage the market much more than twice per month unless VIX is well over 15.   And that gets really, really, old for so many months out of the year.

But I liked today's patterns and the VIX spiked off of lows a bit to provide some nice movement.

Trade of the day was to go long at 11:00 the transitional structure lows for a late session short covering rally.

Little Sell Day

Today was a great example of balancing the prior day's inventory in a liquidation type fashion.

As we write about over and over, overly fast down action got stuffed.

On watch for a possible big brake down day.  But just watching.

Check Mark Day

Monday Action

The key metric for today was the low volume.  Like 1.0 relative volume.

Down and Pause

And back down the market went.  But this time there were a few holes in the bearish case as the Nasdaq was severely diverged relative to yesterday's range -- and that spelled trouble for the sellers.

The daily is now becoming interesting as a mongo coil in the making.  And that may mean a lot of up or down is in the cards.  Will the bulls pull it off once again?  Or will sellers re-emerge?

Two Way Auction

Like, why did we even out think it?

OF COURSE, buyers would step in and pound the auction higher!

The big clue, and we noted it in the slides, was the price liquidated to a major visual support zone -- and that was it.  Too mechanical to be real, honest to goodness, selling.

Firm Trend Day Down

Ha, Scott-Trader!   The dreaded 11'ish VIX was indeed a canary in the coal mine.

So we finally got the monster sell day and the VIX promptly flies back up into the range.

With the market so short, we are always on watch for a powerful move back up.  After-all we are firmly still in an uptrend.

On the flip side, a few more days of selling would not surprise us at all either.


Structural Analysis:
It's really important to detail structure on day's like this, because there were some huge tell tail signals that tipped off the astute trader to take advantage of the fierce downtrend.

1) As we noted, VIX was at range lows extreme, and had been low like this for an extended period of time. I read on Thursday that the last 40 sessions were the tightest in history.  As the rule goes, the tighter the action prior to a breakout, the bigger the break -- and we were on watch for this.

2) Upon the market open, TICK exhibited extreme readings of almost -1800.  Yes, almost -1800.  Readings like that simply do not come along very often and when that many sell programs hit the tape, then a short bias is in play.  Especially if the readings and price are not firmly rejected relatively quickly.  The market just balanced and then proceeded lower.

3) After the session's 1st hour SPY was 4x relative volume.  Other majors over 3x as well.  This volume was the fuel for a major move.

4) A/D sediment extreme -2500+

5) Not even close to a +600 reading in TICK until the final hour.  This is as skewed as it can get.

6) Rocket ship VIX: Grinding higher the whole session and ending up a whopping 40%

7) The price action itself was grinding lower.  Compare this to liquidation movement that is prone to over extension and reversal.  Price did not liquidate lower until the last hour.

Now for some slides: