A less common latin phrase today and this one means ‘holding a wolf by the ears’, and I think that’s a decent description of what we are looking at on equities here with the frankly amazing amount of compression on the daily bollinger bands. My friend Mike Vacchi has looked back ten years and this level of compression is unprecedented in that time and possibly a lot longer. The range between the daily lower and upper band on SPX is down to 26 handles, about 1.2%, so the journey between them is down to a level where Yellen clearing her throat might take SPX from one to the other. What does this mean? Well it may mean that we are building to a very strong move in a direction yet to be determined. A hard compression considerably smaller than this one delivered the mini-crash a year ago. This is the sort of phenomenon that advises caution.
The bears woke up for a while yesterday but failed to take out Friday’s low or sustain the trend down into the afternoon. They did however close well below both the 50 hour MA at 2177 and the daily middle band at 2179.5, so that was still a bearish close, and yesterday’s move could follow through today.
