Sentiment Indicators see more upside ahead

We might see some short term pause....

...but the intermediate outlook seems promising

Vix FairValue:

VixOsc:

ISE & CBOE Equity Options:

....but be careful because the intermediate time window might only last more than a couple of days, maybe 1-2 weeks. Anything beyond that is out of our scope....

Mr. Market seen through the lens of Apple

Apple is the ultimate Alphadog in this market. Apple dominates the Tech sector, the optionflows and should lead the market either way. So waht has Apple to tell us....

Medium term: 

Expect some painful correction in a couple of weeks (6-8 ?). The Structure seems developped and probably only needs some final push to mature.

Short term:
we could expect a pause/correction or see a case where the overbought situation leads to a upside break out and thus to some action on the upside. This could develop another neg. Divergence which would eventually trigger the medium term scenario.

Further hints for a short term 'melt up' can be found in the OptionSkews over time. As of now the downside is already priced in which should be bullish.

When we look at the Skews over time we see that a correction started to be priced in over the last weeks. We had a similar situation after x-mas when a small correction was also priced in and run over. This time it is even more pronounced because we find the same structure in the 1 month skews and in the 3 months (bottom chart).

Bottom line:

• maybe a short pause.....
• followed by a potential melt up....
• which will turn out to be a fake upside breakout.....
• that will lead into deeper correction

Weekly TimeCycles & OptionFlows highlights

Small Caps look for a shortterm correction....

 ...as do the Q's

...,more medium term we should expect a bounce in the Euro which will lift all boats of the risk trade

 ...but only after a short bearish interlude.

Weekly TimeCycles & OptionFlows highlights

The Euro looks overbought, which is bearish for the risk trade...

The Spyder is Overbought....

...the Hot Money sits on the sidelines...

...because they sit on good unrealized profits and have begun to take some money off the table...

...which all jives with Gold topping out....

We don't know what will happen in Europe but the data shows some caution for the next week. View this against the backdrop of the disappearing liquidity and you will get more wild rides.

Maybe we can get a SANTA CLAUSE rally later in december after we have seem some kind of correction.

Weekly TimeCycles & OptionFlows highlights

When we look at the SPYDER Optionspicture we see not much FLOW into speculative Positions in a pretty much over-bought market. The Option chain structure indicates (RGW, bottom right) a risk of Volatiliy.

The QQQ's mirror that statement.

But when you look at the key Volume/ Trading vehicles of the BIG BOYS you see they liked to play AAPL (as always) and GOOG. No real touching of materials or banks.

You see who pushed the monster rally of the last 2 weeks, not real investment but hot AAPL and GOOG lottery tickets.

Expect the PRO's to take some money off the table.....i.a.W. expect Vola!

The also get confirmed by some of our MOMO and TimeCycles work that you will find below.

....expect all risk assets to be pulled into the cooling off period which will also include the precious metals. Mid November could become a good timing target.

Sentiment still hints at a short covering rally

Sentiment looks like a 3 PUNCH structure

I : first IMPULSE

II: 2nd IMPULSE

II: 3rd IMPULSE & POS. Divergence in the indicator and final LOW which could be in a couple of weeks

Sentiment expects some severe Volatility

Now that the EURO is saved and Germany virtually is backstopping the entire EU, funding the Bail out fund and allow the ECB to dump their Zombie exposure into the fund, Mr Market took this as good news. (only the German Credit Spreads seem to disagree...)

The overall context on the other side develops some explosive structures. Our VIX_OSCs sport triangles that will resolve (normally with lots of Vola) over time and our VIX true Value Indicator shows some extreme bearishness. We're always alert when the Mr. Market refuses to follow through after a triangle break out like in the Vix true value chart.

Reader's Notice

There will no regular posts over the next 2 weeks due to other engagements.

SENTIMENT:

We saw some relief of the OVERSOLD condition and next week will tell us where we will go.

Quo Vadis Prec. Metals?

A muddled picture on the Sentiment side. Just look at the Call Flow explosion followed by a Put Flow explosion. The bears were just waiting for the kill after having the bulls allows to take silver parabolic.

The exhaustion chart is confirmed bearish ....plain and simple...
MOMO is extremely obersold which explains the moster intraday short covering rallies...

The TimeCycles Gold/Silver Ratio chart on the other side looks promising. It forecasts a final low in Silver (& and Gold) around June/July. The GSR will aim at 50 but could also overshoot to 60.

Silver prices could reach into the mid/high 20ties.

The end of the Flame out

We aclled the SILVER Flame out here at reflections-of-reality and man what fire we got. Look at the spike in the Call Flows (bottom left) and this all against an unhealthy neg. Div. in the Put/Call ratios.

Silver has noe reached the an extreme Exhaustion level which we see just a few times in a decade!!! Normal exhaustions lead to tops or bottoms within 20-30 days and the counter already stands on 15. We are so overheated that we should expect extreme vola any day !!
Compare this to Gold and we have a similar story.
Our Timing model also seems to indicate a looming PIVOT.
Also look at the broader Commodities Universe and you will fine a high risk set up that COULD lead to a cyclical TOP across all risk classes !! (Notice that the counter has already reached a potential target !!)

We have too many traders and investors on the same side of the boat.

Nobody dares to question...

1. the Inflation story
2. GOLD and OIL and SILVER going to the moon
3. the end of the DOLLAR.

Maybe we will get there but the curent structure of the Markets indicates that we might go the other way for one more round before these 'common truth' materialze.

OptionFlows show caution...

Seriously lower Flows in Call Options (bottom left corner) and diverging Put/Call ratios paired with steep Option profiles (bottom right corner , green line) indicate upcoming Volatility.

Maybe the market hold another week, maybe not....

Sentiment is in HIGH RISK Land!!

The neg. Div is further progessing, which means we are still topping...

Also look at these other key sentiment gages..

http://www.zerohedge.com/article/rydex-nasdaq-100-bullbear-ratio-highest-dot-com-collapse?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+zerohedge/feed+(zero+hedge+-+on+a+long+enough+timeline,+the+survival+rate+for+everyone+drops+to+zero)

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2010/12/10_Investors_Intelligence_-_Important_Bull_Bear_Chart_Watch_Out!.html