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Good morning Traders,

In this fractal market, where individual time frames break down
into disparate signals, we find ourselves in the vortex
of the mid and short term.  As we’ve been discussing, this wall of
worry has been developing.  There’s a question as to whether the worry was
real (North Korea) or just the dominant strategy of the day (to buy stocks
concurrently with options as protection).  And throwing in options
expiration into the mix, which is a non emotional, calendar driven event, we’re
playing the waiting game.

From a chart perspective, resistance is coming in as it should:

qqq

And the bearish projection is for something much akin to the March 2000
‘crack’ that set in stage the bear market which initiated that September
1st.  These gaps will get filled – and much more.

But in the short term:

dsb st

We have conflict with the mid term barometer (which was designed to get us
out of the short term noise and reduce trading activity, but maintain
profitability as the mid term moves are the most profitable):

dsb

But what’s driving this wall of worry?

equity options

So it’s hard not to see the market trying real hard to lift here – unless the
move is very inefficient – whereas the indicator moves higher but prices do
not.

And timing is the key – and what we’re all about.   To help us
with this, here are our forecast and our cycle update:

forecast

cycles

So we have some confluence of indicators aligning for a move lower this
September.  But for that to happen, we’ll need to see more complacency
or more selling.  Otherwise, the wall of worry will dominate.  The
mechanics of the market, i.e. put buying to an extreme puts a floor on stock
prices and can cause prices to rise as these positions are lifted.  And
liquidity is a double edged sword – which cuts equally as hard when selling
programs dominate the action.  And we’re beginning to see some evidence of
that.

So maybe I should have titled this article “hurry up and wait” instead of
“this is where the rubber meets the road” but the two are approaching a point in
time where we’ll either have to change our position or be rewarded for our
perseverance.

Have a great Thursday.  Expiration is tomorrow (though VIX options
turned over yesterday) and I expect the effect of expiration to carry over into
mid next week.

Regards,

www.stockbarometer.com

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