Sunday, August 2, 2009

Oscillators appear to be diverging once again

I did not re-buy those SPY puts as I pondered I might on Friday. Here's one of the reasons why.

We appear to have a divergence setting up between the Short Term & Long Term Chicken Oscillator. The STCO is bleeding off while the LTCO remains pinned in overbought territory. This is a set up I've mentioned a number of times including this recent post.

Many times I see this occur during a sideways consolidation as price is preparing to make another lurch higher. It doesn't mean there's not some downside to come on Monday - it just means I'm on guard for classic cheat waves to the upside until I see the long term oscillator get un-stuck. When that happens, the signal will be clear and the risk of entry will be more suitable for my taste. I never mind being late to a party - or anywhere else for that matter since I live in LA.

Here's what it looks like on the /ES.