Channel SurfingFebruary 5th, 2009 10:16 am Intraday Update 147 Comments
UPDATE 10:12am EST: The green scenario increasingly appears to be playing out:
http://evilspeculator.com/wp-content/uploads/2009/02/2009-02-05_channel.png
Watch this channel, which seems to be well defined - if you’re out of the market be patient and wait for a break. Chasing the tape never works and you will get burned - MMs just love to take you to the woodshed if you sell into weakness.
However, I’m keeping my eyes on the NQ futures this morning which have stubbornly remained above VWAP and are pushing a bit higher. YM and ES look sickly and the Yen is just ing around - not sure which way it wants to go. But if the NQ holds (and it has thus far) we might be in for a little surprise to the upside. The level to watch there is 1202, which is the S1 pivot.
UPDATE 10:35am EST: Not to pad my own shoulder, but is my timing spot on or what? http://evilspeculator.com/wp-includes/images/smilies/icon_wink.gif
UPDATE 10:45am EST: SWEET! Gap has been filled - loving this - bear trap from hell. Don’t say I didn’t warn you.
UPDATE 10:49am EST: Watch the 830 level on the ES as that one appeared to pose much resistance in overnight trading. If we breach that one we might bust higher substantially. Not sure we will, but watch that level.
UPDATE 10:57am EST: Judging by the silence in here it seems a bunch of bears just got caught in a trap. Yup, greed will get your ass every time. Come on, ladies and leeches - fess up! What are you doing?
UPDATE 11:31am EST: Well, I’m 50% unhedged now - waiting for some profits (thus a drop) before I consider going all delta negative. I’m sure we’ll get another scare to the upside, but this was as good as any level to leg out.
Eat Shit Mole!February 4th, 2009 9:37 pm Market Forecasts 128 Comments
The title of this posting is actually a message to myself. Let me explain:
http://evilspeculator.com/wp-content/uploads/2009/02/2009-02-04_update_spx.png
I was smart enough to load up on those February puts today but I also sold puts against them, expecting more upside later in the day. My thinking process was that we might start dropping perhaps and I would scale out on a little bounce. Only problem was that we never got a bounce anywhere near the top and I wound up riding it down hedged.
This happens to traders several times in their careers and it’s a huge psychological trap. As you see the market plunge it’s very tempting to un-hedge yourself. But you know exactly what’ll happen if you do that - the second you legged out of your short side the tape starts whipping up again. We all have been there and it sucks.
There is only one solution, which is to pick your next best poison. As there are no guarantees that the market will not suddenly reverse you at least need to raise your odds by legging out on a rip - whenever it comes. No market drops forever without taking a pause and you have to wait it out - discipline is a core virtue of a successful trader. No ifs and no buts.
So, basically I have to eat shit and like it - until there’s an opportunity to crawl out of the hole and jump on the horse. How’s that for weird analogies? LOL http://evilspeculator.com/wp-includes/images/smilies/icon_smile.gif
I usually don’t do updates on Wednesdays but after today’s tape I decided to put one together telegram style - I’m already over my word count, so let’s get on with it:
Green: Looks likely at this point, despite the lack of participation this market is tired and wants to drop it seems. If this plays out we’re basically going to rapidly descend from here with only minor breaks.
Orange: Not the triangle scenario - just a variation on the motive wave 2 of intermediate (5). This means that there is a slight chance that today was the mother of all bear traps and that we’ll somehow rally up to complete a c wave. I know … I know - sounds unrealistic, but I’ve seen horses puke and thus we should never get too comfortable and be prepared to embrace possible alternatives. Anyway, we’ll know fairly soon as any rally attempt would have to start right around the open. If we drop much further this one is off the table.
FYI - the 10-day CBOE Call Put Ratio is still extremely low - this means that o.i. in call options heavily outweighs put options. We usually see this kind of stuff ahead of major drops.
One big fly in my ointment is the breadth on the Nasdaq 100 which closed around 1:1 - amazing, after a day like this. On the S&P 500 it closed at 1.2:1 negative - which is an ‘improvement’ but still pretty neutral. That and the lack of participation makes my head scratch a little.
http://evilspeculator.com/wp-content/uploads/2009/02/2009-02-04_bpnya.png
The NYSE Bullish Percent Index barely moved today - which I have a hard time interpreting. Obviously, there is plenty of space towards a bottom, at least based on prior lows which I have an inkling we’ll be approaching sometime this month.
http://evilspeculator.com/wp-content/uploads/2009/02/2009-02-04_nymo.png
Leaving the door open for a counter rally as well is the more medium term NYSE McClellan Oscillator. We are in slightly bearish territory at this point and the risk is actually towards the upside. Doesn’t have to happen but I’d feel a lot easier if we were sitting at 40 right now.
As I know what makes the Zero tick, I was looking at those components separately and I can tell you that there is very little participation and momentum going on. I actually cannot stress this enough - the readings were minimal and reminiscent of what I saw during the X-Mas season. So, although things look all bearish right now and many of you believe this thing is ‘in the bag’ - be careful.
Remember, just because you’re paranoid doesn’t mean they’re not out to get you http://evilspeculator.com/wp-includes/images/smilies/icon_wink.gif
There’s a lot more I could say about today but I got to run. See you tomorrow, rats!
February 4th, 2009 3:40 pm Intraday Update 112 Comments
UPDATE 3:38pm EST: If you’re like me and snoozed to unleg yourself at the top then you’re waiting for a ‘dead cat bounce’ to drop the short side of your hedge.
http://evilspeculator.com/wp-content/uploads/2009/02/2009-02-04_bounce.png
Since I’ve got channels galore today here’s another one. I think that we’ll have to bust through this and estabish higher highs before I feel comfortable cutting off my short leg. Arrrr arrrrr, and a bo’tle of rum, mateeey!!!
David Viniar - this one is for you, baby!
I’m still laughing watching this… LOL … sniff… sorry folks…
UPDATE Closing Bell - 3: I saw something nasty in the woodshed:
http://evilspeculator.com/wp-content/uploads/2009/02/2009-02-04_ndx_b.png
Let’s not get too giddy. I’m NOT saying this is what’ll play out. But looking at the NDX I see breadth around 50/50 right now if you can believe that. This could just be the mother of all bear traps. Further evidence is needed and I think the next bounce will give it to us.
However, we are about to close below 8000 on the DJI - unless some miracle happens in the next 180 seconds.
Show Your CardsFebruary 4th, 2009 1:44 pm Market Forecasts 114 Comments
UPDATE 1:44pm EST: We just broke that channel - could this be it?
http://evilspeculator.com/wp-content/uploads/2009/02/2009-02-04_channel_2.png
UPDATE 2:00pm EST: WOW, what a drop! I think we are now stabilizing around 830, which is an ES pivot. Some folks are surprised that the Zero is not signaling - I know - I’m surprised too. But having written the damn thing I also know what it’s comprised of. And thus I can tell you that market trend sentiment does not reflect the change in price - on both sides of the extreme. What I’m seeing is extremely thin - a lack of participation, if you can believe that.
UPDATE 2:08pm EST: Now this is the scary part:
http://evilspeculator.com/wp-content/uploads/2009/02/2009-02-04_yen.png
What do you think will happen once the Yen actually starts to rally?
UPDATE 2:49pm EST: You guys have got to see this:
So, let me get this straight: Free cash without strings attached was desperately needed last fall, as we were told the financial markets as we know might come to an end? But the very day President Obama announces pay caps for bailed out firms they’re willing to return those funds?
I’m not even going to go on rant here as the sheer cynicism in this is blatantly obvious. I’ve said it before and I say it again: The TARP was/is nothing but a fleecing of the public purse - a financial coup if you will.
Disgusting!
February 4th, 2009 12:49 pm Market Forecasts 33 Comments
http://evilspeculator.com/wp-content/uploads/2009/02/2009-02-04_channel.png
It’s amazing how well my channel has played out - this is another chart we should keep an eye on. A breach of the lower channel line would also roughly coincide with a swing below the ES 841.75 R1 pivot (give or take a few points). But until we cross this channel let’s not get too exuberant and jump to conclusions.
http://evilspeculator.com/wp-content/uploads/2009/02/air-cargo-airmail-image-007.jpg
853 Please!February 4th, 2009 10:33 am Intraday Update 131 Comments
UPDATE 10:11am EST: Booo-yaaah!!!
http://evilspeculator.com/wp-content/uploads/2009/02/2009-02-04_853.png
We’re getting closer to 853 - at which point I’ll be grabbing a boat load of Feb/March SPY puts. Gold still not following equities - so far so good but it stubbornly clings above the 900 line.
UPDATE 12:34pm EST: So, I’m already sitting on those Feb puts but am hedged right now - so no cookies just yet. I suspect we might get a late day rally, especially after looking at the NDX:
http://evilspeculator.com/wp-content/uploads/2009/02/2009-02-04_ndx.png
As you probably noticed, the NDX is leading this advance and today stopped but a few ticks below the Jan 28 high. Now, EWT rules only state that we should not breach the high of the higher degree wave - in this case 2 of (5). However, we should also consider that the Jan 28 high might have been only wave A of 2 of (5) and that we bust higher to reach A-C equality. That would get us fairly close to what we are now considering the top of intermediate wave (4) and this is our line in the sand.
So, it’s worthwhile watching the NDX in the next two days as it’s the leading index and since its wave pattern seems more developed. It’s possible to have discrepancies between indexes in the wave count but I don’t think we’ll see something completely different play out in the SPX/DJI than in the NDX. Finally, a 2 day close below the 8000 DJI should be a ‘tell’ that we’re on our way to the downside.
I’m sitting here now hoping for a rally as I didn’t think we’d drop so quickly from the top - but that’s exactly how things often play out. Had it not been so early in the day I would have remained unhedged but I do believe this move down could be just another shake out and an opportunity for the bulls to reload. We’ll see - the Yen is pushing up pretty hard right now and maybe I missed the golden spot. Then I will have to scale out of the short side of my puts at the next best opportunity, which is always a rip, not a dip.
February 3rd, 2009 6:31 pm Market Forecasts 152 Comments
We’re almost there - I can smell it:
http://evilspeculator.com/wp-content/uploads/2009/02/2009-02-03_spx.png
On a very short term (minuette or smaller) degree I am counting an abc-x-ab, which hopefully will be followed by a nice long c wave leading to 853. I didn’t un-hedge yet as my stochastics promised a bit more of that coveted upside. So, here’s a call out to all you perma-bulls: Please push the tape higher - you can DO IT! http://evilspeculator.com/wp-includes/images/smilies/icon_smile.gif
Nothing else has changed really - same evil plan we’ve hatched over two months ago. Hopefully soon will come Igor’s time to pull the switch. Here’s something to get you in the spirit of things:
So the formula here is pretty simple. Uncover at the next fibonaaci line - see if it breaches. If it does - cover again and wait for the next one. Frankly, I have no idea how high this thing can go - usually it goes higher than you think. If we breach the Jan 28 high than the green scenario might not be unfolding yet and I would happily load up on more puts around 900/920.
Gold behaved today after an early morning scare - I’d feel more comfortable to see some distance between my enty and where it’s trading. However, the fact that it did not participate in the early morning push upwards is promising.
TLT at 102 now - I feel like an idiot having sold mine at 110 - jeeezzz.
The Dollar painted 9 waves to the upside and then dropped hard today. A count of 9 is fine for a motive wave and perhaps this is wave A of a corrective pattern.
All I got for tonight - as I said - we’re getting close. Your mission now - should you choose to accept it - is to somehow pick the best spot to leg out (or load up for some of you rats) without incurring too much of a loss in any ensuing whipsaws. I was lucky last time when I bought puts at 944 - I don’t expect to be lucky twice in a row and will cover immediately if I sense any monkey business. Anyway, I’ll be around to keep you guys in the loop.
No, you won’t be tested http://evilspeculator.com/wp-includes/images/smilies/icon_wink.gif
Cheers!
ConvergenceFebruary 3rd, 2009 1:43 pm Intraday Update 165 Comments
UPDATE 1:37pm EST: I was just poking around in my charts (being bored to hell and all) and uncovered this little jewel:
http://evilspeculator.com/wp-content/uploads/2009/02/2009-02-03_nyud.png
Maybe this means nothing, but when three different moving averages converge to a singularity the evil part of my brain is taking notice (it’s a large section). Worth noting is also where this is happening - we are basically in neutral territory here. A big move is unfolding and that sooner than later, and based on what I’m seeing this situation usually resolves to the upside. However, I’m open to other interpretations - anyone got an epiphany looking at this?
BTW, as I’m typing this the futures just jumped - maybe my keyboard is somehow triggering the NYSE to move. You know like the butterfly triggering a hurricane chaos theory - be afraid - be very afraid….
UPDATE 2:00pm EST (for real this time): Exhibit B:
http://evilspeculator.com/wp-content/uploads/2009/02/2009-02-03_indexes.png
My stochastics suggest that we might be busting higher - could it be we’re getting 850 after all? Whatever - just get on with it already! http://evilspeculator.com/wp-includes/images/smilies/icon_wink.gif
UPDATE 2:06pm EST: Quote of the day #2:
One day the Fed’s going to try and kick that can down the road and painfully realize thet its filled with cement.
I think that day is rapidly approaching.
–
LOL - I thought Karl’s quote couldn’t be beat today but I think Jeff pulled it off.
UPDATE 2:47pm EST: After much mental anguish I decided to block CNBS08 - his comments continued to be unproductive, aggressive, and generally a mental distraction. Thus I fear that his presence will negatively influence the quality of this blog as well as the attention of some noobs. I know some of you guys will disagree but frankly I think this blog will be better without him. Too much noise and drama - I have zero tolerance for that.
Listen, I get bent out of shape myself every once in a while but I do cut people a lot of slack when it comes to wasting bits on this digital dungeon of doom. But make no mistake - my focus here needs to remain razor sharp as this bear market is the opportunity of a lifetime. So, if I see a consistent eye sore that’s detracting me (or others) from my mission to milk this puppy for all it’s worth then I have to take action.
Let’s not forget that he’s still welcome to listen. Decision final - if you disagree - you’ll get over it. If you agree - let’s not rub it in and move on. Thanks guys.
UPDATE 3:06pm EST: Daytraders - check this out:
http://evilspeculator.com/wp-content/uploads/2009/02/2009-02-03_yen.png
I’ve seen the opposite happening but not this. Anyway, YM and NQ are breaching R2 and R1 pivots - pushing up higher right now.
Heading For The HillsFebruary 3rd, 2009 10:38 am Market Forecasts 144 Comments
UPDATE 10:39am EST: I’m looking at the tape of the past two days and am not liking what I see. There is a battle going on to recapture 8000 on the Dow but there is little momentum going either way right now. On top of that I do expect a correction to the upside so I took (small) profits on BIDU and GOOG right at the low - sometimes you get lucky.
I need to supress my urge to act and wait for the right moment to take action - this is not it. The plan is to make a move at 800 or at 850 - everything in between is just razorblade whipsaw and noise.
FYI - we are above VWAP on the three index futures food groups (YM/NQ/ES). Yen looks overbought on a short term basis (1min correlation chart) - I suggest you treat carefully if you’re delta negative.
Don’t worry rats - our time will come - but we can’t force it.
UPDATE 11:00am EST: Here’s some mental masturbation for you rats - as I know y’all like pretty pictures.
http://evilspeculator.com/wp-content/uploads/2009/02/2009-02-03_channel.png
V for Vendetta!!! Well, let’s see if this turns into some symmetrical counter channel. Yeah, yeah… I know - how German of me, but I like order in my trading universe…
UPDATE 11:08am EST: FYI - we just touched 8000 on the Dow again.
UPDATE 1:00pm EST: Pretty uneventful day thus far, but the channel I proposed seems to be holding. I was sweating there around 825 but we bounced back up. That doesn’t mean it’ll play out this way - it’s just a probability based on prior observation - call it a guess at best. As I’m typing this we’re suddenly dropping down hard to retest the channel edge and the VWAP on the ES and the YM. This tape seems to be going nowhere - feels like it’s engineered by the MMs to generate some buying/selling - sorry if I sound like a broken record. However, worth mentioning that the breadth in the SPX is 1.3:1 advancing right now and about the same in the NDX. I’m only exposed on the GLD front and hedged otherwise and that’s working well for me right now - after a little early morning scare - LOL http://evilspeculator.com/wp-includes/images/smilies/icon_smile.gif
BTW, yields are still crawling to the upside, much to the chagrin of Mr. Bernanke. What’s next, Ben? Surprise us… (never mind that).
UPDATE 1:15pm EST:
The end of the rope for this generation has been reached and it is a long way down.
– Karl Denninger
A Little QuickyFebruary 2nd, 2009 11:51 pm Market Forecasts 71 Comments
Let’s do a quick update to keep you leeches ahead of the game:
http://evilspeculator.com/wp-content/uploads/2009/02/2009-02-02_spx.png
Today’s tape was a royal pain in any rat’s rectum - whipsaw galore and we didn’t really get anywhere. Noteable however was a close below the 8000 line on the Dow Jones. Frankly, I don’t think it’ll hold (for now) and I expect a bounce here, probably starting tomorrow. Accordingly, the green scenario seems to be playing out as planned and we should complete {2} of 2 of (5) later this week. Let’s zoom into this thing:
http://evilspeculator.com/wp-content/uploads/2009/02/2009-02-02_zoom.png
I haven’t seen this chart anywhere else, so I wanted to bring it to your attention. Note the channel we’ve been following since the Jan 28 peak. Today we breached it, then there was a retest to get back in, which failed and led to a late day rally which constitutes a clear detachment from the channel. One could even make out some kind of double bottom, but this pattern is way overused and I don’t want to push my luck.
For the record - although I’m holding some puts I’d be happy to take a hit on them tomorrow and see a strong rip to the upside. My motives are less altruistic of course as I’m looking for a good spot to leg out of my hedge and return to my old negative self again (delta-wise that is).
If we push higher my target remains the ‘magic’ 850 zone - I’d settle for 840 frankly and if we push higher we should count our blessings.
http://evilspeculator.com/wp-content/uploads/2009/02/2009-02-02_cpc.png
The CPC has gone completely loco as of late - we’re seeing manic swings into bullish territory one day, back to neutral, and now back to pretty overbought levels (low number means less puts in circulation than calls). Historically these extremes only happen after a sizable rally (40+ points or so on the SPX - 300+ in the DJI) but NYSE breadth was negative all day, so I can’t really explain it. This however does mean we should continue to drop - either after a counter rally or immediately. We shall know for sure very soon - I hope for the former as it would give us an opportunity to ride the slide into the abyss in style.
Dollar: Has consolidated a little, as expected and should complete its motive wave to the upside. Target: 88.
Gold: Has played ball thus far - actually made up for some of today’s whipsaw - who would have known. I don’t trust it yet however - it doesn’t have any business being above 931 and if it breaches that level I will scale out of my GLD puts fairly quickly (I hope the MMs don’t read this - LOL).
TLT: I think we’re due for a large bounce here - I put in an alert for 106 - will pick up some calls there.
My BIDU and GOOG puts were hit hard in late trading - that was some tough love. I’ll monitor the situation and probably cover them or cut and rebuy if it looks like we bust higher tomorrow. I still think they’re due for a sizable drop.
That’s all for tonight - I want to see a few good symbols tomorrow - surprise me http://evilspeculator.com/wp-includes/images/smilies/icon_wink.gif
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February 2nd, 2009 3:19 pm Market Forecasts 72 Comments
UPDATE 3:16pm EST: Let’s not forget what the main trend continues to be, despite all the nasty whipsaws:
http://evilspeculator.com/wp-content/uploads/2009/02/2009-02-02_momentum.png
Even if you don’t trade the Zero’s trade alerts, IMHO this alone is worth looking at on a daily basis. Unless we see an upward spike that sticks around and continues the trend remains down.
Gap Filled!February 2nd, 2009 10:36 am Market Forecasts 122 Comments
UPDATE 10:34am EST: That was a nice gap fill - hope you didn’t get hit by the tip of that whip.
http://evilspeculator.com/wp-content/uploads/2009/02/gap.jpg
Let’s see if there’ll be some follow through going forward.
UPDATE 12:04pm EST: I closed a few short positions which went from nicely profitable to okay profitable. This happens when you try to blog, trade, back test, get a quote on a new data feed, chat with fellow traders, etc - LOL. Well, after the gap down the buyers seemed to have taken control and thus far the YM, ES, and NQ remain above their respective VWAPs. The Yen has been falling apart and shows little strength - perhaps that double top someone mentioned is forming.
UPDATE 12:15pm EST: I find it interesting that Gold is not participating in the equities rally.
http://evilspeculator.com/wp-content/uploads/2009/02/2009-02-02_gold.png
Is it possible that this line will actually hold this time? Perhaps three times is a charm when trading Gold.
UPDATE 1:30pm EST: What you are seeing in action here, ladies and leeches, is the Slope Of Hope in action. This is how it feels, smells, and looks like.
Investors/traders are frantic and are being herded from one direction to the other. Once they are completely wiped out, disgusted, and are vowing to never ever return to the stock market - then, and only then, will a new bull market begin.
We are not there yet by a long shot.
I would recommend you guys stay hedged and wait for critical lines to be breached. Thus far this starts looking a lot like the green scenario I described, although the rally was a bit more shallow than I expected. I actually really hope we get a nice juicy rally before we drop all the way. Would prefer to leg out of my hedge at the top, not at the bottom.
UPDATE 2:36pm EST: I’m liking BIDU and GOOG here as short candidates. Already got some puts on GOOG and am waiting for a little bounce to grab BIDU.
UPDATE 3:04pm EST: I’m glad I waited for BIDU as I already picked GOOG in an oversold market. Futures are trying another shot at the VWAP. If we breach we might get a late day rally.
FYI - if we rally hard from here we’ll probably complete a zigzag and hit 830. If we drop much further from here I think this might have been it. Of course various scenarios are possible but I don’t see much conviction by the bulls right now.
February 1st, 2009 7:09 pm Market Forecasts 110 Comments
Let’s talk about information overload today. I see a lot of fledgling traders struggle with this issue and I start seeing it creep into some of the exchanges here on the blog. It’s a natural phenomenon in that many folks driven to trading the markets happen to rank in the upper percentage slots on the IQ scale. Their intellect often becomes their curse in that they overthink the situation, assuming that the more information and more analysis they consume the better their profits will turn out to be.
My favorite analogy is the nerdy kid who’s got a crush on the hot redhead in 4th grade and is trying to muster all his courage to chat her up. He’s planned his approach for weeks, has gone through all the scenarios, maybe even asked a friend or two for advice on what to do. The more he thinks about it the more he freezes up, unable to make a move. What if she sees that pimple that showed up last night? What if she give me the bounce and I look like an idiot? What if…. ?
Then, while he’s still tormenting himself with various scenarios, debating what approach will work best, suddenly some other kids walk in the room, smiles at the girl and asks her out for a soda pop. Done - no big deal.
Now, the message here is not that dumb jocks make good traders - the point I’m trying to make is that often less is more. And I’m also not saying that you shouldn’t be prepared - on the contrary. But the key lies in figuring out what works for you and then stick with that. Reading ten dissenting reports on whether or not Gold is going to but higher or drop off the plate is not going to help your case - it’s probably going to frustrate and confuse you. It all comes down to what I keep referring to as ‘noise’ - which is the bane to any trader’s existence.
What makes it even worse is that it makes you ‘feel’ better about whatever you wind up doing. Now you have ample ammunition to defend your winners and plenty of scapegoats to blame your losers on.
“I knew I shouldn’t have listened to that idiot - next time I know better.”
Yeah right - information overload paired with mental masturbation appears to be a national past time these days. People immersed in their crackberries even while on vacation, the volume of instant information we have access to has grown exponentially in the past decade.
Now I ask you this - had you not been able to watch CNBC, read Marketwatch or Bloomberg, listened to the radio, or had have any access to market analysts - if you had only access to your trading platforms and your charts - would you have made the same or different trading decisions? Would you maybe even have done better?
I cannot answer this question for you but I have for myself a long time ago. Which is another reason why I started this blog - to fade out the noise and the confusion. Just the charts - and just the info I know works and has produced results for me in the recent past. If for instance some market correlation breaks, then I ignore it until it works again. Have you guys heard me talk about the TNX/equities correlation as of late? Exactly - no, because it’s broken right now (for reasons I know but that really don’t matter).
Less is more people - let’s stop the mental masturbation right now. Debating why Kramer is an asshat or not, as much as it may be, is not going to lead to you banking any coin, probably on the contrary (maybe if you take the opposite side of his trades - LOL). Let’s focus on looking at what we know has worked for us: technical analysis, trend probabilities, the wave cycle, statistics (i.e. retracement levels). I know all those are debatable, but thus far they seem to have treated us nicely. Why bother listening to the pundits out there?
http://evilspeculator.com/wp-content/uploads/2009/02/2009-02-01_update_spx1.png
The wave count has not changed dramatically - the main difference being that I have kicked the triangle scenario to the curb as the difference between a triangle and a wave (5) count seem to be academic. Short term we are due for a bounce as equities are heavily oversold - not necessarily a large bounce but I think we’ll push higher either Monday morning or Tuesday after some sideways action.
There are now 2 1/2 scenarios on the table:
[*]Again, the green and orange lines now both depict the same wave count - we are in minor 3 ofintermediate (5) and are scheduled for a hard landing below the November 740 low (around the 9th). I wouldn’t give the green scenario much further than 850 to get back on track, which also appears to be a congestion zone for various Fibonacci lines.[*]The orange line is a variation of the green scenario and has us push a bit higher - thus completing equality of an a/b/c. End result would be the same - we are taking the express elevator into the abyss, but only a week later (around the 16th).[*]The blue scenario is still a contender as it’s not impossible to imagine some irrational exuberance to lure the perma-bulls out of hiding again - perhaps the ‘hope du jour’ in the form of a creation of a ‘bad bank’ (you couldn’t make this stuff up - I swear) would be the catalyst for a good old fashioned dip buying frenzy. Never never under estimate the mouth breathers…I have not labeled this chart with action items as all of you guys know the drill by now. If not - just take a look at last Sunday’s update. In any case, I will obviously let you guys know when I take action - remember that I am still holding those March/June puts and covered them around 820 by selling puts against them. I might actually start loading up on more March puts if we reach 890 - 900. If that doesn’t happen I plan to leg out of the short side of my puts once we breach 800 (i.e. buy back the puts I sold to hedge myself).
http://evilspeculator.com/wp-content/uploads/2009/02/2009-02-01_update_spx_weekly.png
Here’s another reason why I think that we’re do for a little bounce right now. We just closed down for the week four times in a row, which increases the probability for weekly gain. This would actually be the perfect scenario. Push up to relieve the oversold condition, reload, and then watch the market descend into the abyss. That would work fine for me, thank you very much. Whether or not we get such a treat remains to be seen.
Yet another reason why I think we’re due for a little bounce is that the spread between the 30-Year T-Bond yield and Moody’s BAA Corporate Yield has dropped from -4.9 to -4.3 as of January 28th. I am not putting a huge amount of weight on this spread right now due to the ongoing dislocation in the bond market but I wanted to throw it out there as it might feed into the blue scenario (i.e. flat ending around 1020 on the SPX).
BTW, in that context - bond traders did call Bernanke’s bluff as long term yields have actually shot up instead of dropping after he announced that the Fed would start buying the long end of the yield curve. And if you wonder what I mean about a ‘dislocation in the bond market’ take a look at this applet visualizing the yield curve changes since 2001.
http://evilspeculator.com/wp-content/uploads/2009/02/2009-02-01_dow.png
You might have noticed that the Dow Jones closed at 8000.86 on Friday - after trading below that mark for quite a while. Some folks with Level II feeds reported that there was some monkey business going on (bids not being taken), and I’m not surprised as a close below 8000 would have looked even worse as a weekly or monthly candle. I think we’ll need a bit more ‘juice’ to breach through this level - right now we’re a bit too oversold (4 weekly closes to the downside). I’m not saying it’s impossible and maybe I’m in for a surprise in a few hours from now but look how often we’ve bounced off of this support shelf. This is a line the bulls intend to hold at all cost. If it breaches I would expect a lot of bots to kick into overdrive and initiate massive selling. So, keep your eyes on this level…
http://evilspeculator.com/wp-content/uploads/2009/02/2009-02-01_crack_spread1.png
I never counted waves on the crack spread but is starting to look like a familiar pattern - so I can’t help myself. We even got that large drop I talked about about two weeks ago. Now it’s off to the races and I’m getting pretty antsy about shorting some of those refiners. I propose we correlate good old TA on our favorite victims with some weakness in the crack spread.
http://evilspeculator.com/wp-content/uploads/2009/02/2009-02-01_gold.png
Gold has been utterly invulnerable to the voodoo curse I put on it last month but when it touched my last line of defense I couldn’t help but to grab a few more GLD puts. This will be pretty clear cut going forward I think - if it breaches this it’ll probably shoot towards 1000. The gold bears (i.e. bullion banks and the primary dealers in collaboration with the Feds) will most likely put up a fight at this line. Maybe they wait until we get closer to 1000 to lure in a few more gold bugs. But I don’t think they’ll let the shiny metal bust to the upside without a fight. There are a lot of TOMO/POMO funds that are dedicated to keep Gold from competing with the mighty buck.
Let me finish with pointing you to a fellow blogger who wrote a fine piece aptly titled ‘
Oh, and before I forget: GO STEELERS!!! http://evilspeculator.com/wp-includes/images/smilies/icon_smile.gif
UPDATE: Thank you Harrison and Holmes! Congrats to all you Steelers fans!!
See guys - I don’t just call the market - I call Superbowl games now too http://evilspeculator.com/wp-includes/images/smilies/icon_razz.gif
January 30th, 2009 2:26 pm Market Forecasts 229 Comments
UPDATE 2:17pm EST: IF we hold the 832 level on the SPX, which is 61.8% fib line I drew yesterday, then I have reason to believe that we might rally up to 920 next week.
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-30_spx.png
Perhaps what Eric is seeing in his XLF analysis is an early warning sign. Again, the close is almost two hours away and if we drop from here we might continue our trajectory downward. But I wanted to give you guys an early warning to at least hedge yourself for the weekend. Maybe sell some puts against the ones you’re holding - or take profits.
UPDATE 3:30pm EST: Looks like CatBird got his wish and the market dropped - good for you mate. The Yen is still wrestling with the R1 pivot - it seems that’s the Berlin wall for now - watch towers, moat, and crocodiles included.
We are closer now to the 78.6% mark - still a possibility we rally from here, but the pattern is weakening a bit now. Just FYI - I think being hedged over the weekend is not the worst idea still.
UPDATE Closing Bell: Well, that was an interesting and productive week - only regret I have is not being able to trade most of yesterday. I’ll be posting my forecast on Sunday afternoon - in the meantime take a lookgreat analysis as usual.
Favorite quote: “Charlie Gasparino was trotted out by CNBC to claim that some sort of deal was imminent”. LMAO http://evilspeculator.com/wp-includes/images/smilies/icon_smile.gif
UPDATE 7:02pm EST: Okay, since everyone here seems to confuse Karl’s analysis as mine - NOT SO! People - I was not suggesting to take Karl’s SPX targets at bare value - just wanted you to read his analysis of the Fed’s meddling. In my mind he’s more of an economist than a trader. Obviously I continue to follow the scenarios I outlined for what - 2 months now?
Please VoteJanuary 30th, 2009 11:43 am Market Forecasts 197 Comments
UPDATE 11:43am EST: I see only 36 votes on the latest poll and majority picked the joke response. Seriously - has everyone given up on the Zero or what’s going on?
UPDATE 11:50am EST: Gold baby - GOLD!
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-30_gold.png
What you think guys? I’m trying my luck at yet another gold short. I think that this resistance line should be difficult to overcome - if it breaches it’s probably off to the races for the precious metal.
UPDATE 1:12pm EST: Let’s throw up a quick fib:
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-30_spy.png
If 84.1 doesn’t hold then I think 84.85 is in the cards - the dip buyers took their chances at 83. Nothing unusual IMHO - after two days of dropping like a rock a little relief rally is what we need.
UPDATE 1:42pm EST: Looks like the 23.6% fib was all the bulls could muster. We just made new lows but I’m staying out as the signal is weak. However, we might see some fireworks soon as the Yen just pushed above its R2 resistance pivot (1.1155) and it’s only at its 60% short term stochastic.
January 30th, 2009 10:10 am Market Forecasts 124 Comments
UPDATE 10:05am EST: So, we got our obligatory fake-the-open whip after which we dropped nicely. Last night I did the right thing by actually simulating taking an earlier ETA yesterday afternoon as the tape touched 846. However, when whipped up I was hit by a surge of recency bias and cut one contract - I could be sitting on double profits now. No excuses - I’m pretty steamed - if you think I’m tough on you guys - I’m a lot tougher on myself.
Anyway, take a look at this:
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-30_yen.png
You know that Yen/ES correlation chart by now. Is this another bear trap or a sign of major weakness. The Yen has been dropping along with the ES futures - bad sign for equities. Are we lured into a trap or into the elevator to riches?
Cake or Death?
UPDATE 10:20am EST: Recently I keep seeing comments along the lines of‘Mole - you are a rock star’ or ‘Mole - you rule!’, etc… Now don’t get me wrong - I’m respond to praise as well as the next guy - but I also have been influenced by Zen teachings long enough to realize that such praise will only serve to built my ego and in the end might become the source of hubris, arrogance and finally my demise.
Let me be very clear about something: Since I was a kid I despised gurus and the core of my existence is based around a secular mindset and the idea that each human being has great potential that can be fostered and thus led to excellence. In other (non fancy) words - if you really want something badly enough you will succeed - as long as you know that there are many sacrifices on the way.I don’t believe that any other human being is less special or less deserving than I am - or you rats!
My intention here is not to accumulate a bunch of trading disciples - if you want that kind of thing - well - there are a few blogs I can direct you to. My goal - no my mission - is to produce a community of highly knowledgeable and profitable traders in order to give non professional traders (i.e. the ‘rats’ analogy) a chance to succeed in this crazy market. Did you know that 9 out of 10 people who try their luck at trading lose their capital and give up within the first year? Those are some sobering statistics, n’est-ce pas? Pair that with a deflationary low interest environment in which many casual investors are forced to try their luck at trading, in this market, and you can take the aphorism of ‘taking candy from a baby’ to a whole new level.
Only by banding together we can succeed in our battle against the Wall Street illuminati. Those guys get all the breaks (obviously) and they know all the tricks - plus they have the power to shift markets their way - the past month is a tribute to that. We have to all be smarter, more nimble, and simply better than they are. I know those are some lofty goals, but if we work together we can become a force that is larger than the sum of its parts. Think about that please - because this is what EvilSpeculator is all about.
Now, cake or death? http://evilspeculator.com/wp-includes/images/smilies/icon_wink.gif
UPDATE 11:01am EST: Symbols people symbols!!! What are you trading? Chop chop! BTW, I did get a good fill on NVDA this morning - it’s rolling nicely right now.
UPDATE 11:13m EST: Yen just pushed above its VWAP and is just pushing above the 25 line on my short term stochastic (see 1st chart above). It however bounced off the R2 pivot once more - if we see it push above the 1.1154 level we might see some fireworks today.
BTW, I see only 36 votes on the latest poll and majority picked the joke response. Seriously - has everyone given up on the Zero or what’s going on?
Calculitious!January 29th, 2009 6:25 pm Market Forecasts 119 Comments
You guys held up well without me today and I think it’s time for a little reward. I already mentioned that I was doing a lot of trend trading before this market turned so volatile. FYI - as you might imagine trend trading becomes a lot more difficult when implied volatility is on the rise:
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-29_iv.png
But when I was still chasing long term discretionary trend trades I also became a big fan of pyramiding. No - we’re not talking about a pyramid (ponzi) scheme a la Madoff - I’ll teach you that one later http://evilspeculator.com/wp-includes/images/smilies/icon_smile.gif
What I’m talking about is a popular technique of stacking additional units (i.e. positions) on top of your first one as the trade goes in your favor, therefore confirming the trend. The way to do that is to decide on some kind of price interval at which you add to your additional ‘units’. The turtles used a 10-day ATR (average true range), which is an expression of how much a stock moves on average within a 10 day range. That number becomes ‘N’ - the number you multiply by whatever risk ratio you prefer. Pick something else if you like but ATR has treated me very well in the past.
Depending who you asked the turtles used either 1N or 2N as their stop - there’s also talk that they used 1/2N on the first day and then bumped it up to 1N or 2N but I tried that and it got me kicked out of trades very quickly.
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-29_pyramid.png
The best way to explain this and really understand it is to look at an example. For instance, I grabbed AAPL before the close at a spot which I think might lead to some downside - tomorrow’s tape will show me whether or not I should have my head examined.
The first thing I look at is the 10-day ATR, which in this case is 3.7. However, I screwed up here and actually picked the 20-day ATR, which is 4.3 - so sue me! Now what I have to decide on are my stop and the pyramid interval. Usually I use a 2N stop but since there is a resistance line I decided to use a 1N stop. My plan is to add 2 additional units at a 1N interval if the trade goes my way.
The calculation for all this is on the chart - I set an alert (i.e. mental stop) in TOS at 94.95, which is 4.3 points away from my entry (1N). If that gets hit I will cut my position. I also set an alert at 88.5, which is where I would add my 2nd unit - probably the same strike, as I want the first one to pay for the second one. Ahaaaa - I think some of you just had an epiphany! http://evilspeculator.com/wp-includes/images/smilies/icon_wink.gif Finally, the new unit also needs a (mental) stop, and based on your trading system you either set the stop for all your units to the next stop point at 92.8, or you leave your original stop for the first unit in place and also set one for your 2nd unit. The impact of that is a different discussion and I don’t want to confuse you today. Same game for the third one - if 84.3 gets hit we add one more unit and also set one more stop at 88.5
Now, the idea here obviously is to ride a trend as it unfolds - the further it goes your way the more you add and if you are lucky you sit on three or four units as the underlying stock keeps moving your way. The maximum for me has been 5 units and only when the trend was unidirectional, fast, and clear. The result - less initial risk and compounding profits!
The problem here of course is that all this math makes your head spin and it’s almost impossible to do this while you’re trading. And even if you do it for the first unit you probably forgot your settings once the next unit comes knocking at your door. Heck, even writing this little intro was a piece of work!
But have no fear - evil Mole to rescue! Sometime last year I got sick of doing this by hand over and over again - although I’m actually pretty good in math - but I’m also equally lazy. So, I sat down and wrote a simple browser based JavaScript utility that does it all for me in an instant:
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-29_aapl_trade.png
All you do is to first select your stop and pyramid setting in the drop downs. Then you type in a symbol - it won’t go online and get the data - LOL - not that sophisticated. It’s so you know what the numbers belong to. then you select whether it’s a short or long trade - that’s important as it reverses the direction. Finally you type in the current ask price and the ATR. The rest is all done for you and all that’s left is to set your alerts (or stop orders if you like) in your trading platform. I usually only set one unit alert and the stop at first - after all you don’t know if the trade will go your way. Then you set the next alert when another unit is due.
The final task is to use jing or your favorite screen grabber to take an image of your trade setup and store it somewhere. I actually post it on a private blobspot site, which is password protected. So, when my alert hits I add my unit, then look up AAPL in my blog and set the next unit plus the stop alert based on the image. You ‘could’ recalculate it of course but that’s too much work and you never get the perfect entry anyway.
So, where can you find this coveted NCalc utility for which many traders would give their firstborn just to bask in its glory? Well, right here:
That’s it - it’s free to use for all you leeches - so you might want to bookmark that sucker. Remember that you don’t have to be a trend trader to leverage this tool. Just calculating your stop usually is enough of a pain, so this will do it for you. But it’s also a good tool for your own trading blog as you basically ‘commit’ to your trade when you place it. From then on it’s all in black & white and there’s no changing plans afterward.
One more tip - make sure you reload the page once a day as the date does not change automatically. The time however changes, so not only do you have a track record of your trade, you also know what date and time you placed it. Perfect for your trading journal/blog.
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-29_update_spx.png
Before I let you go, let’s do a quick review of today’s tape: The chart is a bit messy but don’t let that intimidate you - I’ll explain.
[*]The green line can now apply to the green or orange scenario - meaning either today’s highs (which I missed out on - grrrrr) were the top of minor 2 of intermediate (5) or it was the top of minor wave E of intermediate wave (4). If it was the former then we should keep dropping here and that pronto as we should now be in wave 3 of (5) - no more of frustrating whipsaw action. Gaps should only happen towards the downside, not the upside. So, we’ll probably know fairly soon if this one is playing out.[*]The orange line scenario would have us rally to the upside fairly soon, I think 840 is what I would be looking at, bringing us to our 900 zone which we have been coveting. This would also give us relative equality with the first a wave up and thus produce a nice a/b/c. Tomorrow or Monday is when it needs to happen, so this scenario is also due to finally resolve or walk into the sunset.[*]The blue scenario shares its path with the orange one until the separation point around 900. If we keep pushing past 920 it would be strike 1 for blue, and if we push past the prior 944 top then that would be strike 2. To continue our baseball analogies - home base would be at around 1020 - 1040. We would probably not get there in a straight line, so if this scenario unfolds expect more of this torturous tape we had to condone during the past week or so.Also note how nicely the two Fibonacci scales fit into each other - the 50% lines are overlapping and the 100% and 0% lines fit right inside centers of the large ones. I’m not sure what this means, but it’s worth mentioning as it is a tribute to how omnipresent and magnificent the ‘golden spiral’ really is. Sometimes you see something that has meaning - you know it instantly - you don’t know what exactly its meaning is, and sometimes it takes you a long time figure out. But when we see truth or something truly beautiful we recognize it instantly.
In that spirit I am dedicating tonight’s post to Leonardo Fibonacci. We all greatly benefit from his work on a daily basis, but rarely do I see a tribute to his work and his genius.
http://evilspeculator.com/wp-content/uploads/2009/01/fibo.jpg
‘A. Leonardo Fibonacci, Insigne Matematico Piisano del Secolo XII.’
January 29th, 2009 3:08 pm Market Forecasts 93 Comments
I just got back - looks like I missed out on a glorious day. Actually I wasted one hour standing in line to apply for a passport. Then they told me that I have to send in my citizenship certificate. NO WAY I’m doing this unless I have a notarized copy of the original. Can you imagine the red tape nightmare if it gets lost in the mail?
It was a nice ceremony though - can you believe over 6000 people attended it? There was basically a sea of people taking the oath - almost surreal. Anyway, I will put up some pictures later.
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-29_spx.png
Back to business - it seems the green scenario might be in the making here as this was quite a retracement. We are right at the 38.8% fib line but should keep dropping here soon if this one is playing out.
Let me get my bearings straight - I basically walked in here 10 minutes ago - need to check my charts.
UPDATE 3:24pm EST: I was almost shaking when pulling up XLU - I forgot to grab it this morning and I was prepared to see it have run away from me.
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-29_xlu.png
Looks like I missed out on a great entry but it’s still a viable entry, so I’m grabbing some puts here. Probably some OTM March or June puts - sometimes this one makes you wait.
BTW, I just skimmed through the previous discussion thread and must say that I’m proud of you guys. Dozens of great comments with substance - I’m very excited to see that this blog doesn’t fall apart when I’m gone, which speaks for the quality of our members. You know I can be really tough on people - must be my German upbringing. But I also believe in giving credit where credit is due and you guys kicked ass today. Congrats!
UPDATE 3:52pm EST: Buying Feb puts on AAPL, which wants to be at 80.
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-29_aapl.png
UPDATE 4:04pm EST: You guys cannot believe how frustrated I am. There were tons of great entries I missed out on today and I had to get into AAPL and XLU at less then ideal entries - couldn’t get filled with NVDA - bid/ask too nasty and not enough time to wear out the MM.
Well, it could have been worse - I could have been scheduled for the day the market decides to crash. But I missed out on a lot of potential short plays, so I feel a bit prickly right now.
However - I guess a U.S. citizenship is worth a few lost SPX points - so I’ll get over it http://evilspeculator.com/wp-includes/images/smilies/icon_wink.gif
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January 28th, 2009 3:25 pm Market Forecasts 154 Comments
UPDATE 3:15pm EST: I’m pretty much mentally checked out at this point. The Zero has been flat for the past 5 trading days and I remain hedged with a few nice longs in between. Was about to take profits on POT but I think it can bust higher. I might chime in later today if there’s anything imporant to report.
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-28_spx.png
We are at the 50% fib line on the SPX. So far I’m still looking at either the green or the blue scenario. Frankly, the orange scenario has lost much of its luster and although theoretically still possible I’m having grave doubts. I think you guys know the drill regarding the action points - if in doubt check yesterday’s post.
Short term I think we push up - so my favorite is the notion that we are in intermediate (4) still and that we might see new quarterly highs in all indexes. For green to play out we should not breach today’s highs - if we do I might kick that one to the curb as well. Process of elimination - something I learned as an engineer. Seems to serve traders well also.
For the record: Today was a great example of the old aphorism ‘Buy the rumor, sell the news!’
Cheers!
Where Do We Go Now?January 28th, 2009 12:17 pm Market Forecasts 137 Comments
UPDATE 12:12pm EST: Bullish sentiment galore!
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-28_cpc.png
Are we about to make new record lows in the CPC? If we rally from here to 920 or higher we probably will. OMG - this is going to be the shorting opportunity of a lifetime.
BTW, CNBS08 - you’re on a short leash - your contributions are not offsetting the conflict you create in here. Last warning - I mean it.
UPDATE 12:24pm EST: I took profits in NVDA:
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-28_nvda.png
I’m really happy here - that was a nice trade. The filling of the gap this morning was scary enough and although I think we might bust higher this is a good spot to exit for a discretionary trade.
UPDATE 12:18pm EST: I see a lot of back and forth here - some of the discussions even have turned angry. Can we please relax and just trade what we see? Everything else is just mental masturbation.
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-28_wedge.png
SPY: Yes, it’s a nice bearish wedge but that doesn’t mean it can’t go a lot higher. Never forget: the market can stay irrational a lot longer than you can stay solvent. Let’s just wait and see what happens and when. Usually things take longer to unfold than you want them to.
BTW, for the record - when I talked about a nasty wave (4) I wasn’t kidding - LOL - it’s been a tough few weeks. But we made money anyway - which is probably more than 90% of traders out there can say.
UPDATE 1:46pm EST: I was just about to post about XLU but damn T.K. already did an SDP post. I swear I did not read his post before pulling this - it’s part of my favorites list. Anyway, I’m looking to go short XLU soon - think it has a few more points to climb but maybe at the close today. I also like long: BGC, DE, WYNN.
UPDATE 2:16pm EST: Fed leaves rate unchanged. What a shocker http://evilspeculator.com/wp-includes/images/smilies/icon_smile.gif
January 28th, 2009 10:15 am Market Forecasts 109 Comments
UPDATE 10:13am EST: I expect the Yen to bounce back any second now as we just touched its S1 pivot (1.1195 on JYH9). But take a look at this:
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-28_beartrap.png
We gap at the open and then drop along with the Yen. Right…. we’ve seen that one before. If you’re bearish today, be careful - I think the trend remains to the upside.
Man Up!January 27th, 2009 9:10 pm Market Forecasts 111 Comments
This was the perfect day to run my errands and catch up with meetings - I didn’t miss a thing! Looking at those candles on the Zero chart I’m actually proud that it only got faked out once - and even then I hope you guys took some profits once that signal went flat http://evilspeculator.com/wp-includes/images/smilies/icon_wink.gif
I have to make a statement though and some of you won’t like it. When catching up on my favorite blogs I saw a lot of folks bitching and moaning about the recent tape. Consensus is that it’s been one nasty, spasmodic nightmare of a whipsaw.
SO WHAT??
One big lesson we need to learn is that the market will have it’s ‘period’ every once in a while (oh, I can already sense the shitstorm I’m unleashing with my female readers…. no, he didn’t just say THAT - did he??). Seriously, you want to be some bad ass trader who rides the bear into the abyss? Better know a thing or two about T-I-M-I-N-G and how to not force trades in a lose/lose environment. I’m sure daytraders had a field day today but the rest of us rats need to learn when to just sit and W-A-I-T. This is something I’m trying to drill into your tiny little skulls - and I hope that eventually, maybe by the end of this damn decade, this particular lesson sticks. Come on - lurking in the dark and waiting for an opportunity to strike at some hapless victim should be 2nd nature to any evil speculator. Work on that!
So, seriously - I don’t want to hear another word about it. The Zero has been pretty blatant about the state of the market lately - just look at the signal reading. F-L-A-T as Delaware (Florida is flatter but it’s not as funny) - so, sit back and wait for it. Use the time to look for victims for each scenario. The market breaks to the upside? I want to see 20 symbols that will benefit. Market breaks to the downside - well, you know the drill.
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-27_spx.png
Real quick, because I’m about to grab dinner:
Orange triangle scenario: Getting very stale by now - needs to break tomorrow otherwise it’s toast in my mind. The 38.2% fib is my line in the sand for that one, which is around the 860 level (futures are already at 850 right now).
Green scenario: Still a possibility - should however break at the 38.2% or 50% fib line. So the turning points here are between 860 - 875.
Blue scenario: Starting to look better and better to me. If we bust higher tomorrow after the FOMC minutes then I’d say we might have a winner here. Mission accomplished around 1020 - I would sell my first born for that one (damn, I already did).
Gold seems to be hugging 900 and I think 940 will be the next battle front. I might try my luck with some puts again if we get there. No, I don’t want to play it long until then.
The Dollar retraced a bit - as predicted (I should trade *&@%# currencies) - and I expect it to continue to the upside in a very short order.
The TLT has pushed back - also as predicted - and I’m glad I took profits last week. I think we see more upside here in the coming days, as I expect an a/b/c correctionI’m not as educated as Karl Denninger on that subject, so read his POV if you’re trading those markets.
Finally, the CPC (CBOE Put/Call ratio) is still ridiculously low, which flies in the face of the blue scenario, but in term of price movement appears it’s the most probable, right? But if we really rally from here - where is the CPC going to drop to? Strange things are afoot and I have not seen (or could make up) a good explanation for this. Did I miss something and the did the Dow just rally 400 points? Plus, remember my stochastic grid chart I shared this morning? We are now nicely above the 80% mark on all averages, so the bulls are running out of time to push this market higher. Chop chop chop (and in a british sense as in ‘get a move on’).
In the end however we should not care. Price is the ultimate indicator and we have our mission briefing (see Sunday post). When we reach particular price points - that’s when we take action. Everything in between is just….
N-O-I-S-E
Cheers! http://evilspeculator.com/wp-includes/images/smilies/icon_wink.gif
Yankee DoodleJanuary 27th, 2009 10:17 am Market Forecasts 233 Comments
UPDATE 10:00am EST: Good morning rats - now that was a pretty interesting open. If you are an RL subscriber I suggest you check your notes (ahem)….
Two orders of business: First, de3600 points out that I can’t call myself a ‘yank’ unless I live in the Northeast (shudder). Yes, I do know that of course, but when you venture abroad they’ll call all Americans ‘yanks’ - so bite me! http://evilspeculator.com/wp-includes/images/smilies/icon_wink.gif Like we all call all Brits ‘limeys’ over here - hehe - no offense to our marmite munching rats overseas.
Now, Berk seems to have placed an oracle style message on the VIX Reversal post, stating that ‘one major component’ is missing - he missed to mention what it is of course as he likes puzzlers (remember the ‘what is this chart’ posts?).
Okay, I checked it and it does not satisfy candle #3 - as that close was higher than candle #2. However, I wonder if this is merely a technicality - not to doubt the pattern and all. Bottom line is that we jumped outside the Bollinger and then reversed on a dime (see the 2nd candle). If it wasn’t the VIX that would have been a good exit (i.e. VIX sell) signal to me. And since then we dropped from 56.65 to 45.87 as I’m typing this - I call that a reversal. But yeah - technically this particular pattern is invalid - thanks Berk.
Yen is on fire right now, which is ruining the nice open for the bulls. Crude also just tanked by nearly 5% andTLT is slightly in the green - perhaps that is the first leg up in its a/b/c correction that should get started soon.
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-27_grid1.png
Something I wanted to share with you rats before I run off is my trusted 2hr stochastic chart grid of our four food groups. As you can see - we have burned a lot of stochastic potential yet have not gone anywhere fast. Yes, there is more upside possible - we’re only just about to hit the 75% line. But this does put a ‘roof’ on how far we can go here (to quote Erik) until we will see some kind of correction. The bulls better get a move on tomorrow after the FOMC announcement, otherwise I’m not sure how we’ll be able to reach 920. I would love to see that happen - so, chop chop mouthbreathers!!
I’ll be here for about an hour or so, but then I’m off. Please keep the flow going while I’m gone. I always hate to see blog discussions hit the wall when the author is MIA - self reliance is key and you guys know the drill by now. Make me proud.
Cheers!
January 26th, 2009 12:58 pm Market Forecasts 176 Comments
UPDATE 12:52pm EST: Since I have to post for two now I will start to post some analysis during the day as well. This way I don’t get stuck with having to post in the afternoons every single trading day.
Something I completely snoozed on was a clean bullish VIX reversal signal last week:
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-26_vix.png
Remember those rules that Berk taught us back when:
For a $VIX confirmed signal you need 3 things:
[*]a close outside of the 2.0 Bollinger Band (20 day, SMA[*]a close back inside the 2.0 Bollinger Band - this issues the signal[*]a higher close (sell) or lower close (buy) than the close of the day back inside the 2.0 Bollinger Band - this confirms the signal.Once you get those 3 things a major reversal usually occurs within the next week. The sell signals are far more accurate than the buy signals.
Okay, we got a buy signal and so far it’s holding up. The wave count I slapped on also seems to point to a scenario where we push higher in equities, and then drop massively as Mr. VIX embarks on its 3rd wave to the upside.
I love it when things all come together - let’s keep monitoring this situation closely. I’m waiting for the lower band of the Bollinger band to swing up towards the price (and VIX to drop lower), giving us hopefullly the opportunity to see a reversal sell signal (i.e. buy on the VIX).
UPDATE 3:09pm EST: If I hate anything more than expiration weeks, it’s FOMC weeks. You can basically run errands on the days before because you will not get resolution in one direction or the other. I picked one of those short VTAs but got kicked out with small profits. For now I’m just sitting and watching as I’m sick of trading those 0.5 signals. Just look at the Zero line of the recent week - it’s completely flat and I will ignore any signals below 1.0.
Anyway, this is what the turtles used to call ‘ping pong tape’ - so, unless you’re a daytrader sit back and watch the show. And don’t expect any clarification until tomorrow when the whole FOMC kabuki theater reaches its finale.
Revenge of the Silver SpoonsJanuary 26th, 2009 9:51 am Market Forecasts, Market News 118 Comments
UPDATE 9:46am EST: Silver is on fire this morning and there are no stains in sight:
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-26_slv.png
I have mixed feelings about this H&S though - not sure why. It sure looks precious - maybe I should just shut up and take it. But let’s wait out that triangle breach in equities first - that attempt to breach the resistance line ended on a whimper. No surprise as the Zero signal was fairly flat. The bulls will have to muster up a few more legions to ram through this barricade. Could just be a an E wave throw-over… happens sometime.
Happy Chinese New Year to you Asian rats!
UPDATE 10:35am EST: Check this out:
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-26_cpc.png
The CPC has no business being here unless we just rallied by 500 points in the DOW or something along those lines.
UPDATE 11:00am EST: Yen just fell off the plate… again… definitely a big seller here - maybe the Japanese are putting a lid on their currency?
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-26_yen.png
Let’s remember - our intrepid Asian friends do not enjoy a strong currency - Yen or Yuan (Renminbi). Strong currency is bad for their exports. Anyway, this is lining up to be a painful week - we got that FOMC meeting looming and until then we’ll see a lot of fake outs and thin tape monkey business.
January 25th, 2009 8:47 pm Market Forecasts 83 Comments
Friday’s tape failed to award us a resolution of the pesky triangle I talked about the night before. We bounced around all day in spasmotic fashion (disclaimer - word coined by Tim “The Dark” Knight). So, tonight’s forecast will be rather painless as really nothing much has changed since. So, set your brains to cruise control and let’s take a look at our trusted SPX chart:
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-25_spx.png
To make it worth your while I have again labeled our journey ahead - no matter which path the market will decide to take tomorrow. Always remember Yogi Bera’s famous quote: If you find yourself at a fork in the road - take it! http://evilspeculator.com/wp-includes/images/smilies/icon_smile.gif
So we still have got 2 1/2 scenarios in play. The green one remains my least favorite as things have slowed down on the bearish end of the stick. Although I am fairly sure we drop tomorrow the odds still indicate that we won’t make it past 770 - the point where the green and orange scenarios depart. So again - don’t be tempted to un-hedge yourself if you are still holding those June puts we grabbed beginning of January. They are extremely motivated to continue banking you coin, so don’t disappoint them by cutting off your legs (or any other of your vital limbs that is). Let’s stick with the plan, shall we?
Elliott Wave Role Call:
Green Scenario: Intermediate (5) down - we still need to breach 740 for this one to remain valid . I’ve made it clear that I’m extremely hesitant to un-hedge myself before we hit that mark.
Orange Scenario: Intermediate (4) triangle - E wave up - remains my all time favorite. We first drop out of this pesky triangle, then stall and rally back up just to irate some of the hobby bears. Then we skydive into the abyss from our drop zone at around 920.
Blue Scenario: Intermediate (4) flat - C wave up - remains a strong contender, especially if we breach the triangle to the upside tomorrow. This would lead us to the Mount Everest of all sell the rip opportunities at an alpine altitude of 1020-1040 - bring your oxygen masks. If this happens I plan to pawn my own gold fillings to load up on massive amounts of SPY puts.
Trust me rats, I’m as impatient as the next guy and would love nothing more than being able to cash out of those June puts. However, all good things take time and your mission, should you choose to accept it, is to leverage each market gyration to your maximum benefit. So far we’ve done a good job of anticipating where things will lead. But as you all know - the path is only clear in hindsight, which often leaves us to question our actions after the fact. Why didn’t I buy a ton of puts back in June? Why didn’t I unload end of November? Usually the answer is either greed or fear or outright ignorance of medium to long term market trends. It’s just too easy to pull the trigger just to make yourself feel good that very day. Regrets usually kick in when you realize you just cut your legs off. BTW, that happened to me with TLT on Friday - cut it too early and could have made double the profits (or more).
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-25_cpc.png
I have to say, this one has me scratching my head a little. The CBOE Put/Call ratio has again dropped to levels we usually only see after a large and prolonged drop (i.e. more outstanding calls than puts). Something similar occurred briefly in December as part of the ‘end of year slope of hope extravaganca’ - short term investors looked back at 2008 and decided that things could not possibly get any worse and thus only go up from here. As a result the CPC fell to lows we have not seen since the end of December 2007, right at the latest bull market top. Little do they know what this supercycle has in store for them - (un)fortunately we do and thus we continue to trade in the direction of the long term trend, which is down.
Although I can explain away the mindless end of year exuberance of our mouthbreathing trading cousins I have no idea why the CPC has dropped so low again right now. However, this does open the possibility that we are indeed in intermediate (5) , so let’s remain open minded and nimble.
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-25_nymo.png
The more medium term McClellan oscillator has coiled up a bit around -30, which is only halfway in oversold territory. So, there is definitely a lot more downside potential available here - perhaps even more than just to SPX 740.
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-25_bpnya.png
Similar story on the long term NYSE Bullish Percent Index. There’s downside potential galore - we are neutral at best.
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-25_dollar.png
The good ole buck has legs - as predicted we are in wave 3 of 3 and continue to push to the upside. Too bad I don’t have the nerves to become a currency trader - could have made a fortune. I do expect a little correction coming up here fairly soon. The Friday candle looks a bit ominous - perhaps we see a drop to about 84 right here.
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-25_gold.png
The recent Dollar rally did not manage to impress Gold the least bit, which took me a bit by surprise on Friday when I bought puts at around 876. So, the old wave count is out of the window for now and I cannot offer much except that we’ll probably push a bit higher here as the next resistance area is the 940 spot. Too little potential to justify calls and I also don’t like to sink my money into anything that remains uncertain in respect to the wave count. Gold has pulled a lot of fast ones on me lately and perhaps this is indeed the big pop all those gold bugs have been waiting for. Or, it’s yet another bull trap - wouldn’t be the first time. A lot of folks are long Gold right now, which also makes me very cautious. As usual, when something is supposedly ‘obvious’ - it’s often ‘obviously wrong’. So, until further notice I will turn into a precious metal voyeur and just ‘watch’ http://evilspeculator.com/wp-includes/images/smilies/icon_smile.gif
Last but not least - remember that spread between the 30-year T-Bond yield ($TYX) and Moody’s BAA Corporate Bond Yield I used to talk about? Well, it has dropped from -5.3 in mid January to about -4.95, which although still extremely negative by historic levels points towards a bullish correction on the horizon. This is more of a medium term indicator for me but the easing of this spread in combination with the current CPC/NYMO/BPNYA levels supports the orange wave count as it usually precedes an upside in equities.
There you have it - this should adequately prepare you for another turbulent week in the 2009 bear market. If nothing else it I can promise you that it will be nerve rattling, annoying, volatile, and emotional for the average trader out there. Not for us I hope - I believe this should give you sufficient ammunition to counter whatever the market Gods decide to throw at us.
UPDATE 9:32pm EST: Just was reminded that there’ll be an FOMC meeting this week - sheeeeshh…
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-25_marketwatch.png
Maybe the ‘dramatic announcement’ will be booster rockets that get us to 920 or higher. BTW, what do they mean by ‘dramatic’ - perhaps Bernanke is going to sing? I can’t wait….
Stay nimble and don’t get too exposed - but also remember the old aphorism: Buy the rumor - sell the news http://evilspeculator.com/wp-includes/images/smilies/icon_wink.gif
Cheers!
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January 23rd, 2009 11:45 am Market Forecasts 247 Comments
UPDATE 11:42am EST: BREACH! As usual Gold did the opposite of what was expected http://evilspeculator.com/wp-includes/images/smilies/icon_smile.gif
http://evilspeculator.com/wp-content/uploads/2009/01/middle-finger-of-the-apocalypse.jpg
I had the audacity to short the precious metal and this is what I got.
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-23_gold_2.png
Well, I’m out of GLD again with a tiny loss. Not sure I’m ready to load up on calls yet here. But this breach changes everything - based on the wave count it had no business being above the 892 line. Maybe this is the new line in the sand for Gold - let’s see if it sticks.
UPDATE 12:30pm EST: The triangle continues - unless we breach those lines swing traders are having a field day:
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-23_spx.png
UPDATE 2:11pm EST: So far the triangle has held the line. Remember that a breach would open us up to the blue scenario.
UPDATE 2:21pm EST: I just grabbed some March SNDK calls - by mistake actually - planned on getting the Februaries. Anyway, defensible and mental stop around 11.5.
UPDATE Closing Bell: It’s almost closing time and the ES is creeping back towards that triangle resistance line on basically vapor (i.e. flat signal). Now, I’m not in the prediction business, but a possible scenario I can see happening here is that we’ll do something similar as yesterday. MMs bang the tape higher and horrible news over the weekend brings us to the bottom of the triangle and perhaps lower. Not saying that will happen but it’s a plausible scenario.
I will post my usual weekend forecast on Sunday afternoon. Now, I’ve got more coding to do. Enjoy your weekend, you rats! http://evilspeculator.com/wp-includes/images/smilies/icon_smile.gif
January 23rd, 2009 9:45 am Market Forecasts 109 Comments
UPDATE 9:43am EST: I’m looking at Gold this morning and thinking - how can you pass this one up?
http://evilspeculator.com/wp-content/uploads/2009/01/goldfinger.jpg
Actually, I meant this one:
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-23_gold.png
I call this a defensible position. I know, I know - Gold has been stubborn but as a trader I love to take trades at support/resistance lines.
GLD puts it is…
UPDATE 10:23am EST: If the tape of the past few days is any indication the current script is this:
[*]Really bad news happens (i.e. earnings reports).[*]Futures drop like a rock over night.[*]Market falls off the plate at the open.[*]Hope/Greed/Speculation sets in - leading to erratic buying.[*]Market recovers partially.[*]Rinse/lather/repeat.The trend continues down for now - let’s not lose sight through all the noise. Noise is bad during bear markets - it makes you doubt yourself and that leads to dumb actions you’ll regret later.
Let’s stick with our script, shall we? So far the wave count has treated us fairly well. It’s not a crystal ball, but probabilities are the name of the game.
UPDATE 11:22am EST: We just crossed the 892.6 line. This changes a lot of things and I’m out with a small loss. Long positions are now possible, but I’ll see if it sticks.
Three Ways!January 22nd, 2009 5:57 pm Market Forecasts 112 Comments
And not the kinky type you have in mind, you dirty rat! http://evilspeculator.com/wp-includes/images/smilies/icon_wink.gif
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-22_spx.png
I’ll be lighting fast here as I’ve got some coding to do, but I didn’t want to let you guys hanging after today’s whipsaw.
This is the gist of it: We’ve got 2 1/2 scenarios in play. What’s the 1/2 scenario? The green one - although I think we drop tomorrow the odds now indicate that we won’t make it past 770ish. So, don’t be tempted to unhedge yourself if you are still holding those miracle puts we got two weeks ago. You do, don’t you?
Elliott Wave Role Call:
Green Scenario: Intermediate (5) down - we need to breach 740 for this one to remain valid , anything less than that will not convince me. If that happens against all rhyme and reason I will be happy to drop my hedge once we’re clear.
Orange Scenario: Intermediate (4) triangle - E wave up - my all time favorite today. We first drop, then stall and rally back up just to confuse the last bear out there. We fall from our drop zone at around 920.
Blue Scenario: Intermediate (4) flat - C wave up - still a contender. If we rally tomorrow this would become our favorite theme going forward. The odds to reach 1020-1040 would increase dramatically. Actually, I would be ecstatic if this happens - reloading at such alpine heights would be like taking candy from a baby and worth all the prior hassle. No pain, no gain - right?
Personal message to Keirsten - what really blows me away is that the orange scenario falls right at around February 9th. Could it be? http://evilspeculator.com/wp-includes/images/smilies/icon_wink.gif
So, tomorrow will be make or break day for at least one of these scenarios. If we go down I do not expect much more ‘complicated tape’ until at least the end of 770. Remember my comment yesterday about triangles usually only showing one complex correction. Well, let’s see if the market decided to behave for a change…
That’s it, steel rats - I have some coding to do - this is turning into another 16 hour day. Nothing else to say except that today’s tape was horridly spastic and I was happy to be hedged. There is bliss in being neutral like Switzerland (preferably with an access key to one of their numbered accounts).
http://evilspeculator.com/wp-content/uploads/2009/01/swiss.jpg
Yodellli-yoooooeeeehhhh!!!
January 22nd, 2009 1:58 pm Market Forecasts 144 Comments
UPDATE 2:00pm EST: Up and down we go - I’m heading for the neutral zone until further notice.
http://evilspeculator.com/wp-content/uploads/2009/01/neutral-zone.jpg
Please observe how we rallied to the 826 pivot on a negative Zero signal. Not negative enough to trigger a short VTA/ETA but it was actually below the zero line. So, you guys probably know already what I’m thinking - thin tape on top of wild gyrations spells bloody market maker chop chop. Stay out unless you know how to trade the swings. I don’t see 822 being breached until we see a positive Zero signal.
UPDATE 2:02pm EST: GREAT, as soon as I post this the Zero went positive and I grabbed an ETA. Crazy day - if this one reverses I might just walk away for the day. So far I have remained profitable in the Zero account for today and I don’t want to test my luck.
BTW, NVDA is treating me well now and even NOV has pulled back http://evilspeculator.com/wp-includes/images/smilies/icon_smile.gif
UPDATE 2:30pm EST: BigHouse just mentioned an abc-x-abc. I think this is what he means:
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-22_abc.png
It looks a bit ugly but it’s a possibility. I usually don’t try to count below the minute level but his count would support one more leg up. Timing wise that could be the closing bell today.
Frankly, the wave count is getting a bit messy right now and I’m staying hedged until things resolve either way.
UPDATE 2:50pm EST: Looks like BigHouse was on to something as we already descented into the B wave. So, let’s see if we get a long VTA to the upside. Zero doesn’t like this types of whipsaw patterns, but I actually might be tempted to grab a contract if we push back up and pick up momentum.
UPDATE 3:40pm EST: May I just say that today’s tape was completely ridiculous. Zero was basically flat most of the day and the MMs just banged the tape where they wanted it. Glad I sat this one out - mostly.
Make Up Your MindJanuary 22nd, 2009 10:04 am Market Forecasts 162 Comments
UPDATE 10:00am EST: So, last night I was already willing to kick the intermediate (5) scenario to the curb, unless we’d drop right away. Fat chance, right? Futures were already scraping 844 and everything looked bullish as hell. Well, truth (i.e. earnings) caught up with those intrepid futures traders and gapped the open yet again. I already mentioned on the Zero chart that I hated to be right on taking profits yesterday night as it introduces another level of uncertainty into our trading. But for now I expect volatility to only increase during this earning season as investors slide the ’slope of hope’ all the way to the bottom. Sometimes I really wonder what’s going on in the heads of those guys. Were they truly unprepared for an onslaught of bad earnings reports? I don’t think so - thus what we’re seeing is good old fashioned speculation.
Frankly, I’m sitting happily hedged and won’t leg out until I see clear levels breached (not just touched). I frankly don’t care about a few points I might miss out on. It’s just too easy to get caught up into all this craziness. In the end truth will prevail - and by truth I mean the downtrend.
My NOV long trade has dropped a few points but is still well above support. My TLT is getting close to where I would want to take profits. We might drop a lot further but I am expecting a counter rally soon.
UPDATE 10:17am EST: Take a look at this:
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-22_yen.png
I’m still cautious predicting a direction, but my trusted Yen/ES correlation chart looks very ominous to me.
Fuzzy, DrMalaka, moneyfarm, malusDiaz, Steveo, Keirsten - I’m going through your symbols now and will report back with yay or nays.
UPDATE 11:10am EST:
fuzzy:
ILMN - don’t like it
BMRN - don’t like it
GILD - should hold here
CBST - stay away
SGMO - conflicting - not sure
ATW - should hold here
DO - should hold but too far gone
NE - should hold but too far gone
PDE - should hold
HERO - should hold - maybe nice entry for long
DrMalaka:
UYG - conflicting
moneyfarm:
SHEN - long - nice one
GILD - should hold here
BIIB - long but too late right now
OIH - long
HAL - long
AAPL - was long but it’s too late obviously
malusDiaz:
NVDA - long - might be good entry
INTC - don’t like it
EBAY - forget it (for now)
DELL - not yet
CSCO - not yet
Steveo:
GLW - going down
SGP - could go even higher
ABC - could be good for a few more points
Lovely Keirsten:
EBS - could go higher - like it - decent entry too
NTRS - missed the entry - should reverse soon
MT - might break soon - careful
Sorry it took so long but Prophet charts are super slow again (apologies Tim but that’s the truth).
January 22nd, 2009 12:20 am Market Forecasts 78 Comments
So, Berk announces he’s leaving and all he gets is 300 good-bye comments? Just kidding… http://evilspeculator.com/wp-includes/images/smilies/icon_wink.gif
http://evilspeculator.com/wp-content/uploads/2009/01/300.jpg
No worries rats, the battle continues. Frankly, I was not fishing for encouragement at all - I am dead serious about wanting to see more trading related discourse, so let’s get on with it, shall we?
I was planning on doing a quick update today but got bogged down setting up eSignal in preparation for implementing the Zero in NinjaTrader. Cutting through all that data provider red tape and market data confusion took some time. I got a decent deal though and am almost ecstatic about my new tick-by-tick data feed. And how would you feel about 180 days of hourly data? Sure beats the measily 20 in TOS http://evilspeculator.com/wp-includes/images/smilies/icon_wink.gif
Anyway, since you’re all dying to know - real quick in telegram style:
[*]Green Scenario - minor 2 of intermediate (5): probability enhanced: It’s possible that we are tracing out a more complex corrective wave which could get us to 880.[*]Green Scenario - minor 3 of intermediate (5): probability greatly diminished: We need to drop almost immediately tomorrow for this one to remain valid.[*]Orange Scenario - triangle count - minor E of intermediate (4): Probability has been increased that this one is playing out. Should get us a bit higher than the 2 of (5) scenario - I stick with my 900 - 920 target for the top of E.[*]Blue Scenario - large flat count - minor C of intermediate (4): Similar to the orange scenario - probability increased today. Target still 1020 - 1040.Three of out four (probable) scenarios now project us moving to the upside unless we make a u-turn right away. I actually hope we are going to see 920 minimum - would be a wonderful opportunity to keep adding to my June puts. So, we took a bit of a hit today - that happens - nobody could have foreseen this whipsaw move. We legged back into our hedge and are now able to sit back, relax and watch the market do its bear rally thing. We’ll strike when the stars are aligned just right - you’ll know when we get close.
That’s it - I’m turning into a pumpkin in 15 minutes. See you on the other side - I better see fantastic good long trade candidates when I get up tomorrow. Charts please!! Technical analysis please! Maybe even a wave count? Boy, that would be something.
Give it all you got, rats - because tomorrow WE DINE IN HELL!!!
ChangesJanuary 21st, 2009 12:31 pm Intraday Update 309 Comments
On this less than happy trading day (whipsaws are never happy occasions, except for swing traders) I unfortunately have to make a sad announcement. Due to personal reasons Berk has decided to take a step back from posting on EvilSpeculator. His brilliant insights and top notch forecasts will be sorely missed and offhand I cannot think of anyone capable of filling his shoes. No worries, he’s still around and I’m sure he’ll chime into the comment section here and there.
Please join me in thanking Berk for his contributions to EvilSpeculator and to you personally - let’s hope he will be back one day to enlighten us with his brilliance. You will be missed.
http://evilspeculator.com/wp-content/uploads/2009/01/sunset_walking_s.jpg
On a personal note I also have to make a statement: I myself have gotten a bit burned out on the blogging end lately. It seems to me that the quality of the comment stream has been rapidly diminishing as of late. I see a lot of back and forth but very little substance. Compared with some of the discourse on the Slope I see almost no sharing of high quality trading tips, symbols, analysis, charts, etc. I have often jokingly called you guys ‘leeches’, but lately it really feels like the majority of visitors are here only to get a free forecast and some trading tips from a handful of senior people (you know who you are and I thank you for your contributions). Maybe that’s my fault and I have somehow failed to stimulate intelligent discussions due to my particular style of blogging. Or maybe it’s typical growing pains and it’s what every blog has to go through once it reaches critical mass.
The other issue I’m battling with is the Zero feed. I have been quieting things down on that end in my postings as various folks were complaining that I was overdoing it and that they wanted their old blog back. However, despite a visibly stellar performance in the past few weeks I keep seeing a lot more critical comments than supportive ones. Either few people care or an uncongenial minority is the most verbal. I have no idea how many people are actually successfully trading this thing, which is a mystery to me. Because just looking at the current chart it’s clear that this indicator has a lot going for it. The only time I hear from folks is when the feed goes down - very disappointing. I’m giving this a bit more time but would encourage you to share your experience.
Due to the above I have become a bit disenchanted with the entire process. I’m not saying that I’m going to pull the plug but I might reduce my exposure as the input at this point vastly outweighs the output I’m receiving. I have been working day & night to maintain a high standard here and it’s starting to take a toll on a personal and trading level. So far my account has been doing extremely well but I also know that I cannot continue putting in 12 hour days - plus my lovely wife would love to get to see me more often.
My hope was to attract a growing group of senior traders willing to share, educate, and improve everyone’s game. On that end I have to say that I have seen very few trades being posted in the past month that I would be willing to take. Don’t get me wrong - I can deal with a healthy amount of noobs and idle chatter, but the way it’s going this seems to be turning into a one-way street.
The ball is in your court, steel rats. Help me make this place a better one, otherwise I might have to follow Berk into the sunset.
On a personal note: I am also looking for a trading partner - if you are interested please send an email to mmehrle at yahoo. My requirements are this:
[*]You need to have traded options successfully for a minimum of 3 years.[*]You need to have your own proven option trading system and have produced profits over 50% during 2008.[*]You need to have gone through a > 25% drawdown in the past and not given up.[*]You need to have a basic understanding of Elliott Wave Theory, however it’s not necessary that it’s an active part of your trading system.[*]You need to have a profound understanding of technical chart analysis. This means charting patterns, indicators, and other pertinent technical analysis.[*]You need to have a basic understanding of what trend trading is all about.[*]You cannot be a daytrader or swingtrader. I have nothing against them and occasionally daytrade myself, but the majority of what I do is longer term.[*]You need to be present during all NYSE trading hours (5 x 6.5) - no exceptions.[*]You need to be accessible for at least 2 hours over the weekend to prepare for the week.[*]You need to be available to chat via skype for at least one hour each trading day.[*]You need to enjoy a mutual exchange of trading tips via your favorite chat client (e.g. Gmail, AIM, Yahoo, etc).[*]You need to have an open mind (that’ll cut down on 90% of the candidates - LOL - no worries nothing kinky).[*]If any of the points above don’t apply to you, please don’t send me an email as I have my hands full and it will probably just be ignored.Cheers!
January 20th, 2009 7:39 pm Market Forecasts 110 Comments
I just got out of a seminar and am going to make this one very quick today. I think the key question among you rats was where we were in our wave count and what will happen next. Let me get right to our favorite SPX chart:
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-20_spx.png
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-20_spx.png
Today’s breadth in the S&P500 was extremely bearish - closing at 40.5:1 declining vs. advancing issues. The result was that we found ourselves dropping to 805 without one single positive hourly candle. The strength of this move reaffirms our suspicion that intermediate wave (5) is indeed playing out. I was a bit surprised to not even see 865 or 880, however a minimum required retracement of 23.6% was satisfied last Friday. There is a possibility that the triangle scenario is still in play, which would somehow require that we drop further from here to about 760 or 750 and then rally rapidly. This would paint some an a,b,c from the the 944 top and reaching quasi equality with the first move to 820, thus the triangle would still be valid and we would be tracing out wave E to the upside.
However, based on the sheer momentum the blue and orange scenarios are losing their luster very quickly and after today I can give them each only aca. 20% probability. Which leaves me with 60% for a minor wave 3 of intermediate wave (5) scenario. We will get final confirmation for intermediate (5) when we breach the bottom of wave B, which bottomed at around 741.02. Until then the orange and blue scenario do remain in play but at with much diminished probabilities.
Another hint towards intermediate (5) can be found when consulting the EWT rule book:
A triangle never has more than one complex subwave, in which case it is always a zigzag combination or a triangle.
I have highlighted our ‘complex sub wave’ on the chart above - it’s quite clear that this was the meat of the whipsaw and I can count either a wedge here or a ‘double three’ (abc-x-abc). What this means is that the expectation for a complex sub wave has already been satisfied and that we should not see a complex D wave if the triangle situation is still valid.
As most of you know - I have bought back the short puts leg of my hedges and am now back in ‘deltra negative’ mode. So, this is not just an academic exercise for me, my money is on the line. My plan is to carefully watch for sudden whipsaw rallies that might indicate that something else is going on. We should not reach the 820 level again, and if we do I would re-hedge into a bull put spread.
However, my expectation at this stage is that we keep dropping and eventually breach the 741.02 low on the SPX. Until we see a counter move that questions the current downtrend we remain delta negative and hope to ride this bear all the way to the bottom.
In other news: The Dollar is on fire as expected and Gold/Silver is still a stubborn pain in the butt. But there’s nothing to add on either front as the Dollar is on course and Gold/Silver have not breached any thresholds that would question our bearish outlook.
That’s all I got for tonight - see you all tomorrow bright and early.
Cheers!
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January 20th, 2009 9:47 am Market Forecasts 122 Comments
UPDATE 9:35am EST: Good morning steel rats, hope you enjoyed the long weekend. First order of business is to inform youthat the free ride with Retracement Levels levels has ended. So, starting today you’ll have to cough up a rather insignificant monthly subscription fee if you want to get your greedy paws on those numbers. So- 2sweeties deserves to be compensated for his excellent work. This also brings up a few ground rules:
http://evilspeculator.com/wp-content/uploads/2009/01/fcrules.jpg
#1 - The first rule of RetracementLevels is, you do not talk about Retracement Levels.
#2 - The second rule of RetracementLevels is, you DO NOT talk about Retracement Levels.
#3 - If someone says broke, goes limp, taps out, the trade is over.
#4 - Two guys to a trade.
#5 - One trade at a time.
#6 - No shirts, no shoes during trading.
#7 - Trading will go on as long until the final NYSE hour (4pm EST).
#8 - If this is your first night at RetracementLevels, you have to trade.
I think that should cover it. Now seriously, those RLs are not public domain anymore, thus please refrain from talking about them on this blog (or any other). If you publish or mention them without prior approval by 2sweeties you will get a warning and your comment will get your comment removed. The 2nd time will get an ass whopping by me personally and the 3rd time will get you banned. Those are the rules - please abide by them.
Also, here’s this week’s economic schedule - plenty of juice coming down the pipe. I’m particularly excited about the jobless claims and housing starts on Thursday.
http://evilspeculator.com/wp-content/uploads/2009/01/schedule-week-jan-19.jpg
UPDATE 9:56am EST: Wowzers, we dropped all the way to 822, which henceforth shall be our line in the sand. Remember, in my weekend update I talked about the 820 level as I am ready to unhedge myself once we breach below. So, let’s keep a keen eye on that line, maybe we get our 2nd X-Mas earlier than expected.
UPDATE 11:02am EST: Just wanted to throw out a little warning - market participation seems very thin this morning, so be careful. Those little surprise spikes/drops will continue until we see the big boys joining the game. Stay nimble and be ready for anything - I think everyone is waiting for some miracle move based on the inauguration. Complete horsewash in my mind, but that’s why they call it the ’slope of hope’ right?
UPDATE 11:13am EST: I’ll be pretty quiet in the next hour or so as I’m toasting goodbye to the worst president in U.S. history - good riddance. BTW, please no political discussions on this blog - this is my personal opinion and I know some disagree. Anyway, time to bring out that bottle of Cristal I bought a few months ago - just for this occasion.
UPDATE 11:24am EST: ES now already at 820 - SPX at ~825. According to EWT rules we are already in a down trend again but I’m playing it safe today due to the lack of participation - will unhedge below 820 on the SPX.
UPDATE 1:42pm EST: That was a wonderful inauguration ceremony - but we rats are not the emotional type, so back to business.
http://evilspeculator.com/wp-content/uploads/2009/01/2009-01-20_bounce.png
In case you haven’t caught on to today’s little game just yet: There is little participation (maybe it’s fear driven), thus the MMs are ‘encouraging’ buying and selling by bidding the price back up to the VWAP, where usually the big bears step and and push it back down. So, what you keep seeing is this wavy bouncy pattern which is pure heaven for daytraders. IF you initiate positions, even when you get a Zero signal on days like this, it’s wise to wait out a bounce and then get in.
UPDATE 2:03pm EST: We’re a few ticks away from 817.04 on the SPX - getting ready to unhedge. Wait for it - a few ticks sometimes make a world’s difference. OR, if you prefer to buy them back on the way up wait for another retest of the VWAP.