Outta Here

I decided to head out to the Californian wilderness and let the market churn on its own for a little while. Clarity is needed and a little vacation was long overdue. Besides, it’s been raining in the desert all winter and that means spring flowers at Joshua Tree – my camera is locked and loaded.

I should be back next weekend – unless of course some UFO decides to beam me up ;-)

Cheers,

Mole

Epiphany

I know – two posts in one day – almost feels like the good ole’ days (when the bears were banking coin). Anyway, I was looking at my VIX chart and suddenly had an epiphany*:

See, if you want to understand how the market works you need to look behind the scenes – and once you look at that you must try to look at what’s underneath. From there you simply forget everything you’ve seen and flip a coin.

Now seriously – look at the chart above. It’s a left/correlation chart between the SPX and the VIX for the past two years. What I noticed is that the VIX seems to become more ‘volatile’ during trend change periods. For instance: Mr. VIX basically pushed straight up during the meat of Primary {1} and then started to flail around sideways right before we got that last leg to the downside. Inversely we’ve seen a straight downward pattern for over six months which then stalled late last year. Since then we have been fluctuating between the 20 and 30 mark, only briefly dipping below 20.

Now also look at that potential fractal right before the ‘oh shit moment’ in August 2008. Mmmmh – does that pattern look familiar to you?

Yes we might get more upside before the pain stops but it seems to me that LONG TERM equities are screwed royally. BTW, did I ever mention to you rats to think long term? Right – I think I might have forgotten… ;-)

Enjoy your weekend – and don’t fret about the past two weeks. Think ‘Revenge of the Nerds’… or if you’re the macho type – think Sparta – whatever floats your boat.

Before you run off – here’ s a little supri-iiiise! More evil tees in the works – and more mediums this time. Who would have thought you rats all hit the gym? That’s the spirit – my mean lean army of rat warriors ready to take on the trading establishment.

UPDATE: I just heard that the tees are now live – you guys can place orders as of right now – just click on the image or simply go here. Remember that I don’t make a penny on those – it’s your way of supporting the spirit of Evil Speculator. BTW, there are more colors – poke around.

UPDATE 3:50pm EDT: Hindyomen just brought this to our attention:

Remember three weeks ago when I posted about Jeff Kohler’s warning that there was a bullish McClellan divergence? Well, we’re now on the opposite side of that coin. Plus if you imagine a channel from the top left to where we are now it is reasonable to assume a turning point is coming soon.

Cheers,

Mole

* Look it up :-)

The Plot Thickens

The breach of 1,106.42 on the SPX this morning is something I hoped would not happen:

This event shifts things around a little bit. The immediate downside scenario has lost a lot of credibility. It’s possible we are completing a Minuette (b) wave but the prior wave looks like a textbook (a)-(b)-(c), so let’s not kid ourselves. Chances now are we push into 1,127 at which point the bears better put up a fight – if not we might be talking Soylent Green. Not before reeling in a few more bears of course – just to squeeze them a few handles after (how many bear traps have we been enduring now since March 2009?).

On Wednesday I said this:

“….This would be followed by Minor B, the first half of which would look
to the bears like the onset of Minor 3 to the downside. Which would be
tantamount to a bear trap clusterfuck of death star like proportions. Not
a pretty picture.”

Trading is pretty easy actually – just imagine the scenario that will hurt most market participants and it’s almost guaranteed to play out. At least since the prop desk monkeys at Goldman Sucks are running the show that is. Which in itself was the genesis of Geronimo – but that’s a different story.

I wanted to visualize the full extent of the drop in the Euro for you rats. We’re roughly talking a 50% retracement since the late November highs. That’s quite a drop in one quarter. Compare that with the tiny correction we have seen in equities and you wonder – who’s right? Currency traders or whoever is continously putting an emergency floor underneath the tape the second buying volume is drying up?

Seems to me that we are destined to revisit that red diagonal trend line which should now pose as resistance. This also roughly correlates with the target zone for gmak’s Gartley count. If we don’t reverse there I am afraid it’s green all the way. Monday will be an important day for both the bears and the bulls.

If you’re holding long term puts – do you yourself a favor and don’t even look at them. Yes, that’s right – Mr. VIX has dropped below 20 yet once more. It seems to be slowly riding down that lower border of its 2.0 Bollinger – exactly what I was warning about a week ago.

Damn – I hate to be right sometimes…

Cheers,

Mole




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