Not …. So ….. Fast!

Volar is having his hands full as he’s trying to trade without an Internet connection, functioning central heating, and food in his fridge, whilst fighting off alien invaders with a dull steak knife with his right hand tied behind his back. Plus the zombies over at MF Global refused to close out some of his client’s positions last week. Gee – I can only imagine the amount of stress he must be dealing with. We’re rooting for you mate and I hope you rats are sending him any charts he needs at his very whim.

Anyway, the poor fellow managed to free his right thumb and type me a quick email about the FDOM stats he shared with us back in August. Don’t feel bad – I had to think about it for a second as well. Fortunately my depraved brain eventually kicked in and I realized he was talking about his first day of month statistics. Anyway, Volar wants me to put up a pertinent post which gives me an opportunity to legally plagiarize his stuff for all it’s worth so that I get to appear intelligent for a change:

You just bet your ass that after today’s session the bears are ‘all in’. And I’m not saying there won’t be any further downside – after all my coveted daily NLBL has been taken to the butchers at the close, which means that there’s a chance we head toward 1226 or even 1200 here on the ES E-Mini. UNLESS of course we immediately reverse tomorrow morning and that’s what this post is all about.

Before we get to the stats let’s talk psychology, market distribution, and mean reversion. As the real Volar pointed out so aptly – if you are betting on mean reversion then you need a platykurtotic market – no, it has nothing to do with a platypus, although it does have a tendency to confuse mammalian trend traders in droves. And you just know that the perma-bears are now growling with joy hoping for some healthy mean reversion (as part of a platykurtotic market) to occur here and now. Although they definitely had their day today it just may just have been be a scheme to suck them in and hence take them to the cleaners tomorrow.

So what gives? First Mole proposes that we drop to 1226 or even 1200 – then he proposes that we may reverse here. You can’t it have it both ways, mister! Well, actually I can. This is what’s going to happen: We are either going to bust higher in a huge way right here or now (i.e. starting in the overnight spoos and then at the NYSE open tomorrow) – OR we beat all statistical odds and drop lower. So watch the S&P E-Mini overnight and look out for signs of accumulation – I sure will.

Since some of you noobs may be confused by all this let me be even more explicit – I’m going to give you three scripts for tonight and tomorrow:

  1. Overnight action lackluster and the spoos remain in the 1240 range. At the open there is little buying interest and we breach 1240 and descend lower with the Zero pointing down. This probably means we go down and touch P1 – which is at 1226.
  2. Overnight action lackluster and the spoos remain in the 1240 range. At the open there is buying interest although we may remain sideways for the first two hours testing the previous low. However, 1240 in the spoos remains intact and there is increasing buying interest during the session with a possible EOD rally to squeeze the shorts.
  3. Overnight action strong after initially shaking out a few more longs – we push above 1250 and are holding. Spoos continue upward and there may be a gap to open the NYSE session – the rest is textbook short squeeze.

Now let’s get to the good stuff. I yet have to tell you the reason why Volar (and now Ersatz-Volar) is suggesting a possible bear trap here and now:

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That’s why – statistically speaking the first trading day of the month in November is one of the strongest of the year, only to be beat by July (who knew?) and September (who knew?). Of course that is all statistics and they can be faded but this gives us a reason to apply reasonable doubt and to expect a possible counter reaction following a short term shake out.

Now here’s the Sharpe ratio for the first trading day in November – and it’s TRES bueno. So, if you are short I recommend you watch the spoos overnight for signs of some possible bear trap monkey business.

Of course it doesn’t happen then it doesn’t happen – a failure to reverse here tomorrow in my mind leads further downside, especially in the face of these statistics. Let’s not force it and let prices be the last judge. Damn, I love statistics – if it was a girl I’d probably marry it.

I hope I did okay playing ‘Ersatz-Volar’ – see you on the other side.


S&P E-Mini Short Term Update

The spoos spent much of today correcting in a fairly orderly manner – crap & camp – pretty much textbook. Now, the big question that’s probably in your tortured minds is whether or not the perma-bears were right for a change or if this is just the short term shake out I proposed last weekend.

After falling away from a whole cluster of green we’ve got a brand new NLBL at 1267.5 right now – alas, a first attempt to breach failed. With two more hours left in the session we do have a sufficient time left for the real players to show their cards. If we fall back down I would be mindful of the 1257 mark – a violation of the 100-hour SMA would be a first sign of real trouble ahead.

The daily NLBL breached last week was at 1252 and I’d like to see it remain intact or we may be looking at a more meaningful correction. A breach below that would invalidate the previous buy signal and is probably good for a drop into 1235. Again, I have no directional bias and thus I look for behavior at important inflection points to gauge the short to medium outlook.

On the weekly/monthly front we seem to be in good shape as we will most likely close above the respective resistance clusters I outlined last week (in that context also see my weekend post in case you missed it).

UPDATE at the bell: We closed the month above the previous NL sell level but we dropped through the previous daily NL buy level. So unless there is an almost immediate counter push tomorrow we are most likely at 1226 or even 1200 here on the ES E-Mini.


es futures setup right now

We have a tasty retest variation buy on the 60 min es z1 chart right now. The upmove of Thursday showed the bears that this market wants to go up.

We have a clearly impulsive movement up, and a clearly corrective movement back down, to support, at the 50 ema.

Then we have a RETEST VARIATION BUY SETUP on the 60 minute chart.

This is a good setup, a retest of the lows, with trend, after a proportional corrective move, at support… it all smells like another leg up to me.

Wait until it breaks the 60 minute high long @1273.25 stop 1267.75

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