The Mole Smells A Rat

Let me cut right to the point: I don’t trust this tape further than I can throw the average NYSE market maker, and if you’ve been there then you know that most of those guys aren’t exactly underwear models. Whatever is the source of your paranoid suspicions, you ask? We barely have three down candles and you already getting antsy, you say? That’s right – once again the Mole is smelling a rat. Let’s observe:

Exhibit A: The tape has been dropping (thus far – we ain’t seen the close yet) but UVOL is clearly outrunning DVOL. Rather suspicious and that’s putting it mildly.

Exhibit B: NYUD clearly in ‘meh’ territory. There is no selling pressure and this is all for show. Perhaps it’ll change by the EOD, but for now I’m not seeing any angry bears taking advantage of a clear inflection point as the SPX is pinned below its 25-day SMA .

VIX:VXO – on the rise already and that divergence on Friday before the close looks rather iffy (especially given the late Friday drop). Perhaps EOM artifact – possible – but even then today’s ratio does not suggest MMs are overly worried here.

The only one that’s doing what one would expect is the VXV:VIX ratio. Provided here as the Mole believes in ‘fair and balanced’ charting practices ;-)

The Zero Lite isn’t exactly screaming bearish either here. But again, let’s not jump to conclusions and wait for the close.

In the absence of any daily/weekly/monthly resistance levels I would keep my eye on the 25-hour right now. It held up well this morning and I expect it’ll be the decider here.

Remember one of our prime directives – it’s not the first sell-off that counts, it’s the follow up. The Mole is watching in eager anticipation.

Bonus Chart!

I would be remiss in not sharing this prime rib AAA rated EUR/USD setup with my intrepid steel rats. It’s bumping against daily AND weekly resistance, of which the weekly is rather pronounced (i.e. 25-w and 100-w right above). Excellent inflection point for the Euro and if it hops the fence(s) it’s going to be one cold summer for the greenback.

 

It’s not too late – learn how to consistently bank coin without news, drama, and all the misinformation. If you are interested in becoming a subscriber then don’t waste time and sign up here. The Zero indicator service also offers access to all Gold posts, so you actually get double the bang for your buck.

Cheers,

Some Sentiment, Some Stats, And Some Energy Spreads

This is volar with a quant and sentiment update. That being said, I did something different today- I added some “fundamental” data on the bottom. I did this- not for trading, but bc the news is lame, CNBC is full of retards and koolaid, and frankly its nice to hear sound thoughts- even if its my own voice. I understand most of this may seem like it does not go together (sory in advance per the 20 charts)- but we are talking markets and what else do you have to do this weekend? Beer and free data- sheesh I might read my own post- jk.

For those that are not subs- you get a freebie- heck I bummed 2 charts.

Anyway as for the market, I cannot say I could agree more with Fearless’s last post. Longer-term there is much potential given the panic (VIX and volume for that matter) in August. Yet, some red flags are prevalent. Let us have an unbiased look.

First sentiment, then stats, then spreads.

The CBOE equity put/call ratio is low and my daily sentiment data is off-the-charts. The NASDAQ daily is the highest since 2000- and here is what Jason at ST says “Hulbert Nasdaq Newsletter Sentiment was 75% net long again this week.  The 3-week average is now 75%.  That’s the highest average over a 3-week period since July 14, 2000.”

As always my hats of to SentimenTrader.

Unreal.

Unreal.

And… unreal. Now on to stats…

A ton more of Volar’s charts and cynical commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero or Geronimo subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.

Please login or register for Zero Data Feed (non-recurring) or Zero Data Feed (recurring) or ES Gold (non-recurring) or ES Gold (recurring) or geronimo/ES (recurring) to view this content.

Not sure all of that should go in one post – but now you have something to do this weekend besides get off on Ben Bernanke.

Best of luck unbiased trading,

-Volar

The Day Equity Options Went Full Retard

Some days are boring- and some make seasoned traders say WTF? Friday was a WTF day for me—the market is calm as can be, and I am starring at option data that raises the hair on the back of my neck. Sure the tape had absolutely ZERO OPEX volume- and CNBC touts are saying, “Sideline money is coming in…”  but my radar screen is screaming retardation.

Seasoned option traders are not idiots – they gauge risk better than anybody else. Option trading is not for the faint of heart – if one does not understand the game- one is as good as dead. As of this week option makers are not selling puts or selling deferred IV, while call volume is surging.  Sure this stuff happens in December and these indicators can be early – but Santa is gone…

In any case, for every retail call buyer there is a seasoned call seller. There were nearly 100mm net OCC equity calls less puts over the last 30 days — drink the kool-aid if you want. Skews and IV time spreads are utterly absurd, VIX and VXV are both trading outside bollinger bands, and call buying has gone from beartard to bulltard. Yes the trend is higher, and yes we had volume capitulation on the low, and yes there are Euro shorts, but gamma has been falling like natty gas in many markets.

Last week, the equity option market went full retard IMO- here is a well analyzed look.

First here is  look at IV time spreads. IV time spreads help put the VIX in perspective and seasonality helps to show the strong seasonal tendencies.

C’mon- this is retarded- and frankly bearish as crap in the short-term. Notice that even in 2008 December expired in a predictable value- even with a VIX that traded north of 50.

This next chart is a spin off of the first chart that shows the seasonal tendency is lower- not higher here. Or contango/time spreads should be narrowing not widening…


More charts and cynical commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero or Geronimo subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.

Please login or register for Zero Data Feed (non-recurring) or Zero Data Feed (recurring) or ES Gold (non-recurring) or ES Gold (recurring) or geronimo/ES (recurring) to view this content.

Cheers,

-Volar





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