Darth Mole’s Evil Deeds

Since last Friday some of you have been enjoying the fruit of Darth Mole‘s predictive abilities ahead of volatility surges. Although I am the one who developed this newest contraption I myself am stunned by how spot on it is. Personally I consider it a huge step forward in identifying intra-day market cycles. Why? Because once you identify an entry opportunity near a systemic or technical inflection point a successful campaign hinges on two key components: 1) direction and 2) volatility.

Direction is binary in most cases – you are either long or short. But obviously there’s a lot more to this than meets the eye. You could be right about the general direction but you could still be whipsawed out of your entry. This happens quite a lot. Or perhaps you have a time-based window in which you are operating. Nevertheless in order to pick effective entries getting positioned ahead of large moves is obviously key (unless you dabble in calendar spreads). Protecting yourself against whipsaws and shake-outs obviously complicates matters but volatility is what drives profits and losses. Very rarely do we enjoy slow orderly advances to the upside – at least on an intra-day basis.

I wanted to share a few charts with Darth Mole alerts during the past three sessions. Here’s EUG/GBP – the yellow candle signifies an anticipated slowing in price volatility while any blue candles suggest a jump in price volatility. Getting positioned after the latter was triggered would have been rather profitable had you followed price lower and bowed out after 1 or 2 R. Obviously GBP was expected to whipsaw due to event risk today and I would advise against keeping any pertinent ST campaigns open during that time.

Here’s cable – very similar idea formation and Darth Mole called it spot on. One could suggest that this was easy to anticipate due to the BOE Inflation Report. Okay, let’s look at a few more then…

Here’s EUR/USD – once again Darth Mole nailed it.

USD/JPY – very nice calls as well. On the very left I saw an instance where Darth Mole got it wrong. But then again compared with the preceding candles I do believe it made a fair call. Because volatility did slow down – this is not about direction after all. Sometimes a slow down means sideways tape but sometimes it means only a slow down but the trend continues.

USD/CAD – beautiful.

And here’s gold – caught it a bit late here on the very right and admittedly it would have been a tough trade either way.

Bottom Line: In conjunction with your existing entry and campaign rules Darth Mole has the potential to significantly shift the odds in your favor. Just like sailors heading into the open sea, knowing when and where to anticipate rough waters would be an important survival tool in your arsenal. Frankly, I don’t think trading will ever be the same for me. Granted, as the author I’m probably subjective, so the thoughts and insights of traders like you would be very much appreciated.

If you care about price volatility (and as any self respecting trader you should) then here’s your chance to give Darth Mole a test run. We’re making it available for FREE throughout August to show you how awesome it is – we are confident that it will revolutionize your trading. You can sign up right now and enjoy your free ride for the rest of the month. If you want free Jabber alerts as well then send me an email to admin@ with your amember user id and the password you want. You will find step by step Jabber/XMPP instructions on the bottom of the DarthMole page.


Juicy Setups Galore

Alright – I threw my back out at the gym and am now operating on a mix of illegal pain killers, icepacks, and purified adrenalin soaked adamancy. It’s only Wednesday and it’s been a fun week already. While the hapless schmucks on the other side of our trades are busy applying vaseline we are banking coin and having fun. This tape is literally plastered with excellent setups and the Market Mole will not be denied. So let’s get on with it – but snappy as the drugs may wear off any moment:

I told you that ES 1910 will most likely be a bounce zone and thus far the tape is playing along. There are good reasons for it as well as we got the 100-day SMA, a weekly NLSL, plus a 25-week SNA all looming a few ticks away. However, at least as of this writing price remains lackluster and if that doesn’t change near the EOS we may just fall off the plate this week.

The GBP/JPY correlation is still pointing down – as you can imagine I’m keeping a close eye on that one and so should you. Now this may be all a last attempt to reel in some late hobby bears. Possible yes – but a drop below ES 1900 puts us into the next participation range:

As you can see the volume hole is rather pronounced right at 1900. If the bulls let this level slip it’ll be one hot late summer to be sure. Fair chance we would see some panic selling into 1850 and perhaps even lower. But as of right now let’s assume we are holding 1910 today. In which case we may be long tomorrow on a breach of today’s highs. Stop below – you guessed it – 1900.

Quick update on a gold campaign I threw to the wolves yesterday. I got stopped out once and then entered again as today’s hourly NLSL was breached. So far so good – but it gets better. This thing either falls apart today by pushing below the NLBL or it heads higher and probably starts a squeeze. Which means I’m advancing my stop to b/e and then wait for further instructions. This could turn into a fun one.

Talking about juicy setups – here’s another one – cotton. It’s been a long way into hell and it has been weeks since it even looked at a NLBL. It touched 65.25 today and I just went short with a stop above it. IF it breaches then I will try a long with a stop below yesterday’s lows (or whatever floats your boat).

But we’re just getting warmed up – wait until I see the goodies I have in store for my intrepid subs. I’m all over this like a fat kid in a Mars bar:

More charts and 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 subscriber you get free access to all Gold posts, which gives you double the bang for your buck!

Please login or subscribe here to see the remainder of this post.

So, did I promise too much? Didn’t think so – now go out and play but don’t talk to strangers or people with strong opinions.


Inflection Points

Equities are now beginning to accumulate sufficient context, allowing us to consider various inflection points where the odds either support continuation lower or a reversal toward the recent highs. Let’s review the daily context first:

In order to simplify it for you guys I’m hereby resurrecting an old tradition of mine – the Soylent line up. The volume profile chart show a pretty shallow volume hole near yesterday’s highs, just below ES 1940. The bounce didn’t have much meat in it but it may just have been a first foray into lost territory, perhaps leading to continuation either today or tomorrow.

Below us we of course have a bit of bearish wiggle room until about 1917, after which you can see a gradual drop off in the volume profile terminating in a textbook volume hole around 1900. That’s obviously a psychological line in the sand the bulls will want to hold. If it fails we’re going toward 1850ish – our current point and figure price objective on the P&F.

  • Soylent Green: At this point being long above 1940 is a pretty decent play if the GBP/JPY correlation shown below holds up. If breached a ride toward 1960 is in the cards and based on velocity/momentum/participation we’ll have to evaluate once/if we get there.
  • Soylent Orange: The highest odds right now are continuation lower toward 1900 unless we breach 1940. It does not have to be a black & white approach – watch the Zero indicator after the open for signs of increasing buying interest (or lack thereof). I think today is an excellent day to follow the Zero Lite for clues.
  • Soylent Red: Only applicable if we drop straight through 1900 without much of a bounce. If panic selling ensues a drop through that mark leads us toward 1850. The odds for that to happen are very slim right now. Recall what I showed you on the LT VIX chart on Friday.

The spoos to GBP/JPY correlation is pointing upward right now. That’s positive for the bulls and why I wouldn’t count the bulls out just yet. But equities need to follow higher now – the onus is once again on the bulls to draw the line here before major damage is incurred which may threaten the medium term and perhaps even the long term trend.

On the price side here’s a bit more detail. You can of course trade the E-Mini or the Spiders, or your favorite ETF, what have you. The 100-hour SMA is near our 1940 inflection point, so I think we have a pretty solid ST guide here.

I would however play the short side via the Russell futures – at least 50% of my exposure. After all it does make sense to short the weakest index and buy the strongest.

Which brings me to the NQ which still looks weak but should we see a reversal today then here are your long triggers and the stop. This may change as the day unfolds – so watch this chart as it may paint a nice diagonal higher under which you can place a stop.

Once again I found a ton of juicy ST setups this morning. Here’s gold which I want to buy on a push above that diagonal I painted on the chart. A short position is definitely possible here until that happens – in that case put your stop above 1295.

Quite a few more goodies are looming below – please meet me in the lair:

More charts and 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 subscriber you get free access to all Gold posts, which gives you double the bang for your buck!

Please login or subscribe here to see the remainder of this post.

Anyone? Damn it, I don’t get no respect… (you have to be a sub to get the reference)


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