Waning Momentum

Today’s session could be used a good example for a textbook chapter on waning momentum. Early in the session I started to see strong signs of distribution and after a complimentary blow-off top things started to fall apart quickly.

I think the Zero Lite shows it best – despite the early morning ramp to above SPX 1500 it was painting a complete flatline. That doesn’t always mean we turn but it usually puts me on extra alert. It remained above the zero mark and thus there was nothing to do but to watch for signs of a top. Then as soon as VWAP fell and the Zero Lite went negative the cattle prods came out quickly. Nice Mole signal on the bottom near the lower standard deviation by the way – that’s how we like it.

Here’s my SPX:VIX ratio and that’s what I mean by distribution. The writing was on the wall when the ratio remained flat in contrast with a fast rising E-Mini.

In terms of support there’s not much on the daily right now – our next NLSL is at ES 1470.5. However the hourly term panel above shows us a possible ST support cluster between 1483 and 1487.

Since I deem myself a benevolent market megalomaniac I am going to throw this goodie out for free. It may be the most important setup on my wall right now, so leeches rejoice! ZN is testing the ole’ diagonal and has been holding up thus far. Meanwhile we have it tickle the 100-hour and maybe, just maybe, this is a quick shake out before a blast higher. I think it’s worth a few longs here with a stop below the hourly SMA. Pretty good setup with little risk if you don’t waste time.

More below for my intrepid subs:

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Cheers,

This entry was posted on Thursday, January 24th, 2013 at 1:55 pm. Both comments and pings are currently closed.


  • AmazingLarry

    Just another day in the woodshed!

    Liking what I see on the 10 and 30 year. Wait, I don’t like it. No, I do. Oh, forget it. My name is Larry, and I’m just a dumb rat. ;) Good stuff, boss.

  • http://dartht.blogspot.com/ Darth_Gerb

    I think this would be appropriate, nearing the SuperBowl n’all.

    http://www.cartoonstock.com/lowres/smb091030l.jpg

  • convictscott

    Interesting. I just did my morning (evening for you) market work on plain charts with no indicators. Came to EXACTLY the same conclusion, on both ZN (10 year note) and ES futures. Only caution on the 10 year note is that they are strongly correlated with 30 year bonds, and viewed in context with the 30 year chart you can make an alternate hypothesis

  • captainboom

    I like that SPX:VIX ratio on the emini chart.  I’m going to have to figure out how to code that…

  • http://evilspeculator.com molecool

    Hey there – good to see you around. Let me grab some dinner and we chat if you have time.

  • bdoone

    Glad to see you and was just thinking of you (no, not in that way).  I always remember what you said 2 years ago about meaningful tops being made are almost always(or maybe always) retested.  The 1500 level would seem be one of these areas, especially in context of current VIX, bonds, divergences, etc…Any thoughts greatly appreciated.

  • http://iberianviews.blogspot.com/ catracho

    Seems 1500 is a bit too obvious, round number and all that; maybe a little higher with some divergence may be better for a top (short term, or long term..who knows).  DJT still storming ahead; market pretty strong despite AAPL; AAPL bottoms? EURO poised to break higher; 

  • newbfxtrader

    usd looking bullish vs cad, gbp, nzd, aud. Not sure if eur/usd can break out here.

  • http://twitter.com/NobodyTrader Nobody Trader

    RUT closing high was Tue at 899.24, I believe all-time high since the index started. We could close above that today.

  • bdoone

    Transports up another 1.75%. Amazing.

  • Y KW

    Hiya Scott … perhaps Crude Oil is providing a cleaner opportunity … shaping up nicely on weekly and daily … off the radar markets are less prone to ‘fun & games’.

  • http://ibergamot.blogspot.com/ i Bergamot

    AAPL short ban until 1/26.
    The Flagship of American Industry will not be allowed to fall (or is it Chinese industry?)

  • http://iberianviews.blogspot.com/ catracho

    yes but look at USD index..looks like forming a bear flag…euro most important, cable may almost be done on downside, anyways always open to various scenarios

  • Skynard

    AAPL at the LOD selling hard now..

  • convictscott

    Sure thing amigo I’m on skype

  • Ronebadger

    All right…Scott’s back.  All we need now is Fearless, Volar and Trading Mom to make the family complete.

  • Joe_Jones
  • Curiousmind3861

    Yen longs getting crushed

  • BobbyLow

    Just think, somebody paid $705.07 per share for this stock over the past year.  It’s 36% off it’s high.

    I thought it was over priced back when it was trading at $55.  That’s shows you what I know.  LOL

    But the big question now is APPL over, or does it have another big rebound?

  • convictscott

    The thing is that it is part of human bias to want to “get it right” and pick tops. It gives our ego a stroke. So for that (and other) reason the counter trend setups subjectively nearly always LOOK MUCH BETTER than the higher probability with trend setups.

    It is extremely rare for a major top not to be retested. You should never get short a higher timeframe trend until this happens.

  • BobbyLow

    Yep.  I overstayed my welcome last night and decent gains shrunk into small tokens of appreciation.  :)

  • Joe_Jones

    I am looking for playing a bounce but not before I see some sort of bottoming pattern.

    Any suggestion for a downside target?

  • http://dartht.blogspot.com/ Darth_Gerb

    embedded.
    is that the fearless bollinger band of death?
    glad I didn’t short early Jan, because ‘its has too’ fall back down.
    whew, dodged a train on that one.

  • convictscott

    Fearless and Volar are some of the best analysts I’ve ever seen

  • newbfxtrader

    Dont rub salt onto my wounds now!

  • http://ibergamot.blogspot.com/ i Bergamot

     This one is known to get stuck overbought in strong uptrend. If this ramp is as sick as I think it is – Full Stochast. should be disregarded along with the rest of oscillators. Throw 5 day EMA on it – not a single close below. That is  strong

  • http://dartht.blogspot.com/ Darth_Gerb

    sure they paid 705, but who’s to say they didn’t bundle it with a short option? :-)

  • Curiousmind3861

    I share your wound, brother!

  • http://dartht.blogspot.com/ Darth_Gerb

    there goes my currency career  {/sarc}

  • Curiousmind3861

    it was fun to watch UVXY today, from getting crushed early morning (as usual), to up 10% midday, to flat at close. Anyone want roller coaster ride? there you have it.

  • Curiousmind3861

    200 pips from yesterday low to today’s high. Yen shorts are fearless..

  • http://evilspeculator.com molecool

    Volar is dead.

  • http://dartht.blogspot.com/ Darth_Gerb

    CS, are you still status quo on the Krastins?

    (Now I dont look for new setups. I use 6 out of Krastins 13 setups. The other 7 I pay attention to but dont trade off (eg I dont trade bearish non-confirmations but I stand aside from long trades where they exist))

    my notes say Feb 2011, thought I’d get an update.

  • Pervergence

    Gold sitting right at the 25 day sma………still short

  • BobbyLow

    It is very close to its 52 Week Low which is is 443.14.

    I remember trading the long side when it was in the $20′s.  After price began to go crazy to the upside, I shorted it a number of times with a dismal success rate.  I haven’t touched it in about four years because I banned myself from ever trading it again.   :)

  • BobbyLow

    Literally or figuratively?

  • dma0

    Oh, no… God rest his soul.

  • http://evilspeculator.com molecool

    Well, the human being is still alive but he’s not blogging anymore. So the entity you know as Volar is dead.

  • http://dartht.blogspot.com/ Darth_Gerb

    whew.  

    Corzined, I bet.
    (i hope for his return, but plan not for it)

  • Joe_Jones

    LOL!

  • http://ibergamot.blogspot.com/ i Bergamot

     If you don’t mind me asking.
    Why? What happened?

  • mrmik3

    … your EUR/JPY just keeps banging higher Bobbyboy!!

  • AmazingLarry

    Look at the daily volume. We’re getting there! Highest since the ramp and collapse so far. More blood! More blood! $448 and dropping still….

    Volume gap fills back up at $432. 

  • BobbyLow

    Yep and this is also a retest of a previous high so we’ll see what happens from here.

  • BobbyLow

    Are you short?

  • AmazingLarry

    Just short the NDQ via PSQ and SQQQ. In and out. 

  • dma0

    Been faked out by both you and NG today, Mole… At least hearing Volar is well took some of my sorrow away of being right on NG and losing on execution… There is always another day.

  • Skynard

    Your not the only one, was short at the 100 daily and it held for a few days on the hourly so went long. Then the storage report came out and it shit the bed.

  • mrmik3

    I say she keeps banging higher.. your right lets wait and see!!

  • http://dartht.blogspot.com/ Darth_Gerb

    another point+ for the bulls.  ”81.00″

    http://stockcharts.com/h-sc/ui?s=$BPSPX&p=D&yr=0&mn=4&dy=0&id=p61511725933
    -Gerb

  • dma0

    I got short at 50 daily, have not been stopped above 100 daily… Then it came back my way just at 50 daily and wobbled there for 2 days. I did not have the guts to hold through the report and sold at a very small profit. Then today, I went in to put buy stops and was scroogy. I put my stop too close on the long, not above yesterday’s high, as I should have… ah well… So the rest you know, it didn’t breach the yesterday’s high, I got in (with the slippage deserved for report time, of course), cancelled my short stops and then watched it go down… If I planned to lose money I wouldn’t have done it better… I need a drink…

  • BobbyLow

    Don’t need no stinkin risk.   :)

  • convictscott

    I use the Krastins setups, just in a different way than he does. If you go to his pattern site (google it Mole doesn’t like links) join (free) and go through his articles there his whole system is pretty much available, though he uses a lot of weird acronyms. If you spend a while going through his messy labyrinth of a site there is hours of video of him live trading and articles on setups and money management. 

    Ivan is big on 100% mechanical trading in the 6hr timeframe, which I am investigating now. My best results have been es futures on daily timeframes.I also believe that every single bar gives new information which contributes to the overall picture, and that a sophisticated pure tape reading style, no indicators, blank charts, can give a significant edge

  • AMCabrera

    http://content.screencast.com/users/AMCabrera/folders/Jing/media/86f397a3-7729-4881-aef8-95aeee2a32fd/2013-01-24_1842.png

    (Yawning) Let me stretch real quick. Well gentlemen of this beloved blog. Im closing out my aussie shorts, it has been the only thing I have held since my long slumber and really did not make anything amazing since I went short at 1.0490 and 1.0430 (took a vacation if you will). However, while going through the charts it is no surprise the spx banged the 1500 look at the eur/gbp..Which is now my short.

  • convictscott

    This is a 4th push to fresh highs. More than 4 is extremely unusual. I’d be looking to exit on a target somewhere towards the upper trendline

  • convictscott

    Agree

  • AMCabrera

    http://content.screencast.com/users/AMCabrera/folders/Jing/media/d7a11d61-cf3b-4dc1-975c-c74fd713a41b/2013-01-24_1844.png

    and this is weekly. Im almost tempted to just go back to sleep lol! Nah I miss you guys..IM sure you guys have missed me

  • AMCabrera
  • AMCabrera

    http://content.screencast.com/users/AMCabrera/folders/Jing/media/e0c47a61-811c-4758-a586-19805418bfa1/2013-01-24_1851.png

    And Im just looking at the Standard deviation. pretty high so I almost complete expect 8200 to get tagged by de jure.

  • AMCabrera

    http://content.screencast.com/users/AMCabrera/folders/Jing/media/a1d068f1-deb2-44c9-ad9e-a6198ffb3361/2013-01-24_1853.png

    One massive and I mean MASSIVE sucker move. but clearly waning and I will enter short..Actually fuck that entering now only a quarter lot.

  • http://dartht.blogspot.com/ Darth_Gerb

    well well.
    do you have your Dr. voucher?
    otherwise we’ll have to dock you. ;-)

  • BobbyLow

    Hey Bro,

    I thought you might have been kidnapped or something.  

    Either that or sometimes it’s just good to take a break.  

    Either way, it’s good to see you back.  :)

  • AMCabrera

    nice to get back. 

  • AMCabrera

    (checking both pockets)..umm 

  • newbfxtrader

    Welcome back senor!

  • Skynard

    Very similar price action up their as this sucker:)

  • AMCabrera

    Its amazing the absolutely rip feast that has occurred in the /jpy crosses. Glad I only had aussie shorts against dollar.

  • Curiousmind3861

    you mean exit yen shorts? can you tell me where the upper trendline is at right now? Thanks 

  • newbfxtrader

    No kidding. 300+ pips on eur/jpy in a days work!

  • AMCabrera

    I was reading the comments…I have forgotten how refined this site is. I think if someone did not at least have an intermediate level understanding of trading or finance this site would be a Chinese.

  • AMCabrera

    http://content.screencast.com/users/AMCabrera/folders/Jing/media/2a63255d-f07f-4abb-8e7a-85147922f841/2013-01-24_2042.png

    funny you should mention that nasty girl. I went short this one too quarter lot which brings me to a total of half lot.

  • http://dartht.blogspot.com/ Darth_Gerb

    one of Mole’s sayings, doesn’t translate well – you get the jist.
    ???????

  • Skynard

    Putting a short on EURUSD here, how many chances does it get anyhow?

  • AmazingLarry

    Just a little more absurdity to cap an absurd day.

    Fed’s balance sheet. Nice boner, Ben. Go all-in! You know you gotta…

    http://research.stlouisfed.org/fred2/graph/?s1id=WALCL

  • Y KW

    It only takes one … one more that is!

  • Skynard

    Hehe, right about that. When I actually spend more time waiting for a trade things appear that you will not see by jumping the gun. Now, when I look at this chart the candles are testing the upper BB’s the entire time and now has lost the 100. “Time to Pounce”. Should make a good team with AUDUSD now:)

  • Darkthirty

    What do you make of the triangle on ES from 1030 this AM, riding a trendline

  • Joe_Jones

    Found a little trove of Livermore’s quotes:
    http://leavittbrothers.com/chartspeak/ChartSpeak_040608.pdf
    Helps to retrieve head from ass. ;-)

  • Joe_Jones

    and it doesn’t matter ;-)

  • Y KW

    51st state of USA (AUDUSD) has been downhill for way outside the bell curve (basis my Bread & Butter Ruleset aka 6 hr charts and setups) … so how do you see ‘good team’?

  • Skynard

    Only with the help of the dollar, agree it is extended right now and anticipate some ST reversal. Have reduced already from earlier today. If it is correcting their is more room on the daily (target 100).

  • Y KW

    Targets are not part of my approach … I do not possess those skills enough on a regular basis (nor does the RBT depend on them) … I prefer to simply apply the Language of the Market to say ‘Uncle’ … I am more than happy to leave something on the table.

  • Pervergence

    Closed out GG short…..now long

  • Skynard

    Target 1.042, if that fails a more substantial correction would be in order. FN TOS charts are still screwed up.

  • convictscott

    Plot the chart with volume on it. That action happened during the Asian session, when es is washed around by profit taking, stupid individuals

    During market hours the es trades around 2000 contracts / minute. During the Asian session it trades 100 contracts a minute. 

    Even though it fills up the same space on the chart, it does NOT have the same significance. 

    Globex session is made of lies. The only relevance of that price action is a likely fake out before the start of decent action in an hour or so when Europe opens.

  • convictscott

    Woodchipper action the last few days

  • convictscott

    Could you elaborate :) Is what you are saying that the strong break through old highs (before the pullback) is the setup?

  • convictscott

    What I actually meant, was don’t be a big baller top caller :) IMO one of the best way’s to trade is to wait until tasty tasty looking counter trend setups get stopped out, and jump back on the main trend.

  • Skynard

    Mmm, good to wait that out. Saves allot of hair:)

  • Darkthirty

    Always been an issue with EWT and globex. Thanks for the insight

  • http://evilspeculator.com molecool

    EWT? Seriously? Short term?

  • http://evilspeculator.com molecool

    Weeks.

  • http://evilspeculator.com molecool

    What is this – Firefly?

  • Darkthirty

    Rufus T Firefly ?

  • Darkthirty

    It’s all fractals

  • http://ibergamot.blogspot.com/ i Bergamot

     Thanks, JJ. Really refreshing. I read these books so long ago, I forgot some of the best pearls:
    “The game taught me the game. And it didn’t spare me rod while teaching.”
    “It sounds very easy to say that all you have to do is to watch the tape, establish your resistance points and be ready to trade along the line of least resistance as soon as you have determined it.
    But in actual practice a man has to guard against many things, and most of all against himself – that is, against human nature.”
    “The game does not change and neither does human nature.”

  • DollarChaser

    Gold 25 day and 25 hour MVA closing in on each other. Just over $1 diff now. Anyone else watching this? Thoughts?

  • http://ibergamot.blogspot.com/ i Bergamot

     I am watching, that is JUST watching.
    On a daily chart Gold is in this 1650ish – 1700 box. Volume profile is horrid, getting distributed since Sept/Oct of last year. Stuck between 50 and 200 dma.
    People are led to beleive that Gold has to appreciate because of Central Banks this and Fed that, but PF points down with targets 1500 and 1560.
    I don’t have a position in metal or miners, but I don’t day-trade…
    JM2C

  • AMCabrera

    Yes sir.

  • AMCabrera

    I can only say sometimes I wonder if an account manager at oanda is after me..Kind of wish I would have held my aussie short. Luckly I only have quarter lots shorts in the eur,aud/jpy pairs. I will add another quarter lot here for the eur/jpy. I was nearly popped in the eur/gbp..Why did I wake up again? lol

  • AMCabrera

    http://content.screencast.com/users/AMCabrera/folders/Jing/media/2c76ad1c-772c-43ac-b1fa-d81026f5344e/2013-01-25_0814.png

    this is the eur/jpy order book. I assume late comers will get hurt badly andoverextended shorts where handled accordingly.

  • AMCabrera

    http://content.screencast.com/users/AMCabrera/folders/Jing/media/3386261d-e180-4f2c-ba74-5c2e19ddc473/2013-01-25_0818.png

    Sorry let me get a little more clear about what I see. 1480 would be first test of continuation of sucker move upwards however a break below AND a close below the upper BB line could be the first sign that 1445 could get tagged. But yes a break above would be very unknown territory. 

  • AMCabrera
  • Rightside_ot_trade

    Last weeks fund flows $3.66B, continuing the 3 week trend
    3.75, 7.53 for this year
    Retail knows best

  • Schwerepunkt

    We have ignition in USD.CAD.

  • http://dartht.blogspot.com/ Darth_Gerb
  • Schwerepunkt

    Is it T-time?  Time for rest and back-test before resumption of new trend?  Is that what you imply my wily rodent?

  • http://dartht.blogspot.com/ Darth_Gerb

    time to ride the rocket and be on your toes in CAD.
    or set a stop and go back to sleep. ;-)

  • Schwerepunkt

    Anybody looking at Cable? News of economic contraction right at the bottom candle?  Seems like a perfect time for a snap-back, at the very least, if not a new trend.

  • http://evilspeculator.com molecool

    ¤ø„¸¸„ø¤º°¨¤ø„¸¸„ø¤º°¨ 
    ¨°º¤ø„¸F R E S H „ø¤º°¨ 
    ¸„ø¤º°¨ M E A T“°º¤ø„¸
    ¸„ø¤º°¨¤ø„¸¸„ø¤º°º¤ø„¸

  • Skynard

    If this is the re-test, full short /ES.

  • DollarChaser

    Got in short at 1666, one fairly happy camper right now. :)

  • http://evilspeculator.com molecool

    Yes, that’s what mine says as well: http://content.screencast.com/users/evilspeculator/folders/Jing/media/61e987d4-8b4e-4411-83ef-3488a82210b9/00006561.png





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