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Bearish Aspirations
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Bearish Aspirations

by The MoleJuly 10, 2017

I can’t believe I’m actually saying this but there may actually be a chance for a short term correction in equities. But let’s not get ahead of ourselves, shall we? The current bullish trend isn’t even close to being threatened yet. And although we are seeing bearish divergences on the A/D and other momo indicators equities have proven many times over the past few years that they can stubbornly continue upward for weeks or even months on end. That said, let’s review what we are up against here:

2017-07-10_spoos_entry

Yes, there is nothing wrong with your display or your eyesight, and no I haven’t gone completely bonkers yet. This is a short setup but it comes with a few disclaimers. First up we need to see what happens in the first hour or so. If weakness continues and we continue pushing sideways in a lackluster manner then I may be inclined to take out a TEENY WEENY short position here. If it banks coin I may actually add short positions as we continue lower. But not so fast – don’t touch that sell button just yet.

2017-07-10_spoos_volume_profile

For one we are dealing with a pretty limited price window here. I have highlighted the range on our volume profile which shows us heavy selling and it’s responsible for the lower highs and lower lows we have been seeing. But once ES 2440 is breached then there’s a good chance we simply squeeze higher. Thus my entry range is below 2431 and the odds decline significantly once we push above that. And once again 2440 is where it all falls apart. A good stop range is anywhere above 2437 but 2441 may be better (but allows you less contracts). Doesn’t really matter though as we’re using a small position size, right?

2017-07-10_NQ

Another caveat is the NQ. In short it’s looking bullish and I am not willing to grab any shorts on neither the ES nor the NQ unless I’m seeing a juicy spike high here after the open. So let’s call that condition #2: Weakness in the NQ.

2017-07-10_Zero

And here of course is condition #3: We need to see a negative signal on the Zero Lite (right panel). Unless participation is suggesting weakness going long the ES is a fool’s errand. So let me summarize it for you:

  1. Price remains below 2431
  2. Weakness in the NQ – a spike high would be nice.
  3. The Zero Lite is flat, goes into negative territory, or even better paints a bearish divergence.

So the odds for us to be long today are exactly [tak.. tak… tak…. tak…] 1.8%. Yaaaayyyy!!!! 😉

2017-07-10_gold_usdjpy

Alright, we need to talk about gold and it’s correlation with the USD/JPY. I used to plot that relationship quite obsessively and a recent post by Chris Carolan over at the Spiralcalendar served as a much needed reminder. In short, if you are trading gold (inversely shown in blue) then you need to be tailing the USD/JPY because it is the latter that drives the former.

2017-07-10_gold_eurusd_60m

And here’s the hourly panel which looks extremely tantalizing to me in that expansions in the delta (i.e. the gaps between the two) appear to result in gold following the USD/JPY. I for one can imagine a whole list of trading opportunities there or perhaps you can simply pair trade it.

HINT, I mentioned the Kalman filter the other day and if you’re mathematically inclined then you should check out the Forex section on pair trading in Ernie Chan’s book ‘Algorithmic Trading’. Enough said.

2017-07-10_USDJPY_update

Now speaking of the USD/JPY – it’s time to once again move our trailing stop a little higher. As you can see I’m now tightening into acceleration higher, which is exactly what you want to be doing, especially after +3R in profits. It’s quite possible that we’ll see this one push into 115 before it decides to correct a little.

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About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at various social media waterholes below.
  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    Interesting.
    well I *am* traveling this week, starting today.

    Do you know if they have Wi-Fi in Los-Angeles? I hear it’s a very primitive region.
    😉

    for all you baby bears, when in doubt – run like Hell.
    https://www.youtube.com/watch?v=Geb3oCcB_jY
    -GG

  • ridingwaves

    I’ll pray for you while in the city of angels and demons…Wifi is everywhere there….enjoy the coffee with it…

  • ridingwaves

    discus never gives us new post update anymore…

  • http://evilspeculator.com Sir Mole III

    But I do! :-)

  • http://evilspeculator.com Sir Mole III

    In L.A. we mostly still used cans with strings in between them.

  • OJuice

    Nice! I was looking at /ES over the weekend specifically with potential for a break down this week. Was even going to right a comment in the last post, but, decided not to because I cursed /GC so bad on Friday morning…

  • ridingwaves

    funny that my short SPY trade on Friday that I sold out to go hiking instead is still in play…never would have stopped out, Earnings are going to have to be above expectations…

    ridingwaves Mark Shinnick 3 days ago
    SPY 60 min, a little hurdle here on hourly…3 touches so far
    S SPY 242.02, 242.93S

  • ridingwaves

    I don’t get those for some reason now…

  • http://evilspeculator.com Sir Mole III
  • ridingwaves

    could it be painting a doji candle on hourly?

  • http://evilspeculator.com Sir Mole III

    Quiet here today – I hate vacation season 😉

  • kudra

    i’m here, boss.

  • ridingwaves

    no kidding….
    went short SPY here 242.71 would rather wait for .20 more upside but I trade in slow motion not HFT….

  • Mark Shinnick

    I’m still cocked….unsprung…looking for some likely 243 handles but see what happens. I believe that somehow the hook really needs to get sunk deep into the BTFD’s and volatility shorts, so that might be best done intraday.
    Closed this morning long miners from spike low.
    Here’s an interesting Rydex chart.https://uploads.disquscdn.com/images/9a297c9b4164c8168bc2e467e67b41980b0d94ed8d7b11bca607481ad6d66ee0.jpg

  • OzarkHillBilly

    I’m checking in periodically, in between bouts of yard work, or more exactly, clearing invasive species from the woods on and around my hilltop. I see a decent chance here for a small short position, but I think a better opportunity, long or short, will present itself later this week. Just IMO, could be wrong, blah blah blah ……

  • kudra

    IWM might be showing signs of fatigue. Couldn’t bust through $141 today and is now back in the red. QQQ has bounced back well over the past two sessions. GDX also boucin today off of $21, but 21.80 hurdle lies ahead

  • ridingwaves

    interesting…I can see why with bonds now falling out of favor….lets see what happens with t-bill auction over next 2 days

    9 FED speeches this week……a whole lot of nothingburger to be consumed

  • Mark Shinnick

    Never-never land bonds; that recent bund drop wiped out 8 years of interest.

  • OJuice

    Making their rounds while there are in good favor. I would guess when the complacency period is over, they will all go back into hiding.

  • Ronebadger

    NDX up .72%…meanwhile 1300ADV/1600DECL

  • ridingwaves

    Ojuice,
    I read an interesting article over the weekend that talks of all these fed folks nearing the end of their terms and being able to walk away (second qtr next year) before their experiment is completed and the real results are in front of us

  • OJuice

    Classic.

  • ridingwaves

    100 day avg vol SPY 75M, 25M today

  • Mark Shinnick

    ok, got some short…pretty tight stop.

  • ridingwaves

    thinking out loud like a wall street guy here, 3 big banks report friday, I would rather buy in lower on XLF if earnings are good, so take it down a little and then run it up on Friday…if earnings are not good, the sell off beforehand was because of earnings miss….

  • Ronebadger

    me too

  • Julie

    On a break … Initiated a small short position BAC on Friday. An ABC up from June 6
    JULIE

  • http://evilspeculator.com Sir Mole III

    Oo-oooohh…. wave counting… we’re in trouble now! 😉

  • http://evilspeculator.com Sir Mole III

    You may be right – today’s close was rather interesting.

  • http://evilspeculator.com Sir Mole III

    Good to see you sticking around. No summer vacation for you?

  • https://scottphillipstrading.com/trade-setup Scott Phillips

    Oh wait. We knew this one guy one the blog that one time who claimed to have heard of a guy who was a multi-multi-millionaire through wave counting.

    Actually more than once. We have those guys all the time.

    So it must be real. Not confirmation bias, but REAL!

  • OzarkHillBilly

    I can’t think of any “analysis” more prone to confirmation bias than EWT. Since most of us here had to learn that the hard way, I bet I’m not the only one who can’t help but notice a nice, clean, textbook five-wave pattern when it appears, or maybe even an occasional ABC. Cursed forever, I will be repenting here for the rest of my life.

  • Julie

    This is my 1st post here. I would like to emphasize that I am not a waver.I do look for ABC patterns as imo they appear frequently. I mainly use trend lines ; channels; fib retracements ; exp fib moving averages. positive and negative divergences; overbought and oversold ; my own parameters for the ichimoku cloud; support and resistance zones ; 60 min – daily – weekly and monthly charts ; candlesticks ; chart patterns ….. I started trading approx a little over a year ago and usually trade the IBD 50
    Thank You
    JULIE

  • Julie

    I came across this site and saw that it was female friendly. Not too many sites are and I am not a troll I have never belittled anyone and would like to be a valuable contributor’
    JULIE

  • Julie

    BTW In a post below a poster jokingly commented on wi fi in Los Angeles. There is wi fi in Montana Lol !
    JULIE

  • http://evilspeculator.com Sir Mole III
  • http://evilspeculator.com Sir Mole III

    First rule of being a trader: Develop a thick skin, otherwise you most likely won’t last long. Evil Speculator does NOT constitute a safe space. By the way we don’t care about gender, race, sexual orientation, religion, none of that here – all that counts is what works and banks coin and we discard anything that doesn’t. Wave counting has absolutely zero predictive value. Trust me – I know because I used to be one of them and finally saw the light sometime in 2010.

    Take a look at our educational section as well – there is a TON of material there FOR FREE. If you still think we’re a hostile and narrow minded group then I’d be very surprised. Most of all however – bring a sense of humor. Nobody cares about hurt feelings here – freedom of speech as per the 1st amendment is tantamount and will be vigorously enforced here. No exceptions for no-one.

  • http://evilspeculator.com Sir Mole III
  • OzarkHillBilly

    Welcome aboard, Julie. There’s a long, and long ago, history here re: EWT, and as 99% of the posters here are old regulars, most of the comments about it are akin to inside jokes.