Now Reading
Ben’s Middle Finger
91

Ben’s Middle Finger

by The MoleNovember 10, 2010

Pointed at the shorts that is:

Click on the image or here for the NY Fed’s POMO calendar page.

And I quote:

Across all operations in the schedule listed below, the Desk plans to purchase approximately $105 billion. This represents $75 billion in purchases of the announced $600 billion purchase program and $30 billion of principal payments from agency debt and agency MBS expected to be received between mid-November and mid-December.

Well, there you have it, folks – do I care about those POMO auctions? Not really – I’ve long given up on the notion of final justice for either Mr. Bernanke or the fat cat banksters he’s feeding cookies on a daily basis. But what I care about is downside risk and that’s pretty much eliminated if you can lever $105 Billion by a factor of 100 and throw it into the equity maelstrom.

Let’s take a quick peek at our DXY chart:

The Dollar bounced off an important resistance line today (marked in tasty lime) – unless it can breach it soon I expect it to be pounded into the ground yet again. We now have a 76 – 78 range that needs to be breached – either to the up or down side – pick your poison. We burned a lot of valuable upside momentum in those recent sideways bounces and unless it makes a run for it soon I see more red candles for ole’ bucky.

Unless a miracle happens on the currency side (fat chance with G20 in the works) my sentiment is that we may see a little correction in equities which however will be bought near the 1100 mark – that’s probably the extend of what we’ll see ahead of the X-Mas rally. Either that or it’s sideways gyrations into the new year.

Cheers,

Mole


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.
  • alexnewbee

    everybody on the web and my grandmother are talking about POMO and how it will kill the shorts. funny, nobody was talking about it, when everywhere on the web the matrix was telling about “death cross” this summer. LOL :))
    always the same story, just from the different perspective. good luck guys.

  • convictscott

    Something Bob posted on the previous thread twigged something in my subconscious. Its time to decide on direction for equities, and trading suddenly becomes clear again.

    That hammer candle painted on the daily is inherently bullish. Euro (and therefore ol bucky) are at potential inflection points.

    http://www.masterkillers.com/wp-content/uploads/2010/11/image8.png

    Take a look at this chart. Statistically hammer candles get bought – this setup implies *rejection* of the lows and is a trigger for dip buying longs to get back into the market, feeling miffed that they missed the last epic short squeeze.

    Therefore a break of this high is inherently bullish. My trade plan is to take it, but only place the order before market opens, incase the after house globex slop whips me around.

    A break of the low, however, is a different story. If the evidence says the market should go up from here, but it doesnt – we get a reverse of the short squeezes we have had for the last months, ie a long squeeze. A break of todays $spx lows is one trade I want to be on.

    If this happens the *form* of the pullback tells us much more about future direction, and the future of dx.

    And bucky gets interesting too…

    This chart indicates my probability options for euro. They coincide nicely with $spx. Basically the euro “should” bounce from here. If it bounces, the form of the bounce will tell us much more. If the buying pressure is enough to squeeze early shorts into covering and it propels euro to fresh highs – then basically the dollar is fucked, its get long and stay long. If the bounce is not enough to propel us to new highs, the odds are high that that 1.4282 high will stand for a while. If it breaks that daily low today (and the equiv high in dx) this will almost certainly trigger a short squeeze in dx/weakness in euro, since by any standards its a compelling long setup.

    So without falling into the prediction trap, tomorrow is a key day for the whole complex.
    http://www.masterkillers.com/wp-content/uploads/2010/11/image9.png

    http://www.masterkillers.com/wp-content/uploads/2010/11/image8.png

  • convictscott

    You forgot about that hindenburg omen bullshit too

  • http://evilspeculator.com molecool

    Actually I have been talking about TOMO and POMO for two years now – WAY before ZH and anyone else. Just search this site and you'll find plenty of links ๐Ÿ˜‰

  • http://evilspeculator.com molecool

    Yes, yes – I agree with all that. BUT setups have been faded before and unless we breach that tasty little lemony line I drew none of that matters, IYKWIM ๐Ÿ˜‰

    Now, if we breach and finally push higher then that tasty lemony line will actually provide some support. But right now there's nothing but air underneath and you know what they say about path of least resistance…

  • malverd

    I was actually thinking about the HO today. what a load of crap

  • convictscott

    I trade strictly with the odds my friend… I'm short dx on a break of the daily low, long es futures on a break of the high. Path of least resistance is indeed down, just highlighting what would happen if a low probability event were to play out :)

    Any interpretation on the zero at this point?

  • alexnewbee

    in the past only you – may be.
    but now it is mainstream talk for my grandmother )).

  • malverd

    I thin the dookie is getting ready to hit the fan. Now if those LMT puts will go to work tomorrow. The Fed Govt is planning on cutting F-35 fighter jet program to balance the federal budget (way to go.)

    Anyhow that should probably bring in the buyers tomorrow with a spike up, considering it should go down:P

  • gsavli

    a waterfall.

    let's see how this goes tomorrow. :)

  • gsavli

    one more thing. this is a channel, NQ has been following for more than a month:

    http://www.uploadgeek.com/share-999D_4CDB10F0.html

  • http://www.mylifemytrade.com MyLifeMyTrade

    csco down 3 bucks and more… WOW

  • gsavli

    this tech rally is a tiny bit overstreched, time for a correction. a gap down tomorrow, which will probably be furiously bought at the open, until we run out of buyers at resistance and then we make a nice -3% day. what do you think?

  • 99er
  • http://chartsandthat.blogspot.com/ ultra

    Nice round up. Funny how different things look on the all-hours chart though. Maybe the chances of a breakdown aren't as low as you think? Alternatively, it could also show just how well stage managed opening hours are these days.

    http://bit.ly/b7v8TU

  • http://evilspeculator.com molecool

    You have a pretty sharp grandma' ๐Ÿ˜‰

  • http://evilspeculator.com molecool

    Here you go – September 25th 2008 – ZeroHedge did not even exist yet:

    http://evilspeculator.com/?p=879

    ๐Ÿ˜‰

  • 99er
  • convictscott

    I think predictions are for suckers

  • convictscott

    The same setup curiously exists on silver and gold. A significant high, decent pullback, then an attempt at new highs which looks like failing. I'd say the odds are definitely worth considering, sentiment in currencies is such that a squeeze would be nasty

  • convictscott

    You talking about the tasty lime colored line? Thats my go-point to get long on bucky…. IMO *anything* else but that is a shorting op

  • convictscott

    Pure unadulterated triple distilled bullshit. Some pundits should have their blogging licences revoked

  • http://evilspeculator.com molecool

    In sync we are again – scary! ๐Ÿ˜‰

  • http://evilspeculator.com molecool

    Still a tough read on the daily – flat and indeterminate which is why I don't give too much credence to a big drop here. A quick reversal could happen just to punish the pigs. But that doesn't show up on the daily – it's more long term. The hourly is also just moseying around – nothing concrete to sink my teeth in. I think we're just going to gyrate around until the new year – I know it sucks. IF I see anything exciting I will of course report it here first.

  • http://evilspeculator.com molecool

    Don't fall prey to cynicism – yes mia culpa on several occasions but I'm here to entertain ๐Ÿ˜‰

    Seriously – cynicism leads to losses. Just look at the market as what it is and just *be* – don't judge – be completely Zen and you'll be able to trade your positions just on your charts. I saw many folks here bitch and complain and then eventually disappear – I'm pretty sure they got wiped out trying to force the tape or cutting their losing positions too late.

  • convictscott

    If someone smarter than me here can make sense of the globex session es market I'd love to hear it :) My usually reliable pattern recognition stuff falls to pieces after hours ;-( As far as I can tell after hours es is made of lies.

    I find that outside nyse hours the currency markets are far more reliable indicators of direction – I'm serious, if anyone can shed light on after hours es action, it vexes me

  • convictscott

    Crazy 1 min aud chart after jobless claims number – could have implications for wider complex of markets
    http://www.masterkillers.com/wp-content/uploads/2010/11/image10.png

  • convictscott

    Thanks for that :) If a reversal was to happen here I'd be trading it as a quick in n out. There is simply no evidence, none at all that I can see, that a 2-3 day dip is anything but a buying opp and a chance to shake out weak hand longs.

  • convictscott

    And certainly short setups have NOT worked in a while

  • http://evilspeculator.com molecool

    Except on the Dollar – LOL :-)

  • http://evilspeculator.com molecool

    Hey Scott – is it just me and you here now? Sheeesh….

  • convictscott

    Making fun of bucky is shooting fish in a barrel

  • http://twitter.com/MNtweetes MNtweetes

    Im lurking… hoping to pick up any gems as i have many a time…

  • http://www.mylifemytrade.com MyLifeMyTrade

    At some level every trade you put on, you have a prediction in mind.

  • Joe_Jones

    What if Pomo's money goes to fill the Fraudclosure's credit vacuum that is developing on PD's balance sheets and not to pump the market up? Any thoughts?

  • http://evilspeculator.com molecool

    I have probabilities in mind – slight difference. If a level is hit that probability increases and I go with it. If I get stopped out I was wrong – that simple. If I'm right then I may add to my position as it moves in my favor. Read the turtle rules and you will be able to define your own trading rules – everything that came afterward is a variation on the theme.

  • convictscott

    Only if you want to lose all your money and get carried out of the market feet first. Expectation is the way of defeat, its starts a process of delusion in the mind where you accumulate evidence reinforcing your own position and ignore evidence which goes against you. Expectation bias in action is very powerful, when I fall prey to it it hijacks my reality completely, it makes me feel very comfortable with losses, and stops me from banking profits on winning trades when appropriate. Its why Hochberg and Prechter kept calling an imminent wave 2 top after 1130 spx all the way up to now, and they are still calling it – to them I bet they have looked at the $spx chart 2000 times in the last 3 months, and it still looks just as bearish as it did 2 months ago at 1040. I'd be willing to bet that they simply CANNOT see the obvious bullish potential in the charts right now.

    The process for me is so insidious its difficult to notice until it is too late. For instance I was so focused on looking at the market from the long side, I didnt notice the perfect short setup on the daily charts on break of the daily low (which hasnt happened yet)

    To me, it makes much more sense to trade with a decent set of parameters which give a repeatable statistically valid market edge. I dont know any real world profitable traders who average better than 70% accuracy (and most of those are scalpers which is somewhat easier since the risk/reward is skewed)
    Most profitable traders are a little better or a little worse than 50%.

    So objectively I DONT KNOW ANYONE who is right nearly as much as he/she is in their own mind, myself included (I average between 62% and 65% real world, I had a breakeven month once at 35% winners) which is, objectively, NOT GREAT AT ALL.

    Another way of putting that is “I am wrong in my predictions nearly 40% of the time”

    Another way of putting that is “my predictive ability licks hairy sweaty ass crack”

    Another way of putting that is “If I rely on my ability to predict the market, I am not going to last in this business”

    Prechter is a far far better analyst than me, but I know for sure and certain he cant trade for shit, which is exactly why he *doesnt* have a fund.

  • http://evilspeculator.com molecool

    Good question – but thus far it has streamed into equities. I think that we should separate POMO and other windows the Fed uses to prop up and support those PDs.

  • convictscott

    And you are only here because you have jet lag and can't sleep ๐Ÿ˜‰

  • http://evilspeculator.com molecool

    Well put – he and Hochberg are academics – Prechter did trade back in the 80s I think but that's a long time ago. It's easier to sell shovels than to dig for gold ๐Ÿ˜‰

    Now, I do both and I think it shows.

  • http://evilspeculator.com molecool

    It's 5:50pm here in CA – so I'm legally required to be awake :-)

  • http://twitter.com/MNtweetes MNtweetes

    USD hinges onthe G-20 meeting for a rally or resumption of the collapse

  • Seahawk87

    Hey all — Very bright minds here, so I want to ask a serious question. How exactly does POMO prop up the market, and why is it not a zero sum game? I understand the FED is purchasing Treasuries from Primary Dealers, but what is the nexus between that activity and the Dealers turning around and investing the money in the market? I have been googling POMO and stock market and have yet to find a good explanation for how this takes place or proof that it does. Assuming it does, the Primary Dealers must have an incentive to invest the money into equities rather than some other asset class. If that incentive is profit, doesn't that profit have to be realized by selling at some point whatever purchases were made with POMO monies? Lastly, if Primary Dealers wished to goose the market, couldn't they sell their Treasuries without the Fed being the buyer to accomplish the same? And if it is clear that all of this is artificial, why wouldn't the primary dealers use the proceeds to buy long term puts on the market, or puts on Treasuries? This is a serious post, I am trying to get my mind around how POMO works and would appreciate your input. TIA

  • convictscott

    I did an interesting experiment once, and rated my confidence in trades from 1-10, as I was putting them on. Turns out that over a month every single trade I thought was a lock down certainty, take it to the bank proposition – lost. My biggest winners rarely come from a confident position. For me, anyway, confidence is a very poor predictor of trade outcome.

  • http://evilspeculator.com molecool

    I do have answers to all those questions:

    http://yelnick.typepad.com/yelnick/2010/11/qe-for-dummies.html

    Now read it and explain it to me ๐Ÿ˜‰

  • http://evilspeculator.com molecool

    That's an interesting experiment – hey, maybe you've got anti-psy – just do the opposite of what feels good.

  • AudioTactics

    I posted this explanation of QE on another blog earlier today…

    Just wanted to clear some things up about POMO because there seems to be alot of misunderstanding. The Fed actually performs it's POMO by 11am and then the trades settle the following day. On a POMO day, the Fed sends a list of securities that they want to the primary dealers at 10:15am (typically a large bank or broker-dealer), who then send back their offers on those securities. The Fed then buys the securities at the best offers available from the banks and then the trades settle the next day. So the banks do not actually receive any money until the next day after the scheduled POMO day.

    Now a Trsy desk is a stand alone business unit within the bank and it will either sell Trsy securities out of its own account or acquire them to sell to the Fed but essentially the Trsy desk would never buy equities. That is just not what they do. Therefore it's very difficult to argue that POMO directly affects the level of the stock market. The balance sheet of the bank is primarily managed exclusively with money market or fixed income products.

    However, a Trsry desk needs inventory (US Treasurys) to sell to the Fed and when the primary dealer obtains this inventory from a client (hedge fund or institutional money manager) the proceeds of that purchase could be applied to a purchase of stocks (or bonds or commodities etc.) but it is unclear. So there really is no exact and direct link between POMO and the stock market.

    In conclusion though, you could say that the main way that POMO acts to lift stock prices is only indirectly through keeping interest rates low (future earnings are therefore discounted at lower rates making them more valuable in current terms) and weakening the $USD (allowing multi-nationals to re-patriate foreign earnings at a more favorable rate). Either way it is clear that the Fed is manipulating the Trsy markets which impacts all other markets so maybe the details don't matter but I think it's helpful for everyone to understand how this stuff really works and how POMO doesn't necessarily guarantee a higher stock market. Hope this is helpful!

  • convictscott

    Your soylent approach to wave theory is the primary reason I read this blog :)

  • http://chartsandthat.blogspot.com/ ultra

    Best approach I have seen (haven't tried it yet though) is to go with tick charts, whereupon if you analyse the bid/ask action, specifically wrt size of trades going through, it becomes possible to track what the profis are doing when they do it. Check out the e-mini watch blog (with apols to mole for the puff for the competition..) – http://bit.ly/cEBLcO.

  • Brishort

    I have to agree. This is what brought me too to the site first! Mole probabilities soylent approach is excellent!

  • Brishort

    Sorry not commenting a lot these days, outrageously busy at work… most likely until Xmas. Will try to drop by from time to time but just can't do much now, too underwater with work.

    In short:
    All P&F still bullish everywhere because not enough amplitude on SPX moves recently. Still in “don't fight the trend as long as above BB upper (or lower if we ever get that one day!) band,
    http://stockcharts.com/def/servlet/SC.pnf?c=$SPX:$VIX,PLTBDANRBOPA!E20,2.618!B13DF1!3!!!2!20][J208924110,Y]&listNum=8
    Euro still key to me, and as Convict & Mole say below, currencies will lead the way. it's worth paying attention.
    Vix raping still not over, a pitty to watch.
    Weekly on NYSI are hesitating, so nothing convincing there.
    http://stockcharts.com/h-sc/ui?s=$NYSI&p=W&yr=1&mn=4&dy=0&id=p34580576494&a=211150833&listNum=8

    Good luck to all, I am still reading all of you as soon as I have a moment.
    As soon as I see something crunchy and tasty on my side, I'll post as well

    Good luck to all!

    Brishort

  • convictscott

    Thanks, thats cool shit!

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

    FTSE long ?

    30 min http://www.screencast.com/t/QSsIS8nU

    daily broke above down trend line http://www.screencast.com/t/rJfTs4sv

    monthly targets 6500 ? http://www.screencast.com/t/rDak6NpF2ST

  • Brishort

    SPX at yesterday's low. Zero will be crucial here to see what happens.

  • http://evilspeculator.com molecool

    Did disqus change for you guys? Looks weird…

  • BobbyLow

    Looks the same for me Mole

  • Clint

    Calculation and predictions…what the hell else have we got when it's all said and done ?

  • http://wealthadviseruk.blogspot.com/ Gary_UK

    Once we have just a few Pomo days (like Monday) where the usual ramp doesn't happen, the Pomo effect is over.

    It's become a self-filfilling prophecy, and once it stops, it stops.

    With Ireland & Portugal near to needing a rescue, it seems the dolar will strenthen.

    And no comment here on the last minute sell-off on the KOSPI?

    http://www.bloomberg.com/news/2010-11-11/emerging-market-stocks-decline-as-kospi-index-dives-in-last-minute-trading.html

    Sure looks like buyers are getting the hell out of Seoul to me?

    But it appears all here are resigned to further upside.

  • http://evilspeculator.com molecool

    The silence in here has not escaped me – in the past this usually occurred just ahead of a meaningful correction. Yes, it appears we are seeing complete capitulation here.

  • http://evilspeculator.com molecool

    Maybe it's only on the iPad then – fuckers didn't QA the latest release.

  • http://chartsandthat.blogspot.com/ ultra

    Wouldn't say that – I think they consensus is pretty much how Scott summed it up last night – hella short if we break yesterdays low, otherwise up we go.

  • 99er
  • Fearless

    Mole, I'm sure other people have asked this question – do you have plans to make the Zero datafeed for the Nasdaq as well?

    On a side note – I've noticed that most POMO equity bids went into the Tech stocks. Maybe we're just repeating Y2K.

  • 99er
  • http://evilspeculator.com molecool

    It would not look any different as it tracks the equity market as a whole. The SPX is merely a better representation of what's going on. Have you tried to use the Zero against the NDX?

  • Fearless

    Hmmm, interesting. I will try that for sure. In fact, if I went long the Nasdaq back on August 31 on the Zero signal the returns would have been more than the SPX. I guess that'll be my experiment for the next correction.

  • Bob the Horse

    Where's Katzo when you need him?

  • Pingback: ISEE Red Candles | the evil speculator - one nefarious trade at a time()

  • malverd

    Come on….Fat Finger ๐Ÿ˜›

  • Brishort

    Mole,

    Aren't we above tasty lime?

  • malverd

    I think this thing is getting read to bust….

  • http://chartsandthat.blogspot.com/ ultra
  • Brishort

    Hmm.. I don't have live DXY chart. You are right on UUP , but from Finviz Futures, it looks above.

    http://www.finviz.com/futures_charts.ashx?t=DX

    Anybody else with better live charts to comments?

  • EvilTrader

    long eur/usd 1.3659 target@1.3695 23.6 retrace stop @ 1.3655

  • http://chartsandthat.blogspot.com/ ultra

    That's exactly the same chart. Depends whether you draw the line to join the body and then the two wick highs or the tops of the real bodies.

    Meanwhile – internals coming off negative start, looks like the low is going to hold as of now:

    http://stockcharts.com/h-sc/ui?s=$SPX&p=60&yr=0&mn=3&dy=0&id=p91292254358&a=203443508&listNum=2

    // members-only link sorry

  • malverd

    what timeframe you using?

  • EvilTrader

    stopped out ! damn :)

    im using 1 min chart.

  • malverd

    Isn't this what started this whole mess in the first place??

    The cost of a 30-year fixed-rate mortgage fell to its lowest level in decades, 4.17% from 4.24% last week, spurred by the Federal Reserve's plan to buy bonds, including 30-year Treasurys, to spur the economy.
    That's the lowest on record dating back to 1971 when mortgage buyer Freddie Mac first began tracking rates. The average rate on 15-year fixed loans fell to 3.57% percent from 3.63%, also the lowest on record, dating back to 1991.

  • malverd

    bummer. you ever try 5 min charts? or 1 min best for your style?

  • 99er
  • Bob the Horse

    Sure but it was fun while it lasted.

  • malverd
  • EvilTrader

    depends.

    i mostly trade currencies with 1min charts.

    equities i trade from 1 hour to daily swings.

  • http://chartsandthat.blogspot.com/ ultra

    ES 5 min up against its own version of “lime green”…

  • jacksoo
  • Brishort

    How come this feels like 1040 again in August… when it was about to break but didn't.

    Hopefully the fat lady has not sung yet and this is not yet a whatever fu..ing double or triple whatever bottom that will hold in la-la land upside forever.

    I see lime line everywhere I look now!

  • malverd

    it's been chopping around since around 10:50 Central; but is trending down

  • malverd

    so true. oh the good ol' days ๐Ÿ˜›

  • malverd

    Nice!

    Perfect trading marks again for 2 big banks
    Lenders had a profit daily for quarter
    Bloomberg News / November 10, 2010

    NEW YORK โ€” Bank of America Corp. and JPMorgan Chase & Co., the two biggest US banks by assets, racked up perfect trading records for the second time this year, making money every day last quarter after accomplishing the same feat in the first three months of 2010.

  • Eva S

    This is so funny!!! The similarities are just amazing. I wonder if Geithner is a red head who colors his hair….

  • Clint

    This market makes one feel like if you made a huge bet that the sun would come up in the east tomorrow morning…you'd be wrong.