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Bushido
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Bushido

by The MoleFebruary 16, 2009

It’s good to be back in business – as the sun was setting in Los Angeles I was getting worried about not being able to trade at all tomorrow. Anyway, I have lost most of my day, so let’s get cracking.

Being cut off from civilization however gave me a lot of time to reflect on last week and thus draw various conclusions which I would like to share with you rats before we get to our charts. What’s become abundantly clear is that Thursday and Friday was nothing but one big shake out designed to clear out the hobby bears.

Keirsten was so kind to send me some screen grabs of her Level II historical time/sales history over the weekend. I have not even bothered to highlight particular sections as the massive block orders posted just before 4:15pm EST are quite salient. Remember futures and and big ETFs like SPY keep trading for another 15 minutes past the NYSE closing bell. That is usually right when market makers and primary dealers show their cards – once it’s too late for the average small spec to jump onto the bandwagon. Let’s also not forget that probably 80% (educated guess) of all small specs out there are unaware that SPY, IWM, QQQQ, and DIA continue to trade for a 15 more minutes. Even if you do know you probably get a horrible fill and it’s probably too late to get in as in most cases a large chunk of the move has already completed.

We both basically came to the following conclusion: The big boys were probably quietly buying up puts throughout the Friday peaks – then a few minutes before the closing bell they initiated a massive block sell assault, which triggered panic market orders by the bullish L2 crowd who suddenly faced being hit by margin calls. They usually panic and place market order in a desperate attempt to get out. Once they got the pendulum swinging towards the bearish end the rest was pretty much procedural. The nasty slew of economic news reports spread all across a three day weekend only helped to expedite bearish sentiment. It’s been downhill since and ES futures are trading around 808.75 as I’m typing this.

In one of my comments this morning I mentioned that we have been stuck in this 800 region for over a month now and that it might take a significant trigger event to get us out of this channel. We finally did breach 8000 on the DJI last week (i.e. 2 consecutive closes below) but the SPX has thus far been stubbornly clinging to the bull’s line in the sand at 800. Maybe this weekend’s flood of bad news represents an inflection point that will able to get us out of this horrible whipsaw zone we have had to put with for much too long now. But I still believe that the permabulls will not admit defeat so easily and put up a massive fight to hold the fort. For they know that a breach of 800 will most likely lead to a breach of the November 21 low of 741.02 – and beyond that lies the darkness of the abyss.

Which brings me to the theme of tonight’s post: Bushido.

Bushido comes out of Buddhism, Zen, Confucianism, and Shintoism. The combination of these schools of thought and religions formed the code of warrior values known as Bushido.

From Buddhism, Bushido gets its relationship to danger and death. The samurai did not fear death and had no fear of danger. Through Zen, a school of Buddhism one Samurai engaged in mental disciplines with the goal of reaching the ultimate Absolute. Zen meditation teaches one to focus and reach a level of thought words cannot describe. Zen teaches one to know thyself and how not to limit yourself. Samurai used this as a tool to drive out fear, unsteadiness and ultimately mistakes. These things could get them killed.

So, what does all that have to do with trading?

Everything! Especially in this upcoming week.

If the past few weeks have taught us anything it’s that technical analysis has slowly degraded to point where it utility has almost broken down. Various inter market correlations have been out of sync,  daily moves have bordered the random, and trading during NYSE hours has turned into a virtual war of wits. The stakes are high on both ends – and in this case the two warrior factions are the bulls and the bears. The bulls are represented best by the PPT, the primary dealers, and the millions of mouth breathers sliding the slope of hope (i.e. the Cramer crowd). The market makers are neutral and synonymous with arms dealers – no matter where the tape goes they make money as long as they keep the conflict going. The bears are the few remaining hedge funds, institutional speculators, Tim Knight and his intrepid disciples, and finally us rats.

The past two trading days were brilliantly executed strategies that turned out to be an extremely profitable endeavor by institutionals. Sun Tzu would have been proud – with the exception of maybe Eric and a few hardcore bears most of the small specs buckled and got shaken out. Anyone who was expecting another rip leading to an opportunity to reload on puts is probably kicking him/herself right now – myself included.

Now where am I going with this? I had plenty of time to think long and hard about what I needed to convey this week as we might be on the brink of a significant move to the downside. What differentiates this blog from many others is that it seeks to avoid academic technical analysis which might be useless to hands-on traders. My core mission is to offer insights that will lead to real trades capable of producing maximum profits at the least amount of risk exposure.

What is clear to me right now is that whatever happens tomorrow morning, unless you are already positioned, active participation in wave {3} of 3 of intermediate (5) will require the following:

  • Commitment to participate
  • A lack of fear
  • Focus
  • Time
  • Capacity to embrace death (i.e. total loss of invested capital):

A commitment to participate: You have to make a decision on whether or not you want to trade this wave down. I know this may sound silly because chances are you have been waiting for this for weeks now and might even have incurred losses in all the whipsaws. But I want to make it clear that, just like 3 of intermediate wave (3) this one won’t be easy and in the best case scenario we probably will have to endure losses before we arrive at a final release to the downside. It is crucial that you sell the rips and are not lured into chasing the market. Even if you are able to time your trades well, there is not guarantee that a PPT assault of the likes we witnessed on Wednesday and Thursday won’t repeat itself. They will do whatever it takes to keep this market from crashing. So, before you position yourself you must commit yourself to sitting through any counter moves.

A lack of fear: This plays into the commitment part – I am sure we will see nasty whipsaws this week. Use them. This is the only way to position yourself. Follow your charts, the RLs, the fibs, and whatever else you think you can rely on. But be ready to pull the trigger – if you snooze you will lose. Now, that does not mean that you should be reckless – follow your system to the letter, whatever that may be.

Focus: Again, leads into the prior point. We cannot be driven by fear. This has been my mantra here for months now but we have to constantly remind ourselves that it is human emotion that keeps us from placing winning trades.

Time: I made a big mistake two 1/2 weeks ago in buying February puts. The one weakness of Elliott Wave Theory is that does not offer us a clear time dimension. It is up to us as traders to look at various complementing indicators that may give us a reasonable estimate as to how far we are along in a particular count. That doesn’t mean you buy puts six months out, but it’s obvious that option buyers should err on the cautious side, especially at critical defensible lines.

Capacity to embrace death: I know that sounds a bit over the top – just stay with me here :-) Whatever capital you devote to riding this one down should be money you can afford to lose. We are not gamblers, and as traders we do our best to position ourselves ahead of moves that afford the highest probability of success. However, I personally always approach a trade with an expectation that I will lose. I know where my line in the sand is and that is where I exit, no questions asked and no re-evaluation. Never enter a trade unless you know what your exit is. However, we have recently reached a point at which risk management is almost impossible. Therefore, this plays into point number one: If you decide to play this week you might not be able to employ your usual stop loss provisions. Or at least you might have to be extremely generous in how much losses you will be able to tolerate. For me personally, this means playing it relatively small – I initially thought that I would be vested 50% or more at this very stage. However, even if I decide to take entries in the coming days – assuming we don’t just plunge to the bottom tomorrow morning of course – then I will most likely limit myself to less than 20% of my trading capital. Remember rats – the key to surviving in the long term as a trader is not getting taken out by your own greed.

Sorry this took so long – now that I have painted the picture from a psychological perspective let’s look at some charts:

You might remember that SPY chart I posted on Friday in which I proposed that we might complete an a-b-c which would have gotten us to around 854 (equality). Frankly, at this stage this train seems to have left the station as the ES futures were trading around 808.75 as I started typing this. In the chart above I am calculating the SPX equivalent by deducting the PREM from the ES. That gets us to around an equivalent of about 810.75 – barely above the bottom of minute wave (i) of minor 2 of intermediate (5). There is a very good chance we’ll blast through that tomorrow at some point (probably after an obligatory post-gap counter rally) and then proceed to challenge 786, which is a long retracement level plus it happens to be close to the 78.6% fib line relative to the November 21 bottom.

I do believe that the bulls will make a stand right around that level, and whether or not they succeed will determine if we push up into wave E of a triangle which would complete intermediate wave (4), or if this is already intermediate (5) and we finally breach the November lows and proceed our plunge into the abyss. Frankly, I give both scenarios equal weight at this point as various of my trend/sentiment indicators are almost in equilibrium right now:

Medium term we are far from oversold levels by any standard.

More long term we are traditionally in neutral territory, but when compared with recent readings we are slightly overbought.

This one gives me hope – the moving averages on the NYSE new highs/lows chart have not budged and there is plenty of room below. Again, we have not seen such levels since last August at the peak of intermediate wave (2) of primary wave {1} of cycle wave c.

The CPC chart shows that the we have retraced from those extremely bullish levels but then started to drop again on Thursday and Friday. No matter which way you read this chart, there is plenty of room above and I do believe that we will see a ratio of 1.3 and above before this wave is complete.

Oh, I must say I like this chart very very much :-) There has been a lot of pressure on the Yen all last week plus over the weekend. I wish I had the time and space here tonight to explain some of the underlying dynamics. However, this post is way too long already and this is the gist: It might be possible that we see the Yen drop a bit further but it can’t last forever and eventually it will snap back inside the the BB, even if it’s only for a day or two. If and when that happens – and that might be tomorrow or it might be a week from now – it will put immense pressure on equities. I was spot on with that last time I posted this chart and I am confident that we will see a repeat.

In that context the following news tidbit is extremely interesting:

Japanese Finance Minister Nakagawa Resigns After Furor Over G-7 Briefing

The proverbial excrement is about to hit the fan down in Japan and it might just be the trigger event we have been waiting for.

UPDATE: Karl Denninger points out that there might be an FX dislocation in progress. Again, I didn’t have access to the markets all day and am just now catching up on news.

This chart is my fly in the proverbial ointment. As I’ve made it already abundantly clear – as long as this one keeps pointing up I am extremely hesitant to expose myself to the downside. I will of course need to see those readings after the open, as a gap to the downside might be able to swing them southward.

Last but not least my favorite chart for tonight. What seems to be developing on the weekly stochastic may be a repeat of what we saw prior to wave 5 of (3). Remember that back then I was a bit nervous about my stochastics pointing up, after which we however got one last drop before we consolidated into intermediate (4). The pattern looks familiar but I don’t want to jump to conclusions. Nevertheless, it’s a possibility – and based on prior precedence a door to the downside appears to be open.

I think Gold might actually have overstayed its welcome and I might try my luck with a very small position in GLD in a few days (yes, I swore I would never touch the stuff again, but I can’t help myself). The stochs/MACD on GLD look like they are close to rolling over – but emphasis is on ‘close to’ – don’t jump on this tomorrow morning. I will let you guys know when I think this one is ready for the plucking. Hey, 6th time is a charm, right? 😉

Alright, that’s all I got for tonight – my apologies if this one feels a bit rushed but as you know I didn’t have much time this weekend due to my 10 hour power outage. Based on the flood of comments you guys have been on fire this weekend – I’m truly impressed by the quality of the discussions I see here lately. Good stuff – keep it up and we might just make it through this wave with some profits.

Also a big up to Eric – mate, you stuck with your guns last Friday and are now reaping the benefits.

REKOGNIZE!!

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.
  • hy

    MOLE, you are very funny. You seem to change your opinion every single day. While flexibility is a good quality in a trader, in general, in your case it is a sign of how completely confused you are. You seem to lack a clear strategy, but use a hodge podge of elliot wave, tape reading, and mostly, it seems, EMOTION to guide your decisions, which will not get you far at the end.
    However, you have done a good job attracting a mass of followers (mostly clueless losers, judging from the comments… but there's nothing wrong with that) and that's where your real strength lies. You should focus your efforts on selling ads/systems/indicators to them, as they are your main asset.

  • Insect Overlord

    Here is my very very short two cents on /NQ.

    http://screencast.com/t/N86qr5QSq

    As far as gold, if it can creep up to 975, I'll look for an entry to short it.

    http://screencast.com/t/PIqj662I

  • molecool

    And STILL I have been taking your money all year – how does that make you feel?

  • hy

    Indifferent.

  • http://gemstowear.etsy.com Jan

    Mole,

    You are a true die hard. I can picture you working on a small laptop in complete darkness..yet you still manage to pull off AAA+ charts.

    Maybe you should think about relocating to a different state? I wouldn't wanna be in California these days! As we say in Florida….Come on Down!

    Just went over to KD's ticker forum and the traffic there has slowed the sight down. Karl has put out a “Red Alert”.

    Anyway….thanks for all you do.

  • http://gemstowear.etsy.com Jan

    shoo, fly

  • standard_and_poor

    Roadtrip through hell …. here is map and new brochure:
    http://www.screencast.com/t/qTplPcAQR99
    http://www.screencast.com/t/CqpACV9qmE

  • http://goldversuspaper.blogspot.com/ Downandout

    I am heavilty short KSS (Kohl's) and glad. I am also heavily short gold miners right now and needless to say, a little nervous right now given the current explosion in the gold price. I will be very interested to see how gold stocks react if we have a market meltdown tomorrow in the setting of an elevated gold price. Despite common sense and risk management principles that might dictate otherwise, I am going to stay short, let it all ride, and see what happens, since I have April expiration puts and smell a blow-off top to a short-term bull trap in the precious metals.

    No fear and, if it doesn't work, I'll look back and say “no common sense”…

  • segaa

    Wow, Mole, it is a huge post ! :-) One small correction: if I remember correctly, cubes could be traded till 8PM EST, not all brokers probably permit doing so.

  • kzhat

    Mole, FANTASTIC post. Thanks again for your insightful commentary.

    Your comment regarding time and the ability to stomach this trend is exactly on par with how I've been trading lately. Long dated options, right now I'm in sept SPY puts. I play around with the futures, but the big money is at play on the larger macro moves. Part of that is just the way I prefer to trade (longer time horizons). I've been actively playing the swings by hedging off the long options, scalping profits by selling premium and then buying it back cheaply.

  • kzhat

    Has anyone seen this yet? http://www.bloomberg.com/apps/news?pid=20601087

    The rumor has it than the Chinese market has been propped up by lending. New capital has been going into firms, they have been buying equities. Good be a very interesting story on the Asian markets, with global fallout.

    Currently LONG FXP. This could prove to be a spectacular play in the coming week. US bailouts won't help the Chinese market if they start to pull this capital.

  • molecool

    BTW, where is your blog? It takes guts to put yourself out there on a daily basis and by doing this I'm committing myself and my analysis on a daily basis. It's easy to drop by and post lame ass remarks. If I'm really such an asshat then explain to me why thousands of professional traders are visiting this blog on a daily basis?

    I don't expect a constructive response really – but hey, surprise me….

  • molecool

    Really? Cuts off at 4:15pm for me but I'll try tomorrow.

  • rockwind

    awesome post man. you're site is in my top 5 i check each day.

    my kids keep me to a “2 posts a day lifestyle” I hope they can afford to pay off all this debt when they grow up.

  • asetrader

    lol…please tell me you don't read the fly?

  • amgrant

    SPY, IWM , QQQQ, etc trade on ECN's during after hours (i.e. do not trade on a primary exchange, namely, NYSE). The additional 15 minutes you're referring to, Mole, have to do with the trading of options. During that 15 minute interval, the options on SPY, IWM, QQQQ, etc trade off their respective futures.

  • http://greedangerignorance.blogspot.com DJ

    /NQ look good at 1192 to go long

  • de3600

    Why even waste your time with this jackass.Just someone looking for attention.

  • http://www.twitter.com/TraderTamas TraderTamas

    I am also going to be reaping the benefits of Erikd great analysis… thank you Erikd!

  • jacksoo

    and there's me expecting a chart of the SPX…fooled again.

  • molecool

    Only when I feel like slumming it :-)

  • molecool

    Top 5 only? What do I have to do to make it to top 3? Post naked pix of Keirsten?

  • segaa

    I can’t say for sure if it’s ECN trades only, because I see cubes in NASDAQ feed till around 8PM (maybe 7PM? – not sure about this), but anyways if Mole was referring to options trading only – sorry, my bad, I did not get it.

  • jigdaddy

    i feel like i have really good positions for this drop, as i have mar/apr puts on SPY and i got pretty good fills on them. my only other positon is SRS, but now i am paranoid as all hell. So do I take profits and reload higher? If we go higher that is. Do i miss the big move if i take those profits as i am early? Also if i set loose stops then i will walk away flat and pissed off and probably get stopped out at the top at which point the plunge happens and i will have missed it. Perhpas i take profits at 2Sweets786 level and see what happens??

    confused i am as i have some big decisions to make. i will definitely be watching XLF like a hawk this week…

  • standard_and_poor

    Hi Jacksoo,click on the second url for SPX chart.

  • segaa

    Mole wrote> The bears are the few remaining hedge funds, institutional speculators, Tim Knight and his intrepid disciples, and finally us rats.
    It's funny, but your right frame shows me bull's advertising: :=) http://img02.picoodle.com/img/img02/3/2/16/f_bu

  • kzhat

    jigdaddy, you'll need to figure out your SRS deal on your own.

    However, going forward. May I humbly suggest that all trades have a pre-defined trading plan. That includes EXIT points. These can of course be adjusted, but you should never have to question if a trade is right.. I've lost a lot of money in the pasting trying to trade my gut.

    Before I get into a trade now, I know my entry points, exit points, and target profits. That may include laying some off to capture gains and allowing some to run at the end. it may also include pyramid trading into a larger position as it runs. It all depends, but it is planned ahead of time.

    You will sleep much better, and hopefully, make a lot more money :) Also, I trade options so that forces a little more diligence. I noticed when I started to get into equities again and futures that my disciplines slacked – go figure, I lost a lot of money in those products – now, I trade them with the same planning in place.

  • Keirsten

    Just set your trades/alarms and let it go. Do not over think it, just trade like a machine. It's never wrong to take profits, and don't look back at what coulda/woulda been. It goes the same way with profits AND losses. The minute you diss yourself for not “making more from the trade,” or “I should have gotten out,” that's your signal you're getting too greedy and it might bite you in the tush. G/L tomorrow Jig.

  • jigdaddy

    thanks. good advice, i think im just gonna set my stops and move to the next trade. at least i will be booking some profits right. have a good nite..

  • jigdaddy

    thanks Kzhat!

  • Keirsten

    Best come-back I've seen lately. Is this the same troll that paid us a visit on Thursday? If so, not very adept at the head-games. But definitely good comic relief.

  • Keirsten

    You too Jig. 😉

  • http://centrifugaldeforest.blogspot.com/ Centrifugal_Deforest

    Love the Zenacity

  • Randy Harris

    Thanks much, good levels to watch for.

  • Teito

    I expect tomorrow a reversal. why you might ask.. and that's cause there are too many shorts right now. I am 100% and might get a small position in SSO.

    Now it is hard to rely on previous contrarian indicators. So I am guessing this based on my observation of how the “dumb money” is doing lately

  • http://greedangerignorance.blogspot.com DJ

    Thanks for your efforts for this post Mole. +1

  • Marc45

    I'm glad someone said it. I too think there are too many bears (in the trading realm). Even amongst my friends (who are sitting on huge 401k losses), they think things will get worse. If I was the market and wanted to screw as many people as possible I would just trade sideways until the averages catch up and then when the bears start talking about rallies, the bottom falls out.

    Disclaimer: I'm 100% cash and ready to trade either way.

  • SteveInChicago (spsnomad)

    I saw the currency stuff over on Tickerforum too.
    http://www.tickerforum.org/cgi-ticker/akcs-www?…

    This looks bigger than just the usual Opex shenanigans — my guess is that Latvia (or some other Eastern European country) is about to default on its debt and a large Eurozone bank is in deep trouble.

  • Vic

    Yes, it does. http://screencast.com/t/NukkZUikrY -I only record blocks over 1,000
    If it cuts after 4:15 you may have to change your sessions. I don't know what data feed you use, but in mine it defaults to 4:00pm. If I want to get quotes for the aftermarket session I have to change the default to 24h.
    BTW, these are sell orders. No bids over 1000 in the after-hours session.

  • jacksoo

    its a start….

  • molecool

    I hope wasn't over the top – busted wanted to set the stage for what we are heading into tomorrow.

  • El gAto

    Mole……I have been on the other side of the gold trade since 700. However, now there is lots of small cap junk coming up on my scans…..it might be time to join you short.

  • molecool

    I think that's what I said but thanks for spelling it out for everyone.

  • El gAto

    Great post BTW….one of your best !

  • Erikd

    XLF trade set-up for this week http://screencast.com/t/1eZP20Nzvci

  • http://www.pacfreehotwater.com steveo77

    Take the darn bull money however you can….click fees, whatever…. :)

  • Vladz

    And EUR just got punished to new multi-month low, interesting moves in currencies on no news tonight

  • http://www.pacfreehotwater.com steveo77

    TICKERS!
    WWW
    PEG
    EAT
    CMP
    EGO

    Great post Mole, I figured this was another attempt to shake the weak bears from the tree, and it was a scary shake no doubt, But my tired little bear paws held on to the equivalent of 20,000 shares short of stuff (shorts and puts)—very uncomfortable, but I think Tuesday morning will be very pleasant.

    BTW lots of timing signal suggest This week as a major turn in market….maybe a big fast capitualation bottom….like 15% down in 2 days, Shake out the gazillions of call holders….and then bounce up to a mere 7% down week…..that is my SWAG….run trailing stops on all your positions to benefit from this–and then—I love this as the direct opposite to “admitting you were wrong”, is then reverse the trade….go long for strong expiry finish.

  • standard_and_poor

    Cue the drum roll please…. HMMM, Ladies and Gentlemen, and the winner of this week's “BRASS BALL” award goes to……………
    http://www.screencast.com/t/LyI29oCI
    http://www.youtube.com/watch?v=MKUaPo6sORU

  • benji12

    erik…more downside in fianancials this week? thinking about getting into FAZ calls

  • tezcatl

    I've been lurking for a month or so and just wanted to say, Kudos Mole! Always lots of food for thought.

    I haven't been trading long but after taking a few licks with other styles I have quickly come to the conclusion that scalping is the only trading style that makes any sense in these market conditions and so far so good. Assuming there is a PPT, and I do, how can anyone even try to make a longer term, rational trading decision?

    Anyhow, in the hopes of making a contribution, something to consider when thinking about the next moves for gold.

    http://www.kitco.com/ind/willie/feb052009.html

    Seems fairly convincing IMHO.

  • fuzzygreysocks
  • Erikd

    use XLF channel posted to guide you.

  • Jacko

    These days the “smart money” is pretty fucking dumb, so what's your point?

  • Fujisan

    Never thought in my whole life that Bushido got something to do with trading. Now I know. Good posting, Mole.

  • SteveInChicago (spsnomad)

    True! The last time I saw balls that big, one of them was rolling after Indiana Jones :-)

  • Marc45

    Hmmm, I would think that a stronger dollar would push gold down but noooo. However, a stronger dollar might give a boost to equities. We all know the Fed would like a weaker dollar to help the “economy”.

  • malusDiaz

    Mole: Some consideration on GLD, SLV, PTM, longer term: http://chartsandcoffee.blogspot.com/2009/02/pre

  • Vladz

    Well I dont know about the boost to equities… look where SP was last time at this EURUSD level (it just plunged lower since i took screenshot 2 mins ago)

    http://content.screencast.com/users/vlads123/fo

  • Keirsten

    Har, har, har. I saw that!

  • jacksoo

    way to go fuzzy – what a babe…..

  • Jacko

    Seems like our resident Hitl… I mean Mole simply deletes comments he doesn't like. Just following orders, were we?

  • Fishrman

    Hi Mole,

    Love the blog. I am trying to learn more. Looking at the screenshot of the level 2 quotes it looks like lots of big BUYING (green blocks) but price plunged EOD. Why is this and how does it fit in your description in the post? Thanks!

  • Merlynn

    Great post Mole, and thank you!!!! Your posts in the last week or so have kept me from panicking and sticking with all of my puts( April to july on various head and shoulders etc.) I have been stopped out of a few but didn't adjust my stops or take profits. This market is so nuts that I have just decided that you make a calculated assesment and stick to it until you get close to your target or get stopped out. Keep giving us your great Zen insight and maybe some of us get quit jumping from fear.
    Great Post!

  • Dragonsbane

    I don't understand scalping… and honestly, I don't know anyone who does it profitably on a pure prop basis. You take a penny here, a penny there, but when you lose, you lose 30x what you make. Maybe it's just me, but be careful. Especially with markets as volatile as they are now, I would have guessed scalpers would have all been carried out on stretchers in these markets.

  • Dragonsbane

    Lots of news goin' on bud… EUR is down because Moody's said they may downgrade a number of European banks due to exposure to Eastern European loans that can never be paid back (now that their currencies have collapsed). Fear is back in the market.

  • Dragonsbane

    lol… only 1? If Latvia deperciates the LAT, watch SEK get crushed as Swedbank will need a bailout.

  • Dragonsbane

    It takes more than just guts and I commend you for it. Keep up the good work!!

    BTW – We visit because you're very good at what you do and looking at different things keeps us sharp. I don't agree with everything you have to say, but that doesn't detract from the quality of the work here. Ignore the wank, he's obviously bitter that the market hosed him.

  • JohnyWalker

    Not over the top at all. Very apt for the moment. Thank you.

  • T.B. Aurelius

    Since Mole mentioned Bushido…
    ??(Warrior aka samurai)?(Way: road) does point to elimination of fear by the way of eliminating a “Self”, “Ego”…
    It is not, in anyway the same as reckless abandon…That would be called “Insanity”…
    Awareness is not only present, but elevated to extreme…but fear is absent…
    Warrior is alert to everything that is happening around him, only the ego is missing, thus absent is emotion…
    And because fear is not there, the warrior is clearly aware of all the danger…..he turns away from none…stare at them all with indifference of a rock…
    It all comes down to one thing…”Awareness without mental noise from within”
    It is well illustrated in “The last samurai”…
    The son of Daimyo instruct Tom Cruise during sword training…

    Nobutada: Please forgive, too many mind.
    Nathan Algren: Too many mind?
    Nobutada: Hai. Mind the sword, mind the people watch, mind the enemy, too many mind… [pause] No mind.

    Happy trading~

  • molecool

    Yes – the gold bull reading is around 90% at this point – should be fun shorting this sucker.

  • katzo7

    That would put you as my top 1 site. Drool, drool.
    Oh f**k, you already are.

    Wasn't Keirsten one of the dancers in Steve's videos? As I have always said beauty and brains too.

  • katzo7

    Mole do not change his opinion of what the market is doing every day, he is adapting to the market as it is fluctuating wildly. It is protective. The market is changing it's position every day. Wake up. But better still, Mole is the only one who can make sense out of this shit. DId you read today's commentary? Exceptional analysis. Best I have ever read.
    IMO we are at a point of transition. But maybe you should go watch CNBC and buy some GE.

    If you lost big, take your hostility elsewhere.

  • whatthefuckdidhejustsay

    for those dogmatic bears – does it make you nervous to be on the same side as that asshat bear leader atilla?

    the guy has posted more nonsense for the past few months and continues to get comment after comment from armchair traders lacking any underpinning of logic to go along with their misguided perception of things.

  • T.B. Aurelius

    Next level to eye:
    VIX 57.50
    DIA 74.50
    Qs 26.75
    SPY 77.50

  • unSane

    It makes me nervous to be on the same blog as you.

  • whatthefuckdidhejustsay

    you must be one of his lemmings eh?

  • unSane

    Wrong.

  • T. Waffle

    Great post Mole,

    My current positions are

    MARCH PUTs
    ———
    SSO
    JPM
    HBC

    MARCH CALLs
    ———–
    QID

    Shares
    ————
    SRS

    I will take half of with some decent profit and ride other half. on pull back I will buy June PUTs

  • DZZ

    But are you still predicting drop as far as indicated last summer?
    Great post & ZeroRL
    Namaste

  • Douala

    Mole

    A M A Z I N G write up today. You're a huge blessing to all of us. Danke !

    Erikd… brilliant call Friday… I got stopped out of my SDS. Wish I hadn't :-( Enjoy the ride down. Please keep postings your thoughts !

  • Teito

    I am in cash too! when we were at the top of the bull market everything seemed so perfect. Could we be at or very close to the bottom? Or maybe a intermediate bottom?

  • minion of the ppt

    May your trades always add as much value to your portfolio as you've added value to this blog.

  • alphahorn

    Good morning all, great post Mole.

    Time for the Warriors to come out to play:
    http://www.youtube.com/watch?v=xITVFgxcDIg&feat

  • Douala

    LOL [great come back!]

  • katzo7

    Sides? How juvenile. There is only charting.

  • katzo7

    Gold up 23.48 @965.

  • whatthefuckdidhejustsay

    Hey Atilla – good to see you over here.

    So the market appears to be following your black swan event part II. Testing the lows. How conspiratorial.

  • alphahorn

    people are getting to scared to invest in equities, the dollar is getting overextended and so they are turning to gold. i know it looks like a great short, but i think i'll wait until we rally off the bottom of this move before i play it

  • T. Waffle

    lol nice one!!!!!

  • BalaB

    Lots and Lots of overhead Retracement Levels starting at 827…..
    I have yet to see the levels this close to each other (i.e. all bundled up)

  • dust13

    I’m thinking the signing too obvious of a set up for a crash, especially since the market likes to screw as many people as possible. So my thoughts are to screw as many people as possible go down to 786 and then rally into close. The Obama admin has a vested interest in making the market hold here, so why not send the PPT to hold it up for a couple of weeks. This way they can claim the market liked the bill and when it crashes in a couple of weeks they either try to expedite it or add more to it. Politics trumps the crash today

  • DZZ

    Oh O:
    SPY 80.31
    XLF 8.47

  • DZZ

    and dropping!

  • Chrys

    Some people are talking about a Black Swan event. There are news reports this morning that Lativia may default. Eastern Europe may be next. Watch the dollar.

  • alphahorn

    what little cash i have sitting on the sidelines i might use to go long dxo if it sees $1.75-$1.80

  • Blind_Squirrel

    Russia limit down

  • katzo7

    I agree Alphahorn. I have learned my lesson in trying to call a bottom.

  • BigHouse(Aka Mr Vix)

    FAS at 7.01 :) glad i shorted that last week

  • Erikd

    I will cashout all front month options on the open since they have doubled and are now ITM.. will reposition winnings from over the weekend and press my winner with buying ATM feb options at the open – pressing my winners and utilizing the leverage..will buy march options ATM strikes with initial investment.
    we will be below XLF 8.70 at the open and trading the channel. do not stay paralyzed if you did not get in before the weekend this move is just starting…

  • DZZ

    The 20 day channel on the dollar looks like a trading short.

  • Erikd

    YES, i will be repositioned at the open and expect your SPY target to be hit within 24 hours…

  • alphahorn

    Erik are you concentrating your efforts on XLF or are you spreading it around?

  • willc

    thank you for all the calls on Friday.

    what is your target on XLF? SPY?

  • TomOfTheNorth

    Hehe – awesome

    I've been dug-in short for 3 months now
    Just waitin'….

    http://www.youtube.com/watch?v=0bDY0DfEjmo&feat

  • BigHouse(Aka Mr Vix)

    Mr Vix at 48 :)

  • http://spnakr007.blogspot.com/ Steve

    A great writeup, mole…You are more into the eastern philosophy than me…Best!

  • Smeagol

    Why buying at the open, you don't think that the gap will be filled?

  • BigHouse(Aka Mr Vix)

    Keep an eye on MS is at important support at 21.50

  • http://centrifugaldeforest.blogspot.com/ Centrifugal_Deforest

    Added SIVB short at open, 19.15

  • BigHouse(Aka Mr Vix)

    Soon Mole will be playing that song “break on through to the otherside”

  • VaJim

    Just heard on CNBS from Ameriway Financial Services anlyst. Mark Haines says “What does an investor do?” Ameriway analyst beats around the bush and Haines nails him saying “What does the investor do?” Ameriway analyst “I think the investor just has to dollar cost average into this market..” OMG

  • Erikd

    SPY,XLF,

  • katzo7

    I was just going to post it. LOL

  • http://greedangerignorance.blogspot.com DJ

    Closed puts: XLF in 90%, VIX in 43%, QQQQ in 66% and 32%, SPY in 40% profit. Closed/Sold usd/cad in 100 pips profit. will put for pullback now.

  • alphadriven

    Ameriway or Ameriprise?

  • molecool

    NEW POST!

  • molecool

    NOT until we breach the November 21 lows.

  • Erikd

    trading options and want to be re-positioned and take advantage of volatility increasing…
    do not procrastinate i already know what my plan is i am just trading it. posted above info for traders to understand how to grow your winners.. a must…

  • unSane

    Americrissmas

  • BigHouse(Aka Mr Vix)

    Finally MS is dropping like a rock now at 20.93 lol

  • T.B. Aurelius

    Drop me a line Erik
    T.B.Aurelius(at)gmail.com
    And folks,…this is not about trading…no hush, hush, secret stuff….

  • standard_and_poor

    $…..;-)….hehe

  • T.B. Aurelius

    My TOS ticker stalled….what's up??

  • TomOfTheNorth

    exactly my reaction

  • Lonewolf7107

    Great calls Erik. What is your near term target for XLF ?

    Thanks.

  • jigdaddy

    which strikes are you looking at for SPY, i just took profits :-) and am looking to reload. i had mar/apr 70s…

  • http://centrifugaldeforest.blogspot.com/ Centrifugal_Deforest

    Pyramid higher into long SDS at 85.60 here
    Breadth is well more than 4-1 negative, which means we are very likely to make lower lows n the final 90 min trading. This may not be the biggest % decline so far, but don't kid yourself – today is a rout

  • http://centrifugaldeforest.blogspot.com/ Centrifugal_Deforest

    Pushing very hard now intraday – long still more SDS 85.15

  • Rhett

    For this leg down, I get a potential bounce in the XLF ~7.4 region, off the trendline originating in March through the Nov 21 lows.
    http://screencast.com/t/OGz1kEX48

    -Rhett

  • Smeagol

    The XLF has passed the lower limit of you channel posted above. Do you have any update?

  • Erikd

    excellent target area..

  • Erikd

    XLF updated channel that has expanded to the downside with the close we got below 8.07 yesterday… http://screencast.com/t/SkTtTbPh

  • Erikd

    XLF expanded channel http://screencast.com/t/9Q4oBeUYr

  • adrian_boy

    The XLF has passed the lower limit of you channel posted above. Do you have any update?

  • Erikd

    excellent target area..

  • Erikd

    XLF updated channel that has expanded to the downside with the close we got below 8.07 yesterday… http://screencast.com/t/9Q4oBeUYr

  • Erikd

    XLF expanded channel http://screencast.com/t/9Q4oBeUYr