I’m pretty distressed by what I’m seeing in the comment section in recent weeks. There is increasing directional bias combined with an irrational urgency to catch every single swing. Let me take this opportunity to remind all of you that as soon as you believe that you are in control or possess any prescience as to the future direction of the tape Mrs Market will pick you up and deliver a thorough spanking – if you’re lucky.
The Zero is a fantastic market oscillator and frankly I still cannot grasp why not every single one of you trading equities is hooked on this thing. However that said – it is not the holy grail and does not give you license to engage in spurious trading activity. Of course sometimes what it doesn’t show you may be as important as what it does. Namely that, over the past few days, the signal has spent over 90% of its time above the zero mark. So when I say comments like ‘I’m all in‘ or ‘die b..tch‘ or ‘did you go short?‘ then I wonder if any of you are paying any attention to the prime directives that have been offered here for over eight years now. One of them being – wait for signal and for price to confirm before even thinking about placing a trade. We are not running a bucket shop over here!
I strongly encourage the culprits to spend some time meditating on this before you resort to posting paltry excuses or attempt to offer some hare brained rationalization. What do you think you are doing? This is Evil Speculator – so act accordingly.
Nothing interesting on the setup front today. Gold is slowing down but I don’t see a reason to go short here just yet. That said – the daily looks like it could embark on a massive short squeeze, which is why we need to bite our time. If I see a spike high and some weakness I will grab a small short with a stop above the SH. However if I see a quick drop lower then I plan on doing the opposite and go long. Again small positions sizing is appropriate here as volatility will work in your favor.
It’s not too late – learn how to consistently bank coin without news, drama, and all the misinformation. If you are interested in becoming a subscriber then don’t waste time and sign up here. The Zero indicator service also offers access to all Gold posts, so you actually get double the bang for your buck.
Apologies for the sporadic posts recently but I have been bogged down with various technical and administrative issues in recent days which command way too much of my attention. Suffice to say I’m running low on patience, anti-depressants, and duct tape.
However the tape waits for no man (or woman) and it’s time for us to pay attention again. If you are still long then I suggest you do nothing and put your stop below 1966.25, which in my mind is our bullish/bearish inflection point. If we drop below that then we most likely do a retest of the 100-hour SMA which has ascended to ES 1930. Whether or not we’d be long there depends on the velocity of the tape and what the level of participation we’ll see on the Zero.
Gold looks like it’s ripe for a play. The idea here is to wait for the current ST ramp to run out of energy and produce a spike high (i.e. new high followed by a candle with a lower high), then grab some short positions and put your stop above the spike high. This play has good odds until around 1160 – higher than that and we may start a massive short squeeze. So watch the tape and don’t get married to either the short or long side.
A few more symbols below the fold:
More charts and commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don't waste time and sign up here. And if you are a Zero subscriber you get free access to all Gold posts, which gives you double the bang for your buck!
A few wild gyrations are guaranteed around 1:00pm today when Super Mario is scheduled to feed the market a new dose of hopium. I really need him to tongue lash the EUR back into submission. That new base it’s building near 1.10 has been a major thorn in the Mole’s backside. Which part of ‘I want the Euro on par’ don’t they understand over at the ECB? How is Northern Europe supposed to wine and dine millions of economic migrants with an overvalued currency? Get with the program Mario and turn those printing machines back on!
I would like to expand a little on the topic of my Thursday post which submitted that 2015 will most likely be remembered as one nasty sideways high volatility wood chipper, inflicting massive losses on both bulls and bears alike. As we are gradually transitioning out of a QE fueled artificially engineered bull market fear and confusion are slowly replacing an abundance of greed and complacency (just look at the daily VIX before August). And that really should not be any surprise to anyone – it’s been a lot of fun and laughs over the past seven years but the end of the line is in sight and it’s now time to pay the piper. Please understand that I make this point without any ulterior motives or allusions of possessing any predictive powers.
All we have to do is to listen what the tape is telling us on a daily basis. There really isn’t much to it – assuming you somehow manage to quiet down the incessant cacophony of your own ego emitting a never ending stream of opinions and distractions. After all in this, the greatest game of our time, we are often our own worst enemy. But even the thickest mind should should have a hard time refuting that we are not in any trending phase right now and that in fact intra-day volatility has become the name of the game. It remains to be the one constant we can depend on these days. Whereas the direction of the (mostly bullish) trend and BTFD was the modus operandi over the past few years, catching the next sharp turn remains the only way to extract yourself a modicum of ill gotten gains. Thus as successful traders your primary concern should not be direction – it should be volatility.
Which appears to be expanding – and has been slowly all year. Not that the VIX would have offered you any indication whatsoever as to clear and present downside risk I was highlighting right here at Evil Speculator on a regular basis starting as early as late last year. Everyone out there was simply in a holding pattern, waiting for one last push higher – just like drug addicts begging for just one more hit before committing themselves to face cold turkey.
It’s been a while since we’ve experienced conditions such as these and the only other analogy in recent history is the big shake out in 2011. If you compare what happened then you’ll find the same pattern:
Sideways topping pattern after a massive squeeze that lasted months.
Fast drop to the downside.
High volatility shake out period.
Now if you look at the current year you see an almost identical pattern, however there are some crucial differences I would like to point out as well.
Starting late last year we experienced a sideways topping pattern with increasing volatility. Again the VIX was ignoring it all, except during quick drops which served as buying opportunities. However things were already starting to slow down in 2014 – the buying frenzy that preceded 2015 was the result of a big correction which spiked the VIX all the way to 25.
The fast drop played out just like it did in 2011 – even the magnitude of the correction is roughly the same.
The current high volatility directional guessing game is per the same script and what will follow late this year or early next year is the final resolution.
Of course the direction that the fourth phase is going to take us is the topic in everyone’s mind, and as always (un)educated predictions are as ubiquitous as lofty theories as to what the Fed or the ECB may do or say next. But before you go and throw your own 2 cents into the big smoldering stew of opinions ask yourself this: How accurate have your own predictions and assumptions been in the past few months or in the past few years? Were you the one who traded the SPX all the way from 667 to 2100? If so then please go ahead and bet the house. I for one will continue doing what I have been doing pretty effectively since I started to see the light sometime in early 2010 – simply follow the tape and leave academic theories to the professionals. After all – I just work here and the day you start taking things personal or seriously is the day when you should call it quits.
Never take advice from anyone in a tie. They’ll bankrupt you. Don’t ask a general for advice on war, and don’t ask a broker for advice on money. — Nassim Nicholas Taleb
The future is now – so don’t bring a knife to a raygun fight. If you are interested in becoming a Zero subscriber then don’t waste time and sign up here. A Zero subscription comes with full access to all Gold posts, so you actually get double the bang for your buck.
Disclaimer: The information provided on this website, while timely, colorful, and accurate, is not to be taken as financial, legal, tax, psychological or any type of advise. The purpose of this website is to track the progressions of human herd psychology as it is reflected through several financial markets. Any commentary on this page, however useful it may be, is used for illustration, and to inspire thought provoking discussion, and not to be taken as specific trade recommendations. We are not endorsing any site or service, nor are we promoting choice examples as real-life trades. If it sounds sarcastic, it probably is and if it offends you, just don't read it. There are tremendous inherent risks in attempting to trade any market using any vehicle, particularly if it is leverage. Please contact your broker to explain all risks involved in the vehicle you will be trading and any questions you may have. Please consult with your own financial advisor before you tempt fate by following our evil speculation.