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Chart Medley
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Chart Medley

by The MoleApril 27, 2011

As we are creeping above SPX 1350 it’s yet again time to sink our teeth into some of my infamous low-carb-high-protein chart medley:

Let’s start short term. As we painted new highs today tomorrow’s net-lines sell level will advance to 1327.25. As long as we hover above that the longs should be okay. If we drop below that mark then we may see some follow through – which would be that little retail schmucks shake out I have been proposing.

Again, I have adopted the net-lines concept from Chris Carolan – friend of the blog and one of my favorite financial analysts.

Since some folks asked me about Mr. VIX – so I thought I should clarify whether or not we in fact painted an equities sell signal the other day. And the answer is (drum rolls…) – no, there was not. Yes, we did get our spike outside the 2.0 BB (actually we got two) – followed by a close inside – followed by oooops a close lower. Sorry folks – we needed a close above the first inside close to get a bonafide VIX sell signal. So the longs yet again cleverly avoided one of my favorite reversal signals.

However, all is not well in Equities Paradise – medium term I am seeing conflicting signals, which make me very nervous. Long term the writing pretty much is on the wall.
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Easy chart – we are plotting the number of stocks trading above their 200-day MA against the SPX. As you can see we are now flat lining in the 90% range, which is typical ahead of a meaningful reversal. My best guess on past history would be that this reversal would transpire early to mid summer.

Here I’m being a bit more creative by plotting a ratio between all stocks above their 50-day MA against all above their 200-day MA. Again, I’m seeing a divergence here – the drop means the former is not keeping up with the latter (which as shown in the previous chart is in the 90 percentile). Whichever way you want to interpret this – there appears to be a distinct diagonal resistance line and we are hitting it right now. Does that mean we are reversing tomorrow? No – of course not – but I would not want to be unduly exposed to the long side here.

Now we are looking at a ratio of all NYSE stocks above their 50-day MA against down volume. In the past few months we have been in a nice downward slopping channel. And yes – we are now getting close to the upper boundary. Which does not guarantee a reversal, mind you, but leaves ‘the door open’.

This is basically the ratio between Fidelity’s income fund (i.e. junk) vs. Vanguard’s long term treasury fund. As you can see we are now painting a solid divergence – and that is also not good medium term. I have seen these divergences persist for a while in the past but we are getting to the point where I would expect some kind of reaction in equities.

Finally – a simple chart for a change! RSI_EMA running against the spoos. And although we are painting that delicious inverted H&S there is a distinct divergence – again! Now, can this H&S resolve despite this? Of course it can – but once/if we get a big blast higher and if we see this divergence hold it may present a nice opportunity to go short. I say ‘may’ because we always need to assess all evidence when that time comes.

Of course we all know what has fueled this relentless melt up in equities – and it’s the concerted destruction of the U.S. Dollar by our friends at 33 Liberty. I’m plotting the inverse of the UUP (i.e. Dollar bull ETF – yes, I could have used the regular UDN) as a left chart against the SPX. And as long as this continues any reversals will be shallow and tightly controlled.

Nevertheless I am seeing a bit of a widening in the SPX:VIX to SPX ratio – which means that market makers are pricing in a bit more risk here. May change after Banana Ben’s big speech today but worth keeping in mind.

Bottom Line:

A pretty mixed picture as you can see. Hence – I don’t want to be long here but I also don’t want to be short. My preferred setup would be a nice shake out of long chasing retail traders after which there would be a nice setup to get positioned for a final push higher.

Let’s not force it and wait for the tape to come to us. It’s always prudent to keep your powder dry for those extra juicy setups – those are worth waiting for. In the interim we can still have fun with selected symbols, in FX, a few commodity plays, etc.

Cheers,

Mole

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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.
  • amokta

    Where is everyone – Watching 'Bernanke the Movie' no doubt

  • http://pulse.yahoo.com/_VSVXKYHCX5MPKIR6C2MRTTL42U Celtic33

    With regard to the VIX, yesterdays close (X on your chart) appears to close lower that 2 on your chart. So, why then do you say it closed higher?

  • malverd

    HAHA

    http://news.yahoo.com/s/ap/201

    “The news conference, the first of three scheduled this year, is part of a long-standing Bernanke effort to make the Fed more transparent.”

  • amokta

    Silver going paranormal!

  • bshah

    unfucking believable… Thx to Mr. Berna.. everything used in daily life is so inflated not in US, but everywhere in the world, and yet the idea of not enough hangs out there..

  • Clint

    Ha….Bernank says he's all for a stronger dollar and lower inflation…and yet he's the A-hole causing the situation to be just the opposite and ruining things. The dude needs a bitch-slappin'.

  • bshah

    so 1350 taken , now target is 13000 K on Dow.. I want to be like these bastards,… Ambitions that can be achieved… damn…

  • bshah

    r u kidding me.. wow… 12700 is guaranteed…

  • amokta

    The question for he silver bulls is whether this is a double top melt up marking a major top, or not

    Also, spx, oil, real-estate drn everythng melting upwards, but is it a trap?

  • Bob the Horse

    Only for shorts.

  • DarthTrader

    Silver rallying with low volume.

    Silver bears would like for it to take out the high with low volume.

    That would take away the need to retest the Hi volume high as it would be converted into a low volume high

  • http://evilspeculator.com molecool

    Sorry – I screwed it up – I meant we got a close lower but needed one higher. Just corrected it.

  • Bob the Horse

    Interesting moves going on – Gold & Silver rallying but Bond yields going lower. All about inflation rather than growth this move. All very 1970's.

  • http://evilspeculator.com molecool

    Why don't I just cut out the middle man (i.e. Banana Ben) and flush my dollar bills down the toilet?

  • http://evilspeculator.com molecool

    TBT still up for the day.

  • amokta

    IM trying to maintain some bias-less analysis both sides of coin considerd :-)

  • BobbyLow

    We've debated this before, but during the 1970's and early 1980's we also had wage inflation. Bernanke said that “it is the Fed's Job not to have Inflation filter into wages. So I still say this has to blow up because without wage inflation we will have the one thing they don't want and that is Deflation. JMNSHO

  • DarthTrader

    Psst Pssst

    Hey Buddy I gotta take a dump . . .

    Could you spare $20 $30 bucks it might be a little messy

    Dollar going to hell today

  • Clint

    12,700. Interesting spot here I think. Almost all of the 30 DOW stocks are really waking up here looking at multi-year highs. Is AMZN really up 15 pts today after that after hour selloff last night ? Yep…it is. Not boring at the moment at least…feels like something's going to happen into next week.

  • bshah

    Can I even dare to short SLV ?

  • malverd

    you know you wanna. got me some otm june puts.

  • ds2

    You can send them to me! I can use them to buy gas, pay for my newspaper and my health club membership – all UP in the last month.

  • amokta

    Time to bring out your disco shoes (yes we know you kept them!)

  • ricebowl

    Which bonds? ^TNX and ^TYX have been basically parabolic since the Fed announcement. I am exaggerating, but they were roughly par earlier, and now up ~1.5%.

  • bisq

    Seriously? are you suicidal? Goto vegas and at least get laid and free drinks.

  • DarthTrader

    Kinda reminds me of the Greedspam Days

    Whenever Fed Chairman spoke they ramped up the markets.

    Meet the New Boss, Same as the old Boss

    The Who

  • bisq

    Mole , you must make good coin out of trading – just make sure your profit is being siphoned off somewhere that will be worth something in a few years , like gold. Lots of nominal gains in peoples bank accounts are going to mean diddly with this Fed Reserves mandate. How asset prices and forex reacted today says it all. Unless Ben is just a master poker player??

  • Clint

    Can't wait to see what tmrw brings…very interesting close here…feels like the bernank made one more secret multi-billion dollar injection under the table or something. Lot of stocks that have been basically dormant seemed to wake up. Things that make you go mmmmmm.

  • bisq

    Quite right. This isnt the 1970s. Its far worse.

  • bisq

    Low volume? What??

  • captainboom

    Mole, can we get a Daily Zero update?

  • http://evilspeculator.com molecool

    Yessirree!

  • raised_by_wolves

    “Mole, you must make good coin out of trading – just make sure your profit is being siphoned off somewhere that will be worth something in a few years , like gold”

    Like a camouflaged, fortified, fully-stocked, energy-independent, and sustainable compound in Antartica?

  • BobbyLow

    Back in March, I put together a UUP Married Put Long Stock and Long June Puts Combo. (the ratio was 5 Contracts for each 200 Shares of Stock). I also Shorted some June Puts with a Higher Strike to pay for my Long Puts.

    As the value of my Long Stock went down, the value of my Long Puts went up so that I was able to sell my Long June Puts to buy 1 September Put for each 100 Shares of Long Stock to extend the play further out.

    I was also able to buy enough September Puts to protect the stock that I expect to be put to me from the Short June Puts. In recent days, the Delta on my Short Puts has ranged from about 93 to 100. So I think it's only a matter of time.

    The funny part about this, is that my loss exposure is still limited yet if ole bucky can get a life between now and September, I might do fairly well on this trade. OTOH, if Bucky keeps defecating the bed from now through the September Expiry, then Gas should be $5 – $6 per gallon and we would be screwed even more than we already are.

    This has turned out to be a fairly interesting trade at least for me. But a lot of patience has been needed. :)

  • http://evilspeculator.com molecool

    I'm actually actively working on removing myself from the U.S. – this country is fucking doomed.

  • skynard

    Just went short /SI @ 48. Resistance level and stop in above last hr candle.

  • http://evilspeculator.com molecool

    That opportunity has come and gone – easier victims to slay now.

  • jigdaddy

    im trying to do the same, what countyr sparks your interest?

  • amokta

    I find your trades highly complicated, but as long as they work, and hav a bulit in 'hedge' :-)

    As the old saying goes 'From each according to his abilities, and to each according to his needs'
    (or do i mean 'each to their own'?)

  • http://evilspeculator.com molecool

    Chile, Argentinia are high on the list of places to live. In terms of business Singapore is good turf, so is Estonia. Unfortunately in terms of actually living there – Singapore is too regulated and Estonia is too cold. My plan is to spread myself a little all over the place in terms of business while setting up a base that allows me access to agricultural resources, clean water, and a reasonable amount of sunshine and hot mamasitas.

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

    Namecheckin' Marx in a den of arch-capitalists – I like your style, amigo…

  • amokta

    Worth a punt, but silver is like the red army on the march to the Bundesbank, might work in futures, as must surely dip o/nite at least

  • amokta

    :-)
    Ok, must sleep now, so catch up tomorrow (hoping silver still has its mojo tomoorow)

  • http://twitter.com/ActiveTrader ActiveTrader

    I sold my long ES swing trade yesterday. It looked like they were going to dip more 2 points yesterday going into today, but Banana Ben saved the day. Currently, I think the next long swing trade, may be in the 1330-35 area, if they let it go that far. What do you guys think?

  • bisq

    Chile is a great place. I should stop wasting my time trying to outrun Bens printing press and just learn Spanish.

  • http://evilspeculator.com molecool

    ¤ø„¸¸„ø¤º°¨¤ø„¸¸„ø¤º°¨
    ¨°º¤ø„¸ N E W „ø¤º°¨
    ¸„ø¤º°¨ P O S T “°º¤ø„¸
    ¸„ø¤º°¨¤ø„¸¸„ø¤º°º¤ø„¸

  • http://evilspeculator.com molecool

    All depends on the velocity – at this point 1360 is an option after which it needs to turn, otherwise the inverse H&S will resolve immediately in a short squeeze of mammoth proportions.

  • http://evilspeculator.com molecool

    Well, we did put up a bit of a fight, mate 😛

  • DarthTrader

    Silver rallied today back up to the Lower Uptrend channel Line. That's the strong up channel it was in for the last 2 weeks.
    Tested it and the 61.8% Extension Level at the same time.

    Tomorrow we will see if it can break back into that up channel or if it repelled and then will head back down to the down channel that started Monday

  • ronebadger

    Everyone is lamenting the dollar's demise….sounds like it's gonna rally soon…

  • http://twitter.com/ActiveTrader ActiveTrader

    I agree, how price moves is always the most important aspect in trading.

  • DarthTrader

    I keep thinkin that ronebadger 1 day we'll be right.

    Certainly could turn any day nowas we're testing the lows of 2008 right now

    But the absolute low is still 2.5 below here on the spot chart

  • amokta

    :-)

  • raised_by_wolves

    For some reason, I start salivating every time someone says the word mammoth.

  • raised_by_wolves

    LOL!

  • amokta

    One day i will be King :-)

  • convictscott

    I heard that in August 2009, and continually ever since. For a fair part of the time from me!