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Cognitive Dissonance
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Cognitive Dissonance

by The MoleJuly 5, 2010

I hope everyone had an enjoyable Independence Day weekend and took this opportunity to forget about the market for a few days and spend some time with your family. Life is short after all and as human beings in the 21st century we often have to force ourselves to stop and smell a few flowers. Of course market megalomaniacs like yours truly can’t afford such luxuries – a long weekend for Mole means an opportunity to break out the safari hat and hunt for exotic charts.

And boy, did I bag a few rare specimen – I was quite the busy bee.Β  You better close a few tabs before you log in – what’s waiting is a veritable onslaught of charts.

But let me set the stage first: Over the weekend the blogosphere has been buzzing with the notion that the current H&S pattern on the SPX is most likely going to fail. The reasoning behind this prediction is simple and on the surface quite a delicious notion, one that would make complete sense to the average market contrarian:

Everyone is short the market right now.

Unfortunately I have this mental compulsive disorder which forces me to constantly question any type evidence or hypothesis that I come across. Sure, I have my own silly ideas but I try to back them up with data. Some people call that a ‘critical mind’ – but the magnitude of my chronic disposition stems from the realization that I am probably just a major pain in the ass and enjoy disagreeing with people way to much. But that’s a different story.

So, are the pundits may be over thinking this a little? Or is it me who gets the poison?

Alright, I bite! Let’s take a look at the evidence that, according to various analysts, will surely propel us back to SPX 1200 and beyond in the coming weeks:

Let’s start with the simple stuff first. Mr. VIX against the SPX – everyone looks at that. Well, what I’m seeing is that volatility of S&P index options on the CBOE is currently 50% lower than when the SPX was trading at 1080. We are now at 1022. How does that make sense? Are we less at risk right now as we are slightly below the neckline of a monster size H&S pattern? Not that there are any guarantees but it’s not unreasonable to think that a VIX of 30 at this very stage just may be a tad optimistic?

In any case – if everyone is short this market, then why are market makers pricing puts so cheaply? Let’s be devious for a minute (easy for stainless steel rats) and assume that they are going to push the tape up to 1130 and higher next week – wouldn’t you want to push put premiums as high as you can? I for one see complacency here at best – and at worst a bout of cognitive dissonance.

Well, let’s dig a little deeper – volatility skew on the Spiders: Seems to me that put strikes horizontally are priced higher than their call strike counterparts. If put volatilities are higher than call volatilities it indicates that traders are buying puts. An excess of put buyers reveals a skew that favors stock prices going down. A similar argument can be made for expensive calls.

Alright, so it must be all of us dumb retail traders then, right?

Actually no – things are a bit more bearish than in 2009 but the ISEE closed at 200 on July 1st and at 179 the day after. I don’t call that excessively bearish. Now if we were close to the 100 mark that would be a different story but that happened a few weeks ago after the first big drop. Seems to me that many retail traders are buying the dip – not excessively so but there is is buying.

The one chart that does point to an excessively oversold condition is the NYSE Adv/Decl Volume chart. Boy, we have not seen a spike like this since the end of Primary {1}. But if you look closer – we did continue downward after that 0.75 reading and it was a divergence that indicates we were sitting at a low. Not unreasonable to think that the same may happen this time around and that a divergence would accompany the end of Intermediate (1) of Primary {3}.

But this chart is a cause for bearish concern, so let’s dig in even deeper:

This chart is a ratio between the McClellan (a medium term momentum indicator) and the CBOE Put/Call ratio. I would have preferred the ISEE but there is no way to get that one into stockcharts (I think). What this thing seems to be really good at is to call market lows (see the vertical lines). It used to be pretty descend at market tops as well but that was weakened in 2009. So, let’s stick with the long side: Are we anywhere close to a low here?

Okay, maybe I’m looking at the wrong ratio – let’s try something else:

NYMO:BPNYA (the latter being a long term P&F based momo indicator). Granted – we are closer to an oversold condition here but we are far away from some of the recent lows.

Okay, let’s use an SMA instead of an EMA – the latter favoring the short term more. But it’s the same story – clear divergence between price and oversold reading.

How about the NYMO:VIX ratio chart which I posted here before? Again pretty good at calling medium/long term market lows, remember? And again I’m not seeing a reading that’s even close.

Alright, we’re not getting anywhere with this, let’s look again at the SPXA50 – which shows us all S&P 500 stocks above their 50-day SMA:

I have to admit that this one may make the hair in your neck stand up. So, first we are curious about how many S&P 500 stocks are above their 50 SMA. Fine – but that wasn’t good enough for Mole – too much noise. So, I slapped on a zigzag which shows the general trend – many Elliotticians use the zigzag indicator to indentify wave counts. We’re not doing that here. We are looking for long term divergences and fractals.

Once I added the zigzag I was surprised about the fractal nature of the pattern. I have labeled what I see – and again it’s not related to Elliott wave counts – I’m just trying to put things into context. Short/medium term it seems to me that we may face a repeat of 2008 – may be wishful thinking. But the CCI I added to the bottom also doesn’t think we are way oversold right now.

Same chart but this time against the VIX – let’s see if volatility alters the data. I actually think it increases the quality of the pattern – would you agree?

Maybe we are looking too short term – let’s go to the SPXA200 and do the same thing. Now, that in my mind is our chart of the week. Why? Look at the pattern accompanying the bear market rally of 2009. Boy, had I just uncovered this thing earlier, we could have saved ourselves a lot of pain. A fascinating chart indeed and it strongly suggests that we may bounce short/medium term but that the long term trend has most likely changed.

What do I base that assumption on? Let’s zoom in a little more: Look at the crash pattern in 2008 and what preceded it. We are now seeing a similar pattern as what was unfolding in early 2008. What’s also fascinating is that it shows two crashes – one to the downside (which everyone acknowledges) and one to the upside (which we call a bear market rally). These things go both ways – of course very few market participants associate a buying frenzy with a long crash.

Many pundits are pointing towards the extreme TRIN reading as a sure sign of a bull market in the works.

Well, I think that my VIX:TRIN ratio chart is a lot more accurate at calling bottoms and tops. And if history is of any value right now then why are we not closer to my top line? Why are we so close to the bottom one?

Before we get to the count one more chart and it’s a more subtle one. The 2.0 BB on the SPX, which shows no close outside its Bollinger just yet. So, we may see a bounce here but I have doubts about a violent snap back as the ones you get when closing outside the top or bottom lines.

Frankly, I myself would expect a bounce here pretty soon – but a rally to new highs and a failed H&S? I don’t think the fat lady has sung on that one yet. Let’s also not forget that H&S pattern (when they actually succeed) often breach that neckline and then snap back one last time to shake out as many passengers as possible. Remember – the bus moves fastest when it’s empty. Fair to suspect that this may happen this time.

So, I’m going to stick with my medium to long term perspective – which is that we may bounce as indicated by Soylent Blue but that we remain inside Minor 3 of Intermediate (1) of Primary {3}. Which means that a low is quite some ways away.

When do I know that I’m wrong? Once we breach 1130 – I know that’s a bit late but that’s also why I’m playing this thing more long term. Calling market tops and bottoms is a fools game. So is calling market crashes. And maybe we won’t get one – perhaps we just keep descending like we have for the next few months. That would be a lot less profitable but IMNSHO a lot more profitable than trying to be long in this market. Too much technical damage has been done and I believe it’s going to get a lot worse before it gets better. In the end of course price will tell us when we’re wrong and 1130 is not that far away in the big scheme of things – especially considering the downside potential here.

If you think that Soylent Blue (or worse) is what we’ll get then I would suggest you try your luck at some vertical spreads. Granted Mr. VIX is only at 30 but if we bust higher towards 1070 I expect CBOE volatility to drop towards 25 and that would be a 17% change against your vega. So, a vertical spread is better medicine and cheaper too!

If we go that high then I personally will add a few more short positions – which I would probably hold into 1120. Any higher than that and our count is probably wrong and we’ll have to go back to the old drawing board.

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 the usual social media waterholes.
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  • amokta

    Call the SEC – futures behaving most peculiar !

  • http://pitch3.zstock7.com/ zstock7 Pro Select!

    It's been a long time since I've seen QQQQ at RSI 25–RSI 29 today. 25, That's a strong buy signal. Has been in the past.
    41 is a 38% fib. The evidence is mounting more and more for an up day.
    Should get at least 1 up day, this week. It'll probably be a gap up (+200), so as to take out / wipe out, as many overnight bears as possible.

  • http://pitch3.zstock7.com/ zstock7 Pro Select!

    Hi amotka!
    Looks like I get the second place prize!
    A years supply of Milk Duds, would be nice….

  • DudePlunger

    Nice post mole. I look forward to reading your posts before I create my gameplan for the week ahead.

    This 4th of July was pretty solid. I umpired 8 baseball games in 3 days–the games were pretty damn good, especially today's 12yr old championship game. But I'm ready to get back to the markets, we're in July and what do we have left–2-4 weeks of volume till everyone goes away to the Hamptons and leaves the buy programs on? This market may need a quick visit to 975 to pick up the fear and force a snap back rally into August–especially with the way the futures have been acting this past week.

  • ricebowl

    Asia is selling. /ES is pretty close to the low a couple of days ago; I watch SPX instead of /ES, so I don't know where it bottomed, but SPX was sitting at 1006.88 a few minutes ago which is SPX ~1011.

  • ricebowl

    This isn't Slashdot. πŸ˜‰

  • yudhisthira

    ES low was 1006 on Thursday morning.
    Touching 1006.50 as I type

    AUD/JPY low was 72.67.
    Trading at 72.95 area now.

  • ricebowl

    1006.00?

    Thanks.

  • yudhisthira

    Yep. 1006.00

    Copper is only about a third of way back to its Thurs low.

    Oops, ES through the floor at least short-term

  • ricebowl

    Next stop: minor support at 970 or major support at 950.

  • yudhisthira

    New low 1002.75.
    We shall see.
    Would like to see at least another extension of a fifth wave down.

  • BigHouse(Aka Mr Vix)

    Nice and red tonight for ES πŸ™‚

  • yudhisthira

    Mole, thanks for the “everyone is short” analysis.
    How can we tell if the “talk” is true unless some crunches the charts to find clues.

  • Clint

    The $SPX futures are down 80 already.

  • jigdaddy

    u mean 8 right?

  • skynard

    +5 ES 1005, tight stop

  • Clint

    Well yea….80 DJIA pts. Actually now it's 68 DJIA pts. Guess we'll see if we hold SPX1000 this week for a relief/oversold rally….OR NOT !!

  • BobbyLow

    Great job on the charts Mole. Nice way to begin the new week.

    I have to go out of town and might make it back before the close tomorrow. My trading account is set up pretty good so whatever will be will be.

    BTW, the last time I went for the day to where I'm going tomorrow was on May 6th.

    Good luck everybody and I'll catch y'all sometime in the late afternoon.

  • bensjoyce

    very interesting post but very difficult to follow -reminds me a bit of immunology back in school. But Mole, it appears to me that you usually omit writing a gist type conclusion for each chart, for those who have less traveled those TA conceptualizations which are already stamped in your mind but not the minds of your rookie readers. You assume we know what you are talking about and often we DON't

    I hope my yen put works out (with an S&P rally)

  • DudePlunger

    If it happens again, go there more often!

  • http://evilspeculator.com molecool

    I think I explained the concept pretty well. Maybe read it again and it'll be clearer to you?

  • Tooncez

    Hmmm, the simple vix chart makes me wonder if the flash crash is important in that it makes any subsequent decline seem a (little?) less scary:
    http://www.youtube.com/watch?v=4WDB0zvgMnI
    http://www.youtube.com/watch?v=XC6I8iPiHT8

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

    thanks for the charts ..good reading, ties in with the “gut” feel that most are looking for a rally…so we might get one, but short lived..like you pointed out..I like the “empty bus” analogy..

  • http://evilspeculator.com molecool

    Wow – 14 handle ramp in the futures in five hours. Tape banging par excellence…

  • TrustFundCowboy

    can't have people waking up after a long weekend celebrating america's greatness to a stark reminder of its rapid decay

  • AudioTactics

    Yeah, what the hell is going on today?

    Some crazy action for a holiday session… WTF?

  • http://evilspeculator.com molecool

    HFT gone wild… that and the AUD/JPY was rallying. Based on the pattern I'd say there was an 'intervention'.

  • chronographics

    Great Analysis Mole πŸ™‚

  • gsavli

    and looks like more to come.

  • http://evilspeculator.com molecool

    But will it hold after the open? We shall see….

  • raised_by_wolves

    It would take far too many words to exhaustively describe what the charts visually represent if a picture is worth a thousand words. Thank goodness Mole posted charts instead of writing a multi-thousand word essay.

    Did you open each chart in a new tab and spend a couple minutes looking at each one?

    First step: Look to see what happens to the black $SPX line at the approximate time when a blue line touches one of Mole's trend lines and reverses. Second step: Look to see where the blue line is now and ask yourself the question, 'Is it close to touching one of those trend lines and reversing or is it somewhere else?'

    At this moment in time, a lot of Mole's charts show a blue line somewhere else, somewhere between trend lines. Essentially, Mole's thesis is 'this probably isn't a bottom because the blue lines aren't at the usual trend-line-touch-and-reverse extremes like they have been for past bottoms.'

  • gsavli

    we might get a stop run at the open, but i'm afraid that's it at least temporarily. this intervention looks divine.

  • gsavli

    your wish was granted. someone was summoned to clean this mess up. πŸ™‚

  • sloth_bear

    Tthanks Mole for this post, exceptional!

    Also I wanted to share a channel I have drawn on friday, and the prices bounced exactly at the bottom of it, so it may be an important one:
    http://screencast.com/t/NTI4YjMzMDAt

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    waiting for freeload time to comment (but i shall)

  • sloth_bear

    I don't want to pimp the subscription but its worth it (May I win a free month for saying that)!

  • sloth_bear
  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    well, you tried

  • CorporalCarrot

    Awesome charts Mole. I have nothing to add technically so I won't bother.

    I closed out my short positions on Friday. I did warn people that I was concerned that this week would provide a perfect environment for a rally.

    The steady state of markets is upwards, in the absence of shocks. Last week we had tons of data, all negative or worse than expected.

    We had downward revision of GDP
    Appalling home sales
    Appalling employment data etc etc

    This week is relatively clear & given the big drop that has already occurred, this morning is exactly what I feared. A massive futures ramp giving shorts no time to cover.

    That being said, I am wary of the contrarian argument. Sometimes everyone is on the same side of the tape……because they are right. And crashes do happen from extremely oversold conditions.

    This market is going to frustrate a lot of people, thats for sure.

  • amokta

    The Futures are so bright, I gotta wear shades !

  • Schwerepunkt

    When I went to bed last night ES was down around 1006. It hit 1027 a little while ago. Whiskey, tango, foxtrot?

  • gsavli

    bravo, sierra.

  • sdesse

    Roaster bear for diner.
    Same dish since last year…

    Are we officially on blue?

  • Schwerepunkt

    ;-)) Yeah, good for spreading on lawns.

    “Hand of god” or the Unholy Trinity (Ben, Tim and Jean-Claude)?

  • Tronacate

    So much for the NQ fractual…….some pent up energy here…..wow

  • CorporalCarrot

    This is why they say only a select few make money in true bear markets.

  • ricebowl

    “Fat-finger”

    After calling my Dad last night to reassure him that the S&P would open close to 1% lower, now I look rather foolish.

  • DudePlunger

    Yesterday, when the market was down to 1002.75 and I was short 1 /ES and long 1 /NQ, I was thinking, “it'd be nice to only be short headed into tomorrow.”

    This morning, as the market is trading at 1030, I'm thinking, “So this is why I keep telling myself you always want to be hedged.”

  • http://channelsandpatterns.blogspot.com/ springheel_jack

    Hi guys,

    Morning write-up for you:

    http://channelsandpatterns.blogspot.com/2010/07

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    unless we count the future's drop yesterday this movement is a headfake

    hey, who wnated in on shorts?we'll soon make some kind of top

  • jacksoo

    was it Livermore that said “bear markets make everyone poor”

  • amokta

    Ok, ive gone short – if im wrong, i will be short!

  • CorporalCarrot

    This is a bizarre open. Looking at the Dow on my charts it opened at 9782, I expected it to power onwards, now 12 minutes later its at 9782?! Weaker than I expected, although maybe its a pause before a move higher.

    My man with a ruler trendline would intersect nicely circa 10,100, which is where I would love to try shorting again although I will keep an open mind.

    I notice the 50/200 are only 2 points apart now.

    That being said, the 50/200 xover has a dismal long term track record overall, except for occasions when it is spectacularly right lol.

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    ladies and rats…. VIX as stoped right at support @ SMA13

    if this holds then neither god nor PPT can stop a retest of 37.5 (and this time it should climb the upper bollinger with the fury of an angry god)

    you wante din on the short train? this is it

  • raised_by_wolves

    While expecting 1055 and 1070, I can't help but wonder if this is the best the bulls can do.

    AUD/JPY

    http://content.screencast.com/users/raised_by_w

    My own crazy ass indicator

    http://content.screencast.com/users/raised_by_w

  • Tronacate

    Just shorted 1 TFU

  • WTFed

    Since we broke 1030, do we HAVE to trace out a soylent blue? This spike looks impotent.

  • sloth_bear

    Here is a trendline on the AUD/JPY that support your case:
    http://screencast.com/t/Yzc0YTFj

  • raised_by_wolves

    Both MA(468) and MA(13) are resistance for ($SPX/$VIX) . . .

    http://content.screencast.com/users/raised_by_w

  • Tronacate

    Lots of currency gyrations……

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    w%r and fast give a first qualified top is in…. lazy is close but not sure

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    i don't use 468 on daylies, but sma13 is there

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    Vix is currently the key, spx could rise some but vix should hold

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    spx:vix is only inche (0.5) from resistence

    second qualified top with accetable lazy this time

  • DudePlunger

    Personally, I'm not calling any tops today. Chances are we close on the highs today with some very bullish market internal readings.

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    we might, but we shouldn't

  • DudePlunger

    Why do you say we shouldn't? Bear market rallies tend to be the most powerful moves around. We're only up 20pts on the S&P so far, we have another 10points in this move no problem with a VIX at 28.

    Not to mention the Zero is giving the strongest bullish signal it has shown in quite some time.

  • Tronacate

    EURJPY lower high….5 min

  • sloth_bear

    Resistance is holding for now on /ES (Red line):
    http://screencast.com/t/YmEwMWJiNjI

  • raised_by_wolves

    Thanks Sloth, I'm borrowing that trend line. There is even more room with log checked . . .

    http://content.screencast.com/users/raised_by_w

  • Tronacate

    Anybody having indicator issues…..I have no current tick or trin on Tradestation

  • raised_by_wolves

    Good question. I'm hoping Mole will comment.

  • sloth_bear

    Np, my lines are often moving when I change the timeframe in TOS (Even worse with prophet), do you know a way to avoid it or a charting software more reliable?

  • Tronacate

    Anybody having indicator issues on tradestation…..no tick or trin and varios other indicators

  • CorporalCarrot

    Shorting fairly big for a trade folks. Seriously overbought on a host of shorter timeframes. Stop just above HOD

  • jacksoo

    get the same problem SB its a darn nuisance

  • tooshort

    ZL divergence… new low on ZL but no new low …yet….

  • sloth_bear

    The only way I found to minimize the problem is to limit the expansion to 50 bars max to the right, but doing so, I don't see where my trend lines are going πŸ™‚

  • jacksoo

    Kind of makes a mockery of TA with TOS when you can't move around timelines
    and have trend lines anchored.

  • raised_by_wolves

    No, sorry, I've been living with this chronic pain you describe.

  • Clint

    Back to $SPX 1040. Is closing above or below that going to be important short term ?

  • raised_by_wolves
  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    Bad news wveryone, SMA13 on VIX didn't hold, either it reverses fast or we're on vix drop to at least 24

  • raised_by_wolves
  • CorporalCarrot

    Who can say. 1040 was one of the most talked about technical levels I can remember discussed in recent history. After the goldman piece, you'd nearly here people at the local grocery store talking about it.

    In traditional TA, a lot of people think that when a key level like that is broken, the market will always revisit it at least once (“to make sure”). Perhaps we are at that juncture.

    I'm positioned short now, slightly in P&L and going to bring in my stop to b/e shortly (because I'm none too confident). On the last move I expected a bigger move down, but we seem to be holding this dow 9830/spx 1039.50-1040 level and quite undecided.

    Would like to see it resolved one way or another fairly shortly.

    Incidentally, if you go back to Mole's post a few back, didn't he give today as the day to resolve any remaining 1987 similarities?

  • raised_by_wolves

    VWAP revisit or gap fill? πŸ˜‰

  • CorporalCarrot

    Incidentally folks, thinking back to Mole's magnificent cycle charts and 1987 comparisons, what sort of market condition today could cause such an event?

    I think a 160+ point gap up on the Dow that got retraced by EOD would be a pretty good beginning of the end πŸ™‚

  • sloth_bear

    Thanks, it would be a beauty if it holds, if not the resistance could become the center axis of a huge ugly rising channel (In red):
    http://screencast.com/t/ZDJmMzhmNjAt

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

    well we were definitely oversold on many indicators..and we are back to that 1040 level…and the oversold condition has worked itself off on shorter time frames…so let's see if this is really a bull move..or a BS move…

  • CorporalCarrot

    Just got cut out for a small profit.

  • Clint

    Thanks for the input. Like everyone else..I”m sick of hearing about..and seeing $SPX 1040…but for now…it is what it is…until it isn't, I guess. Sitting just below it right now. We shall see.

  • DudePlunger

    This looks to me like a typical minute ii wave of minor 3 intermediate 1. I think it makes sense, the /ES saw a Minor 2 that traveled from 1036 to 1130. Then we had a clean move lower from 1130 to 1002.75, 130pts of action, which broke the low of Minor 1 @ 1036 and was just 50pts shy of the entire Minor 1 move of 180pts.

    A retrace to around to 1050-1070 would muster up enough energy for a powerful move lower, that would probably be around 200-250pts lower. That would put us somewhere between 850-900. The only thing is, how long will this Minute 2 take? Minute 1 took 15 days, so it'd make sense if this move took only this week to develop, and then we saw a flat out crash that will bottom out sometime in early-middle August for the summer months.

    Just thinking out loud here :).

  • raised_by_wolves

    While there is not a lot of upper candle wick on $INDU (yet), there is a hell lot of it on my new ratio indicator. The pink and purple MAs are the important ones this week.

    http://content.screencast.com/users/raised_by_w

  • Tronacate

    THAT my man is one wild ratio……..very cool stuff

  • Tronacate

    TF short working

  • tooshort

    more ZL divergences. added to all my shorts this morning. We shall see…. am willing to be patient.

  • LilSpaniard

    Don't see divergence on ZL?? If anything, there is a big positive divergence building on daily

  • DudePlunger

    I believe a divergence is when price makes a new high/low but ZL does not. We haven't had that yet today.

  • jigdaddy

    on a day like this i would have expected the faz & srs to take a double digit beating…only down 4 & 2% so far…

  • tooshort

    I'm sorry… I saw that the ZL made a new low for the morning while the market did not. I added to my shorts and have not regretted it so far but the day is young.

  • DudePlunger

    Today will probably prove to be a pretty good day to add to shorts if you are looking to hold for a few weeks, but if it's a day trade it may not be instant gratification.

  • raised_by_wolves

    Thanks Tron.

    Hey, do you happen to spot any fractal patterns?

    http://content.screencast.com/users/raised_by_w

  • DudePlunger

    That would leave my jaw on the floor.

  • http://evilspeculator.com molecool

    Guys – I don't see any divergences yet.

  • tooshort

    maybe I am looking at this wrong but around 10 the ZL made a new low for the day while the ES had not so I added some TZA and FAZ for a trade. And they are doing fine from where I bought them so whatever ZL said to me, I listened. Maybe I am using it wrong but it certainly has worked intra day with they way I am looking at it so whatever works for each I guess….

  • amokta

    Is today it, or will we be seeing 1050-1070, and then 1100-1200 (could it happen?)

    my view – we were due for a bounce, but how high can a punctured ball go?

  • ricebowl

    I love FAZ.

    06/09 – Bought July 17 FAZ calls @ $206.25
    07/01 – Sold July 17 FAZ calls @ $248
    07/02 – Bought July 17 FAZ calls @ $153
    07/02 – Sold July 17 FAZ calls @ $207
    07/06 – Bought July 17 FAZ calls @ $129

    Current bid: $143

  • http://www.flickr.com/photos/dabasia/sets/ Croozer

    Nice Analogy !!

  • tooshort

    nice job!

  • raised_by_wolves

    If my ratio chart is a leading indicator (it's experimental so I don't know), then bulls are fucked royally.

    http://content.screencast.com/users/raised_by_w

  • sloth_bear

    Interesting…

  • fisheggs

    Frickin nice chart. Let's see how it rolls !

  • Tronacate

    Will tradestation take a ratio entry like that??

  • Tronacate

    very nice

  • ricebowl

    FAZ just rocketed like $.30. The bid on my July 17 FAZ puts went from $139 to $156 in a couple of minutes.

  • sloth_bear

    No ricebowl for you tonight, maybe champagne and oysters…

  • amokta

    let see!

  • Tronacate

    No cockroaches in that rice tonite…….and new chopsticks too!! Take their money…YEAH

  • ricebowl

    Haha…

    Scalping is fun. My only regret is having held from basically the start of the move upward instead of sitting out, but it works out. I learned a month or so ago that if you buy enough time, you're better off holding through the madness and breaking even on the other side instead of trying to trade your way back up.

  • raised_by_wolves

    I don't know, I've never used tradestation. Can you chart $SPX/$VIX in tradestation? That one is also suggesting that a top was put in today.

    http://content.screencast.com/users/raised_by_w

    Now that the orange gap has been filled, I think probability is 97% that the highest purple gap will be filled and 75% that the next one down will be filled as well. But that's me, and I could be wrong.

  • raised_by_wolves

    How long are you going to hold this one?

  • ricebowl

    Been thinking about selling for about 10 minutes now, but FAZ keeps going up. Thing is, I want to cut all of my July puts if we're really in a wave 2 that may last a week as Dudeplunger suggested.

  • fisheggs

    Looking good!!

  • DudePlunger

    How often do you see a new low made overnight, followed by a gap up, a push higher, and then a selloff below the morning's lows?

    Obviously, not very often. Its 1pm, and volume has been light, but the bulls better step up or this could get nasty.

  • ricebowl

    I hadn't even noticed the volume, but wow! That's just anemic. We may close the day with < 3 bn shares traded on SPX.

  • Clint

    Agreed. The bulls fumbled the ball on the 1 yard line about an hour ago.One more of those here and it's 'game over'.

  • amokta

    Is the sudden drop in USO of any prognostic significance – what is the outlook for the patient, are we expecting a relapse?

  • raised_by_wolves

    Mole's chart shows blue possibly going through OPEX. So, the question remains whether this is blue or orange.

  • OldChicago

    Mine. OPEX already? We've just gone through 2 OPEX-like spin & churn.

  • OldChicago

    Financial is holding up. Unless they turn down, this drop might be ending.

  • Tronacate

    NQ painting an ugly wolffe wave…….very nice low target though

  • gsavli

    how mucho low?

  • tradingmom

    Divergence…watch out here, we may be turning up. New lows on ES but rising channel on zero.

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    we have a first bottom and gap fill, but lazy is way high and k lazy below D so this should be more of a pause than a bounce

  • gsavli

    agree, it does look weak. watching nq here and protagonists also look weak.

  • raised_by_wolves

    Possible ($INDU)*($TRAN/$UTIL)*(UUP) EW count?

    http://content.screencast.com/users/raised_by_w

  • gsavli

    so far, this mega ramp looks like a colossal failure.

  • Clint

    Absolutely.

  • Tronacate

    1675

  • gsavli

    nice.

  • amokta

    I dont know if this was wise – i bought Feb 2012 Faz calls strike 33 early in day! (only a few!)

  • Tooncez

    At what point do we consider that div a fail?

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    before counting anything… wtf is that supposed to mean? (you know your old uncle hamster as an economics degree that forces him to understand what he's looking at)

  • DudePlunger

    Oh yeah, we are now trading below 1020 on /ES. This can get very nasty very soon.

  • Tronacate

    Taking out overnight lows would be quite cool…….

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    btw, less is more, take long term and see if you can simplify that monster

  • CorporalCarrot

    So who's gonna give me prophetic comment of the day award πŸ™‚

  • Tronacate

    TF sure is falling off a cliff

  • fisheggs

    Already did

  • tooshort

    the same person who spotted the ZL divergence! πŸ™‚ yea for all who are short

  • Tronacate

    I will

  • gsavli

    you rarely miss, so we are kinda spoiled here. πŸ™‚

  • CorporalCarrot

    Its easy not to miss when you never say anything of any consequence πŸ˜€

  • DudePlunger

    My jaw is finding its way to the floor.

  • gsavli

    lol, you just tell us something about your new car now (how chicks dig it, how you won that drag race and street drifting competition) and we're good.

  • raised_by_wolves

    I don't know what the fuck it is (I was hoping you'd tell me), but, believe me, it makes beautiful patterns. For instance, look at this leading diagonal.

    http://content.screencast.com/users/raised_by_w

  • CorporalCarrot

    Lets not get ahead of ourselves dudes. There have been so many false bearish dawns.

    While today's hanging man looks pretty ugly on the charts if it stays like this, we've had one of these before in this insane bear market rally, and I remember sentiment on bearish boards was pretty similar to today at the time. Guess when it was?

    http://stockcharts.com/h-sc/ui?s=$INDU&p=D&yr=1

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    i know that you should check sector rotation (just one over another) and as you're multiplying by UUP (dollar) you could divide by $xeu (euro)

    tran:xeu gives a scary (bullish) picture on centenial rat and some of the others… hummm not good

  • CorporalCarrot

    Arghhhhh. Disqus again.

    I meant to say, back in november, a very similar failed rally after a decent pullback in an oversold market was supposed to herald a new phase. But it didn't. Keep your wits about you.

  • ricebowl

    To those who were wondering: I was going to sell my FAZ calls at $167 but missed my exit, and I held. The bid is now $200. My average price is $129.

    The other trade I took was to buy July 43 QQQQ puts @ $72. The bid is $118.

    Days like today are awesome.

  • DudePlunger

    We also had one on May 28th, and then we gapped up big time the next day and had a monster rally. Eventually, one of these reversals will follow through to massive downside though, it's just a matter of time….

  • CorporalCarrot

    Gratx mate lets hope theres many more ahead of you.

  • jigdaddy

    can someone explain something to me? this might be a stupid question but i'll ask it anyways. the market is made up by the investors that participate in it; for example if the majority of investors are bearish, then how is that the minority who are bullish can push the market higher?

  • Rayden

    “for example if the majority of investors are bearish, then how is that the minority who are bullish can push the market higher?” – think of investors switching sides as being what pushes the market. if most investors are bearish, there are very few people left who can *become* bearish, but many people who can become bullish. people becoming bullish is what pushes the market higher (as they cover shorts or open longs)

  • jigdaddy

    thanks, thats what i figured but i thought there might be something more evil to it πŸ˜‰

  • Tronacate

    TF hit support at July 1st low……but took it out by .1……..could see it lead us lower.

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    wallet weighted bullish percentage… PPT has printing presses

    all your bases are, belong to us

  • ricebowl

    Took down some of my July 43 QQQQ put position. Will be scaling into August later.

  • Clint

    I guess $SPX 1040 is serious resistance now…to say the least.

  • ricebowl

    The high this morning might have been a wave C of 2.

  • http://www.flickr.com/photos/dabasia/sets/ Croozer

    If that was a C of a 2 then I think we'd be down much much lower by now…….IMO…

  • ricebowl

    That would put us in a 2 of 3 right now.

  • http://www.flickr.com/photos/dabasia/sets/ Croozer

    If the high was a C of a 2…..wouldn't that now put us in a 3 of 3 (by your count)?….

    I think this morning was a C of a 4th Wave…….this now perhaps the start

  • http://www.flickr.com/photos/dabasia/sets/ Croozer

    sorry premature hit of the enter key……meant to say

    If the high was a C of a 2…..wouldn't that now put us in a 3 of 3 (by your count)?….

    I think this morning was a C of a 4th Wave…….this now perhaps the start of the 5th……

  • http://www.portfoliotilt.com PortfolioTilt

    Wonder if the bulls will be able to get a positive close today…

  • raised_by_wolves

    Fuck $SPX. Watch $TRAN.

  • Clint

    Good point. No big upside without their participation. What a beating they've taken in the last 3 hours.Down over 100 pts.

  • raised_by_wolves

    ($TRAN)*(UUP) gives a lovely (bearish) picture on Centennial Rat. Today began with a retest of the broken MA(208) and should finish well below it.

    http://content.screencast.com/users/raised_by_w

  • http://evilspeculator.com molecool

    Okay, I have to admit that I'm a bit bummed out today. 177 comments thus far and I saw ONE from CorporalCarrot who mentioned my charts. Guys – you might disagree with what I'm posting – that's fine. But a deafening silence after having spent close to 10 hours this weekend putting this up is extremely underwhelming.

    Before you guys give me the usual responses (I've heard them all) let me tell you something: I don't just do this for myself – I'm trying to get other inspired minds involved. I have received almost zero input on my work in the past month or so and either I'm slipping and my work is useless – or what I'm posting is too abstract to you guys. Anticipating the latter I have taken great care to explain my charts in more detail, but it doesn't seem to help.

    So, what's up, rats? You see me post over 10 charts and have no single comment about them? I really would like to know, because otherwise I may just put up the obligatory wave count with an up/down vote and be done with it. It takes a lot of my weekend time to put these together, you know…

    Constructive input welcome.

  • raised_by_wolves

    Although I didn't add anything new, I did explain the basics of how to read your charts and the general conclusion about what they mean to the guy that compared them to immunology. I got it right, right?

    First step: Look to see what happens to the black $SPX line at the approximate time when a blue line touches one of Mole's trend lines and reverses. Second step: Look to see where the blue line is now and ask yourself the question, 'Is it close to touching one of those trend lines and reversing or is it somewhere else?'

    At this moment in time, a lot of Mole's charts show a blue line somewhere else, somewhere between trend lines. Essentially, Mole's thesis is 'this probably isn't a bottom because the blue lines aren't at the usual trend-line-touch-and-reverse extremes like they have been for past bottoms.'

  • http://evilspeculator.com molecool

    I thought that much was crystal – am I assuming too much? After all – most of the charts are not brand new and I thought everyone was familiar with the basics.

  • raised_by_wolves

    Yes, crystal to me. You're not assuming too much for people you have spent significant time on ES.

  • raised_by_wolves

    Instead of getting extended soylent blue, could this be a truncated soylent blue?

    http://content.screencast.com/users/raised_by_w

  • http://evilspeculator.com molecool

    Good to hear that. I know those charts are a bit complex (and maybe unorthodox) but just looking at them should be enough to catch the gist of what I'm trying to do. If you guys have specific questions please post them here.

  • http://evilspeculator.com molecool

    I thought of that – and if that's the case the bulls are in a world of hurt.

  • Tronacate

    I thought they were great………you need a hug??

  • http://chaugner.blogspot.com chaugner

    mole, I think this comes with the territory of your new model. You have a pay-to-view model now and the fact that people are paying for your opinion should be enough of an incentive to continue.

    If you want opinions from other market participants who belong into the category of “I rather not pay for someone elses opinion since I trade my own” then you may need to adjust. While I have not seen any of your juicy charts ever since you went into pay mode the fact that people are still quite active here means you getting what you want out of this.

  • Tronacate

    I studied your charts which is why I didn't hestitae to lay a short TF contract on the first sign of distribution……it has kicked ass……thanks mole

  • raised_by_wolves

    Although $TRAN is *only* one percent down, it is multi-percent down from the high. I think your $TRAN fractal is still in play.

  • Tronacate

    Bernanke might be pulling his hair out soon

  • Tronacate

    TRANnies are going to confirm this whole mess…..and look out below

  • Clint

    That won't take long.

  • raised_by_wolves

    Personally, I think everyone would benefit from discussing Mole's charts and commentary more than we do.

  • Clint

    Yes… a 4% drop from where it was just 5 hours a ago. Not good if you're a bull.

  • http://chaugner.blogspot.com chaugner

    same here. I used to come here a lot but unfortunately this blog has disappeared from my “google chrome home page”. Mole seems a lot happier with the new model, if it works, all power for him =)

  • Tronacate

    As I write, the market has been open for about two-and-a-half hours. I told you today was likely going to be a “gap and trap” and that looks exactly like what is currently happening.
    My list of “front runner” stocks is rapidly turning from green to red and all are hitting low of day such as CLF, CTRP, DECK, POT, RL, BUCY, DO, MA, CMG, VNO, RIMM, MGA and AVB (to name a few).
    To top it off, key ETFs that I have identified, such as IWM (Russell 2,000), have now taken out all the morning lows and continue to aggressively sell off, and IYR (commercial real estate ETF) and the IYF (financial ETF) continue to make new lows of the day as they, too, are aggressively reversing from the highs set during the first hour of trade.
    Russell 2,000 futures (TF #F on eSignal) went from the best-performing index to the worst of all the majors today. This is most importantly due to what we would call the “Fast Money – High Beta” risk tolerance index. When that falters first, we generally can expect that this week isn't going to end pretty.
    Lastly, the S&P 500 futures stopped right at the 1,038s this morning after the ISM service index number came in worse than expected. Normally, it would be good news to see the market up on bad news, however to see the highs so quickly after the number and then so many stocks and important ETFs (IWM, IYR, IYF, etc. ) all hit low of day just an hour later turns things from just a purely technical perspective into something much more sinister.
    Remember, the 1038 level was a key number that I highlighted as a significant support level that we broke last week on the S&P 500 futures, so, in reality, S&P 500 futures testing it today couldn't have happened at a better time. It's best to get the highs in this market out of the way at the beginning of the week versus the end of the week.
    For now, the key support levels on S&P 500 futures are so weak they are hardly worth mentioning but they reside at 1,014; 1,006 and lastly 1,002. After that, it's a long way down.

  • http://evilspeculator.com molecool

    chaugner – I'm not sure if you are privy of this but my posts ALL become free after the next session – even if they contain long term charts. And I have often gone back to see if anyone comments afterward – happens rarely.

  • http://evilspeculator.com molecool

    Again, the info is free for everyone after the session. The fact that very few even know that indicates that I should roll the drum a bit more. However, when I did that I got demonized for 'spamming' – so damned if you do and damned if you don't – you know how it goes πŸ˜‰

  • http://futuresrhythms.blogspot.com/ Scrillhound

    What about the spiral stuff

  • http://chaugner.blogspot.com chaugner

    I know that you are making them free within a day or so many times, but you know how it goes in the blogsphere, new post of current events, rest is history. At least that applies to me.

    I use google reader quite a lot and only check new posts, if I see something I like or have an opinion on I go and post it in the relevant blogs, after I read it, never go back to it unless its one of the blogs I call “home”.

    I am not saying you are doing anything incorrectly or you should be doing something different, but I think when you look at your “income” at the end of the month, it should be rewarding enough that people pay a lot of money for your opinion.

  • http://evilspeculator.com molecool

    Why would he? His cronies have cashed out a long time ago after having continuously raped and pillaged the public coffers – a.k.a. the big cash out. Anyone responsible is too busy buying (now discounted) tropical/european islands and shopping for yachts.

    If you really think that anyone connected to Bernanke will be punished for the misdeeds of the past few decades then you are fooling yourself. Reality has no final judgment and most of the time the big (bad) guys get away with their crimes to society.

  • raised_by_wolves

    Your $SPXA50 and $SPXA200 charts kick ass. What oh what could that drop steeper than 2008 be telling us? πŸ˜‰

  • Tronacate

    So true………all them fuckers need to be hung in the towne square.

  • Tronacate

    Waiting for uncle russell to finish on lod

  • http://evilspeculator.com molecool

    Chaugner – please do yourself a favor and read my weekend report once it's openly available. Those are all long term charts. I don't mind people focusing on the short term but those long term charts are kick ass IMNSHO – they even get mentioned on Yelnick these days along with small select group of analysts.

    The real fun is long term, mate – and if you think you'll do just fine without my work then all the power to you. I'm trying to reach a balance between making my blog economically viable and helping retail traders through the biggest market correction in modern history.

  • http://evilspeculator.com molecool

    Actually it has happened – I think in the 1870s an angry mob strung up Wall Street insiders on lamp posts. Of course that little tidbit has mostly been suppressed in history books.

    Time to remind them πŸ˜‰

  • Wave_Surfer

    I am Mr. Rarely πŸ™‚
    In the future, I look forward to becoming a subscriber, but for now, I do check and wait for Sunday's 10 charts and study it for quite a while and make some comments.

  • Tronacate

    Hang 'em up from a bridge and burn 'em like the Iraqis did to the Blackwater boys…..definitely would be a deterrent to further theft.

  • http://evilspeculator.com molecool

    BTW, I think most subscribers are pretty happy with the model. How do I know that? Because even through the summer doldrums subscriptions have remained close to normal. When folks take a few weeks or months off they usually write me and tell me about it. So, I'm really not worried on that end πŸ˜‰

  • BobbyLow

    I just got back and WTF happened? I think you can add the Bobby Low is going to be gone for the day to all the indicators we use. LOL

    BTW, I made it a point to comment on how much I liked the charts last night. The main reason that I like them is because even though they are complex, they can be used to supplement my own conventional T/A that I am able to understand more betterer. πŸ™‚

    Even though I consider myself a “seasoned” trader, I really can't comment on EW Charts or some of the other new charts you put up because I just don't feel knowledgeable enough to do so.

    But what I do know, is that after about 4 months as a member of ES, I trust your work and judgement when it comes to these “complex” charts. For now, that's all I can do and I'm willing to bet that there are others in the same boat. So sometimes silence is not a bad thing.

  • http://evilspeculator.com molecool

    Well, that and the fractal pattern – just look at the prior ones! I think there is a lot of interesting data there. Also, the VIX ratio charts seem to normalize a lot of spikes just perfectly – I would like to get more input on that from you guys as well.

  • http://evilspeculator.com molecool

    I remember you chiming in here and there – always appreciate that.

  • Wave_Surfer

    I'll agree with you there.
    A lot of time whether it is SoH, ES or even TechTicker as good (or bad) as the hosts are, truthfully, the mob that visits the comment section are far worse quality! I don't agree with TT people that much, but I feel for them. They get viciously attacked for being bearish and creating the credit crisis, AND for being permanently, insanely bullish and always bullish. There are also people that are apparently unable to comprehend the idea of The Press that might interview experts on both sides, like a debate so that people could make their own choice. NO, to some people, TT is maliciously trying to prevent anyone in the entire world from making any money. Evidently TT, tells people to sell (interviews a bear) and then 10 minutes later is telling everyone to buy (interviewing a bull).

    Of course ES crowd is 100x better, but to a far smaller degree, the same kind of stuff happens. I do see the 'damned if you do, damned if you don't' happening. That is probably 1 of the reasons I don't start my own blog. Why should I bring that grief upon myself?? I like myself! And people are far too often ignorant and unteachable and are too busy doing straw man attacks to attempt to try to learn something.

  • raised_by_wolves

    Compare $SPX priced in dollars . . .

    http://content.screencast.com/users/raised_by_w

    and $SPX priced in a basket of currencies . . .

    http://content.screencast.com/users/raised_by_w

    Although both have been correcting, $SPX priced in a basket of currencies is weaker. A closer view shows that $SPX priced in a basket of currencies has actually made a low today . . .

    http://content.screencast.com/users/raised_by_w

  • raised_by_wolves

    ($SPX/$VIX)

    http://content.screencast.com/users/raised_by_w

    Inverted head and shoulders followed by head and shoulders?

  • Clint

    What a day ! Now what ?

  • shortcover

    what a sh*t close…wanted to get back into SSO and missed it by 5 cents…ahhh

  • BobbyLow

    Although there sometimes appears to be a limitless supply, the Market seems to be running out of Bull Shit upon which to rally from.

    Being gone most of the day was probably a good thing for me as it did not allow me to do anything stupid. I'm still net short in Various Option Positions for August, November, December and March.

    So tomorrow is another day and hopefully we'll all get a chance to see what happens. πŸ™‚

  • Clint

    Sounds like a good plan.

  • jigdaddy

    i just read up on your strategy. thats very nice ;-). i want to learn about all these types of trades with options and i know mole is doing a series of post on them. you seem to know A LOT about options trading and i love when you post here because i learn a ton from you.

    that being said how did you learn this game? any recommended reading? or advice?

    TIA!!!

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    yes, but that's just the first of the supports, 40 and 468 weeks still possible supports

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    as soon as they are on open-set i'll comment, sorry boss

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    I always comment on the lattest post, people tend to read there, may I offer a suggestion? deblock the older posts but copy them to the newest one, that waywe could have something anchored to chat about (appart from videos and such)

    don't take this comment as a critic, just my best advise

  • Rayden

    Mole – you wrote “Seems to me that put strikes horizontally are priced higher than their call strike counterparts. If put volatilities are higher than call volatilities it indicates that traders are buying puts.”

    A few comments on this: put and call volatilities (with the same strike and expiration) are the mathematically required to be the same, or else an exploitable arbitrage opportunity exists. For example: if put vol > call vol at same strike => sell puts, buy calls, sell underlying => lock in risk-free profit. This is type of trade is called a reversal or conversion (depending on the direction). Thus, while it is certainly possible that the implied vol based on the bid-ask midpoint on puts and calls may not be the same, the vol based on put bids is essentially *never* higher than the vol based on call asks, and vice versa. The best implied volatility is the midpoint of the volatility calculated (1) from volatility of put bids and call bids (whichever is higher), and (2) volatility of put asks and call asks (whichever is lower).

    Also, as I have mentioned before, deep ITM options are rarely traded (by pros). At a certain point it becomes cheaper to use the synthetic equivalent with the opposite OTM option. Thus, bid-ask spreads on ITM options tend to get wide, and the volatility calculated for them tends to be at best not very accurate (or at worst, completely off, as you can see in some of your graphs). It is almost certain that the volatilities based on bids/asks of a far-ITM option would be both outside the volatilities of the opposite OTM option, and thus only the OTM option would be used in the method described above.

    In a nutshell: the apparent difference in put and call implied volatilities isn't really there, and doesn't mean anything πŸ˜‰

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    BTW, wouldn't it be about time the spiral callendar post was released before it gets out of the front page?

  • Wave_Surfer

    > At a certain point it becomes cheaper to use the synthetic equivalent with the opposite OTM option.

    Could you describe how that is done?
    For example, how would I use OTM options to equal a deep ITM put?

  • amokta

    I am wondering, which is better (or no difference): trading european stock options on european options exchange vs trading them using US options in the 'ADRs' for (some) european stocks listed on US exchanges – i.e. do they give the same return re leverage & equivalent options premium pricing

  • Pingback: Wednesday Roadmap | the evil speculator - one nefarious trade at a time()

  • Rayden

    Easy, buy the call with the same strike/expiry as the put you want, and short the underlying = synthetic long put. Whether this is cheaper or more expensive depends primarily on the cost of carry of the position for you (ie, how much margin is required for the short, how much interest you get on margin funds if any vs how much risk free interest) vs the effective cost of carry that the market maker is demanding. Since this type of trade tends to lock up quite a bit of equity, the market makers do not tend to offer a good price for it; thus, usually, it would be cheaper for you to do it yourself. Depends on the duration and how far ITM we're talking, but e.g. for Dec 1200 puts on SPX, it is almost certain that this would be the way to do it.

    Further note: underlying = future with the same date as the options; stock (or ETF) is not exactly the same because you have to factor in dividends, in effect when you make a trade like this would you be taking on exposure to the total dividends to expiry as well. SSF is the same as a future though.

  • marcopolo101520

    I asked the same thing about a week ago; just checked and either my browser is messed up only for that posting or mole is not accurate; “chaugner – I'm not sure if you are privy of this but my posts ALL become free after the next session (NOT YET SPIRAL CALENDAR MAGIC POST- even if they contain long term charts. And I have often gone back to see if anyone comments afterward – happens rarely”. Drop some bone and some meat mole and as SSH said will be there, plus is your word…ALL become free after the next session. I am not an expert in Spiral calendar and if you read Chris's comments the spiral calendar is just a map with turning points. Which way, up down, market will decide. It leaves a lot of room for interpretation but so far I have not had a chance (liek many others) to salivate at it. Maybe I (we) will not get one anytime soon, but I wanted to see what you think on this strategy and what your rational is, maybe we can all learn something extra. No doubt, we all learned something new and we are greatful for that, but as you said, life is short…the subs got their front seats, now share the point – is no longer about the money just debate. Last few weeks have seem major changes for me (professionally) and I can not be around my screen constantly, but once I get home and settle I can take a look at both the posting as well as comments and see what I missed. Sometimes I missed big, but I would rather have a missed opp than a hole in the account.

    Thanks,
    MP

  • Cerebro82

    Dollar futures are at a interesting trendline. Tomorrow will be pivotal. Took some profit on the EUR/USD long that I mentioned a few days ago.
    http://content.screencast.com/users/Cerebro82/f

  • Rayden

    Mole – I'm not sufficiently familiar with the behavior of ratio charts to say anything really useful about them. From a theoretical perspective, the denominator should be normalized to always be in a certain range in order for the ratio to work: $BPSPX is inherently normalized, $VIX is also sort-of normalized. Also from a theoretical perspective, when you calculate a ratio, you are assuming that a 50% move in the denominator is equivalent to a 50% move in the numerator. Why should that be true, in general? I mean, why would $SPXA200=50 and $VIX=50 be the same as $SPXA200=30 and $VIX=30?

    I've written before what I think about $CPCE.

    I find the behavior of $SPXA50 and $SPXA200 by themselves very interesting, it seems to anticipate major moves, but haven't been able to make it into anything I personally can trade, yet.

    Also, like $NYUPV:$NYDNV on a log scale, solves the normalization problem nicely.

    No opinion on $TRIN and $NYMO – I find the construction to be a bit of black magic (especially $NYMO), and I'm afraid that it either loses information or biases the existing information, relative to using a/d and a/d volume data directly.

    Last comment: any time you start looking at a new chart, perhaps it's a good idea to try to formulate a testable (and falsifiable) hypothesis, and see if it is statistically significant using data that goes a decent ways back? (ie: at least several different market “seasons”, ideally 1980-present or more) We humans (and traders even more so) are really good at finding patterns, even in randomness, which is why eyeballing is *great* for pattern discovery but the patterns found by eyeballing must always be confirmed by statistics.

    Apologies for not commenting more: the stuff you look at eg in this post is not my forte. Now, when you start writing about options and the shape and evolution of the volatility surface, I do comment πŸ˜‰

  • marcopolo101520
  • Cerebro82

    Is the EUR/USD backtesting this trendline?

    http://content.screencast.com/users/Cerebro82/f

  • Rayden

    Trade report: been holding an ES July 1050:1000 put backpread (1:3 ratio) since 1120. Sold off 1/3 of the 1000 puts Jul 1 for 25.00 (essentially all profit). Today, bought back all of the 1050 puts at 25.00 (10am) and sold them again at 37.50 (1pm). This does not actually make money just yet – for the big payoff ES would have to drop significantly below 1000 in the next week and a half – but today's maneuver made up for most of the theta burn since the position was opened. Not bad for a day's work πŸ˜‰

    In some variant of Soylent Blue, I expect we may go as high as 1045-1055 (most likely: 1050 based on a measured zigzag up off the overnight low yesterday), at which point I will buy back the 1050 puts *yet again*, this time for 15-17 or so (depending on how long it takes to get there). It wouldn't be terrible if we were right at 1055 sometime late next week, lol, but of course 950 would be better πŸ˜‰

  • OldChicago

    eur/jpy just spiked up. Any clue?

  • DudePlunger

    Appreciate the posts Rayden, you know your stuff. I tend to learn something new every time you make a post, thanks.

  • http://evilspeculator.com molecool

    Nicely played.

  • http://evilspeculator.com molecool

    Well, in my book two touches does not make an important trendline. It's the next best resistance however, so maybe there's some of that. Medium term it's overbought – I expect some kind of downside correction ahead – how big I don't know.

  • http://evilspeculator.com molecool

    Sorry guys – I forgot – give me a minute.

  • http://evilspeculator.com molecool

    Or you guys could just sign up πŸ˜‰

  • Sleepynaptime

    If memory serves, Mole mentioned (in the post or in comments about it) that the spiral post was too good to put out into the free range blogosphere. He was holding for his subs. Comments might haave been made on the next post when asked about it.

    Not sure if he planned to let it roam free after weeks/months, or at all.

  • http://evilspeculator.com molecool

    I just opened it up. But you guys really need to cross the Rubicon and sign up – you cheapskates! πŸ˜›

  • Cerebro82

    TouchΓ©. Two hits does not constitute a trendline. I agree that we are overbought, and am also expecting some downside soon. I took most of my position off this morning but am still long 3 lots with a stop at 1.2589

  • BigIslandLife

    some off us do stop by and take a look at what you do let get posted, even if it a day late, I always found you charts to be most informative and thought provoking, makes me question my assumptions and keeps balance to the approach. One day when I get good at this and actually make real coin I will have the luxury of reading post real time as a member, till then I appreciate what you do post.

  • RFScooter

    When I first started dabbling in options I would read a blog called Daily Options Report by former CBOE trader Adam Warner. A major theme in his posts is that in most cases, when dealing with options, you get what you pay for. Attempting to find arbitrage opportunities in options is a losers game, given that options are generally priced “right”, for their time and place. Like the dude. In Los Angleeze.

    He also routinely posts pics of hot chicks that have NOTHING to do with the post. So he's got that going for him. Which is nice.

    http://www.dailyoptionsreport.com

  • yudhisthira

    Was today's action a 4th wave upper correction or possibly a 2?
    http://screencast.com/t/NGQzMjE5M

  • doublethink

    For those of us relatively new to technical analysis, I think the last two of your newly released charts are easy enough to understand and I for one most appreciate the wave counts. The earlier charts, beautiful as they are, will require more study and probably reference to a textbook. But that's okay. It's the options material you provide that simply leaves me in the dark.

    Thank you for letting some of us at least know what we don't know. Dissonant Cognition.

  • amokta

    Thanks. Let see what happens (bought some shorts!)

  • ricebowl

    I'm with Dudeplunger — I always learn new things when I read your posts. Thank you.

  • Rayden

    Thanks guys.

    P.S. I did buy back the 1050 puts today at 17.00. A bit too early as it turns out πŸ˜‰

  • jigdaddy

    any predictions for tomorrow/rest of week? you nailed the rally although you got 1050 a lot quicker then expected πŸ™‚