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Crude Update
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Crude Update

by ScottMarch 21, 2017

A few days ago I stated that it was extremely stinky that in context crude could not even break it’s daily low. This lessened the odds of a bearish resolution.

Today we have price action which changes from a lessening of the bearish advantage to a bullish advantage.

2017-03-21_05-23-24

The gold standard of trading is holding onto your opinions so weakly that you don’t hesitate to change them when the facts change. Which is why (with the exception of our gracious host and a few lonely others) mostly bloggers and prediction monkeys suck at trading.

Once you put your ideas out into the ether it becomes very tempting to hold on to them, which is one of the many ways we fuck ourselves over.

The highest probability is now a more complex correction. The market had it’s easy phase, and is probably going to go through it’s “I’m a confusing asshole” stage. We have approximately 60% odds of a 1R win here (being conservative) – betting odds. When the market is probably going to be “I’m a confusing asshole” it makes logical sense to use a wider stop and an easier, more attainable target.

Let’s digress a little to a topic that has come up in the comment section. User Grant, who actually has a lot of knowledge about outside periods, pointed out the OP near the bottom. It’s worthwhile to discuss what outside periods mean.

An outside period happens when a market first tries to go down then goes up and then tries to go down, or vice versa. It is very common for traders to trail stops at daily highs (for shorts) or lows (for longs), and the outside period is fuckery which shakes them out of their positions, and shakes eager counter trend traders getting positioned prematurely.

What does it mean? It’s a clue that traders are banking profits in a long running trend, and being replaced with new traders. New traders are weak hands, who are by definition easily fucked with. It doesn’t mean the trend will end, or has to end. An outside period towards the end of a trend means that the trend becomes more fragile. An external shock after an outside period will probably have a greater effect than normal.

An outside period at the beginning of the trend is a sign the bus is leaving empty, which bodes well for trend continuation.

An outside period in a trading range is entirely normal, traders getting faked out of their positions, chopped short and long .

2017-03-21_19-41-57

Overall, statistically there is no significant edge with entering on outside periods, excepting large range outside periods closing near the highs at the start of a bull trend.

Today in indexes the market continues to do nothing significant. It’s tempting to not pay attention to this price action, but we really shouldn’t be so lazy.

We previously hypothesised that the market was probably transitioning into a trading range. That is still the highest probability, though the lack of follow through by the bulls has opened the door for the bears to take back control. There is no weakness yet, but any weakness here would likely be punished. The odds are ever so slightly in favour of a bearish resolution here. Not really betting odds, but maybe soon.

2017-03-21_20-02-35

Scott


About The Author
Scott
  • AcoBrasil

    “An outside period happens when a market first tries to go down then goes up and then tries to go down, or vice versa.”

    So to clarify, was yesterday an outside period because the hammer failed to break the recent 47.50 low on crude?

    Also, the magnified volume ramp seems to be the elephant in the room on the crude chart. Does that support any assumptions or decision to enter long?

    Thanks.

  • Grant

    An OP is simply a higher high and a lower low than the previous bar. It does not need to be a hammer, etc…. I’m no expert, lol.

  • AcoBrasil

    But yesterday’s crude print did not make a higher high. What you are describing seems to be a bullish engulfing pattern.

    http://www.investopedia.com/terms/b/bullishengulfingpattern.asp

  • Tomcat

    Are we talking April contract here or May?

  • Grant

    Scott, does not use OP’s as a setup. Yes, it looks like he is looking at the engulfing candle as a bullish setup with the low of the OP as a stop and close to 50% retrace as a target.

  • Dyellowflash

    IF we looked at the 30m SPX chart, it had been 3 days of selling, right from the open (1630 marked by the white lines) https://uploads.disquscdn.com/images/bc174a7c39fce0a5eb1413809d2f06502e5953bed79a33115ab395be35a72d2e.png . Its the same for DAX, hence i stated in yesterday’s post that i took a short for today and will probably hold through tomorrow to take it one step at a time to see how it goes.

  • BobbyLow

    “The gold standard of trading is holding onto your opinions so weakly that you don’t hesitate to change them when the facts change.”

    This is ABSOLUTE GOLD for sure. It’s also the antithesis of opinions some of us held in the past as “Perma Bears” – myself included.

    Famous last words: “This is not going to end well . . . “They” can’t keep pumping this market up forever. . . I’m going to short this bitch and stay short.”

    Sound familar?

    I’m now a grateful Chameleon and will change my opinion in a heartbeat based on the actual truth of the market which is current price action.

  • Dyellowflash

    TP-ed half of Dax 12040. Keeping the rest at breakeven stops.

  • Mark Shinnick

    Still holding era, added to tza, entered tviz.

  • ZigZag

    Is Mole on a plane or something? Market seems not happy.

  • Yoda

    Probably finally realized that he is on vacation and turned off his lappy πŸ˜‰

  • Yoda

    We finally get some fear in the market:
    http://money.cnn.com/data/fear-and-greed/

  • Mark Shinnick

    Yes, more in less time than usual.

  • Mark Shinnick

    You know, in context to the last couple weeks here, CNN’s Fear & Greed Index is set up to really fuck over a whole bunch of people under its own failure condition.

  • Dyellowflash

    Very strange “trend day”? I will probably TP some and go to sleep soon. Think 2330 is possible b4 i sleep? Asia time now is 11pm

  • StockTalker

    Gold in them there hills:) Nice slide

  • Yoda

    Bear markets start slowly and then it all come down like a waterfall when the last bulls have thrown the towel. Now I need those same bulls to short the tape so I can BTFD (just not yet).

  • Mark Shinnick

    Please let me know…I’ll stay tuned πŸ™‚

  • AcoBrasil

    VIX contracts just rolled over. Front month contago has flattened somewhat.

    https://www.investing.com/indices/us-spx-vix-futures-contracts

  • AcoBrasil

    Nice entry.

  • Yoda

    The zero is a trader’s best friend for this. Let us keep an eye on a positive divergence on the 60 min zero for a start.

  • Yoda

    It has been really good at extreme readings, especially for BTD trades

  • ridingwaves

    L IBB at 289
    L AVXL at 5.52

  • Mark Shinnick

    Yes, exactly the setup…wonder how many people are banking on its readings.

  • Dyellowflash

    Dax 11940. That’s my target for even tomorrow. I am all clear for 6R except for one contract from 12101 in case this IS the top of a multi month double top.

  • Yoda

    “thar” πŸ˜‰

  • saltwaterdog

    take a look at GSAT. went long Friday at 1.50

  • Mark Shinnick

    Balls, Man.

  • Mark Shinnick

    I’ll be loading up more bear again around here with a fairly tight stop.

  • ridingwaves

    I’m married and now ball less….

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • Yoda

    the 50d sma on SPX needs to hold, otherwise the volume profile says that we going to end up much lower

    https://uploads.disquscdn.com/images/26f6a0a7cf7941203c8c6fb3887b513263ae24fb5ef7756a193226ab83135e9b.png

  • OJuice

    Got my fingers crossed for a divergence right around SPX 2335.

  • ridingwaves

    Chart is very promising, thick resistance below 1.40..huge float….
    but your L buy looks solid via my lens….might buy in around you if it dips..

  • Mark Shinnick

    Stood aside all the shorts …for time being.

  • Yoda

    I am going to pay attention at that price level too, and likely take partial profit on my risk-off trade there. The down move kick-off is strong though, so I may leave some chips on the table just in case it has some legs.

  • ridingwaves

    anyone else seeing the long wick down on XLF daily on 3/17? wtf
    makes me think we might find it if it gets thru 23.10

  • Mark Shinnick

    Reentered tza.

  • Mark Shinnick

    All out for now.

  • Scott Phillips

    An outside period is a bar with a lower low AND a higher high than the previous bar.

  • Scott Phillips

    I don’t use it as a setup, but it is a marginal edge.

    Outside periods in and of themselves – CATEGORICALLY not an edge. Like most of Ivan’s stuff.

    I have detailed stats

  • Scott Phillips
  • BobbyLow

    As of this moment, nice 6% move in NUGT so far today. We’ll see how she closes. My Long NG via UGAZ came within a couple of pennies of getting stopped this morning during the 11 AM Candle but price came back. I’m a little concerned that Nat Gas might take a dump overnight but it is what it is. And Silver via USLV has been making a nice steady move upward since last week. Almost a couple of hours to go before the close but all and all – not too shabby. πŸ™‚

  • Scott Phillips

    Metals look quite constructive today. I have setups painting on PL and SI with a few hours to go

  • Mark Shinnick

    For the time being…setting up another setup in my models to sell miners again; no idea when that might happen. That particular condition would be a sell but with a very tight stop to then reverse.

  • BobbyLow

    Are you still trading 2 Minute Charts?

  • Mark Shinnick

    Under this condition for miners its 5 min but showtime always drops to 1 minute.

  • BobbyLow

    Cool. I thought you were in the fast lane. πŸ™‚

    I’m in a relatively slower lane trading the Hourly on NG and Silver and even slowed it down some more to 2 Hours on the Miners.

  • Mark Shinnick

    Good thing about that time frame seems to be less work intensity, fewer trades and sometimes a better hold potential. Its a really sound time frame to be sure.

  • Scott Phillips

    Please remove the phrase “The XYZ DMA needs to hold” from your vocabulary πŸ™‚

    It is incorrect, and the numberless buyers and sellers in the market are mostly bots who are unaware of your line on the chart. Also, what about Mole’s 25 SMA which also needs to hold, Al Brooks 20 EMA which also needs to hold, Clenow’s 100 SMA which also needs to hold as well.

    We can’t all be right πŸ˜‰ Therefore we are all wrong. A moving average has no predictive value. Dropping below, or recapturing it, doesn’t mean a thing.

  • BobbyLow

    Thanks. These time frames are a good fit for me because they offer enough trading opportunities for me to handle. And if I have to leave during the day, I can leave my positions open with an appropriate stop.

  • Yoda

    I mentioned the 50 d sma in this case because it coincides with the next volume hole below. No other reason than that.

  • Mark Shinnick

    Yeah, another crucial aspect to this whole thing is preservation of mental capital; we all must identify the time frames (which are actually just filters against real time price) best suited to all our needs and abilities. As usual, we assume risk for any factor we artificially apply against real time price, but for most times its the tolling of all the other risks (such as to our mental capital) that I believe argues strongly for time filters such as hourly.

  • Mark Shinnick

    There is some hit the fan risk here so I’m reentered short with pretty tight stops.

  • Scott Phillips

    My setups are daily, so probably don’t have any correlation with yours at all πŸ™‚

  • Scott Phillips

    Cool πŸ™‚ Now volume hole is a real thing. But it’s nice to remove the bad vocabulary.

  • Scott Phillips

    He’s travelling today

  • Mark Shinnick

    Yeah…all this diversity available to all of us…just amazing.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • Yoda

    Today’s move felt like a 3rd wave of some sort

  • ridingwaves
  • saltwaterdog

    sets 3-4ft overhead in Nosara today…. crazy winds but an unreal time

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • Scott Phillips

    Lucky that shit doesn’t work πŸ˜‰

  • Scott Phillips

    Stop thinking about that. That is the dumbest shit I saw on the internet today, and I’ve been on facebook today.

    Objectively. The market is in one of the strongest phases of the strongest bull market in history.

    Its due a little pullback, but a bull move as strong as we saw recently will BY DEFINITION attract dip buyers.

    You will go broke unless you change this thinking

  • Yoda

    It does not work in an uptrend that’s for sure. But in a downtrend, when ramping bots are switched off and during which human emotions are high, I found it a bit more reliable for general guidance. At the end though, nothing beat the zero for picking up bottoms.

  • ZigZag

    Thought so. Isn’t there something something about a Mole travel curse?

  • Yoda

    Maybe I should have used “downtrend” instead of “bear market”. To me it looks like we are seeing a stop run on late bulls. A lot got stopped out today. Now I hope those same bulls decide to short the tape in the next 2 sessions so I can gradually close mine and start BTD. I am not comfortable with the idea of staying short for the end of Q1 window dressing session.

  • http://evilspeculator.com Sir Mole III

    THE EAGLE HAS LANDED!

  • http://evilspeculator.com Sir Mole III

    I don’t really think that way although you may wind up ending up like it. When I see a divergence on the Zero I don’t know if it’s a medium term low or if it’s just an intra-day correction. I do consider complementing evidence and then decide whether it’s worth to engage in a ST campaign. Which may turn into a longer term campaign if the tape takes off. In retrospect it may look like as if I picked a low but the process is not geared toward doing that.

  • http://evilspeculator.com Sir Mole III

    I’m back in town – time for a bounce.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    NooooOOOOO!
    πŸ˜‰
    welcome back Cap’n.

  • Yoda

    Damn!! Now I have to close my SDS tomorrow. πŸ˜‰

  • Yoda

    makes sense

  • ridingwaves

    down in CR, where Pura Vida reigns…enjoy…water is cold and stormy at OB today..

  • Mark Shinnick

    Umm…ok…Eagle hung out after landing for about a day and then took off again. πŸ™‚

  • Scott Phillips

    A bear market is a very specific thing. Even if you don’t think you meant it your subconscious did.

    Let’s be clear. This is the very first time in 100 trading days that the market has gone down 1% or more.

    Bulls don’t just get out of longs and decide to short. They get out of longs, mostly to sit on the sidelines for a while, and hopefully to buy in at a lower price.

    It’s a bull market you know. Instead of wondering when it will end, wait for signs of the market bottoming and get long.

    Is it a trend or a trading range? It’s probably a trading range. We are probably somewhere near the lows of that trading range.

    Very surprised if we don’t see buying pressure at the open.

  • http://evilspeculator.com Sir Mole III

    Sorry guys – if you’re nice I’ll bring Scott back every once in a while.

  • http://evilspeculator.com Sir Mole III

    The love is really oozing out of you guys today.

  • Yoda

    Welcome back Mole. Hope you had a blast walking volcanoes.
    http://helpinghandsdispensary.com/blog/wp-content/uploads/2014/09/welcome-back.jpg

  • Yoda

    Reversal alert : Gartman’s gone short

  • http://evilspeculator.com Sir Mole III

    Writing a post right now but since you guys already changed to daylight saving time (Europe hasn’t) I’m one hour behind. Please stay tuned.

  • http://evilspeculator.com Sir Mole III

    LOL

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    Hurry’up man,
    Leecher’s gotta Leech.
    πŸ˜‰

  • StockTalker

    much weakness here

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    meh, it’s only first half hour of the day.
    always deceitful. ..usually.
    πŸ˜‰

  • StockTalker

    Believe the tide has changed.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    two support lines on the QQQ’s weekly.
    but I know you guys trade hourly charts.
    πŸ˜‰
    http://stockcharts.com/h-sc/ui?s=QQQ&p=W&yr=3&mn=0&dy=0&id=p54968979617

  • StockTalker

    Bears have a big opportunity right here.

  • AcoBrasil

    Crude inventories at 10:30a should set the tone for the day.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    ..home sales disappoint.

    http://finviz.com/calendar.ashx

  • StockTalker

    Think we are in a power wave to the downside at the moment.

  • Dyellowflash

    Opportunity taken. But as cautious as a chicken thief for today. Not sure when or how much it might snap.

  • StockTalker

    with interest rates creeping higher it should.

  • OJuice

    Probabilities favor them dropping the ball in the red zone. As we have seen countless other times…

  • StockTalker

    2340 /ES is resistance

  • AcoBrasil

    $VIX broke above its upper Bollinger this morning. $SPX snapped below.

  • Mark Shinnick

    I see spy has hit its daily trendline “support”, but is eroding against it. Still its a acute BTD warning.

  • AcoBrasil

    Crude inventories way over expectations. Cushing inventories dropped.

  • ridingwaves

    more likely 12-1 price to income bubble….homes are a wall street investment, someone is going to take some profit at some point….

    middle class America, welcome to the ass fucking courtesy of our banker overlords…

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • Mark Shinnick

    Personally, I embrace his periodic brutal honesty.

  • ridingwaves

    well, when bankers and the govt. price fix a market they should get an earful of us commoners….what they did to the American dream is put it out of reach for today’s families….pottersvilles was the route they took….

  • ridingwaves

    my apologies but I hate how the fed rewarded specs over the prudent…
    right now the economy would be rolling if they took them out in 08….instead of enabling them….

    btw-XLF is the tell for equities….

  • http://evilspeculator.com Sir Mole III
  • Mark Shinnick

    This business demands a Patton-like simplicity, directness, ruthlessness. Yeah, the Political Economy has been a killer to core values.