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Danger Will Robinson!
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Danger Will Robinson!

by The MoleMay 15, 2013

I’m watching the price action in equities and although I’m not hugely surprised about the continued short squeeze I’m seeing clear and present signs of caution preventing me to participate in anything but very nimble short term trades (see this morning’s entry on the spoos for instance – that was nice!!). Let’s take it from the top:

This is the chart that got me to dig a bit deeper: Despite equities on a proverbial rampage I’m seeing a rather distinct spike in volatility. Could it be that market makers are getting a bit nervous up here?

The SPX:VIX ratio visualizes the divergence rather nicely – usually the two move more or less in tandem. Today however the ratio is heading in the exact opposite direction. This divergence started a around 11:00am EDT and accelerated from there.

But wait there is more – here comes the really interesting stuff. Please step into my trading lair:

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UPDATE 2:26pm EDT: Extremely strange gyrations on the VIX today:

As the market started to drop the VIX dropped along with it. Super odd and I suggest extreme caution up here.

Cheers,


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.
  • Schwerepunkt

    One of these days, this market is going to look like my profile pic.

  • http://evilspeculator.com molecool

    Any thoughts on my charts?

  • Rightside_ot_trade

    Makes good sense; the charts and the trading warning

  • Apple Al

    Good catch, and I think your concern is well justified

  • Schwerepunkt

    I, too, am perplexed by the divergences, but I don’t know what to make of them in this new normal. We do seem to be decoupling the inverse relationship of the USD and equities. That is clear. I would expect other correlations to wobble in that kind of transition as well. And it may be that reliance on some of these correlations in the algos has led big players and bots to hedge their risk. Hence, VIX is levitating rather than falling even as equities rise.

  • strider

    The robot talking to Will Robinson would say That does not compute. Maybe that’s why he was lost in space. Good info, thanks.

  • bdoone

    So ES sells off 5pts and VIX drops from 13.43 to 13.02?

  • Joe_Jones

    USD strength could be related to the recent sell-off in treasuries and bonds. Now the question is where is that cash going to: under the mattress, Gold and Silver or Equities

  • http://dartht.blogspot.com/ Darth_Gerb

    BobbyLow, you could think about an inverted T in the gold.
    with equal time theory, you could take the first extreme low, to the rebound high, and forecast another low.
    again, that would be time, not price.

    but that stuff is volatile, so best for me to just say, good luck.

  • http://evilspeculator.com molecool

    Exactly – very strange tape. Be careful.

  • ridingwaves

    The charts posted let me get into 3/4 short position..

  • http://ibergamot.blogspot.com/ i Bergamot

    Volatility of Volatility (lower panel) is very low.
    It doesn’t stay this low for long
    Volatility wants to be more volatile
    (See what this isolation did to me?)

  • ridingwaves

    entered scalp, ROSG on volume target 4.50

  • amokta

    Closed out RBCN profit – it could indeed go higher, but im happy with what i have done and target for me was 7.50,ánd i dont know what tomorrow will bring, in this topsy-turvy market

  • http://twitter.com/law6 law

    hmmm

  • Joe_Jones

    We are starting to see some really bullish daily candles on crude oil, CAD and CHF

  • Joe_Jones

    Good input 😉

  • amokta

    Is this listed on the Toronto exchange?

  • Schwerepunkt

    Not so much on the dailies.

  • amokta

    I think i just crashed rbcn with my sell (or perhaps it was a cluster point for sellers!)

  • Joe_Jones
  • amokta

    Very small market cap, i assume your position is a small one to mitigate out-of-box risks?

  • bdoone

    NLBL question: Is the 1648.50 NLBL still valid and if so, should it act as support then short it below as late longs scramble to get out?

  • Sean

    I’m thinking dumb money (and maybe even some “smart” money that needs yield) is driving the market up and the real smart money knows this is not justified so they are hedging (maybe hasn’t been for a while, but now it’s not justified for reals)… just a guess… also, NQ is lagging because AAPL is taking a dump today… why does everyone care so much about Tepper?

  • amokta

    So much for my silver short – only a small spec, but the (g)odds were not with me today.
    These pieces of eight keep falling – very strange, like quarks

  • ridingwaves

    yes, but look at the last blast off, which I booked some good profit..Someone saw something in ASCO abstract before they are released at 6pm EDT..I mentioned this trading setup yesterday…if market sells off, bio is good place to scalp. Right now shorts are covering…6.0 short ratio…Bristol Myers jumped 8% today on same thing…

    this is bio seasonality time..

  • amokta

    If you know your stock, then yes, trade your plan!
    Bio’s so sensitive to rumour & hype, but profitable if on right-side-o-trade

  • amokta

    With the loss of subscribers, Prechter has downgraded his computer system
    http://sysrun.haifa.il.ibm.com/ibm/history/exhibits/vintage/images/4506VV4002.jpg

  • http://dartht.blogspot.com/ Darth_Gerb

    he can afford electricity?

  • amokta

    🙂 Mole doesnt like these big pics, but disqus no longer does thumbs!
    On a more trading note, IBM – could be a marker for punching the top?

  • Kerberos

    Russia has basically been given the OK to destroy the Syrian rebels. Just saying. That will throw a wrench in the West’s Middle East agenda.

  • http://dartht.blogspot.com/ Darth_Gerb

    when Markets run hard, I look for fan boundary lines.
    (..not top calling, just looking for cardboard ceiling)

    OEX

    http://s22.postimg.org/eoktjmp4x/OEX_fan.png

  • http://dartht.blogspot.com/ Darth_Gerb

    Yours was bigger than mine, err wait a minute. (that doesn’t sound good)

  • http://dartht.blogspot.com/ Darth_Gerb

    Yours was bigger than mine, err wait a minute. (that doesn’t sound good)

  • ridingwaves

    GENE and ROSG run together…tomorrow should be interesting

  • ridingwaves

    GENE and ROSG run together…tomorrow should be interesting

  • http://dartht.blogspot.com/ Darth_Gerb

    *close your books*

  • http://twitter.com/law6 law

    so do I Gerb…..and sometimes it moves either side but symetrically

  • AmazingLarry

    ‘Splain this. Weekly gap up outside the BB on the /ES. 10+ points. Tha fuck?

  • convictscott

    Ahh Amotka, if only I could short *you* 🙂 Without a set of rules for entering, managing and exiting trades, you will destroy your account. Nothing could be more certain.

    Your silver short should have made money today, right?

  • http://dartht.blogspot.com/ Darth_Gerb

    the Market is not uniformly distributed, hence the BB is F’ed.
    Kurtosis I think’s the term.

  • http://evilspeculator.com molecool

    It is what it is – nothing to explain. I’ve been making a point about short squeezes and with all that QE cash floating around and the bears eager to continue shorting this is not a huge surprise.

  • Kerberos

    Took a long term short on SPX today. Just for the record.

  • http://evilspeculator.com molecool

    That was an hourly NLBL this morning – long expired.

  • http://evilspeculator.com molecool

    Yes, the VIX has been pushing sideways the entire time. It’s rather obvious that MMs are very nervous up here.

  • http://evilspeculator.com molecool

    A bit early to go short IMNSHO. I hope it’s not a big position – it’s best to pyramid as the tape moves in your favor.

  • http://dartht.blogspot.com/ Darth_Gerb

    have you done any posts on pyramiding?
    I don’t think you have.

  • http://dartht.blogspot.com/ Darth_Gerb
  • amokta

    I meant *long* silver (AGQ) taken just off first lows of day. Was hoping for a bounce up, gap fill after such a down move, just a small punt with tight stop, and got stopped out. But your points are valid none the less 🙂

  • amokta

    Who you gonna call – Bernie Madoff? 🙂
    http://evilspeculator.com/?page_id=19150

  • http://dartht.blogspot.com/ Darth_Gerb

    excellent find. I don’t remember Bernie, but I do remember that calculator form.
    cheers!

  • http://evilspeculator.com molecool

    Well, I’m turning in – see you guys on the other side.

  • Kerberos

    I think we could get a big gap down when it turns, so I’d rather short now than be on the fence after a big move.

  • convictscott

    Very easy way, different that how Mole does it. Take a small setup, when it makes 1R bank some profit and set stop on the remaining position to breakeven. If price moves in your favor and gives you another setup, take it. When you have 1R in hand, move stop to breakeven. Repeat every time you have a new setup, risking only 1R and moving stop to breakeven as soon as you have 1R. You may have a few losing trades in your pyramid. If you get 2 losing trades in a row you should stop pyramiding, its unlikely you have the (very rare) situation for pyramiding.

    For a bear move each time the market makes a new spike high (defined as a bar with a higher high than the bar before and bar after it) move the stop of the whole pyramided position to that spike high.

  • convictscott

    Another way. Take a setup. Take the profit from that setup (after you exit) and add it to 1R for the next setup.

    So if you take a short and it banks 2R, you take the next short for 2+1=3R.

    If that 3R short has a 2:1 return you now have 6R.

  • Skynard

    /DX saved by the hourly NLSL/25sma, good place for a stop.

  • Skynard

    /NG playing nicely, ah?

  • http://dartht.blogspot.com/ Darth_Gerb
  • http://dartht.blogspot.com/ Darth_Gerb

    thnx.

  • AMCabrera

    http://content.screencast.com/users/AMCabrera/folders/Jing/media/0dde8f3a-47a0-47d7-bfba-5e465acdb2f8/2013-05-15_1940.png
    http://content.screencast.com/users/AMCabrera/folders/Jing/media/0e055e27-e4af-4140-83ce-52db99c19e02/2013-05-15_1943.png
    I have since closed my nzd shorts that were taken a few weeks ago. Newest project short USD/JPY. Why not I havent tried a short here in what seem like ages because something needed to clear and finally has. Well enjoy.

  • http://dartht.blogspot.com/ Darth_Gerb

    you’re alive, how’s the little one?

  • newbfxtrader

    I thought there was a video posted by you about the order book……

  • Skynard

    Are we their yet on AUD? Printed a doji, will see tonight if it’s time to take some profit:)

  • AMCabrera

    Doing very well! Thank you for asking!

  • http://evilspeculator.com molecool

    Seriously? BPC? Of course it’s for subs only :-p

  • http://evilspeculator.com molecool

    Exactly.

  • http://evilspeculator.com molecool

    No it’s always a penis in your case.

  • AmazingLarry

    Was thinking they’d need to raise the parameters to 200 once it takes out 100. Same thing but opposite for the miner’s BP. I mean 0.0? That’s no floor! 😉

    BTW, the finance sector ($BPFINA) and the Dow ($BPINDU) both hit 96’s today. Super great time to get mega long. The banks are solvent, everything is fixed and nothing could possibly go wrong now.

  • Skynard

    Exited AUD shorts, very close to my target and not overstaying my welcome:) Put a small long on .98

  • Skynard

    AUD Into the lower BB weekly

  • tradem4alpha

    Also slightly below the monthly one.

  • Skynard

    Expect lower prices although a good place to profit and bounce.

  • http://evilspeculator.com molecool

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    ¨°º¤ø„¸F R E S H „ø¤º°¨ 
    ¸„ø¤º°¨ M E A T“°º¤ø„¸
    ¸„ø¤º°¨¤ø„¸¸„ø¤º°º¤ø„¸

  • Skynard

    Stopped out /QG 055.