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Did You Get Out Of Cocoa?
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Did You Get Out Of Cocoa?

by The MoleJanuary 27, 2012

A lot of people are very confused right now and who could blame them? All the while the tape has been dropping in the past few days we received a moderate UP trend day yesterday morning and low UP trend day alert today. A bit of a head scratcher and things seem a bit out of whack. At the same time the Zero shows sign of a systematic long squeeze – the reason I’m suggesting that is the velocity of the current stair step pattern to the downside. It simply feels unnatural – after extremely bullish sentiment you usually get a reset or wipeout of some kind. Downside corrections move at least twice as fast as advances due to raging emotions involved. You don’t just correct down like this and then continue on your merry way. Well – it has happened in the past at several occasions but it’s not tape I particularly enjoy or want to be involved in. I do have some thoughts on what may be next – more on that below.

But before we get to that I must ask: Did you get your butt out of cocoa yesterday when I suggested to take profits? Well, if you did not then you’re really feeling it today and if you did then you are smiling all the way to the bank.

How do I do it? Evil black magic of course! BTW, I’m running out of young willing virgins over here in L.A. – any volunteers?

Now we even breached through a daily NLSL but I don’t like that setup and won’t be taking it. Rather I would be long on a retest and recapture of that NLSL and in particular if we push above that 100-day SMA.

Instead of wasting my time with equity charts I instead follow ole’ bucky, currencies in general, copper of course, and the AUD/JPY. And if you are short the Dollar then I suggest you cash out and spend some of your ill gotten gains before your wife learns about it. The really really interesting perspective however is the long term – please step into my dusty lair:

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More charts and cynical commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero or Geronimo subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.
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The weekly panel shows us sitting right on the 100-week SMA and that better be good for some support. IF that one gives then I think ole’ Mole is going to shed a bucket of crocodile tears when exchanging Dollars into Euros this spring. I really have to start charging you guys in Euros, damn it! ūüėČ

Anyway, all joking aside, I want to drive home here that this is an important inflection point for the Dollar. If 79 gives then we are most likely visiting 78 or worse.

Copper is at target – I think I’ve already suggested scaling out yesterday. Today I’m telling you to get the heck out – hell, you may even venture a short position here.

AUD/JPY is back inside its 25-day BB and there is a cluster of support almost exactly one handle below from here. Frankly, I don’t think we are making a b-line to there right away. What I think may happen is a RTV sell pattern and a drop thereafter. Which brings me to something Volar posted earlier today:

This is a sentiment medley made out of:

  • HFDSI = Hulbert Daily Sentiment Index (need a better link)
  • II =¬† Investors intelligence
  • CI = Consensus inc
  • NAAIM = National Assoc. of Active Investment Managers
  • TSP = TSP Talk Survey (some quant group)

And this is what Volar said:

My sentiment index (6 surveys) I guess it could be extreme – but this is the most extreme i have ever seen it for a market that has yet to make new highs.

Sentimentrader did a piece on that too:

Something notable about our current situation is that the S&P 500 is not sitting at a 52-week high.¬† That has made a difference.¬†Here’s how the S&P performed over the next 2 months when the 4-week Bull Ratio reached this kind of extreme, broken down by whether the S&P was at a high or not:

The S&P was at a 52-week high (11 instances):
Average return:  +2.1%
Average worst loss:  -1.1%
Average best gain:  +2.5%

The S&P was not at a 52-week high (12 instances:
Average return:  -1.6%
Average worst loss:  -3.8%
Average best gain:  +0.9%

There was a stark difference in performance.¬† When the S&P hadn’t yet moved up to a new high, it showed a positive return only 4 of the 12 times, with a nearly 4-to-1 risk-to-reward ratio during the next couple of months.

Bottom Line:

So, if you remember all those divergent momentum/sentiment charts I posted a while ago then the long side is starting to look very iffy here. And then there’s the VIX sell signal (admittedly partially invalidated but let’s see). And to add fuel to the fire there’s Volar’s and ST’s quant data pointing down on a medium term basis.

But I don’t think it’s all going to happen in one wash. Yes, the Dollar is running into support and we are near February, a seasonally brutal month for the bulls. What we may see here however (and you can tell I choose my words carefully) is a quick push higher followed by a more sustained drop in February. This would hurt any late in the game beartards and also burn many BTFD bulltards.

Of course if copper starts dropping and the Dollar pushes up then we may just drop like a rock, so if you are playing contrarian I suggest you watch those two charts like an eagle. And there’s the AUD/JPY – it’s been bullish all the while equities were slowly lead down by the noose. A sustained drop toward 81 may just accelerate things on the equities side.

Otherwise all our currency setups moved the way I suggested, gold and silver are continuing higher. I keep maintaining that you adjust your focus away from equities and into selected currencies and commodities. Give it time – maybe continue reading here for a while – ask questions on the blog. Afford yourself the luxury of picking your markets – even if things look iffy on the equities side for stretches of time – there are almost always good trading opportunities out there.

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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.
  • Paleface

    OFF
    My 1’st 1’st?
    Reality will check in sooner or later.
    ON
    Great post, the type I like:)
    ZL 5m shows some signs of life?

  • http://practicalt.blogspot.com/ Gold_Gerb

    Virgins….good one MOle.

    and congrats Paleface!

    http://www.youtube.com/watch?v=os0F4-XFf6w 

  • nyse

    Love this site.

  • nyse

    What up GG. How those T’s lookin’?

  • volar

    kookoo for cocoa puffs
     

  • http://practicalt.blogspot.com/ Gold_Gerb

    some disappointments, but hey.
    I posted this yesterday, and today the trend continues.

    http://i41.tinypic.com/2w6hq4g.png 

  • http://evilspeculator.com molecool

    Heheheeee… :-)

  • http://www.youtube.com/watch?v=-y_J77RO-wY mmrmnhrm

    Mole, I wasn’t aware that there were any virgins remaining in LA, willing or otherwise ūüėõ

  • Anonymous

    well stopped out of the aud/usd at 1.0660. I guess I will just have to wait. And considering we probably will hit 1.07 Im going to change that to a mini-lot and keep the standard lot at 1.0750.

  • TwinTurboRX7

    Sadly, I did not get out of Cocoa.

  • Fibz

    banks are looking particularly weak. euro problems near?

  • Schwerepunkt

    I suppose the Facebook IPO will be good for about 1K DOW points next week? Just kidding. 

  • Anonymous

    Huh, how about that!

  • Anonymous

    Out of cocoa yesterday. Thx mole for that trade! Pretty sweet!

  • Anonymous

    Patience my friend. Looks like things are headed our way!

  • Joe_Jones

    Wow,what a stupid day!

  • volar
  • Anonymous

    Just now sold my SH for a 0.1% loss. Headline risk over teh weekend is too great for me. Besides the bears had a week to push things down and they got bitch slapped every single afternoon but one.

  • Schwerepunkt

    See that 5-pt spike on ES just before the close? Someone getting out before the weekend?

  • http://evilspeculator.com molecool

    I can’t believe it’s already Friday. Anyway, have a great weekend everyone! :-)

  • http://evilspeculator.com molecool

    You got to be shitting me – oy vey…

    Anyway, in case some of you are noobs:

    The large speculator category represents fund traders and professional traders who carry large positions. Commercial traders (or hedgers) also report their net positions to the CFTC. The rest is retail schmucks who are usually on the wrong side of the trade.

  • http://evilspeculator.com molecool

    Happy to please – hope you banked some mighty coin.

  • http://evilspeculator.com molecool

    Jeeezes – dude, why not??

  • http://evilspeculator.com molecool

    Good point – I used them all up ūüėČ

  • http://evilspeculator.com molecool

    What was that candle on the spoos just now?

  • TwinTurboRX7

    the wife said to keep it…

    It’s on her account.

  • TwinTurboRX7

    What is the red and green lines on bottom and top of the chart? It is located reversed between the small and large…

  • volar

    thats what i said… but then again it is only thru tuesday… in any case… bucky may get bent over here.

    my head hurts

  • http://practicalt.blogspot.com/ Gold_Gerb

    Cheers!

  • Anonymous

    Ya, someone wanted out.

  • Anonymous

    Tagging the trendline. 
    *(trendline tbd)

  • Anonymous

    Good possibility. /DX just filled the gap.

  • http://practicalt.blogspot.com/ Gold_Gerb

    Pussy whipped
    (1) adj Рsituation whereupon a male is undeniably at the mercy of his high-maintenance wife & answers to her every beck and call, usually followed by the reprioritizing of wife over friends, family, school, trading accounts, food, water, and air. 

  • Anonymous

    Hey GG tea time for the Aussie? What do you see?

  • Kudos

    Next time convince her to at least sell half, nothing wrong with at least taking partial profits if you want to hold lottery tickets. 

  • http://practicalt.blogspot.com/ Gold_Gerb

    aussie pair?  gimmie the other twin.  ie: AUD/JPY?

  • Anonymous

    sure or aud/usd whichever you like. thx.

  • Joe_Jones

    Oh look Copper finished the day with a doji:
    http://stockcharts.com/h-sc/ui?s=$COPPER&p=D&b=5&g=0&id=p10809774899

  • Anonymous

    Bit of a divergence on the RSI me thinks.

  • Anonymous

    Definitely overbought!

  • Anonymous

    Same here, thanks mole. Played with NIB.

  • http://practicalt.blogspot.com/ Gold_Gerb

    time to get the Hell out.  (chart to come)

  • Anonymous

    Yeah. I would like to see it turn But nowadays overbought goes to extreme overbought and then it goes to insane overbought and ruins my account before it heads down. lol.

  • Anonymous

    Already short. Hopefully good news.

  • Joe_Jones

    yep that too

  • Anonymous

    Was just going to say that EURUSD looks a little stretched.

  • http://practicalt.blogspot.com/ Gold_Gerb

    :-)

  • TwinTurboRX7

    Hey…i like that…but yea…man..
    I don’t know how I got into this, and only been married for 2 years.

  • Anonymous

    Signal stop on!

  • http://evilspeculator.com molecool

    Haaaaaahaaaaaaa!!!!!!!!!

  • Anonymous

    mmm

  • Anonymous

    Thx GG for the chart. Stops are for cowards…

  • Anonymous

    @molecool:disqus 
    Any thoughts on NG? This looks like it might be the next cocoa.

  • Anonymous

    NOO! always have stops. especially with forex. but anyways, i have another short order at 1.06 now waiting

  • Anonymous

    just kidding! sometimes I just hedge instead of stops. I find that more profitable. Say I am short aud/usd and its going against me then I just take equal amount long aud/jpy to compensate. Its all good. I trade small and slowly build up once I am in the green.

  • http://practicalt.blogspot.com/ Gold_Gerb

    BullishPercent registered up today, and yesterday.
    now that’s a mindtwister, because SPX painted two red candles.
    http://stockcharts.com/h-sc/ui?s=$BPSPX&p=D&yr=0&mn=3&dy=0&id=p63408403269 

    one is lying!

    Bullish view) Internals are strong, the two red candles are bear bait.

    Bearish view) the BP indicator lags, the two red candles is price head start.

    -GG

  • volar

    record tot OI and volume on weekly on down channel and on support with a key reversal… going much higher IMO

  • volar
  • Anonymous

    Volar do you get your II Advisor Sentiment and Hulbert Sentiment directly from them, or through SentimentTrader sub?

  • http://practicalt.blogspot.com/ Gold_Gerb

    (Hulbert Sentiment gets their data from Volar)
    he is after all..The Worlds Most Interesting quant

    http://stealthisfirst.files.wordpress.com/2011/10/dos-equis-guy.jpg

  • Anonymous

    I’m a subscriber to ST – Hulbert is delayed 1 week and II is delayed 3 days.

  • Anonymous

    blahahahahah!! Volar is awesome though..and so are you.

  • volar

    I pay and suscribe for II Hulbert and consensus. They cost a bit but u make that up trading easy. Aaii is free and why I trust it little. Naaim is good, but little.data, but free. Hulbert is daily

  • Anonymous

    Thank you

  • volar

    Lol nothing about being a quantity is interesting …. Well have not figured out bow to apply it to sex. Well sports betting it works.

  • http://evilspeculator.com molecool

    Trust me – I’m watching natural gas. A friend of mine is in the industry – meaning he has actually invested in NG fields. He told me that many producers are going to be filing for¬†bankruptcy¬†if prices do not reverse shortly. It’s simply not sustainable – you basically lose money producing this way and I am sure many are considering to simply stop pumping the stuff.

    Now, I do not trade based on fundamental data – just can’t do it. But what I’m seeing right now is a very strong downtrend that needs to show us sign of a reversal. Once it does I will most definitely put it on the map.

  • Anonymous

    Might need a change in administration (meaning Republican) to start using natural gas. Its idotic that we continue to depend on middle east for oil while we have plenty of natural gas to power everything. Dont even get me started on thorium(US has plenty of thorium to last centuries of clean power, no co2, no chance of Fukushima as thorium will not explode).

  • Anonymous

    Interesting enough to pay for!?! :p

  • Fearless

    NEW POST!

  • Anonymous

    The explosions at Fukushima were not due to uranium exploding in a fissile reaction. My understanding is that they were caused by hydrogen gas, because things got hot enough to dissociate water, among other sources. The caveat is that I’m not fully up on the accident, though Wikipedia has a good discussion.

    http://en.wikipedia.org/wiki/Fukushima_Daiichi_nuclear_disasterEven with a meltdown, which did happen at Fukushima, it’s difficult to actually get a nuclear explosion. You need critical mass and critical geometry for this to happen, and you need those things in a fairly rapid sequence for it to go boom. One is far more likely to get a steam explosion, like at Chernobyl, or as apparently happened in Japan, a hydrogen explosion. It is those conventional explosions that disperse nuclear fuel and fission daughter products, that then causes the radiation and/or contamination concerns.I’m very familiar with current pressurized water reactors, as I’m a former navy plant operator. The conventional explosions I’ve mentioned above could cause the same type of problem with thorium as with uranium. Especially because thorium is transmuted into a uranium isotope as a part of the thorium fuel cycle.

  • Anonymous

    Hmmm. It was my understanding that power was lost because the water took out the backup generators which then compromised cooling. As far as I know if a thorium reactor loses power it just shuts down without a Fukushima like meltdown. I definitely dont know enough to argue. But seems thorium was abandoned because it doesnt produce enough fuel for nuclear missiles and we were in a cold war at that time.

  • Anonymous

    You are correct in that back up power was lost because of the tidal wave. Once cooling is removed in a boiling water (or pressurized water) reactor, the residual heat in the core can cause a rise in temperature. Additionally, due to the radioactive fuel, and the radioactive daughter products from the fission reactions, there will still be a neutron flux that continues to cause some fission. There’s a ton of residual heat that needs to be removed, or the materials that contain the fuel will melt.
    The Fukushima reactors did shut down automatically after the quake, as they were supposed to do. It was the inability to remove the residual heat that caused all the problems, including in the spent fuel storage building. Spent fuel needs to be cooled at a low level for a long time, or the containing materials can be compromised.There are typically three layers of containment in an operating reactor. 1. the fuel is encased in a metallic rod, 2. the collection of fuel rods is contained inside the reactor vessel, and 3. the vessel is inside a containment building. All three of those things were compromised in Japan.

    The fuel core melted, and once you have that glob of molten fuel, criticality can be maintained, and the glob of fuel continues the chain reaction and produces heat, which then can melt through the reactor vessel and the containment building. It’s extremely unlikely that that glob of fuel can ever explode in a nuclear explosion, as the conditions for that to happen are exceedingly remote, if not impossible.

    Additionally, as the fuel glob melts through all that stuff, and eventually gets into the environment, it will disperse and cool, eventually shutting down the chain reaction. Of course it lays waste to the local environment by leaving behind a ton of contamination, essentially radioactive dirt. That’s one of the problems they are dealing with now, and will deal with for many years to come.

    As I stated before, I’m not up on a thorium reactor, but I strongly suspect that the residual heat issues would exist exactly as they do in a uranium based reactor, if that thorium reactor has a boiling (or pressurized) water design. I do know there are some gas cooled reactor designs that are supposed to be intrinsically safe, i.e. if the cooling gas escapes, the fuel containment can’t be compromised, and we don’t get a meltdown. Again, not something I’ve kept up on, but I’d bet you can find a lot on Wikipedia. Hope this helps.

  • Anonymous

    Thx for the explanation. Always wondered what exactly happened at Fukushima. From what I have read thorium coupled with molten salt reactor seems to be safer. Take a look at this http://www.youtube.com/watch?v=370srr67Bnk With population reaching 7 billion we need cheaper sources of fuel for sure else we all stagnate.

  • Kudos

    I have some naked puts on UNG that i sold thursday on test of 100 hour MA on /ng. Added a little yesterday at the close because they were paying very nicely in term of IV. The 6 UNG puts were paying 0.40 and UNG was trading at 5.90.