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Do Or Die!
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Do Or Die!

by The MoleApril 28, 2010

An increase in volatility begets market reversals – which either turn into meaningful corrections or are simply used as buying opportunities. Time to throw out the riff-raff so to say…

Charts only available for evil lair members – freely available to everyone after the session:

As you can see Mr. VIX is stuck in a nice clean channel from which there seems no escape. But escape it must – lest the bears remain trapped in this ‘buy-the-dip purgatory’ they have found themselves boiling on slow flame for the past year.

Bottom line: If this thing snaps back the punishment for the bears will be of biblical proportions as we have now stretched out that 2.0 Bollinger as if Max DeLong had his dirty way with it. A short term bounce is expected here but should be followed by a selling frenzy.

Friend of the blog Chris Carolan (a master of charting in his own domain and one of the folks I have utter respect for) suggested the Bollinger on the weekly VIX as a possible target – assuming we keep pushing higher here (i.e. lower in equities). Sorry for stealing your chart, Chris – just trying to do God’s work 😉

I’ll be back once I dug up a few more juicies for you guys.

Club Zero Update: I drew this channel on the Zero Lite this morning and low and behold we are still in it. I think this is a textbook example of how Mr. Zero can keep you out of trouble when early morning price gyrations are trying to fake you out. Sorry, Zero subs only – again, it’ll be available for free to everyone after the session. Make sure you come back for it – this is not one to be missed:

Zero subs know that I drew this channel about ninety minutes ago – and thus far we’ve remained stuck inside. That is bad news for the bears on a short term basis. We need to clear this thing or the dip buyers will employ their kung fu grip in about one to two hours from now.

Stay frosty until we breach today’s highs and cross that upper boundary of the channel.

UPDATE 1:11pm EDT: A little birdy sent me this last night:

Recent reports of a strengthening recovery are not fully supported by the behavior of consumers on the web. At the Consumer Metrics Institute we measure the depth and quality of web based consumer “demand” on a daily basis, and during this recovery the year-over-year changes in “demand” that we measure actually peaked in August 2009 and have been declining ever since.

In fact, our “trailing quarter” of web based consumer demand slipped into year-over-year contraction on January 15th, and since then we have been plotting the progress of this 2010 contraction event against the profiles of similar events in 2006 and 2008.

As you can see from the above chart the current consumer “demand” contraction event is unique: if there is a “second dip” it may very well be unlike anything we have seen recently. Instead of a “call-911” type of event in 2008 or the “hiccup” witnessed in 2006, we may be seeing a “walking pneumonia” type of contraction that has legs.

Over the most recent 7 quarters our economically “upstream” Daily Growth Index has led the “downstream” factory GDP numbers by about 17 weeks. If that pattern continues to hold, we are currently about halfway through the consumer transactions that will drive the third quarter’s production and GDP. If the blue line shown in the above chart continues drifting laterally over the next 40 days, the 3rd quarter 2010 GDP will look a lot like what we have previously projected for the 2nd quarter 2010 GDP, contracting at a mild but persistent rate.

In summary, our data is telling us that U. S. consumers are very reluctant to take on the kind of debt that they have traditionally assumed when pulling the economy out of previous recessions. Even a recent upturn in our retail index faded once the seasonal impact of the forward shifted Easter holiday had passed. Furthermore, even during the Easter retail up-tick the quality of the transactions was not very high. Big ticket items requiring longer term financial commitments were relatively scarce, and for that
reason our Weighted Composite and Daily Growth Indexes did not materially respond.

Our mission at the Consumer Metrics Institute is to measure (on a daily basis) exactly how consumers are leading the U. S. economy. We “mine” nation-wide internet consumer tracking databases on a daily basis for early warnings about the demand side of the economy. Our data is significant upstream economically from the factories and the products measured by the GDP, putting us far ahead of the traditional economic reports. Perhaps our data is too timely; we are so far ahead of conventional economic measures that our story generally differs (either positively or negatively) from the stories being simultaneously reported by more traditional sources.

The indexes themselves can be found at http://www.consumerindexes.com. An overview can be found at http://www.consumerindexes.com/Overview.pdf.

I realize that your readers are probably tired of hearing about the recession, and frankly our data is certainly less uplifting than the picture currently being painted by most economists. But our data has substance and (as you can see) the chart is telling us that something actually is “different this time.”

Well, isn’t that a how a howdy-doody – some additional evidence that the recently hyped consumer confidence numbers were as usual smoke and mirrors. Buy buy buy!! 😉

For the record however – although I allow myself the occasional Denninger moment this should not affect our TRADING. If certain trend lines and measures are broken we will trade this market up without compunction. Always remember folks – fundamental news and economics mean very little when it comes to trading. Case in point? The past 13 months.

Zero UPDATE: We are running out of time today:

Well, we have 15 more minutes in the futures for a breach here – not sure it’ll happen…

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 various social media waterholes below.
  • http://trading-to-win.blogspot.com/ DavidDT

    you have to number those “DO or DIe” posts

    anyhow – that mentality scares me like New Hampshire's slogan on license plate:
    “LIVE FREE OR DIE”

    DIE BITCH DIE!!!!

  • http://trading-to-win.blogspot.com/ DavidDT
  • http://evilspeculator.com molecool

    Well, the TA is pretty clear on this. I'm not being emotional or anything. Either the bears muster a reversal here or they will be manhandled (again).

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

    no charts for poor hamster but i leave a quote from yesterday “well, as a simple hamster I'll just comment on the vix chart, yes we are outside, but one day we must start riding the upper bollinger and reverse this rally”

    VIX is holding right at the edge of upper BB, where will it close? was outside, was inseide…. EOD?

  • bananaben

    Agreed on the punishment – something I have had enough of already. Going to add to TZA up to full short around 730 on RUT. 735 is the line in the sand. Switched to Russell since it has had such a strong retrace there is probably more downside.

  • http://trading-to-win.blogspot.com/ DavidDT
  • nugie

    Thanks Mole. Like your channel it is very helpful. Bears may have to wait a bit for the next rise to finish but I think it will be worth it.

  • http://trading-to-win.blogspot.com/ DavidDT

    there might be a chance that we'll get kind of ErikD rooftop here (ohps…did I just say “ErikD”? – np more rooftops)
    http://screencast.com/t/YjBiYzNhYzAt

  • http://evilspeculator.com molecool

    Is he squeezing one out? LOL :-)

  • rosocecasita

    Yay! Its like Spain wasn't just knocked out of every money managers portfolio… best to pile into some good stocks!

    Gold Bitches! Look at that negative correlation! Stocks rising ~> gold retract…

  • http://evilspeculator.com molecool

    Yes, I NEVER said we won't. Just saying that we HAVE TO. Everyone get that?

  • http://evilspeculator.com molecool

    Oh jeezzz – now you are just begging to be banned – LOL :-)

  • http://evilspeculator.com molecool

    Tons of new stuff lurking above – RELOAD!!

  • http://trading-to-win.blogspot.com/ DavidDT

    oh shuddup

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

    cristal

  • yudhisthira

    Magic channel was holding as I typed. Maybe..

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

    and i thought there would be a crumble or two for old hamster to feed on….

    btw, did i mention a nice R(at)SI above 80 and a fast rat getting close to k100%?, short term reversal in progress

  • BobbyLow

    Thanks for the heads up Mole. I saw it on the chart.

    It's tried to break through and stay to the downside but it must be getting ready for 2:15 when the Statement is: “The economy is recovering very nicely but we are going to continue to issue free money to banks in so we can keep the markets up especially 401K's so that we don't have a revolution on our hands.

    So then the Pundits can say that the Key here is that the Economy is recovering and BTW, did I say that the economy is recovering? :(

  • http://evilspeculator.com molecool

    Wow – did you get that secret memo too? Yup – it'll boil down to just that – give or take a lie or two.

  • skynard

    Neg div on SPX 15 min. Down to 1186 for triangle and from there?

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

    Yes nice charts..feels like either way we will get a push up from here…scare the bears, pull in the bulls then drop…OR. we just keep going up…but that would be PREDICTABLE…again!

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

    was that a toe thru the zero lite channel just before?

    up against the bolly and resistance

    http://tinyurl.com/2vyq77m

  • http://trading-to-win.blogspot.com/ DavidDT
  • yudhisthira

    Man! What a razor edge triangle on ES 5min. Time to launch higher?

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

    I was playing around with the strong resistance trendline on SPX & traced it back to the Oct 2008 low, with a parallel trendline below dating from the Nov '08 low.

    Looked pretty interesting I thought:

    http://www.screencast.com/users/springheel_jack

  • aussiebinlaughin

    Interesting stuff from the guys at consumer metrics. My day job is in the online marketing (and inadvertently make Google shitloads of money) and we have seen some substantial gains in revenue/profit from many of our clients over the last 6 months, especially prevalent in our travel and retail clients. However, when I delved a little deeper into the figures and did some analysis of a few verticals, 90% of the gains are purely from competitors going bust, not from any real form of growth.
    This is in the UK and it is obviously a much smaller market, however looking over the pond to you guys in the US, I think its very indicative that the latest Google results showed a large fall in revenue. Almost all revenue made by Google is from is paid search (sponsored links) section and this alludes to what we all know in that the consumer is really pulling back and when they do buy, they're shopping around a lot more than they were 2 years back. For example, the average amount of clicks it takes to convert on one of our travel clients has gone from 7 clicks 2 years back, to over 14 this month. These cost anywhere from £0.50 to £4.00 each, so you can imagine how margins are being effected by all those extra clicks. Even more telling is the fact that many of our clients that are kicking arse via taking over failed competitors market share are still struggling to find the cash to advertise. ie. we are making them money, plenty in some cases, and if they gave us more money, we could keep doing so, yet they still cant stump up the necessary cash to do so. Many of them simply haven't got it and cant borrow it.

    BTW, Im sure this also applies in the US, but did you know that searches such as 'home insurance' and 'credit cards' can cost the advertiser up to £50 per click (on sponsored links only of course, the other results/clicks are free). Shows what a cash cow Google (and to a far lesser extend Bing and Yahoo) is and jsut how much those Mo Fo's in the fiance world make of us. ie. to pay £50 a click just to get you to the site, not necessarily convert, alludes to how lucrative those customers are.

  • skynard

    Seems rather tame for FOMC, No?

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

    Hi Jack. Yep, it's a good one. This one from Sol is nice too..

    http://tinyurl.com/2v2rl49 [full post: http://tinyurl.com/2ukcxo8

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

    That is interesting. Thanks.

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

    Just a quick zero question – when the red line goes down as the same time as the green one goes up, does that indicate distribution?

  • roncofooddehydrator

    The test of 1192 on ES looks to have been initially rejected…

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

    Bullish scenario

    http://tinyurl.com/342fega

  • FranceHasTheBomb

    The CMI Contraction Watch fits in nicely with Rosenberg's piece yesterday regarding Q1 revenue. Remove the financial stocks and Q1 revenue met expectations – quite different from the perception that companies have far exceeded expectations.

  • yudhisthira

    Yeah, I'm almost a believer.
    I need a breakdown of the magic zero lite channel to dissuade me.

    Today's action could a complete corrective wave up in my textbook.
    I don't want to buy more books.

  • BobbyLow

    I think the last time I had a really great Fed Day was sometime back in 1999 or 2000 as a dumb rookie. I had bought a shit load of tech just before the announcement (not even realizing that there was going to be an announcement) LOL

    Anyhoo, that day right after the Fed Announcement, the market rocketed upward, I sold my stuff and made about $1,500.00 and said to myself, “self, this shit is easy”.

    Now it seems the more I think I know the more difficult this business becomes. It was so much easier when I didn't know anything. . .

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

    Yep – it's another wedge….

  • matsou

    looks kind of like the Gartley pattern

  • yudhisthira

    Market looks like someone has a hand on the tiller.

  • dturner32

    it looks like Hugo Chavez might be getting involved in in the gold mining business:

    http://www.goldalert.com/gold-price-blog.php#ch

  • roncofooddehydrator

    Maybe he will twitter about it:

    http://www.washingtonpost.com/wp-dyn/content/ar

  • http://evilspeculator.com molecool

    That was minor – look for a clean breach.

  • http://evilspeculator.com molecool

    Well, that announcement was a non-event. Or is my ticker stuck? 😉

  • ShankyS

    LOL look under each post to the left. Everyone has been dead nuts on with their “FLAG” calls thus far. Amazing when you get everyone on the same page.

  • amokta

    Shows over folks. Yesterday must have been 'the' P3. Back to bull market it seems

  • yudhisthira

    Painting wedge all the way to the corner.
    No blank spaces allowed.

  • ShankyS

    Nah, lack of range today has allowed the indicators to creep up without price (this is the inverse trick they used to pull on the bears). They are struggling to get the market to move up. Daily indicators are decisively bearish. What did Mole say about that 40 year old virgin. I agree 100% it is now or never, and with the EU issues, I'm quite surprised FAZ is not at 1000 right now. Just MHO.

  • BobbyLow

    Is that a Bearish Pennant forming on ZL?

  • yudhisthira

    e wave on es or breakdown.

  • amokta

    thanks. im just scalping silver etfs – a meagre trade, but consistently making profit for me

  • http://retracementlevels.zstock7.com/ zstock, Pro Select!

    SINA, I'm buying more! I'll buy more at 33.5, if I can get it that low. 37-38 exit

  • http://retracementlevels.zstock7.com/ zstock, Pro Select!

    YAY! Opera works here, Firefox stopped working here for me. I don't know why. My Firefox is idiotic everywhere.

  • bananaben

    This is looking very good for bears so far IMO. They really tried the old EOD ramp routine and for once it looks like it failed. I still expect more rally attempts over the next couple of days so we shall see.

  • yudhisthira

    Litttle poke beneath zero channel and zero line.
    Almost believe. Euro hanging in there. Must be a follower.

  • yudhisthira

    My Russell the weakest.

  • amokta

    being serious for una momento, who are 'they'. honestly, i doubt anyone is systematically trying to prop up the markets. but they (govts) may be spinning the media, and people falling for it (recovery/bull market) to create a bubble in stocks etc

  • http://trading-to-win.blogspot.com/ DavidDT

    patient either dead or alive

  • yudhisthira

    Quantum state?

  • yudhisthira

    Kissing the underside of the wedge in AH?
    Euro wedging higher.

  • http://trading-to-win.blogspot.com/ DavidDT

    just regular American way of live

  • raised_by_wolves

    Dammit, is no one still around to discuss SLV?

  • http://trading-to-win.blogspot.com/ DavidDT

    nope

  • rosocecasita

    Here.

    Bought 100 oz last night. Physical delivery.

    Already been long for close to a year.

  • rosocecasita

    Seeing Silvers rise on the market fall & dollar strength was awesome!

    Just made a mini-Inverted h&s. -> .50 c up, then completes another i-h-s, for 3$ to 21$, completing another i-h-s for 10$, so 30$ + target, to challenge old price highs,

    after that, we can say silver is officially leaving its 600 year bear market.

  • raised_by_wolves

    It's good to hear that you bought physical. The time may come, and that time may be here soon, where you will want to hedge your position with some SLV puts. Don't go away. Give me a couple minutes to screen capture some charts.

  • raised_by_wolves

    Is “nope” Russian for “yep”?

  • rosocecasita

    k, thats interesting to hear, I want to see your ideas =)

    its true that on a position like that (HUGE for this small ass rat), needs some protection.

  • http://www.mylifemytrade.com MyLifeMyTrade

    BIDU +90 AH

  • http://trading-to-win.blogspot.com/ DavidDT

    yep

  • raised_by_wolves

    We need to go back in history a little bit. So, hop on this here time machine. Our first destination is Winterland, 1968, and our second is . . . .

  • http://trading-to-win.blogspot.com/ DavidDT

    no wonder a-holes in charge added foreign company to US index – faith is not without irony

  • raised_by_wolves

    . . . right where you are, August 2008.

    First, look at SLV.

  • raised_by_wolves
  • rosocecasita

    aye, I've got 16.39 as the 200 day SMA ~> 8% move down from here. Not that unreasonable, and a drop below could cause a 50 / 200 negative cross,

    I know silver is riding on the winds of gold right now,

  • raised_by_wolves
  • rosocecasita

    so heres the question:

    Whats your positions?

  • rosocecasita

    Also, the 83 Week EMA is now Higher then in 2007, at 15.39.

    I'm willing to buy some insurance on this position as it might mean I can purchase some more =)

  • raised_by_wolves

    I don't know about you, but that's what I call a silver market crash. The first question to ask is, can the next silver market crash be recognized slightly ahead of time? Assuming yes, the second question is, what will the next silver look like from a TA point of view?

  • http://www.portfoliotilt.com PortfolioTilt

    Amazing move there, currently sitting at $710. This stock was sitting on its 20 day moving average yesterday, and it is now about $90 above that level.

  • raised_by_wolves

    Currently? Well, I bought my long hedge before buying my short position. My long hedge consists of OTM SLV calls, May 10 19 calls to be exact.

    My short position will be ATM SLV puts.

  • rosocecasita

    What time frame are you looking at?

    I'm Months -> years long positions here.

    (Working on a chart, a push above 18$ makes a perfect inverted H-S & Cup & Handle.)

  • raised_by_wolves

    I'm not yet convinced that a silver crash is going to happen right here and now. At the same time, my mind is open to the possibility since at least one of my conditions has been fulfilled, namely (SLV/GLD) has moved below the MA 208.

    When this happened in January 2010, there was a correction, not a crash. When this happened in July 2009, there was neither a correction nor a crash; the correction had already happened and then there was a head fake followed by a bounce.

    So, the possibilities right now are (1) head fake, (2) correction, or (3) crash.

  • rosocecasita
  • skynard

    Damn!

  • rosocecasita

    Here the MASSIVE negative Correlation i've been waiting for : Gold : Spy.

    They are almost a -1 correlation, coming from a +1 correlation.

    Also, Gold : DX is almost a +1 Correlation, especially coming from non-correlation / gaining on down dollar & flat on rising dollar.

    This is all just a play on Golds tailwinds. When the masses can't find Gold, they will pile into silver.

  • amokta

    ewi stu:
    “Another scenario is that Monday's high is more important, possibly marking the top of Primary 2 (circle)”

    – if EWI STU call a top, thats a clear sigal to go LONG !
    (being fair, they are no longer calling tops so fervently)

  • raised_by_wolves

    I think I have a couple of those trend lines drawn but not all of them. Off to update my chart . . .

  • rosocecasita

    http://goo.gl/Rkvj

    The MA Support & Resistance lines. 19.17$ thats the Key to a serious bull market in Silver.

  • yudhisthira

    My sub expired there. I've got to cut back on my budget.
    This is possibly an important change in my lifestyle and mental outlook.
    Unfolding temporal waves will tell.

  • amokta

    your not missing much – there are enough sites (possibly including tis one!) that can give you enough immediate-term EW views on major indexes. Besides you cant rally trade based on STU – its too hit and miss (to many changes to predictions)

    I think subscribing to monthly EWFF/EWT is helpful, just as a financial read if nothing else

  • raised_by_wolves

    Days if a trade fails. Otherwise, weeks to months, swinging it, long or short.

    Good talking with you. I may be back in an hour or so.

    Question: Do you have TOS Prophet or some other way of doing three variable ratio charts?

  • rosocecasita

    ya, you too.

    I have TOS/prophet insert, but I can't ever get more then like $UVOL-$DVOL, both / * dont work, and trying to create a 3 ratio chart isn't working for me.

    advice? -Btw, I think its way more important about the creation of that Negative correlation, the Flight to Gold and then silver as GLD breaks, then SLV,

  • raised_by_wolves

    Are you using parentheses? You got to have those parentheses.

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

    well, i'm an hamster but I feel we will make another 40 points down before long. Don't let tomorrow's up-move fool you.

    BPSPX under ma13
    spx:vix still manegeable
    spx:gold tried droping again through support, maybe tomorrow's “3 is a charm”

    vix is the key, we need 21 to hold and a rise to >22 (25?)
    an 20 MUST HOLD

  • raised_by_wolves

    Is “gay” Russian for “straight”?

  • http://evilspeculator.com molecool

    The EWT and EWFF are very useful to me personally – I compare it with my own views and make adjustments if I think I missed something (rarely). The STU – foggeddaboudit – Hochberg is a coin flip.

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

    Seems like tomorrow could be make or break for the bears short term .Liking the move today…think we are set up for a couple of hundred points on dow min ..tho focussed on Dax and FTSE, FTSE may get to 5400 ish ..enough to scare the bulls..BUT still feel one more move up to this madness before the BIG pne..

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

    well boss, now we know tomorrow is do or die… VIX must hold and rise …. otherwise it's a confirmed buy and vix 12 a given

    BTW IMHO we have been conned since VIX22, that is as low as it should have gone on it's wildest.

    If 22 now resistence then we are barely in 2004 (please give me your opinion)

  • yudhisthira

    Can Euro just roll over tonight?
    It is trying to start now and would support a nice opening tomorrow.

  • yudhisthira

    At the bottom of triangularitiness on up vol / down vol.
    http://screencast.com/t/NTYwNGMwZj

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

    ideally a flat to slightly higher opening, THEN a sell off would be the “evil $£€” way to do it…no gaps down please…(unless it's a runaway one..doubtful)

  • http://trading-to-win.blogspot.com/ DavidDT

    just for “happy”
    BTW – that was so freaking funny when I just came here 20 years ago and I told someone “I am very gay to be in USA”

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

    this was a very gay moment

  • yudhisthira

    Filling gaps are tedious eh?

  • dullmind

    Its a sad statement on my mental state that I only noticed the problem with that graph and post while talking
    about it with my brother. The S&P index was created in 1950. The post and charts with it begin in 1928. The
    DOW goes back that far, not the S&P500. The chart and post are non-sense I believe. StockCharts (my main
    platform) only goes back to 1980, so I can't re-create such a chart regardless. But here are a couple of Yahoo
    links.

    SPX 1950 to present, 200 day SMA (Yahoo symbol: ^GSPC) (StockCharts symbol $SPX)
    http://finance.yahoo.com/echarts?s=^GSPC+Intera…

    DOW 1928 to present, 200 day SMA (Yahoo symbol: ^DJI) (StockCharts symbol $INDU)
    http://finance.yahoo.com/charts?s=^DJI#chart1:s…

  • raised_by_wolves

    LOL!

  • rosocecasita

    I hate being retarded.

    Thank you.

  • raised_by_wolves

    Hey, I'm a wolf, but I feel we will make another 400 points up before the next big short. Don't let this week's down move fool you 😉

  • raised_by_wolves

    Check out ($NDX/$VIX).

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

    you talking spx? if we make 400 we make almost 600, mark my words