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What Really Just Happened Here
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What Really Just Happened Here

by The MoleFebruary 1, 2012

I don’t have too much to report today. All of our commodities and FX setups posted in the past few days are in the green – and that’s the exception, not the norm out there right now, folks. So enjoy your ride! 😉

The daily spoos busted through its 1319.25 NLBL but turned short of of testing the old highs (and next NLBL) at 1329.75. If it does then we got strike 2 and that means we push higher. As it stands right now there’s still a decent chance that we get a Retest Variation Sell á la Convict Scott. And the next chart lends some credence to that possibility.

The volume profile on the SPX shows us nothing but chirping crickets above 1330 – good luck pushing above that without painting some overnight gap. Not impossible (and it has been done before) but not without some AH ‘surprise’ move – watch the AUD/JPY and the spoos at night.

But the short term is only half the story – if you take a step back then you may get an idea of what really happened here in the past few days:

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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 chart has some subtle information that may not be apparent to everyone. What happened here is that we ran into weekly resistance – remember what I said a week or two back? The monthly however is far from hitting its 1400+ target and in between we needed to ‘generate some air’ – that is loosen some of the resistance looming above. So we basically churned around sideways, giving momentum a chance to reverse some of the overbought conditions. This did not affect the Bollinger by much and now gives us room to head higher.

When you find yourself in a situation with little opportunity then simply change the situation! Very interesting how that works sometimes and that is the very exact reason why having a binary perspective on the tape is in most cases a very expensive endeavor. In other words – the market is a fluid glob of probabilities that is in constant flux and can change on a daily basis. What was excessively overbought a few days ago is suddenly a second opportunity for a short squeeze.

Now, having said that – we are talking medium to long term here. Short term I am very skeptical about the upside as there’s no juice above. I think we may just churn around a bit more and until we breach 1330 I am going to be short here with only a few handles of risk – that’s the way I like it. If we do breach then I’ll be long all the way with half at the breach and the other half at the retest (which would be highly probably given the lack of volume on the profile).

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UPDATE 3:15pm EDT: Bill (an intrepid sub) just sent me this chart he grabbed from the public (not private) section of Sentimentrader:

Here’s his commentary:

Overall volume on the major exchanges has been low, and that’s especially true among many of the exchange-traded funds that profit on a market decline.

The S&P 500 went the entire month of January without a meaningful drop, so traders are not seeing much point in hedging against seeing one anytime soon.

The chart below shows the volume in inverse ETFs.  We can see that the other times this hedging volume was so low, stocks got hit soon afterward.  Even if we compare this volume against total composite NYSE volume, it’s almost exactly the same picture.

And you know who’s usually playing inverse ETFs, so this chart makes me even more skeptical about any further (short term) upside. The best scenario I can think of here is a quick and fast reset that allows short term sentiment to recover (i.e. to normalize) – followed by a continuation higher as suggested by my long term charts.

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

    did Mole say green?
    Hmmm.

    http://www.splitreason.com/Product_Images/8af59c86fb87-xl.jpg

    off to lunch!

  • Anonymous
  • Anonymous

    REally nice…

  • Anonymous

    Possibly a Congressional Intelligence leak of the Jobs Report on Friday?

  • Joe_Jones

    Ouch! Careful with those toys!

  • Anonymous

    http://content.screencast.com/users/AMCabrera/folders/Jing/media/54042068-5a39-40fd-8903-691f0b4c9703/2012-02-01_1525.png
    Flip this picture. Now you see the tactic I intend to use. Let the opposing force move in deeper. I will continue moving around flanks. 

  • http://profile.yahoo.com/D3PSX4XDJOS7A7DRSG7MQRWP6Q Teycir

    If you want to buy wait for a pullback

  • Anonymous

    Astrological Turn Date coming next Monday with Mercury Combust.  Mercury Combust is when the Mercury is conjunct the Sun this aspect tends to coincide with nice market reversals or turns.  If market stays in a nice rally for the rest of this week I’ll begin shorting into the weekend though the turn could be Friday Monday or Tuesday. 

    This aspect has been very effective but since the Quantitative Easing programs have been implemented it has been much less effective.  Usually you get the initial break but then no follow through. We’ll see what happens this time.

  • Anonymous

    ok, i’ll bite.  why?

  • Anonymous

    Ok, im away for the day, and someone have levitated the market skywards
    Anyway, all eyes on whether we break the 25/25th jan high

  • nyse

    Also Legatus Feb 4-5. Might not play tho…

  • Joe_Jones

    As you said Mole, low probability of a trend day.

    Copper’s price action and volume are quite interesting today.
    http://stockcharts.com/h-sc/ui?s=$COPPER&p=D&yr=0&mn=3&dy=0&id=p50995012500

  • Anonymous

    The retest variation sell for today is a great trade. Also I would consider going short right here right now… not because the odds are good, but because you could place a stop (on es futures) a few ticks away at the old high.

  • Fibz

    just noticed on ZH that bill gross is becoming a gold bug… lol. sometimes i feel like i’m the only person who thinks gold/silver bugs are going to be completely wiped out one of these days.

  • http://evilspeculator.com molecool

    Agreed.

  • Anonymous

    Facebook Inc. filed papers Wednesday for an initial public offering potentially worth $5 billion, which would make for the largest U.S. stock-market debut in nearly four years. The social-networking giant filed its initial documents with the Securities and Exchange Commission Wednesday afternoon. It did not specify the amount of shares or projected price range in the filing, nor did it specify which exchange it hopes to list its shares on. The company said it intends to trade its shares under the ticker symbol “FB.” It said it had revenue of $3.7 billion with net income of $1 billion for the year ended Dec. 31

  • Fibz

    negative treasury yields should force people into that garbage. what’s better, facebook or a bond with negative return?

  • http://profile.yahoo.com/KUX3YSFLQNPISYDDKWOXQ3BOGY Vigilant

    Have been lurking for a long long time.   I love your RTVS set ups!  Simply brain dead simple, the way I need to trade!!!

  • http://evilspeculator.com molecool

    Yeah, they initially considered FUBAR but then settled on FB.

  • http://evilspeculator.com molecool

    BTW, fubar is regular in Spanish:

    yo fubo
    tu fubas
    ud fuba
    etc..

    😉

  • Anonymous

    I’m skeptical of the 1 billion net income…trick accounting..My company inserts ads into FB organically for clients via newsfeed which is free…Clients are direct to consumer large ticket items that have 4 wheels, the vertical that advertises the most. Branding and some purchases come into play but most, if not all of them don’t purchase any ads from FB…

  • Anonymous

    What are you talking about? Real numbers? Enron had huge income…and they did Ok! Now be a good boy and just buy some FB come on.

  • Anonymous

    at least facebook only laughs at the young nerd instead of the grandma needing some heat:)

  • Fibz

    I used to advertise on Facebook as an affiliate marketer. It’s pretty hard to get anything to convert profitably on there unless you’re targeting teenagers, but Facebook’s largest regular user group now is people in their 30s. Google AdWords is much more profitable, but people are becoming blind to those ads. The same thing will happen to Facebook ads which will make them even more unprofitable for marketers than they are now.

  • Anonymous

    I have never clicked on a google adword on purpose. And I could not imagine anyone thinking a business model built like that would invest so much money. I only say that because obviously Google is more versatile than FB in being able to shape and form.  FB is susceptible to averse taste changing in the event another social network “google” gaining more muscle. Well at least they are both kosher. hehe.

  • Fibz

    While ads remain their largest source of revenue, Google has acquired a ton of profitable smaller businesses, not to mention Android – which is something that could replace social networks by itself. As you say, all Facebook has is their website.

  • Anonymous

    I swear, you and I think so much alike that it is scary.

  • Skates

    Think of it as a platform, Facebooks biggest source of income soon will be the monetization of “apps” and “games”…similar to your iTunes store!

  • Anonymous

    But Google has missed social until it was too late. Facebook has critical mass now and they’re integrated well in a lot (or rather most) of sites. Google+ may have 90 m users, but there’s almost nothing going on over there. I actually deleted my account some time ago due to the lack of anything going on.

    But Larry Page wants to stuff Google’s social down their user’s throats (see “Search + your world”) no matter the costs and he’s prepared to even compromise their search engine’s integrity in doing so and THAT is a dangerous, dangerous road. Google’s rise to popularity was mainly due to delivering the best results. People trust Google to deliver the best results. If they start manipulating their results to promote some of their other products, they will start losing credibility and risk losing their core business in the long run.

    Some people have compared Google missing social to Microsoft missing the Internet in the Nineties and then performing a brutal 180 degree turn, pushing IE into the market no matter the costs and annihilating Netscape in the process. I don’t think, the situation is that dramatic, but I might be wrong and Larry Page appears to disagree. Microsoft, on the other hand, has paid for this strategy with anti-trust lawsuit and Google may be running the same risk.

    Android is a topic of its own, but right now it has a giant bullseye on its forehead and every patent troll out there is trying to rip his pound of flesh out Google. Buying Motorola show how Google is desperate to plug the leaks. Microsoft is still making more money from licences sold to Android phone vendors than from licensing Windows Phone!

    Meanwhile, Facebook is more solid than one might think. This isn’t all fluff. They hat almost twice the profits in 2011 Amazon had and they’re at about 1/10th of Google’s revenue and profits.

    Bottom line is, I would be careful shorting this thing.

  • Anonymous

    Silver painted an inside day today. I also believe that this qualifies as an RTV sell setup due to the bar with the high making a lower close than the previous bar. Would be nice if Scott could clarify on this. Scott?

  • http://evilspeculator.com molecool

    It’s all about data mining, mate. They are now forcing members to submit historical data and I have no idea why anyone in their right mind would ever do that. It’s insane! I don’t have an FB account and never bought into divulging my personal information on the Internet. Perhaps because I don’t thrive on being an attention whore… but these days everyone wants to make sure that their precious little snowflake receives the recognition they believe they deserve. 

    Ridiculous the way have turned out – scary in many ways.

  • Fibz

    Well regardless of facebook’s fundamentals and competitiveness, as a technical trader I wouldn’t be trading it until it has sufficient chart history. Even then I probably wouldn’t since I don’t like expensive stocks unless I’m buying options on them.

  • http://evilspeculator.com molecool

    Exactly.

  • Fibz

    true. it is crazy how much data people provide to facebook and how little they get in return. i’m trying to wean myself off it. hard to disconnect myself from the contacts i’ve made on there, but some things are more important.

  • Anonymous

    But don’t you require price to be below yesterday’s low (1312) to trigger the RTV sell?

  • Anonymous

    Yes, it is a rtv sell setup.

  • Joe_Jones

    (Dirty) rats are leaving the ship:
    http://dailyreckoning.com/goldman-sachs-is-a-sell/ 

  • Anonymous

    http://content.screencast.com/users/AMCabrera/folders/Jing/media/06bc7ca9-10ab-4b21-aed6-44fb0780f00b/2012-02-02_0734.png
    I expanded the yellow oval. I did not change location only expanded it. Still shady action.

  • Anonymous

    Not trying to justify my own position (still holding short on Dow/S&P at higher levels than these and modestly ITM), but anyone else feel that there is amazing complacency out there at the moment?  Everyone I talk to seems to have digested the European issue and is convinced that they will find a way.  I’m reading stories like this

    http://www.bloomberg.com/news/2012-02-01/global-strategists-abandoning-bearish-views-after-missing-rally.html

    and wondering how everyone got so bullish.  I’ve also read recently that a number of long standing bears have thrown in the towel which is usually a red flag.  Even TK was putting out long ideas yesterday.

    I’m not necessarily expecting collapse here, but do expect some form of pullback soon, holding short with stops just above the old highs on dow/s&p.

  • volar
  • Anonymous

     yes, “amazing complacency”  I too am short a bit, watching closely…scarey. 

  • Anonymous

    Nuts?  Is that good nuts or bad nuts?  I guess I need your thoughts spelled out in plain English.  Or maybe I just need to go get another cup o’ joe. 😮 :) :p

  • Anonymous

     maybe he’s just making an observation, that the chart is nuts…crazy

  • Anonymous

    $BPINDU-Bullish Percentage Index for DOW-is at 96.67, tied with highest level ever.  Just another WTF chart.

    http://stockcharts.com/h-sc/ui

  • Anonymous

    You’re spot on with that. The one thing that makes me wary is the FB IPO. Such big-time IPOs tend to happen near tops. That’s not to say that a top will happen, but it raises a red flag for me especially after the lackluster performance of the high-profile tech IPOs last year.

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

    not there YET..still alot of blogs looking for a top, and CNBC today were “surprised” at the move up in markets, in spite of all the European worries etc etc..
    Plus a lot of liquidity..from all Central banks..
    probably a few weeks left yet..

    “Sure, the Standard & Poor’s 500 Index SPX +0.16%  is up more than 20% since its October low, but Wall Street increasingly believes this rally is about to hit the wall.Bullish sentiment among market strategists fell to a two-year low in January, according to Bank of America Merrill Lynch. The firm’s “Sell Side Indicator” is now registering more pessimism on Wall Street than at any time since August 2009, according to a research report published Wednesday.”

    http://blogs.marketwatch.com/thetell/2012/02/01/why-u-s-stocks-could-soar-another-15-in-2012/ 

  • Anonymous

    about what price is the centerline of the yellow oval? 

  • Anonymous

    maybe he means the new steer thinks it’s grown a new pair 😛

  • Joe_Jones

    AAII: bullshitness has decreased
    http://www.aaii.com/sentimentsurvey/sent_results

  • http://profile.yahoo.com/KUX3YSFLQNPISYDDKWOXQ3BOGY Vigilant

     Then you are saying we top in Mayish?  Thats a long time from now……  So what levels do you expect for the FB IPO?   We are at /ES 1322 right now.

  • Anonymous

    miners are on a tear since the wizard spoke…

  • Kudos

    I love the facebook convergence trade. SINA and RENN are the way to play this IMO. I dont buy IPOs but I love all this hype and crazy valuation talk. Been in sina for a while, keep adding cause its working. RENN options paying extremely well, because they are extremely risky and volatile, expect to take delivery since they aren’t that liquid if you do trade.

  • Joe_Jones

    Thanks for the comment on the zero Herr Mole. It helps to keep me focused.

  • http://evilspeculator.com molecool

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