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Edge ho! Setups off the starboard bow, me hearties… Arrrr
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Edge ho! Setups off the starboard bow, me hearties… Arrrr

by ScottOctober 18, 2011

Today was an OUTSIDE DAY.

What does that mean? In the simplest terms whenever I see an outside day (or an outside bar of any length) I think

OUTSIDE DAY = LONGS GOT FUCKED AND SHORTS GOT FUCKED

Think about it. Both sides got whipsawed out of their positions. What that means for us is that we have NEW PARTICIPANTS in the market. A trader who took a position today has a different expectancy and tolerance for pain than a long term trend trader, or someone who got in at the lows last week.

The latecomer into the long trade (and the short trade) is by definition a weak hand.

Anything not going his way is going to make him jump to the other side. We have shot to new highs for the last 2 months. Rather than predict whether this is a breakout or a test and fail… lets be objective and let the market tell us how it likes (or hates) these lofty heights.

We have a valid sell signal on break of the daily low, fakeout sell. However statistically outside days are often followed by inside days, before a final breakout. You might consider holding your fire here. Also, statistically outside days most often occur 2-3 days before a market turn.

And statistically setups at the top of a flat bollinger band are higher reliability.

What does this mean? Get out of longs for now, be prepared to get short… and if the short opportunity which almost certainly happens here fails, get long again.

Arrrrr!!!

Scott


About The Author
Scott
  • Anonymous

    Love the title!!! Hahaha!

  • Anonymous
  • Anonymous

    Well I’m out @ 11,580.  Can’t call it any more.  What a fantabulous day.  the Dow moved 350 points top to bottom and I got nearly 500 of them (lol!) and called most of the major inflection points.  That’s a good day in my book.  Will check in overnight and may do something if we get back to 11,500 or so in AH.  

  • Anonymous

    Lol couldnt resist long again in AH at 11,530.  

  • http://evilspeculator.com molecool

    Well, for the record the ZL was pretty divergent this morning.

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

    I get the whole stop/sell thing Scott.
    what I would like to know, is how.  or is that dependent on the trader’s tolerance?
    the simple side of me says, set price 5 cents lower, and let the order fly.
    ah, but what if the hourly swings back into an inside candle range? hang inside the inside range until the stop takes you out?

    -GG

  • nyse

    Im not seeing that. Please help. Does this imply that the move toward end of day should not have taken anyone adept at reading ZL by surprise?

  • http://evilspeculator.com molecool

    I hope you liked the video, Scott 😉

  • volar

    evil pirates ahoy

  • nyse

    This is a great post, Scott. Concise, actionable, and educational. Thanks to the E.S. team (m,v,&cs)

  • Hinkognito

    Thanks Scott, timely post.
    Pirate Booty!
    had to say it.

  • Anonymous

    Not to forget Fearless!

  • Anonymous

    Can’t get that song out of my head!

  • Anonymous

    not enough stupidity for today.

  • Anonymous

    yep and banked some very nice coin indeed!!!

  • Anonymous

    apple down 6% A/H

  • Anonymous

    – i meant NQ move in the AH (and AAPl of course).

    your post, CS is brilliant, concise, short, simple and understandable – only those, who know what they are saying can say it like this.

  • nyse

    but of course – Fearless too!

  • Anonymous

    Newton’s Law

  • jigdaddy

    Evil Spec has got to be the best shit on the internet when it comes to learning hands down!!

  • Anonymous

    yep.

  • Kudos

    Daily zero?

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

    shhhhhh.
    it’s a pirate secret.

  • Anonymous

    Another learning point is that CS remains unbiased and unflustered by the market action, and looks objectively at the data & setups. He is not trying to chase the market, for example.

    He will let the price action confirm his set-ups, and then enter, not try to predict market direction and enter a trade on a prediction.

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

    CVX jumped 4.40% ?

    I think that is unprecedented.

  • Anonymous

    GG, considering today’s new high, how would your T look like?

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

    ..working it right now.. un momento.

  • http://twitter.com/ActiveTrader ActiveTrader

    There is clear negative
    divergence building between SPX and the McClellan Oscillator. See attachment.

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

    blog updated.

  • http://profiles.yahoo.com/u/6NFOSGRXKB4LMGOAXV3ZY6IWZA Grainman

    GG….what blog?  yours i assume…?

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

    ps.  yesterday I was looking for a secondary high.  my apologies.
    looks like today we got one, errrr a new one!

  • Anonymous

    AAPl down 7% AH – for info, msybe just an apple thing and we cant draw any wider mkt sig from it

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

    yes.
    just click on my name next to the pic.

  • http://profiles.yahoo.com/u/6NFOSGRXKB4LMGOAXV3ZY6IWZA Grainman

    sorry…got it..

  • http://evilspeculator.com molecool

    ????????????????????????????????­??????????????

    D   A   I    L   Y      Z   E   R   O     H   A   S      B   E    E   N      U   P   D   A   T   E   D

    ????????????????????????????????­???????????????

  • http://evilspeculator.com molecool
  • http://twitter.com/ActiveTrader ActiveTrader

    I agree, a reversal probably will not play out immediately, but probably within a week. Above 250 on the McClellan Oscillator is unsustainable.

  • Anonymous

    Excellent!

  • Anonymous

    Daily Zero does not look like it updated.  I have refreshed many times.   I am seeing SPY at 120.32  – Not 122.xx

  • Anonymous

    I think at this point, AAPL is more a sentiment indicator then technical.  AAPL ran up pre-market and has been like a college girl on spring break. Chinese stocks went down 3% in AM and turn green. Just felt a lot of optimism in the air today.   If I am a long-term AAPL investor, I would not buy it tomorrow at open. If I am a bull, I’d sell it off hard and buy it on the cheap for Q4 earning, which should be much better… IMO

  • TwinTurboRX7

    Mole, is it updated or my browser just kept displaying the cached.
    I tried F5, Ctrl-F5, clear cache, and open back browser, and the darn thing still the same. I had this issue before but Ctrl-F5 works.

  • Anonymous

    Yes, need to see how things play out – im not an apple-er!

  • Anonymous

    http://content.screencast.com/users/AMCabrera/folders/Jing/media/d07dac36-24e0-4d11-86c5-ec8a9bb283f3/2011-10-18_1830.png
    http://content.screencast.com/users/AMCabrera/folders/Jing/media/5d0d15a2-0f7f-4ff0-a041-b9231bca2c94/2011-10-18_1832.png
    Nice post, I agree. The way I see it, if you were long good for you as gg put it you have “brass balls”.  Im sure our sentiment will straight lining up with the general audience (confidence) and to put extra longs is a dangerous high-wire act right now.That is a hard fall if it fails to 1180 then this is a scary movie, like my favorite film REC (zombie movie). and 2.

  • Anonymous

    to put simply Im not confident of my preconceived  edge on this market.  just looking at that 3mo chart I can see this looking like a mirror image of late july early august. But  likely it will be the slow grinding climb, trademark of nasty bull market before it pukes again.

  • http://twitter.com/ActiveTrader ActiveTrader

    I agree, I see no edge currently. A pullback to shake out the excesses would be best and then rally again, but I doubt Mr. Market will make it that easy.

  • http://evilspeculator.com molecool

    ????????????????????????????????­??????????????

    D   A   I    L   Y      Z   E   R   O     H   A   S      B   E    E   N      U   P   D   A   T   E   D

    ????????????????????????????????­???????????????

    For real now 😉

  • Tronacate

    I’m shorting the high flyers on this push……eyeing FOSL

  • Anonymous

    which is why i like long here for high risk reward. volar had that best post in reaction to comments i had on standard devs, it is the the best way to say what im seeing now unfold. http://evilspeculator.com/?p=23567

  • Kudos

    I’ve been checking for hours. I like what I see and how i’m oriented. To me the zero looks pretty consistent across time frames. I wonder if Fearless will make a post soon. His scenario of 6 outa 7 up days up and a quick jump above the 20 and 50 days makes an interesting case for a bottom.

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

    I’m sticking with Scott.  

  • Anonymous

    OH yea no doubt it would be serious mistake to take serious position here. 

  • Marcus Troyka

    The end of the day didn’t surprise me at all. Zero was all upward peaks and even lifted off the zero line, so it was fairly obvious that the market’s preffered direction was gonna be ‘up’. It was the beginning of the day that was a pisser >_<

  • Anonymous

     mole nice chart. I’m glad I scanned the posts again. Thanks.

  • Ted Gresch

    Great post Scott. I must say all of you have been as hot as a pistol. 

    PS. Look at all the closes or touches to the closing price today on UUP. It held the 200 sma. and has retraced 50% of the move. It’s time to light a fire under this puppy.

  • TwinTurboRX7

    Mole,

    Would you comment on divergences between SPX and AUDJPY. we can see it on zero hourly vs zerofx hourly

  • Fearless

    NEW POST!