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Limboland
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Limboland

by The MoleOctober 14, 2015

Yesterday’s session started as a bear trap but then slowly transitioned into the first significant selling pressure for the past few weeks. Bulls and bears alike were getting reamed and staying ahead of the tape took quite a bit of doing.

2015-10-13_zero

The trap at the open was rather obvious. If you were a Zero sub then you must have paid attention to a distinct non-confirmation during the first gab down (right panel). Most interestingly the signal remained flat during the fast advance higher, which sometimes simply suggests a stop run initiated by institutional traders/bots/prop desks. However the failure at VWAP was the first sign that further weakness may be in the cards.

Most importantly however the expanding negative signal suggested that we may facing some real selling pressure here. Given that new information and the LT context below odds are increasingly supporting a sideways high volatility phase followed by a trending high volatility and then trending low volatility phase. In other words – at this point I do not expect resolution in the near future – most likely we shake out some weak hands and then either take off or fall off the plate.

2015-10-14_shake_out_time

This may sound like a problem but actually it affords us an opportunity to make use of additional technical context we are currently lacking. The long term panel is the only one which currently offers us upside resistance, otherwise we are pretty much in limbo land on the daily and hourly panels. And those are what I personally use for entry points.

So at this point I would propose we stand by and let the next few sessions play out. It will also be valuable to watch the Zero – should we see selling pressure expansion then the odds for a large downside correction may increase – if the signal remains relatively flat or positive then I think we continue to the upside.

2015-10-14_AUDCHF

AUD/CHF – a tepid long here with a stop below last night’s touch of the 25-day SMA. If you want wait for a little dip lower on meager participation which would increase the odds quite a bit.

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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://greenlander1.blogspot.com/ Greenlander

    Just exited SDS from yesterday as didn’t get the follow through move needed.

  • http://evilspeculator.com molecool

    Be careful with the ultra short (e.g. 2x, 3x etc.) ETFs/ETNs. They are fine if you trade them short term but if you hold them for several days you can really get screwed courtesy of settlement procedures.

  • http://evilspeculator.com molecool

    Have you ever traded the futures? Plenty of liquidity and it’s a 24×5 market. Enough leverage as well. Only downside are roll overs but we’re in the December (Z) contract right now and there’s plenty of time.

  • BKXtoZERO

    Leveraged ETFs are all I have access to and use. I have never noticed any issues with settlement. What kind of things can happen?
    Only problems for me holding them is Mrs Market herself so far.

  • tradingmom

    Google leveraged etfs and decay. There are volumes written about them.

  • http://greenlander1.blogspot.com/ Greenlander

    Thanks Mole. Yeh I am giving futures thought. I def don’t hold these leverage ETF’s long term bc of the decay.

  • BKXtoZERO

    oh that yes…..

  • RoastBeeph

    Yeah, I was researching some of the leveraged ETFs the other day and noticed that if you compare their prices to index prices from months ago that the percentage differences are pretty divergent due to ETF expenses, settlement, etc.

  • tradingmom

    which is not to say that you can’t make money with them — you just have to understand the product. Some of my best trades ever are shorting the top ticks — when those leveraged etfs go parabolic the collapse is spectacular.

  • tradingmom

    Pull up a longer chart of the ones that are going the wrong way. They are impossible to hold through a drawdown period — they never regain their previous price.

  • http://evilspeculator.com molecool

    Well done.

  • stovis

    MCD making new highs, saving the Dow. I guess McDonald’s is all some people will be able to afford to eat in the near future – makes sense that they go up I guess.

  • tradingmom

    Thanks for pointing that out. My kids own some — I think I’ll sell it.

  • http://evilspeculator.com molecool

    I don’t think equating a stock price with the actual company has ever really had any edge. It’s a mental trap that is being passed from one trading generation to the next by the financial MSM. A stock price is merely a representation of how people feel or how they value a particular company. It is NOT the company. Good companies can have under valued stock prices and shitty companies can have raving ones. So I don’t even think about all that stuff – I simply look at the chart. Well, truth to be told I don’t trade stocks anymore – only forex, bonds, futures, etc.

  • http://evilspeculator.com molecool

    LOL

  • stovis

    I agree, just joking around.

  • RoastBeeph

    Yeah as you and Mole said, and I’ve read, leveraged ETF trading should be very short term (a few days, not held for months) because of decay, settlement, etc. Compare the price of a leveraged ETF versus the index it tracks from six months ago and compare their percentage differences. You’ll see the ETF isn’t as valuable as simply tracking the index should have made it.

  • http://greenlander1.blogspot.com/ Greenlander

    Ive also had small portions (10-15%) of my account shorting both sides but you can’t have big positions bc on major selloffs the inverse can spike up much larger than the positive ETF.

  • tradingmom

    Re: SPX — we are now back at the bottom trendline of that megaphone I pointed out yesterday. There is a significant zl divergence, but w/ the caveat that comparing the signal between days isn’t always valid.

  • BobbyLow

    I’ve traded Futures and IMO they are a better deal than anything else on that’s available with the exception of Forex. However, I don’t consider myself capitalized enough to trade futures and it makes me uncomfortable to do so at the present time. I plan to get “back to the futures” at some point.

    But in the meantime, I trade the 2X ETFs and I accept whatever Shrinkage occurs over time. These products offer some leverage without taking on all the risk of multiple ways to get screwed via the Option Market.

  • http://greenlander1.blogspot.com/ Greenlander

    Just reentered

  • BobbyLow

    That’s not necessarily true. I’ve held UCO and SCO for periods for a month or longer and banked some serious coin doing so. I’ve accepted that I’m going to get screwed a little and that is the cost of doing business. The alternatives would be to try to keep rolling Options over which is a very difficult thing to do correctly or to trade futures which I’m under capitalized to do so.

    So I don’t know about anybody else but I’ve got to do the best that I can do with what is available to me. And there is a cost for this.

  • RoastBeeph

    I am not familiar with UCO or SCO (never traded the oil etfs), i am just speaking about SPXU, SDS, and QID specifically as those are the ones I looked at. SPXU was specifically pretty bad with price loss.

  • nyse

    Great post brov

  • Round we go

    oil and Nikkei leading the way. party time.

  • Round we go

    short rut. it has been leading the downturn. look at it since 2014.. rwm no leverage.

  • http://greenlander1.blogspot.com/ Greenlander

    Yeh you have been doing quite nicely on the oil ETF’s. Those have been pretty good trending trades (relatively speaking)

  • Round we go

    volume increasing. nice

  • Kidd Cudi

    so basically–we’re still in the same sideways mode we’ve been in since the end of august.

  • Huey

    For the S&P??

  • Round we go

    jpy breaking out. watch out carry traders.

  • BKXtoZERO

    Bobby can you tell me how this compares to being wrong BIG on futures? Say you are short the RUT via a futures contract and you are also short the RUT via equal size of TZA 3X short RUT. Pretend NO stops and the market moves against you big time. Which one loses more money faster? I’ve had great success with 3X ETF and some failures as well. If you are small and want the leverage there is nowhere else to go. Being right or controlling risk is everything.

  • Round we go

    guess the hedges killed vix to get cheap insurance yesterday. look at it now.

  • tradingmom

    After the fact, but…look at the pattern of the zl at the same time as the appearance of the blue arrow.

  • RoastBeeph

    Yep, I took that signal, added one ES short and am still in. 🙂

  • Round we go

    now metals need to give it up. will see.

  • BobbyLow

    It’s difficult to pretend no stops because of the way that I trade. I also think we might have “apples and oranges” here. While using daily charts, I won’t have a hard stop on UCO and SCO. At the COB if price is below my stop I will close the position. For example, my Stop on Crude is a close below $46.16 on CL just prior to 4 PM EDT in order to close my position on UCO. Price has already gone below $46.16 and then come back over at least 3 times this morning. This is why I wait. Sometimes I get burned doing it this way but most of the time it works out better for me.

    OTOH, I have absolutely no control over any gap against me at the open with my ETFs. However, if I was trading Futures, I would have a certain amount of control that I would use because an overnight gap usually happens incrementally. My actual loss would be then be “normal” during the night or in “Pre-market” and not some giant sized ass kicking gap at 9:30 AM.

    I agree with (“If you are small and want the leverage there is nowhere else to go”) unless you go with Options which I believe can be the kiss of death for most people.

  • ridingwaves

    Started monday and I’m enjoying it today…Contango on Vix instruments was in play that afternoon…

  • germatrix

    evening Ladies and Gents here from South Africa

    Went short at 2003 ES dec.
    I am in VERY lightly and base it on the attached. Based on RSI divergence and momentum, looks like trending day.

    live long and prosper on your no trades !!!!

  • Jonathan Sarkarati

    Is a bear flag forming on QQQs on the 15-minute chart with the next leg down to a possible 104.50? Am I seeing that right?

  • ridingwaves

    Metals are getting close to buy and hold that fits my trading style….maybe one more push down as the coming months are good delivery months for the precious and friends..

  • strider

    I found this at acting-man.com. Look who’s the author.

  • RoastBeeph

    Looks like a bear flag to me too.

  • Jonathan Sarkarati

    Thanks.

  • newbfxtrader

    https://www.tradingview.com/x/vH4Eq8Gs/

    Theres room until 3900…..

  • germatrix

    My target is 1967 at S1

  • newbfxtrader
  • newbfxtrader

    I dont see the divergence between price and RSI. Its difficult to get an edge with just RSI.

  • Billabong

    LoL (belly laugh)….

  • germatrix

    Agreed, thanks for that, I am also tracking lower highs and lower lows on the 45min scale.

  • Billabong

    What time frame are you using? I’m only the daily and running a trend trade on miners / GC / SI. This is the time of month where the PM beat down usually starts to occur. GCs next resistance point is 1200 and we will see if SI can hold 16 today.

  • Round we go

    oops wrong thread.

  • germatrix

    to elaborate – thanks for pointing out

  • Round we go

    I think gold is just trying to test 1200. but I don’t think it is getting there. I am planning to buy miners in one year or so. if the global deflation is to play out. will see. I just don’t think CB can print like they did the last 8yrs. helicopter money will require huge fight politically and need crises to get implemented. but yah get confirmation of helicopter money and gold will go hyperbolic. will see

  • Round we go

    lets get the stupid channel started again 🙂

  • newbfxtrader

    You dont need the indicator. Trust me. See the chart you posted. Price at 2022. Then it goes down then sideways into 2022. At that point you have an RSI divergence anyway. I havent checked but thats your best entry right there.

  • germatrix

    Not sure what you mean? Care to elaborate?

  • newbfxtrader

    I dont know if channels mean anything. But by the time you wait for the moving average or RSI or stochastic you are already late.

  • RoastBeeph

    The ticks on crude oil futures, CL, is huge. It is $10 per $0.01 of change. If CL goes down a dollar, and you are long, you would lose $1,000. QM, the crude oil mini future, is half tick, so $500 per each $1 movement, still way more leveraged than a crude oil ETF.

    Same is true with most equity futures versus even the triple leveraged ETFs. ES, the SP500 future, is $50 per $1 movement in price. NQ, the Nasdaq future, is $20 per $1 movement in nasdaq. I think those are roughly two or three times more leveraged than the triple ETFs.

  • germatrix

    Elaborate was not towards you 😉
    But to your point I am very aware that they are lagging indicators – but they work for me, rather be a bit late works for me

  • Billabong

    As many would say, is there a trend or is it sideways? Second question is it volatile? Third question is whether or not we should post Ed Seykota’s whipsaw song?

  • ridingwaves

    metals might run a little longer, OPEX for metals on 27th and Fed decision before that……

    The HUI is finally over the 50sma on daily after a year or 2 of being below it for the miners..
    16 SI and 1200 GC are the cap…if gold can bust thru 1200 I suspect 1400 will come quick…

    on silver daily is losing momo after 200sma touch..

  • Billabong

    HG HOD

  • germatrix

    So here is why I am watching that channel….

  • Billabong

    DX LOD … not much discussion here about impact of weakening $$$. Also, miners banging HODs out left and right … following the upper BB (depending on time frame).

  • mugabe

    thanks for that nugget, but i reckon it’s playing ketchup

  • BKXtoZERO

    Thanks. I’ve been reading on this myself this morning as I am home sick. http://budgeting.thenest.com/much-leverage-involved-commodity-futures-28147.html so, I know decay on these ETFs is bad over long periods of time like months. Basically you need to be right and use stops no matter which vehicles you use anyway but you go broke MUCH faster being wrong and holding futures.

  • RoastBeeph

    Reentered one ES short based on ZL signal. Let’s see where we go from here.

  • RoastBeeph

    As BobbyLow pointed out, for most passive index tracking ETFs the decay and expense is very nominal and not a big deal. Non-leveraged ETFs that simply track an index have such low expenses that you won’t lose much over the long term with them IMO.

    The ETFs that lose a worrying amount of value over longer time frames are the 2X and 3X leveraged ETFs which have much higher expenses plus much more frequent turnover/settlement.

  • BobbyLow

    Been a kind of a chop fest in my Forex Stable lately. But I went Long EUR/USD and GBP/JPY this AM. They’ve been flopping around all day but both are positive at this moment.

    I’m also experimenting with my own crazy version of arbitrage where I’m trading longer term Swings on Crude based on the daily and shorter term Swings based on the Hourly. This way it’s possible to have positions of UCO and SCO at the same time. I put on a 1/2 position of SCO today which partially offsets a full position of UCO. Basically this is kind of a Bull Spread but done with ETF stock and not options. I’ve done this before but never managed them as completely different trades. It also might help smooth out the kind of choppy crapola we’ve had in crude lately.

    To be continued. . . 🙂

  • Round we go

    go back to posts from the down cycle in mid-late sept. guess we just hit the top of the new stupid channel.

  • Round we go

    I got out of miners when HUI broke down from 520 in 2011. man 2010 and 2011 were nutz. remember agq? I don’t think the bear market for metals if over. HUI could go down to 40. yikes.

  • http://evilspeculator.com molecool

    Yes, in sideways shake out tape those Mole signals are pure gold…
    .

  • http://evilspeculator.com molecool

    LMAO – you guys have way too much time on your hands 🙂

  • germatrix

    ok thanks for the clarification

  • http://evilspeculator.com molecool

    Not today – what’s your play??

  • http://evilspeculator.com molecool

    that channel you drew is imaginary at the current time – purely hypothetical as your brain is showing you a pattern that does not (yet) exist.

  • newbfxtrader

    Currently long. Target 1040.

  • Billabong

    I’ll be interested to hear the results … always open to a new idea. I moved up my CL support / resistance lines to 44 by 50. Out UCO at 24.82 on R SL. Currently on sidelines.

  • evilasevildoes

    Gold to 1187…if above that 1221…….banked it already will watch where dx z5 goes mid 93 m3 thinks

  • http://evilspeculator.com molecool

    This is pretty awesome! FREE LIVE Forex data offered by NinjaTrader:

    http://ninjatrader.com/LP/PartnerDemo/PartnerDemo

  • stovis

    Decided not to take a 4 hour setup late Monday night. Oh well. Next.

  • germatrix

    Thanks for the inputs on my post – Question to the inputs: was I testing or where they real actual approaches from my end?
    Over the past couple of days some wild suggestions was posted, but there seemingly was a lack of counter constructive – backed by evidence feedback given. Look at the comments on the post I provided, and tell me honestly which ones were educational in feedback 😉
    I have bagged some good coin today and is short with a stop at ……
    Like the market I am elusive – hehehehe

  • Billabong

    I just follow what the market tells me … In the miners case it’s up with a trailing stop at 1R SL increments.

  • Round we go

    stupid channel still working. retard power!

  • stovis

    Hope you got out before it tanked.

  • Round we go

    wow checkout usd/jpy lot of traders are going to be caught off guard.

  • BobbyLow

    The main problem with my new offsetting Hourly Short is that according to my back test, I should have been short on Monday at around $48.50 so I’m a couple dollars late to the dance. I hate to jump in late like this. My Long on the Daily is close to being stopped out. So if I get stopped tomorrow, my Short on the Hourly will then become my longer term Swing and I will Pyramid that trade.

    OTOH, if I get stopped on my Hourly Short at above $47.22, this will mean that my original Long on the Daily has new life and the process would have worked as it should even though the offsetting short would have been a loss.

    If that makes any sense. 🙂

  • Billabong

    SI may be getting some legs here off of a FSS (failed sell signal) … GC is helping with +1.76% move.

  • mugabe

    fwiw – that’s not a H and S (neckline not at all straight ) and that’s not a bull flag -its a break of support

  • BKXtoZERO

    Thanks! I downloaded it. I just got windows7. I’ve been using Linux only for years. I got it so I could see my tdameritrade platform but ninjatrader is way better I am sure. This is for systems work not trading. I wanted better data/graphs to see ideas clearly. The last time I had Etrade Pro w/ real time updating fast charts, I only blew myself up faster. All successful trades in last year or two were daily in nature and not dependent on super fast finesse entries.

  • mugabe

    you play purely support and resistance – is that right?

  • http://evilspeculator.com molecool

    just install parallels with Win7 and you got the best of both worlds.

  • ridingwaves

    have you looked at silver premiums lately…..I picked up a lot in 14.50-80 area. Great Xmas gifts to all the childrens, much better than toys…

  • Round we go

    guess the market finally dawned on them that alcola, jp morgan and walmart all had bad quarters and projecting downwards. and no QE4 insight as the talk now is helicopter money. but helicopter money is controlled by congress not fed.

  • newbfxtrader

    Windows 10 is free upgrade for a year if you got windows 7.

  • ridingwaves

    Vix is very subdued for a move such as this…

  • BobbyLow

    Euro making new highs against the Dollar. I hope you hit the ATM earlier Mole. 🙂

  • Ronebadger

    HUH? Spot silver is at $16+, what am I missing here?

  • ridingwaves

    go buy some physical….the premium is $3-4 higher than spot

  • newbfxtrader

    Mostly yes. Like trades with plenty of room to move. I cant trade fast like Sky.

  • BKXtoZERO

    “parallels” ?

  • Billabong

    Silver premiums reflect two things; first dealers taking advantage of the situation and second, the lack of physical silver … the futures contracts and the physical are way out of balance. Same with gold. If you are interested in following up, there are a ton of articles out there on the subject over the last two years.

  • Billabong

    I have also given them out as Christmas gifts….

  • captainboom

    Ouch…. I used to share an office with a guy who gave me the phrase, “Groans are the punster’s applause.”

  • ridingwaves

    SPX X earnings coming is pretty far out of whack

    fair value is near 1750….

    But capitalizm was replaced by corpocracy…what else is new..

  • BobbyLow

    It’s all an illusion. Don’t worry, be happy. 🙂

  • newbfxtrader

    Bullish!

  • BobbyLow

    Don’t want to overstay my welcome. Closed EUR/USD +1R

    GBP/JPY still open. Crude still open.

  • Billabong

    Everything is out of whack … Not to discuss politics … but the Democratic debate last night was out of touch with reality … old white people … for the party of color and for the people … no Asians, Indians, Hispanics or blacks on stage … what gives.

  • Kevin Mcdonald
  • Kevin Mcdonald

    ignoring that red arrow pointing down for now…. I’ve always been told bond money is the smart money… what are your thoughts?

  • http://evilspeculator.com molecool

    My thoughts on correlations are as always – they stop working as soon as you start relying on them. Of course if we drop like a rock next week you’ll think that you’ve found the holy grail and can predict future direction. Yes, long term the downside has very good odds and I concede that we may be trading a lot lower sometime next year. But the timing is always where the rubber meets the road. In retrospect those overlays always look like a non-brainer. But in reality, in the heat and chaos of the daily gyrations, people get chopped to pieces before the big moves happen. Which is why my approach is to simply keep an eye on what may come around the next corner as opposed projecting what may be one mile down the line.

    Yesterday I posted an article about volatility cycles and how we are currently in a high volatility period and probably will remain so for a while. Those line charts do not show you the long crazy intra-day moves that preceded some of the big moves and as such they only show you a part of the story. In a nutshell – even if you KNEW that we’ll be at 1800 in January – you may still get shaken out in between.

  • BobbyLow

    There was a political debate on last night? I missed it. I missed the debates on the other side too. I was highly involved with politics for most of my life. Then it finally dawned on me that these people (on all sides) are as full of shit as the people are on CNBC. I don’t watch them anymore either. Money rules and will continue to rule. The sad part is that all sides will continue to have the masses fight over “Red Meat” Issues that can not and will not ever be settled. But these issues will continue to be a distraction while big players get what they want.

    Disclaimer: My Cynicism has been earned. 🙂

  • Kevin Mcdonald

    Got it..
    Thank you

  • http://evilspeculator.com molecool

    “Money rules and will continue to rule.”

    You almost got it right.

    A small powerful elite rules and will continue to rule.

    Money is just a stepping stone at first – later down the line it becomes a secondary consideration. Did you ever watch House Of Cards? The old series?

    “Money is the McMansion in Sarasota that starts falling apart after ten years; Power is the old stone building that stands for centuries.”

  • http://evilspeculator.com molecool

    Yeah I’ve been looking this with clenched teeth – fucking Draghi – say something stupid already!

  • http://evilspeculator.com molecool
  • Scott Phillips

    Zerohedge is not helping you. Your info source is wrong 99 times out of 100 – think on that. In bear moves correlations go to 1 anyway, doesn’t mean shit

  • Scott Phillips

    Bond money isn’t smart money but it is bigger money

  • Scott Phillips

    You can buy silver without paying the lore muun. Google cme physical delivery futures.

    If you aren’t a small timer you can buy at the legit rate

  • Scott Phillips

    It sucks. Runs ninja but very slowly and ninja is already slow

  • Scott Phillips

    Great trade there

  • Scott Phillips

    Yes! 2 points does not a channel make

  • Scott Phillips

    More clearly stated they are a scam

  • newbfxtrader

    buy any pullback. has potential to go plenty north.

  • Billabong

    We’re talking Eagles and Maple Leafs. You can actual buy silver bars buying PSLV and redeeming the stock for silver bars. Only cost is delivery … “They’ve” been redeeming a lot of stock for gold delivery (at a discount to NAV) in PHYS.

  • stovis

    Nikkei totally engulfing/reversing yesterday’s down day.

  • http://evilspeculator.com molecool

    I don’t have any problem on my 2012 MBP…

  • Xan

    On a weekly basis (over a 2 month time span as your chart shows) then yes the s&p has definitely moved ahead of itself but as with all correlation type charts, the longer the timespan the less reactive the assets are to each other, so, if jpy rebounds and 10yr rises then that chart can look different in another month’s time….. Also over a stretch of just a few days the s&p has fallen in correlation to 10yr and jpy (i.e. the correlation holds over a shorter timespan). If 10yr and jpy don’t rebound in the next 2 months then, yes, I expect s&p won’t hold it’s current level…..

  • RoastBeeph

    Caught USD/JPY short yesterday before the big move. Helping to offset the overnight loss in ES.

  • Huey

    Nice I’m short there too. Could be a big move out of that 6 week consolidation.

  • ridingwaves
  • http://greenlander1.blogspot.com/ Greenlander

    Flat right now. Looking to go long USD but not quite there yet. Also looking to short gold miners once gold gets closer to 1200. Pulled off SDS and will wait until after OPEX to look at equities again as things look to be in chop mode.

  • ridingwaves

    feels a lot like distribution on the highs…

  • Billabong

    Patience grasshopper….

  • RoastBeeph

    When you go long USD, what instrument do you use to trade USD? Do you trade DX or a dollar ETF? Reason I’m asking is because I can’t seem to find a decent us dollar tracking ETF. I am sure one exists out there somewhere.

  • stovis

    UUP

  • ridingwaves

    OT- No COLA increase for SS folks..
    Yet we have plenty of money for illegal immigrants, 10K more syrians, Presidential golf and family vacations, more wars, IMF aid money etc. etc…

    seniors are just fodder to the pigmen banker elite…

  • Ronebadger

    the Dems are blaming the Republican congress and it has nothing to do with either of them (blame low oil prices)

  • http://greenlander1.blogspot.com/ Greenlander

    Uup works