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Living Inside a Broken Clock: Friday April 23, 2010
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Living Inside a Broken Clock: Friday April 23, 2010

by The MoleApril 23, 2010

by gmak

It looks like Greece is becoming a very crowded one-sided trade. Greece is to officiallly activate the EU/IMF aid package. Spreads tightened and Greek Banks stocks rose. The verbiage seems to be distinctly negative – probably a little too much so. This may now be a case of sell the rumour, buy the news where the EUR is concerned. I admit to having a bearish bias, but I would prefer that civilization not end just yet.

Even though GM is blowing its own horn about repaying TARP, they neglected to mention that the US taxpayer still owns 51% of that company. It’s not called Gov’t Motors for nothing.

The Horror! The Horror!

OverNight

Greece is going where everyone believed that they should – into the arms of the EU / IMF. There were some decent data points regarding the consumer and business sentiment out of Europe earlier. Asia was red, except for Japan, Taiwan, Singapore , and India. Europe is green across the board, strongly so in some cases. However breadth is uneven. The DAX made a strong move off of the open (no GAP) and is consolidating at the familiar 6250 level. The low yesterday was at the support level of 6150 – and I believe we are seeing the classic range-bound trade that comes from distribution. Only the Utilities sector is red. Breadth is good, and most sectors (except financials and telecom) are up over 1% – some approaching 2%. This looks like a strong day for the risk trade – some uncertainty has been removed from the table.

ES was flat (range of 4 points) most of the night but popped off of the neutral pivot with the DAX this AM. Pivots:

  • R2: 1219 = Just as high as yesterday, and I don’t really see it.
  • R1: 1210.25 = Easy to reach. I think it has a strong chance of getting here.
  • Neutral: 1198.50 = This was the LOD overnight ans saw a strong move up. Likely to continue to be strong support.
  • S1: 1189.75 = This was the level for the ramp up at noon yesterday. It was resistance on Monday before the ramp into the close. This point has some meaning in terms of support. What could get us here? Some unexpected information, or if trading bulls are nervous and want to square away positions before the weekend.
  • S2: 1177.50 = This was the area of the low on Monday. I don’t think that it will figure in today’s action.

The above comments are predicated on what we know NOW. The data coming out on Durable goods seems to have a very low bar with expectations of 0.2% vs previous (revised) of 0.9%. This comes out at 8:30 NY Time. At 10AM, it is the new home sales with 325K expected vs 308K prior. The durable goods’ data could change the sentiment – as everything seems to turn on a dime these days.

What’s behind door number 1, today?

[amprotect=1,9,5,2]

DAILY SPX CHART

There looks to be an upper boundary  in the SPX = 1209 – 1211 range. This would need to be cleared decisively (closed above, next day opens higher and closes higher still) for the up trend to continue.  In the meantime, the TD Pressure low risk SELL is still active. You can see the arrows for possible scenarios. If this level holds, we will see the classic double top.

Once again it looks like the combination of the mid-Bollinger (21-day SMA) and the white dotted “Since Oct 21” trend line put a bid under SPX. I expect more of these up and down days, simply because (As I have stated for a number of days now), the Bollinger bands on the VIX need to widen, so the volatility of volatility has to increase = more up and down movement on the SPX. From this, it looks like the SPX is moving into a slight upward sloping channel with the bottom being that trend line, and the upper boundary of the range being the high from April 15. To help you, Friday’s trend line is at SPX = 1187.67; There is no ESM0 pivot near that level.

Someone pointed out in a comment yesterday that the volume is greater on the down ticks than the up ticks. The same is true for most down days vs up days. As they said – this sure looks like distribution.

Yesterday’s interpretation of the probabilities relating to bar shape were pretty close to reality. A nice change after the prior two days. There have been only two instances since 1982 of a ’34’ bar follew by a ’45’ bar, as just happened. In both cases, the pattern was followed by a ’15’ bar – meaning that the OPEN was near the LOD, and the CLOSE was near the HOD (high of day). When one looks at just the ’45’ bar with an upward sloping SPX, then the next day is CLOSE < OPEN (53%); CLOSE = OPEN (same bar segment: 9%); CLOSE > OPEN (37%); + 1% roundoff error. I am of the opinion that (even though it goes against every sample rule) that the two bar combination is worthy of attention because of how rarely it occurs, and because of how the third bar was the same in both cases.

I am becoming of the opinion that it is the rare combinations that mean something. I intend to do some research on all 25 possible bar shapes in my universe, and the frequency of occurence of patterns, and the subsequent result of the third bar. I see this as analoguous to the Japanese candle patterns. I want to see if there are myth-takes in all the assumptions surrounding those patterns – but indirectly through my own bar shapes. This may take more than a week-end but I will keep you informed. 

SPX has been above the 55-day SMA for 38 days now. We are entering dangerous territory and the probabilities favour SPX staying up here much longer (at least 51 days). If there is not a dramatic move down soon, there will be a continued move up – likely to test the 62% FIB at 1228.74 (SPX).

Bottom Line: I’m going to go out on a limb, based on the small sample, and say that today will be an up day with the CLOSE > OPEN. If it is a ’15’ bar, bonus!

DAILY VIX CHART

What can I say? We are seeing the volatility in the VIX that I talked about, as reversion to the mean amost requires that the bollinger bands widen. In the current trading environment, this seems to need a back and forth in the VIX – which is driven by increased volatility in the the SPX.

DAILY EUR CHART

Since I captured this chart, 12 hours have passed and the EUR has put a pin down through the lower Bollinger and the 76% FIB of the channel it is runing in. TD Pressure is near the bottom in oversold territory. EUR is back under the purple trend line that began January 13 of this year. As I mentioned in my introduction, the short trade based on Greece is exceptionally crowed at this time, an it looks like the EUR put in the double bottom last night. Next week wil confirm, but I like the odds of a move up from here given the Bollinger pin.

Right now at 7:44 AM (NY TIME) I see downward pressure to take EUR to the 1.328ish level. There is further support around 1.326ish. A move up will run into resistance at around 1.333, 1.3366, and 1.339ish, IMO – and based on Bollinger and TD technical threshholds.

[/amprotect]

My Best Regards.


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.

  • FranceHasTheBomb

    I believe there are some German lawyers waiting to file suit to prevent Germany from participating in a Greek bailout.

    OT: Anyone know the date for “Take our Daughters to the Unemployment Office”?

  • yossarian_rules

    I thought that after some time has lapsed, the content available only to subscribers becomes available for us freeloaders too. That is not evidently not the case. Tch.

  • gmak

    Which one can't you see? My post from yesterday, or Mole's?

  • gmak

    Durable goods was a terrible number compared to expectations, expecially when looking at how the prior period was revised up.

    -1.3% vs 0.2% expected vs 1.1% previous revised. CAD and JPY certainly sold of on the news – but I don' t see much of a reaction elsewhere. ES held it's own on a big volume candle – so if there was a dump, someone(s) is absorbing it. Suggests that today will be bullish at least into the afternoon.

  • yossarian_rules

    Starting from April 19th, all the posts which initially had login requirement, still do have it. Both yours and Mole's.

  • gmak

    send an email to Mole and ask him kindly. Maybe he just forgot, or maybe the information is so good and timely that he didn't want to release it right away. 🙂
    WHo

  • Onorio

    Cathed the USDJPY long train @ 0.9350, now moved my stop to a few pips above B/E.

    I think we`re in a W3, so im expecting this move to last a few days…im playing that move.

  • Gold_Gerb

    not sure.
    but that would explain why it's a PINK slip.
    😉

  • ricebowl

    I'm going to put on some shorts when we break to new highs.

  • wex

    Does anyone have a standard definition as to what might be considered overnight for the ES futs? I can't decide when the cutoff should be in US.

  • gmak

    I think of it from the end of the second lockup (6PM) to whenever I write my post – but officially it would be until NY market open, no?

  • gmak

    I have noticed that activity picks up when Europe opens at 3AM (NY Time) and again around 6 – 7 AM.

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

    had no time for watching the tape yesterday, but BPSPX is pointing down… and so is SPX:cpce, but SPX:gold is not, and a strangely acurate indicator for “fall chills” (mwj:vix) regained higher ground…

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

    Cor blimey – is this a day for buying Apple puts, one wonders…

    http://stockcharts.com/h-sc/ui?s=AAPL&p=D&yr=0&

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

    and we are not falling from any serious K100% nor R(at)SI so… expect reversal and pumping, probably soon

  • fisheggs

    That is one scary chart!

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

    as far as hamster bands and centenial rat is concerned? hell yes!, 263 leaves nothing but air above, we're above all upper bollingers.

    beware of 2004 syndrome nevertheless

  • slickwilly

    As usual, very nice post gmak! Interesting to see Mobius (Franklin/Templeton) suggests we just let Greece fail.
    “If we pour piles of cash into a country where corruption extends to top government officials, we won’t see any reforms,” Mobius told the Ljubljana based paper. “There is no other solution than to stop financing Greece with creditors taking responsibility and suffering damages, so countries should help them, not Greece, limit those damages.”

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

    BTW, we should have fallen YESTERDAY from 1203 around 13:20

    so you know who was in the house

  • slickwilly

    We loaned GM $50 billion and they pay back $8 billion. Now they say they've paid back all of the loan. Hmmm…must be that NEW MATH.

  • momac

    home sales up almost 27%. I wonder if they'll extend the home buyers tax credit again??? If they don't, the number next month will more than likely fall off a cliff

  • johnny

    hello folks

  • johnny

    looks like everyone started their weekend from today only

  • http://www.mylifemytrade.com MyLifeMyTrade

    ES 122x today? any takers?

  • johnny

    quite possible

  • http://www.mylifemytrade.com MyLifeMyTrade

    I took my dog for a walk yesterday afternoon.. It ran away.. Dog's name was IWM or RUT or TNA – it goes by 3 names

  • randomtrader

    this thread should be renamed living inside a clock because this market is moving up like clockwork i dont see anything broken about it

  • http://www.mylifemytrade.com MyLifeMyTrade

    Don't you know that dollar has strengthened so much that $50 billion back then is like $8 billion now

  • http://www.mylifemytrade.com MyLifeMyTrade

    should have fallen???

  • marcopolo101520

    http://www.eurointelligence.com/article.581+M50

    bunch os shit on Greece, Spain, Portugal, Europe mess, nothimng major to worry

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

    maybe, we do this last k100% on fast was still with low RSI and not quite there lazy

  • momac

    hmm, have we hit a double top on the spy? previous high $121.57, just hit $121.51

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

    yes, stochastics and rsi were lined up for a fall… we had another ramp…

  • ricebowl

    Not a chance. I'm shorting this rip. Max upside target I have for today is ~1215 on the SPX or /ES 1212~1213.

  • johnny

    from my personal experience i hv seen theres nothing like double top in equity mkts , it only works in fx mkts mainly due to 24 hr trading and different time zones although i hv seen some people trade it out as its definately a resistance but it rarely holds in equity so actually double top is only a consolation.

  • ricebowl

    Completed H&S on the intraday with a target of SPX 1208~1209.

  • ricebowl

    Step 1: Wait
    Step 2: Short
    Step 3: (Take) Profit

    Shorting 5 minutes for 4 points is not bad.

  • AlohaBear

    computers do all the trading now No else can hope to swing at any of these pitches as Warren Buffet says the great thing about trading is waiting for the right pitch.

  • momac

    if I wasn't a big chicken, I'd short the crap out of everything right now

  • ricebowl

    A wise decision. I have a small short position on “just in case”, but that's how I roll. We will either close the week out below 1208, or we will sell off again Monday AM, perhaps turning green afterward like yesterday.

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

    u should

  • ricebowl

    Is that a fractal H&S pattern on SPX with a target around SPX 1203?

  • http://www.mylifemytrade.com MyLifeMyTrade

    Look at ZL.. it shows no selling on move down.. it is fake move down… IMO… we will close the day at SPX> 1214 IMO

  • rosocecasita

    *Sitting in the theater thinking about leaving the show early*

    Does anyone else notice that the emergency exit has a brick wall paved over it?

    *Heads to the lobby*

    Man is it smoky in there, I keep opening the doors up to the theater so at least I can hear and some people can leave real fast if they want, but the ushers keeps closing the door and putting 'safety' locks on.

    ./fuck_it

    Orders some popcorn.

  • BobbyLow

    Well there I go again. Got sucked in on a head fake this morning and it took 3 Round Trips to trade my way out. Now back to flat on the day. My bad.

    Viva Las Vegas!

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

    i think there is a fake ramp failing…

  • Tronacate

    QCOM on a ski slope down

  • ricebowl

    I trade much better when I don't even log in until 10:15 or so. Usually the market is at a reversal point there. I went short around SPX 1210~1211 this morning — missed the top, but not by much.

    I'm holding May 121 SPY puts from $176 and May 12 FAZ calls from $56. Both positions are tiny and came out of yesterday's profit. I put in orders to average both positions up, but I doubt I'm going to get filled, so discipline dictates that I leave most of my cash on the sidelines. 🙁

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

    BTW, we're at decison, again, on spx:vix… the bad news is we were testing it downward yesterday and today it's fighting for support at ma13

  • ricebowl

    Don't chase this. You *will* get burned.

  • Cerebro82

    I love you NinjaTrader…. Why I wasn't automating before is beyond me. All I know is that with Sharpe ratios over 15 and % profitability over 65% why ever execute a trade manually.

    Thanks mole for the inspiration to write code. Truly feel like I'm taking the next step.

  • ricebowl

    If we get back to ~1209 it would be an *acceptable* place to put on a short position.

  • http://www.mylifemytrade.com MyLifeMyTrade

    feel free to go long now.. bottom for the day is IN…

    See no signal on ZL on down move.. and a huge buy signal now on the recent up move.

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

    have this strange feeling we're closing the week at 1200, opening up monday for strong decision either way… leaving now, have fun

  • momac

    I just bought some spy calls, so the market can drop now

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

    still not certain on that one, the “saves” (buy signals you spot) haven't reversed today's down trend

  • Tronacate

    Pretty weak volume on the NQ for it to be a reversal candle off the bottom…….could be fake with more downside coming

  • http://evilspeculator.com molecool

    OMG – those fuckers are teasing this thing out all the way.

  • http://evilspeculator.com molecool

    See you next week Hamster Boy.

  • http://evilspeculator.com molecool

    I must have forgotten one or two – but not all of them. Maybe a caching issue on your side?

  • ricebowl

    If you want to short, this is the place to *start*, but don't go crazy.

  • BobbyLow

    Your 10:15 Log in is definately valid as far as I'm concerned. I usually try to delay making a move until the first half hour or so is done. But I had a decent profit on part of my Long Side in May 120 Calls that I wanted to book as the S&P was heading down so I made the trade @ 9:46 AM which of course was a wrong move. It was only a matter of seconds that it reversed and then I was back net Short and losing.

    So after 2 other SPY Option Trade Combos between 10:13 and 11:15, I was able to put Humpty Dumpty back again and was back flat to where I began the morning. (Slightly Net Long Position Delta)

    Now were back to choppy moves which tells me to sit on my hands. If this was a “normal” market we should have tanked many times by now not just today but weeks and or months ago. Is this market going to ever tank? Yes it is. When? I don't have a clue. Maybe today, next week, next month, this summer, this fall, the market tanks.

    And when it tanks it should be massive. The only exception could be if Hyper-Inflation Kicks in then all bets are off.

    I know there is evidence that lead to Deflation but what would happen if Hyper-Inflation did kick in? S&P 3,000?

  • ricebowl

    The market functions best when inflationary/deflationary forces are kept low, and as long as that is so, it will price in expected inflationary trends by lifting the price of stocks. If we were to get hyperinflation, it would cause massive disruptions in the economy that would make doing business very difficult, and stocks would thus suffer; the joke is that shorts would be toast — that $1,000,000 that you made shorting will now buy you a pack of gum. I don't know if it is still this bad in Zimbabwe, but at one point, a day's wages would not even pay for the bus ride to work the next day. In such cases people find alternative currencies. And it would be a mistake to think that gold is likely to become one, although there is nothing to prevent someone from issuing currency backed by gold which is quite different.

  • ricebowl

    I just found out that my ghetto broker posts stats on which options are most held by their customers. Note the items that I've starred on the right. Enjoy.

    Calls:
    CL $50.00 Call Jan 11 $32.50 $34.00 $34.70 -0.20 (0.57%) 157,100 2,026
    SNP $80.00 Call Jan 12 $13.00 $13.90 $13.70 -3.50 (20.35%) 55,500 22
    CAT $52.50 Call May 10 $15.70 $15.85 $15.25 -0.22 (1.42%) 53,607 64
    AAPL $270.00 Call May 10 $7.40 $7.45 $7.45 +1.45 (24.17%) 28,956 27,816 ***
    SPY $122.00 Call May 10 $1.25 $1.26 $1.33 +0.16 (13.68%) 27,850 99,659 ***
    SPY $120.00 Call May 10 $2.36 $2.38 $2.45 +0.16 (6.99%) 25,685 136,026 ***
    SPY $127.00 Call Jul 10 $1.02 $1.05 $1.09 +0.01 (0.93%) 25,642 926 ***
    AAPL $280.00 Call May 10 $3.75 $3.80 $3.84 +0.99 (34.74%) 21,476 21,020 ***
    PFE $16.00 Call Sep 10 $1.12 $1.14 $1.25 +0.12 (10.62%) 20,065 5,247
    SPY $121.00 Call May 10 $1.77 $1.78 $1.84 +0.13 (7.60%) 18,080 138,316 ***

    Puts:
    SPY $120.00 Put May 10 $1.49 $1.50 $1.47 -0.15 (9.26%) 39,567 270,854 ***
    MAS $17.50 Put Jul 10 $1.00 $1.10 $1.05 -0.30 (22.22%) 36,315 42
    SPY $119.00 Put May 10 $1.19 $1.20 $1.16 -0.14 (10.77%) 31,194 209,590 ***
    SPY $121.00 Put May 10 $1.88 $1.89 $1.85 -0.18 (8.87%) 30,431 109,183 ***
    LDK $4.00 Put Jan 12 $1.05 $1.25 $1.24 +0.04 (3.33%) 30,090 30,676
    DISCA $35.00 Put Jul 10 $1.05 $1.25 $1.25 0.00 (0.00%) 26,175 208
    IWM $70.00 Put Jun 10 $1.51 $1.53 $1.53 -0.21 (12.07%) 22,820 144,651
    IWM $65.00 Put Jan 11 $3.51 $3.58 $3.56 -0.10 (2.73%) 20,173 20,955
    IWM $55.00 Put Jan 11 $1.54 $1.58 $1.60 -0.13 (7.51%) 20,074 8,020
    SPY $104.00 Put Sep 10 $1.56 $1.60 $1.69 +0.04 (2.42%) 17,176 89,601 ***

  • gmak

    I just type and publish. That's it.

    ________________________________

  • momac

    damn, what are they doing to the poor dollar

  • rosocecasita

    Better not drop the 1200 on the next 'Correction' least it become a “Healthy Correction” or a god forbid an “Irrational Sell off”

    Especially if gold decided to keep it up…

    And 30/20/10/7/5 year bonds are poised to sell off…

    “The tighter you grip the grains of sand, the easier they slip though your fingers.”

    I recommended “Reminiscence of a Stock Operator” to a person at the library in the finance section. (Got Tim Knights book while I was there!) He asked if it was a “Story book” or how he did it… I told him well, its a Story. (And thought A story of how he did it.) He put it back and told me Jim Cramers Mad money book was good.

  • gmak

    technically, it ran into the upper bollinger (21, 2) and the 50% FIB on my Daily Chart. We have written about the forces and the points that a short would be worthwhile on the USD. It took a while because the EUR has been under such pressure – but now it looks like a doube bottom may be in on that, still to be confirmed next week.

  • ricebowl

    Best thing for the bears would be a close up at 1215-1220.

    Speaking of which, is soylent green toast now?

  • gsavli

    In the ancient times, it was best for bears, when market closed lower.

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

    Another day, another wedge – congrats if you are long from 1190 yesterday – otherwise, hang on in there until, no doubt, after the close…

    http://tinyurl.com/32c9g3j

  • BigIslandLife

    Aloha all, not sure if any one here has been playing the ag sector, grains have held there lows and are starting to make nice moves off the bottom, meats are all at highs and cotton looks ready to break out to new high, sugar and coffee breaking down and at some support could be short plays, best play should be soybeans if they hold 10 next week could run for 10.50 – 10.70 area next resistance

  • http://evilspeculator.com molecool

    LMAO :-))

  • rosocecasita

    How is closing higher good for bears?

    Doublespeak!

  • johnny

    hello folks , looks likenot much traders trading !!

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

    p.s. this gotta be odds on a triangle now right?

    http://tinyurl.com/zawech

  • gmak

    Your link doesn't work.

  • gmak

    I'm guessing here, but maybe because the daily SPX would then be touching the upper bollinger implying a possible reversal?

    Other than that, because some other reversing TA pattern would get completed?

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

    sorry about that – here's the unabbreviated version, see if that's any better..

    http://content.screencast.com/users/ultrabear/f

  • Tyler_K

    yes, thks, works now

  • http://www.mylifemytrade.com MyLifeMyTrade

    Looks like end of the day GBD (Green Big D***) set up to me.

  • amokta

    The game is up: bears are toast, bulls are toasting champagne
    the big mistake was not having a consistent long bias from 09.

    anyway, we can still scalp away making a dollar here, a nickel there, but forget about catching a big move (P3 or other mythological greek beast), as that is history (until history repeats itself in 10-20 years)

    i am doing a reasonable trade in scrap silver!

  • skynard

    Thanks Ultra,

    Wouldn't the high be labeled as (a) though and finishing (e)? Have the same thought.

  • http://evilspeculator.com molecool

    ¤ø„¸¸„ø¤º°¨¤ø„¸¸„ø¤º°¨
    ¨°º¤ø„¸ N E W „ø¤º°¨
    ¸„ø¤º°¨ P O S T “°º¤ø„¸
    ¸„ø¤º°¨¤ø„¸¸„ø¤º°º¤ø„¸

  • amokta

    tell me, why is GMCR falling, even whilst spx/dow rising – what 'logic' governs stock moves?

  • ricebowl

    You nailed it — the weekly SPX bollinger. It wouldn't mark a reversal per se, but it would bring us back down a bit, perhaps to 1200.

  • ricebowl

    There's no champagne for failing to break to new highs.

  • amokta

    ok, i'll put the Domperignion (spellcheck?) back on the ice !
    Caviar anyone?

  • http://tacharts101.blogspot.com j0sh1ngU

    yup for me to two sells. One of longs and one for my shorts. Hehe

  • elliott_surfs

    If anyone is following WAG , I'd love to hear your thoughts =)

  • wex

    I would think the on session would be until RTH open but there is so much trading in the hr prior I thought that might be eliminated and included in the new day

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

    thanks, see you latter