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Manic Monday Wrap Up
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Manic Monday Wrap Up

by The MoleFebruary 14, 2011

I was busy packing this morning, and really didn’t miss much as today’s tape was clearly on the tedious side – we’re talking Snooze Central here:

The Zero Lite traded in a tiny range today, which is something I often point out when it happens. For instance that little divergence today may have looked like something significant to an inexperienced observer. However, that ‘big spike up’ was only a 0.59 reading, which is pitiful and shows that there was very little participation. Which is why I suggested to ignore it – and I turned out to be right. Of course when it comes to ignoring signals you can’t have your cake and eat it too – thus the late day drop back to VWAP was always a possibility but could not be predicted.

There was not too much edge to be had today but Geronimo somehow managed to eek out one scalp. Frankly I was glad when it finally exited as I really don’t like tape like this. But the system is the system – and we won’t start overthinking it.

Public Service Announcement:

Yes, it’s that time of the year again – I will be heading for Seoul late tonight. I will only be gone for a few days and am planning on returning Friday the 18th.

I will put up the occasional comment cleaner with a few thoughts on the lastest tape. But don’t despair as I’m sure Scott will put up a few posts as well.

As a matter of fact see below his FX wrap up mega post. Scott is hoping that the currency trades I put up this weekend are about to crash and burn – he eat some bad sushi and after they pumped his stomach he inexplicably found himself on the other sides of my trades. Am I worried – heck yeah – Scott is a might opponent and although I’m currently on the plus side I am far from getting comfortable. But as Scott points out below – it’s not about being right or wrong – it’s what you do when you’re wrong (although being right does help quite a bit). FWIW – every time I take a trade I expect to be a loser – and I manage my capital accordingly. Alright with that said – here’s Scott’s update on the FX side:

Mole v. Scott Deathmatch

So Mole and I are on the opposite sides of trades today. Cause for concern – nope, because second guessing a tried and true method indicates that somehow this particular trade is important to me. Even though Mole, the rat bastard, is currently winning 😉

Another way of saying that is that you really care about the outcome, which is the exact worst state to trade from emotionally. This trade is simply one in a series of the next 1000 trades (as long as you dont blow up). As long as I stick to the system I know I *cant* blow up. Ergo, stick to the system.

That being said. I made some small, but significant errors here, and its useful to examine both sides of the case.

Lets start with the AUD. Mole and I took the same trade, Mole got a better entry from his bollinger entry, and he exited somewhere near the 50 EMA. I failed to notice that the 50 EMA would likely act as support. I should have banked some profits there, and I was stopped out on break of the daily high. I thought it had more in it to the downside, and although I’m probably right, I got stopped out for a sub-optimal exit as a result of my bias. It may seem like a small thing, but on my own ruleset I should have gotten a $3750 better exit on my position. How long do you think I will be around if I continue to make those sorts of errors each day?

Now what happened here is that I fell victim to RECENCY BIAS, a few down days and I just naturally assumed it would keep going. Its a clear error for me, and gives Mole a 1:zero start.

Its not too late for bucky to start making some moves, but the price action to date is more consistent with an corrective move than a major rise.

The Euro shows it a little clearer, price is bouncing between the 20 and 50 EMA’s (If those arent the MAs you use, it doesnt matter, since the shape of the MA’s indicates that most of them will be in the same zone)

So bottom line, I’m short the Euro, remain so, but it needs to get a move on. Any pause here will end up generating a bounce. Bounces on the smaller timeframe charts 60, 120, 240 to moving average support would be a low risk way to get in if you arent already on board. Moles Long idea would have been getting filled at a great level, so hes in a trade with a low risk and high reward.

Too early to call it. This one is inconclusive now. Mole 1: Scott Zero

The Kiwi Dollar, well Mole has this one all fucked up. To me the evidence is quite bearish at this point, although there was no way to tell what would happen at the old spike low I exited half the position there for a good profit. Price is tentatively embedded in the lower bollinger, we have a weekly sell signal as well, and potential monthly, and bounces should be limited by the moving averages just above which should act as resistance. I plan on reentering short on any bounce painting a sell setup.

Now its too early to tell. Moles entry is at exactly the point where I took partial profits, so I am in total agreement with him that the potential bounce point is here. Lets see what plays out. Mole 1: Scott zero still.

Now the USDJPY – Mole noticed the trendline which I missed, so I need to give myself a smack for that. Still, I’m inclined to think the price action on this is very bullish. Price is squeezed nicely between the keltners and bollingers, indicating high probability of a big move, but direction is unclear. I have a daily buy setup today, which I think is outstanding, hammer candle in an embedded bollinger band. I’ll be taking it on a break of the high. Right now I’m long a 1/3 size position, having taken 2/3 of my long in profits already for a multiple R win.

So price is stalled at the trendline. If that trendline holds, its probably going to fall back like Mole suggests. If it breaks, it *will* set off some upside capitulation. Risk reward on the upside trade is huge, and I will be reentering on the break of the daily high.

This one is still inconclusive, so bottom line is Mole 1: Scott 0

Motherfucker!

p.s. One more great setup, in Gold. Silver made a higher high, Gold did not follow it up. Its a good short on break of the daily low.


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.
  • Joe_Jones

    Looking at the A.H. session, tomorrow should be interesting.

  • convictscott

    Jacksoo, 3 periods is whatever timeframe I'm trading. If I'm trading a daily chart I only look once a day, and the 3 periods is 3 days. If I'm trading 15 min charts, its 45 minutes.

    The only time I drop down in timeframes is if we are approaching resistance or support and I might lower a stop on part or all of the position because of the increased risk. If I am trading 15 min timeframe I may lower the stop to a 5 min candle

  • convictscott

    We are about at the level where bears have another realistic shot at mounting some pressure

  • http://thefxspeculator.blogspot.com Onorio

    Well 666+666=1332 so i put my hands in the fire and say the top is in :)

    333 here we go! 666/2=333

  • Joe_Jones

    Second that. Just for fun.

  • convictscott

    Please tell me you are joking :)

  • convictscott

    My take on it – nervous at these levels, longs are getting agressive with profit taking, nobody wants to be left without a seat when the music stops. No reason to get short yet, but getting interesting

  • http://thefxspeculator.blogspot.com Onorio

    Nop, i`m just trading on fundamentals…the market is irrational, i`m trading the same way :)

    DISCLOSURE : I`M JOKING RIGHT!

  • convictscott

    hahahahhhaha

  • Joe_Jones

    Pressure mounting is an understatement. I am a mad, pissed off and starving grizzly that is about to slaughter some bulls and pigs alike.
    http://www.screencast.com/t/gm

  • chronographics

    hehehe 😉

  • Joe_Jones

    New avatar time for a new era that is about to begin

  • raised_by_wolves

    You know, a wolf pack can annoy a grizzly bear to the point where it gives up its kill. 😉

  • Joe_Jones

    There are enough fat sleepy bulls in the prairie right now so we don't need to fight among each others for the steak. It's like fishing for salmon in a barrel.

  • raised_by_wolves

    If one is going to short, the important thing is what one shorts. Look how much better emerging markets were to short than SPX when they both had two consecutive red closes on the weekly chart.

    http://content.screencast.com/

    It'll be interesting to see whether EEM gets embedded in the lower BBs. Personally, I think the odds favor this being just a corrective period. We'll see.

  • OldChicago

    This market is irrational, right. It also take an “irrational” traders to make money :) I am sane, I lost money :(

  • raised_by_wolves

    Are you sure that you're not just psyching yourself up?

  • OldChicago

    What's up with the weakness after hour? Anyone knows? Index are down, but energy name seem to continue the “electric shock” factor.

  • Joe_Jones

    I have never been of sounder mind.

    Honey, have you seen my chainsaw? I need it for work tomorrow.

  • Joe_Jones

    That's the double evil effect.

  • raised_by_wolves

    Mole's Geronimo exits by end of day, right? It could be that other greedier bots sell after hours after attempting to capture the entire end of day ramp.

  • raised_by_wolves

    What's you plan man? Feel free to describe it with graphic details.

  • amokta

    Glutonimo bot?

    By the way IBM major 'divergence' with spx, dow (ibm down trend since 8th feb)

  • Joe_Jones

    Last time I went on a hunt: http://www.screencast.com/t/y3

    I plan to do much better this time

  • OldChicago

    OPEX witch hunt. The refineries are spewing red hot smoke… When the smoke clears, it's still ugly down below. 30% since Jan 25.

  • http://pulse.yahoo.com/_6FCTHZELNVH7XBHT6OP3DAX5K4 Pretending2fail

    Anyone watching copper?

  • raised_by_wolves

    Yeah, but IBM is still embedded in the upper BBs on the weekly chart. If a hammer candle appears on the weekly, the odds would favor more upside in my opinion.

  • raised_by_wolves

    Too bad there's no short leveraged copper ETF to short.

  • raised_by_wolves

    Nice!

    Honestly, I sort of got the shit beat out of me last time. I couldn't even get one bite out of him.

    http://www.youtube.com/watch?v

    Personally, I wish I had followed Mole's advice: “Expect to be a loser.”

  • Joe_Jones

    And now you grown older and wiser. I am sure you can tell when all the pigs are on one side of the boat, and when a juicy opportunity presents itself. The big boys are aiming for the perfect kill with their HFT bots, but I got my stainless steel armor to counter them with my positions well placed.

  • volar

    EWZ is interesting

  • gsavli

    if so, i sure hope he sticks to this blog :)

  • jacksoo

    GOT YA – THX

  • BobbyLow

    Raised By Wolves,

    In an earlier post you mentioned about how EEM was a good Short especially a couple of days ago. I've had EEM on my radar and it still looks like it's a decent short.

    It's below its 50 DMA and 20 EMA but still in a little support area where it is right now at 45.40. But if we ever get a down day (which remains to be seen), I think it could easily go down to at least the 200 DMA at 43. If that fails there's no solid support until the $39 Area when the Big Run Up in everything began on September 1st.

    Now that I've said all that, it'll probably get its legs back and run back up past the Middle BB and back to the races. But if there is any potential shorts out there at all, I think this is one of them.

    I'm tempted to at least Sell a March Bear Call Spread on this thing and might do it as early as tomorrow.

  • ds2

    Very – looks like someone got a big short squeeze 3 days ago if I am interpreting this right.

  • ds2

    The difference of Ben's POMO?

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

    go Mole! ( on your trade that is..)
    Market Mole ALERT: the last time he left town… (shudder)
    hey, be sure to post some topless surfers this time, okay?
    teehee.

  • convictscott

    No its very simple. The lack of retail participation means this is an institutional driven market. Due to the zero interest rate policy they work with truly mind boggling leverage. Liquidity goes from 400 000 / hour to 2000 / hour in globex. Therefore if you work with size you must

    a) Take on overnight risk
    b) Go home flat.

    At the end of the day everyone who matters sells off and starts again tomorrow.

  • convictscott

    No touchy on the short side. We short LOSERS

  • raised_by_wolves

    IBM looks like a winner to me. If you chart an IBM to SPX ratio, you'll see that last year was an inside year for IBM relative to SPX. This year, it has really broken out.

  • convictscott

    I'm an emotionless robot of a mechanical trader, who goes to work every day. My job is to take money off bulls AND off bears, their colored opinions blind them to reality and make it easy for me to steal their money.

    Its boring, but it pays well 😉

  • raised_by_wolves

    Yeah, EEM has been and still looks like a better short to me than SPX. However, if EEM turns out not to be a good short, it may become a good buy (in which case I would short EDZ to capture some leverage ETF decay). The last few months either have been distribution before a downtrend or have been consolidation before another major leg up, right? Meanwhile SPX has been climbing this entire time.

  • convictscott

    rg64 is a high school kid. I'd bet anything he does not trade

  • raised_by_wolves

    Thanks for the explanation.

  • raised_by_wolves

    Could just be corrective.

  • raised_by_wolves

    Possibly.

  • raised_by_wolves

    The high and low MA 20s are overlapping the low and high BB 20s on the weekly chart which suggests, I think, that there could be some range trading ahead.

    http://content.screencast.com/

    There's a possibility that this thing gets embedded in the lower BBs, but it hasn't happened yet. My guess is that this week will be an inside week closing higher than the current price.

  • convictscott

    I'm sure a smart guy like you could look at, for example up closes where price is above 20 EMA and look at the distribution of globex session pullbacks, and design a strategy around it

  • convictscott

    Full disclosure

    In the Mole/Scott celebrity deathmatch, USDJPY just broke its daily high, and I topped up my long position to a full size 18 contracts. Short the 6J futures (same as long USDJPY which is inverse) 11977 with stop 12038. The 3 contracts I was already short are from 12218 have $9037 worth of unbanked profit in them.

    Therefore with the pyramid if it all goes bad and my stop is hit I will lose (12038-11977) x 12.5 per point x 15 contracts = $11437 less unbanked profit of $6750 (if it pulls back to where my stop was hit less the profit I already banked from the initial 2/3 of the position $16350.

    As you can see I have structured the trade so my worst case scenario profit is $11663, which is better than 1R profit.

  • convictscott

    Watch that trade right now, if its going to start turning down it will do so soon :)

  • convictscott

    Exactly. You can walk around any city and see a bunch of loser businesses run by idiots who should rightfully be broke.

    The same businesses exist in publically listed stocks.

    Short losers – buy winners. Why would you do anything else? There is a strong emotional bias among technical traders to shorting strength. Its delusion, losers statistically fall faster than winners and further.

  • convictscott

    And it turned down hard!

  • fisheggs

    Scott. GBP/CHF RTV setup . Is this correct if it closes above open?
    http://www.screencast.com/t/JG

  • http://thefxspeculator.blogspot.com Onorio

    i`m short GBPCHF since last night, things didn`t look so good moments ago LMAO

  • http://thefxspeculator.blogspot.com Onorio

    I will probably get a USDJPY sell signal during the next hours, if so i will post it here scott.

  • convictscott

    Please do :)

  • fisheggs

    LOL – Scratch that, I will revisit at the end of today.

  • fisheggs

    Sweet! Gettin paid to spin.

  • http://thefxspeculator.blogspot.com Onorio

    cardiacs should not play GBPCHF :)

  • convictscott

    Fisheggs. Your bias has blinded you, you are looking for the reversal, instead of the higher probability continuation. There are several problems here.

    Problem 1) Its an incomplete daily bar, there is still 11 hours to go in the trading day, anything could happen
    Problem 2) Its been going up for several weeks now, not in a spurt and exhaustion type fashion, but in a manner where each days bar has a lot of overlap with the previous days bar. This tells me that top pickers have been burned about 20 times already, fuelling the move. And you want to pick the top!

    My advice is not to take a short trade when price is embedded in the upper bollinger this way. Typically short trades in this scenario look very very appealing, and just get squeezed repeatedly. I'd say a long trade is much more appealing, but in this case the move is very mature, and you would be picking the scraps off the table.

    There are better trades out there for you to find IMO :)

  • http://thefxspeculator.blogspot.com Onorio

    Top pickers here are always fucked up, no mercy in this pair. Despite that i got a sell signal yesterday and decide to play it, so far so good.

  • Bob the Horse

    Not sure why everyone finds it so hard to accept. It's a massive bull market. Long set-ups by definition have a higher probability. Be long or flat – that is your option set.

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

    Interesting day yesterday on the SMI

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

  • fisheggs

    You are correct that I have been blinded by my my bias and looking to pick a top. The very fuckin thing I don't want to be doing!

    Hypothetically if that chart was from the close of the day and not embedded in the bolly, would the pattern criteria for an RTV be correct. i.e significant high with a lower close followed by a higher close?

    Thank you for your advice and words of wisdom. I will take on board your comments and seek to improve my psychology.

  • volar

    ya prob right… look at Bovespa..LT she may have issues.

    TK chart here LOL

    http://content.screencast.com/

  • http://thefxspeculator.blogspot.com Onorio

    Jump to 5:06 please

    http://www.youtube.com/watch?v

  • tradingmom

    Any idea while the oscillator above the zero lite shows the white line way below the zero, but the zero lite itself is still pointing up?

  • tradingmom

    Mole — it looks like there is a large, multi day trendline that runs under the zero lite 5 min chart.

  • tradingmom

    Sorry — my computer is screwy. Don't know why this comment printed, it was from yesterday.

  • volar

    … another day of gap filled pit hours….

    Dont drink AH kool-aid folks

  • http://thefxspeculator.blogspot.com Onorio

    Add more shorts on AUDUSD, seem like 9960 will fade today. I was short from 1.0140 now average is arround 1.0080

    USDJPY short signal to confirm yet, step one is complete 2 more to go.

  • MaxPainMan

    my BIDU, NFLX, IWM shorts from yesterday are holding up pretty well so far…

  • BobbyLow

    Morning folks, as mentioned yesterday FWIW, I just put on a March Bear Call Credit Spread on EEM. It'll probably skyrocket now. LOL

    I've also added a small Bear Call Spread to my SPY Position. Current positions are in SPY, DIA and EEM.

    Portfolio Delta is now skewed slightly negative.

  • http://thefxspeculator.blogspot.com Onorio

    Everybody jumping on CHF, violent moves.

  • bshah

    is this shit pausing for bounce back..? i am scared..

  • BobbyLow

    Here we go again.

    But let's see what the afternoon session brings. SPY has not closed with a red candle in 12 Trading Days. (There were a couple of Dojis but that's it).

    Question is this a Bull Market or just plain Bull Shit? I think it's the latter but Price is Price and nothing matters until it does.

  • amokta

    Keep an eye on the End Zone

    Closed out my aud short (weak hands are easily shaken) – the question is whether we have reached a longer time-frame 'high' for the AUD, snd will it head down to 2008/9 lows (the other question is it at highs from which historically it has only gone down?)

  • http://thefxspeculator.blogspot.com Onorio

    Well i “hope” to see AUD bellow 0.99 tomorrow :)

  • amokta

    YOu could well be right!

  • skynard

    Crude falling hard!

  • http://thefxspeculator.blogspot.com Onorio

    AUD channeling

    http://chartupload.com/viewer….

  • EvilTrader

    bearish flag forming on SPY intraday ?

  • http://twitter.com/RoastBeeph RoastBeeph

    Not much selling pressure at all on ZL, pretty much just buying pressure. Appears to be another melt up day.

  • Joe_Jones

    Got that right

  • http://thefxspeculator.blogspot.com Onorio

    Fucking beautifull :)

  • Joe_Jones

    Got to reach at least -1 on ZL

  • Joe_Jones

    :-))

  • Joe_Jones

    Where is RG64? I need his call as to when to go short.

  • MaxPainMan

    max pain points (so far) for friday opex:

    QQQQ $56.00
    SPY $129.00
    IWM $79.00
    NFLX $210.00
    BIDU $110.00

  • raised_by_wolves

    Or leveraged copper ETF to short.

  • http://pulse.yahoo.com/_6FCTHZELNVH7XBHT6OP3DAX5K4 Pretending2fail

    the bears cannot get it done… Tried to test 12000 DOW. Failure!

  • ds2

    RBW – you are right about copper etfs. No leveraged but they should do well.
    http://etfdailynews.com/blog/2…/

  • http://thefxspeculator.blogspot.com Onorio

    When all the bulls think the way you do, bears will get out of the cave and rape all the bulls like there`s no tomorrow.

  • http://pulse.yahoo.com/_6FCTHZELNVH7XBHT6OP3DAX5K4 Pretending2fail

    This gave me deja vu. Except this was back in 2009-2010.

  • amokta

    Ok, looks like a triple bottom test perhaps
    The bears are skating on thin Lake Michigan ice

  • http://thefxspeculator.blogspot.com Onorio

    Why the fuck did you get out of the AUD short dude?

  • amokta

    Its a flaw – i get into bad trade and out of good one!
    The reason was that the etf i got into was Uk listed with low liquidity, and as the aud hadnt moved dramatically (until recently), then any move up would have resulted in big loss (stop loss would be no good, as very wide spread). so i got out with some profit. maybe reshort if more in it, but this time on US exchange! Theres always tomorrow

  • http://thefxspeculator.blogspot.com Onorio

    You`re using ETFs? Tomorrow might be late to short :) LMAO

  • amokta

    Exactly, i have to be careful!
    To be honest i dont normally trade currencies, it was just a test, so a profitable trade is good enought for me for now

  • http://thefxspeculator.blogspot.com Onorio

    That`s the name of the game…profit :)

  • http://thefxspeculator.blogspot.com Onorio

    Anyone having problems in reply to posts?

  • raised_by_wolves

    Nope.

  • http://thefxspeculator.blogspot.com Onorio

    I`ve to refresh the page before i reply or else it posts. Work PC + IE = shit

  • http://pulse.yahoo.com/_6FCTHZELNVH7XBHT6OP3DAX5K4 Pretending2fail

    Work PC + IE = shit…. Wrong formula… Shoulda been IE = Shit. FTFY

  • http://pulse.yahoo.com/_6FCTHZELNVH7XBHT6OP3DAX5K4 Pretending2fail

    Dell shares are halted!!!!

  • http://pulse.yahoo.com/_6FCTHZELNVH7XBHT6OP3DAX5K4 Pretending2fail

    They destroyed earnings (DELL). This should be interesting. Why would they halt on amazing earnings?

  • Joe_Jones

    Last ZL reading is interesting.

  • ds2

    Circuit breaker triggered? Looks like they are trading again.

  • BobbyLow

    Because they always halt trading for a short period of time when earnings are reported.

  • convictscott

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