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Mind The Booby Traps
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Mind The Booby Traps

by The MoleDecember 4, 2017

The equity market in particular has become extremely good at luring and then trapping people into highly volatile reversals. Which especially is true for those rare moments when we may be tempted to  trade against the prevailing trend, which of course continues up, up, and then up. Given the increasing number of traps placed in front of us on a weekly basis I have a hard time imagining how anyone could succeed trading equities on a long term basis without the aid of some sort of participation measure (a.k.a. market lie detector) as for example our very own Zero indicator:

2017-12-01_Zero

As you recall many of my market momo measures were pointing toward the downside early Friday morning, which is why we took out a little lottery ticket. Which quickly paid off but not as much as I would have liked due to the immediate rebound which has continued all the way into Monday morning. One big give away that it was time to call it a campaign was the Zero Lite signal which quickly pushed into positive territory and then stayed there for the remainder of the session.

Unfortunately we did not get a bullish divergence ahead of time as the reversal was triggered by news about the big tax cut bill being approved by congress. But at least the signal didn’t leave us with any illusions regarding the potential of another dip downward. By the way if you’re interested to learn more about our Zero indicator point your browser here. Or you can just sign up as a member and see for yourself how it can benefit your E-Mini swing trading.

2017-12-04_spoos_update

Fortunately my campaign management did all the thinking for me as it automatically advanced my stop to 1R after 2R MFE. This may be one of the fastest 1R win I have ever had actually but unfortunately my position size had been only 0.3%, thus it was hardly worth all the hubbub… 2017-12-04_VIX

The VIX has now produced another major spike upward, just as predicted right here on Friday morning. Odds now support a reversal back to the mean at minimum. The new formation is short term bullish for equities but the increasing accumulation of rapid spikes depicts a much more volatile market and let’s not forget that the gravy train will one day end, so let’s not get too comfortable.

2017-12-04_USDJPY

The Dollar is in a strange spot right now. The USD/JPY is actually one of its more bullish crosses and it gapped up in a similar fashion on Friday.

2017-12-04_gold_usdjpy

Which is of course what’s driving down precious metals right now, which continues to be a very difficult sector for participation IMO. And seasonally speaking the EOY is not exactly a great time to be long either gold or silver.

2017-12-04_DXAcross the board however the old greenback continues to look droopy. Clearly the past decade of almost non-stop quantitive easing has taken its toll and continues to exert downward pressure on the Dollar. It’s the Euro that the bulls continue to favor for some mysterious reason, perhaps partially fueled by an imaginary economic strength that over course of the next few years I see waning on this (European) side of the Atlantic and rapidly growing on the other (the U.S.).

2017-12-04_crude_stop_out

Not much luck with crude and a very promising looking position mid Friday was stopped out at break/even earlier this morning. It’s possible that we’ll see a more pronounced shake out but the daily panel suggests this one continues higher. However given the current formation I am hesitant to jump in as that double bottom on the short term panel should have driven us much higher.

SPY_weekly_sharpe_stats

For now I’m going to sit tight and watch what happens over the next session or two. There’s way too much realized volatility as well as gapping activity at play here lately, which makes me cautious about taking on any exposure. And let’s not forget the ugly little secret behind the annual Santa Rally, which is that it’s usually preceded by the second most bearish week of the year (i.e. next week). So let’s treat lightly here people and continue to be nimble, which is a policy that has worked out pretty well for us this year.


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://evilspeculator.com Sir Mole III

    Don’t forget to catch up on my Sunday update in case you weren’t aware that I’m posting Sundays now.

  • HD

    very cool that your indicator lined up with price action at 2634. Kudos.

  • HD

    Monday: factory orders at 10am. Tuesday: ISM services. Wednesday: the ADP. Thursday: jobless claims and consumer credit. Friday: monthly payrolls (est. +195k), consumer sentiment and wholesale inventories.

  • StockTalker

    Stops blown both ways, look out below.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • StockTalker

    Poor kitty car is sufocating:)

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    so’s my gold trade.

  • HD

    shake n bake

  • StockTalker

    Writing on the fn wall

  • StockTalker

    /NQ red, big move coming

  • HD

    a few years ago the moons marked key times on the SPX chart. FWIW.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    2660.60 – almoooost there.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    yes they did. Happy SuperMoon everyone.
    😉

    http://www.cnn.com/2017/11/30/us/supermoon-2017/index.html

  • StockTalker

    -3 /YM

  • StockTalker

    Lol, Evil

  • StockTalker

    She is going to tank right here.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    QQQ’s maybe.
    S&P – you’ve got to be kidding me.

    High Yield is neutral. HOly Frackin Crap – it’s a gamble today.

    EDIT: $RUT – ..touched my top rope on the daily.
    http://stockcharts.com/h-sc/ui?s=%24RUT&p=D&yr=1&mn=1&dy=0&id=p29859134108

  • StockTalker

    Nothing but a mammoth bear flag on /NKD daily.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    SLV FWIW.
    at RSI 33, it has turned around (see March).

    http://stockcharts.com/h-sc/ui?s=SLV&p=D&yr=1&mn=0&dy=0&id=p37206403009
    -GG

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    as warren buffet said

    It’s only when the tide goes out that you learn who has been swimming NeKD.

  • StockTalker

    Don’t try to swing trade this tape.

  • Tomcat
  • HD

    Great call stock talker! Gotta love real time market calls! Kudos.

  • StockTalker

    Retail if f’ed right now. First target is Fridays low

  • HD

    Technical looks like SPX sitting on apex of Friday’s triangle. Testing if R is now S.

  • Tomcat

    Aren’t WE retail???

  • StockTalker

    Some are professionals here

  • Mark Shinnick

    Gotta wonder….I fuck-up a lot.

  • StockTalker

    Have to limit those to minor losses and learn from them. Today should make up for the past quarter:)

  • Mark Shinnick

    Just seems to me that the long $ and gold lower trendline dwelling and in view of continuing velocity downside would be a gld exit inflection by now. This debt situation is whacking out all the sensibilities….until that stops.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    I’m all ears. high alert.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    Semi’s
    a sweet little no-brainer daily chart for my subscribers.
    😉

    http://stockcharts.com/h-sc/ui?s=%24SOX&p=D&yr=1&mn=6&dy=0&id=p36115266720

  • StockTalker

    Stepping on /NQ now.

  • BobbyLow

    Good afternoon folks. It’s a crazy market as usual but it is what it is. :)

    Scalped +.4 R on Oil and flipped to short. Currently short Gold and short Oil.

  • Julie

    Hi BL No positions looking to go long OLED Going to watch approx. 161 and 149
    JULIE

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • Julie

    Hi GG Have a journal set up
    JULIE

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    You will use your journal each time, you will live with it, you will sleep with it, it will be your BEST FRIEND

    http://c8.alamy.com/comp/D6XJN2/a-us-marine-corps-drill-instructor-screams-at-a-marine-recruit-during-D6XJN2.jpg

  • StockTalker

    Damn pigs, let’s go!

  • Julie

    GG GDX testing November 3 low on less volume and momentum. Also posiive https://uploads.disquscdn.com/images/7549080213623c68e58bab84a202050391c0337126313f748c2de9126e57946d.png divegences daily and 60 min charts. Your thoughts ?JULIE

  • http://evilspeculator.com Sir Mole III

    This is actually the first digital watch I really like. Still not going to buy it as I don’t want to carry around another digital device they can trace me with.

  • http://evilspeculator.com Sir Mole III

    It’s a good way to go…

  • http://evilspeculator.com Sir Mole III

    Slow here today, where’s everyone?

  • Ronebadger

    Present – no comment…

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    The coffee is weak

  • StockTalker

    /YM below 24400 will roll like a big turd.

  • Julie

    Hi Mole Like a cougar ready to strike. Just watching looking for setups to come to me
    JULIE

  • StockTalker

    Gap fill coming

  • Tomcat

    BL,

    What do you see in the chart for your S on gold? Asking bc I am positioned long against $1265.

  • StockTalker

    Let R ride

  • Mark Shinnick

    …entering your kill zone.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    run Bambi, run!!!

  • Julie

    Stocktalker SPX the gap fill will be on the 60 min 21 ema. The pullback so far looks corrective and not impulsive SPX 60 min chart JULIE
    https://uploads.disquscdn.com/images/45c0017f7b4c7990fa7c7add94406f23aab5c4a9651b9333d30eea1b26694706.png

  • StockTalker

    Sweeeet!

  • Julie

    SPX Possible bounce here at the 10 min 89 ema and lower trend line of channel Possible just saying Shown SPX 10 min chart https://uploads.disquscdn.com/images/075b351ef5c65b76f9454767f86940210838ab1dae70315b08eefc649a88ef65.png JULIE

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • StockTalker

    /YM next support 24300

  • Julie

    Real close GG Stated in post below gap fill closely matches the 60 min 21 ema too
    JULIE

  • BobbyLow

    I probably have a different and faster visual than you do because I’m currently using a 195 Minute Chart without after hours. Because of this, I’m getting 2 candles per day instead of one on a Daily. I’m also trading 3X UGLD/DGLD for swings and because they do not trade 24/7 like /GC, I run my /GC chart to be as close as I can to be in sync with regular trading hours. I imagine you are using a Daily chart that is giving you a stop of 1265 as opposed to my 195 Minute chart that had a stop at around 1284 on the long side.

    I might add that just because my chart is faster, it doesn’t mean that it’s better. All any given chart does is give certain reference points and a specific prescription lens for trigger points to the viewer. They are like prescriptions for eye glasses that vary from user to user. :)

  • Mark Shinnick

    Nice looking tool.

  • Julie

    Watching the Banks $BKX at this level i.e. overbought going up into a parallel channel and MACD at a level where a pullback may occur JULIE https://uploads.disquscdn.com/images/2674efabb6ae4a2c01cbffe103142a60e62bc79895c5d1d28efc8a0701c4b3cf.png

  • Julie
  • http://evilspeculator.com Sir Mole III

    I don’t trust this tape – not touching equities with a ten foot pole right now:

    https://uploads.disquscdn.com/images/0f2aa9b4c1577a5facebd323f287fa709ed52501915cfa37da1cf2f724160a48.png

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • Julie

    How about the QQQ’s Mole ? The dump last week I alluded to an initiation phase for selling Yipes !
    JULIE

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb
  • HD

    Legendary call amigo! Can we do it again? HH and tank?

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    Time. Check.

  • BobbyLow

    I have to give a “tip of the cap” to people succesfully trading equities. I can see where day trading them today could have worked out nicely. I wish I had the cojones to fade this morning’s equity rally but it was not to be. I’m happy to stick with the low beta stuff like Gold and Oil. :)

    BTW, today’s turn around in equities is just another reminder of BobbyLow’s Axiom #1 which is, The Market is completely full of shit at all times. LMAO

  • Julie

    GG on your 60 min chart the upper Bol band has not turned down yet !
    JULIE

  • StockTalker

    Long /YM 24300

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    immaterial, full steam ahead!
    😉

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    no one follow me.
    daily support DEAD AHEAD.
    [qqq]
    http://stockcharts.com/h-sc/ui?s=QQQ&p=D&yr=0&mn=5&dy=0&id=p75475080620

  • Julie

    BL Gap fill and then some SPX … This pullback today could turn impulsive on the intraday charts. If it does will be shorting the subsequent bounce. Not till then
    JULIE

  • Julie

    SPX two charts 2635 is a level of interest and to watch. 2635 is the lower cloud boundary on the 10 min chart matching the Ichi Cloud baseline (21) on the 60 min chart also 2635 JULIE https://uploads.disquscdn.com/images/0ec0e6f3fb59d6ec23ae4b3e8c823168e2088676fb470045ff63b0173ae95116.png https://uploads.disquscdn.com/images/0b9ef3b5ad7beb12d224811e27a04185f9eec3d877db7accc6c90245ebf9f94d.png

  • ridingwaves

    they brow beat the bio indexes there at the end…red headed stepchild syndrome is now in play…..could be interesting week…I’m not in favorable position for more red, stops are a bit lower but their was no mercy across the board

  • Tomcat

    GL Julie. Get em all…

  • Ronebadger

    Read this today on a SentimenTrader tweet:
    Fun fact: The last time the S&P 500 futures gapped up > 0.5% and
    traded to a multi-year high before reversing to close negative on the
    day was January 3, 2000.

  • Ronebadger

    Fun fact, indeed…

  • Julie

    Tomcat no positions currently Just waiting for things to come to me. I am watching SPX ; GLD ; GDX along with OLED
    JULIE

  • BobbyLow

    It’s pretty tricky right now. And I think between last night and today, /ZB (30 year bond) was down about 2 full points at its lowest. Right now it’s only down 0.’04.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    but this time is different

  • http://evilspeculator.com Sir Mole III

    That was a whole lotta nothin…

  • ridingwaves

    thinking the gap at 2582 is going to be filled in Jan. 18

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    5 minutes into open,
    and there’s the Q support.
    I’m going back to bed.
    😉

    https://uploads.disquscdn.com/images/7c32dc266f6ba4613f1a9f33bc123d44e666e3888e25ca4d8a35cd67059090fa.png

  • Mark Shinnick

    Penny for your thoughts?

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    VZ, I could have squeezed out another dollar. doh!

    http://stockcharts.com/h-sc/ui?s=VZ&p=D&yr=1&mn=2&dy=0&id=p45952166990
    -GG

  • Mark Shinnick

    Daz of Y2K talk and fears.

  • http://evilspeculator.com Sir Mole III
  • Mark Shinnick

    Yes, went short with that one; the stop now just above today’s lows. I don’t have any sense of edge one way or the other, however. See some weighing developing for longs.

  • Wave_surfer

    I agree bonds have been coiled and will pick a direction sometime for a big move.
    It is about as likely to break down as up, I think. I will wait and see.
    http://stockcharts.com/h-sc/ui?s=%24USB&p=M&b=3&g=0&id=p07874077680&a=325626179