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Misprint My Foot
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Misprint My Foot

by The MoleOctober 30, 2013

Whether or not they’ll label this a misprint post facto – that early morning spike on Mr. VIX perhaps was a harbinger of the nasty tape we’d be seeing today on the equities side. Which is a good segue into the situation on the volatility side – let me walk you through it:

So first I thought it was just a TOS retail data misprint but I double checked it on stockcharts.com and my (much more reliable and paid for) Kinetick feed and both confirmed a spike to 21.26 today. Now when I suggested yesterday that we should expect a jump in volatility that certainly was not what I had in mind.

Fearless offered his own pertinent musings in the comment section and although I cannot confirm his suspicions I am still awaiting a proper explanation. Let’s not forget that the VIX is NOT a tradeable instrument – it is a continuously computed index which derives from actual bid offers on SPX listed options. Nobody ‘bought’ or ‘fat fingered’ the VIX here – one would have to buy or sell SPX options in order to affect the VIX price directly, or indirectly, buy or sell VIX futures. However, the sheer size and liquidity of both markets effectively rules out a short term market distortion such as this one.

In any case – we are awaiting clarification and I certainly hope it will be forthcoming shortly. Otherwise, how are we to trust any VIX print going forward?

UPDATE 3:21pm EDT: Here’s a link to the official “explanation” on Bloomberg. My take – a ‘software error’ – seriously? And it does not affect option prices? That’s just wonderful – but anyone looking at a chart may be tempted to trade that candle, especially if it is not a glitch that is so obvious (i.e. a rise by only a few percent). So the real question here is this – how often are we getting bad data that perhaps remains uncorrected? IMO this ‘explanation’ opens up more serious questions. Plus the nonchalant manner in which it is being offered and the fact that no further investigation is being promised along with the information deeply worries me.

Now, in related news I would like to show you my long term VIX:VXO chart. If you’re unsure (a.k.a. oblivious) as to the difference of the two: The latter effectively represents the ‘old VIX’ which formula was changed in 2003 – here’s the pertinent announcement back when lifted right off the CBOE site:

The new VIX will be based on prices of S&P 500 (SPX) options. Previously, the original-formula VIX was based on prices of the S&P 100 (OEX) Index Options, and CBOE will continue to calculate and disseminate the original-formula index to be known as the CBOE S&P 100 Volatility IndexSM with the ticker VXO.

What’s missing here is a detail you really have to dig around for. The old formula used (and still uses for the VXO) 30-day ATM (at-the-money) options, while the VIX uses 30-day options across the chain. And that subtle difference offers an important clue – namely when market makers are pricing ATM options either higher or lower against the entire option chain.

Congrats if you stuck around this far – here’s the sweet reward: Obviously judging by the chart above spikes of the ratio (i.e. a drop in ATM or a rise in OTM options) seems to precede market reversals. The timing is clearly on the soft side – it may happen weeks, maybe even months ahead of time. But it is something to keep an eye on as distribution (or accumulation of short positions) would happen ahead of time.

The VXV:VIX ratio however is comparatively muted – although there is a pretty clear falling resistance line which we’re approaching right now. In case you wonder – the VXV is basically a 90-day VIX, thus representative of the expected volatility three months out instead of just 30 days (as in the VIX or VXO).

As they’re cleaning out some of the weak hands I thought I’d offer some plausible support zones. On the cash I’ve got 1756 which is the lower 25-hour BB – but quite frankly speaking it’s a rather weak one. That only leaves us with the daily NLSL at 1757.67 which seems more credible.

If nothing else this day confirms why I avoid being long in bot-driven tape like the one we’ve seen in the previous days. When the machines decide to throw things into reverse it can go ugly quickly – and quite frankly this still was a rather mild day by any measure.

It’s not too late – learn how to consistently bank coin without news, drama, and all the misinformation. If you are interested in becoming a subscriber then don’t waste time and sign up here. The Zero indicator service also offers access to all Gold posts, so you actually get double the bang for your buck.

Cheers,

 


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.
  • Skynard

    Shorted AUD again .945. Short /ES 1760

  • http://evilspeculator.com molecool

    You’re trading it off the 25-day SMA?

  • bdoone

    Thanks Mole. Lot of chatter out there about that VIX spike and you are right to wonder that since its not a tradeable instrument and (supposedly) immune from human fat-fingering then what was WTF was it. It will be interesting to hear CBOE’s take on this, that is if we get one.

  • http://evilspeculator.com molecool

    The usual suspects are pointing at the FOMC non-taper, but that was expected, plus it would not result in such a spike and instant drop. Something is very very fishy here…

  • Skynard

    Yep, Made 3 trades for 10R and now short.

  • Sean
  • http://dartht.blogspot.com/ Heisen_Gerb

    yes, you mentioned the VXO. saved me the effort. +1

    I wouldn’t wipe my butt with the VIX. worse than trash.

  • BobbyLow

    Anybody remember when the VIX over 30 was considered High and a Contrarian Buy. Then somehow that number became over 20 and now it’s ????????????

    I think the only purpose the VIX has is to be a function of Jerking VEGA around on Equity Options. Otherwise WTF good is it?

  • http://dartht.blogspot.com/ Heisen_Gerb
  • Skynard

    These dip buyers should get tha axe:)

  • http://dartht.blogspot.com/ Heisen_Gerb
  • wandering196

    great post, i need to reread a few times though

  • http://evilspeculator.com molecool

    Well, the CBOE states that it did NOT affect option prices, but we’ll have to double check that. I would have like to immediately looked at the SPY option chain and taken a snapshot but unfortunately by the time I saw it the VIX had been dropped.

  • http://ibergamot.blogspot.com/ i Bergamot

    Fed Day is not what it used to be

    AH Facebook fade – thats epic

  • SS_JJ

    lol, hilarious

  • Skynard

    Hehehe, put the hurt on /NQ it did:)

  • SS_JJ

    Dreams of beef fillet have been reduced to mac&cheese in a matter of 1h. Curious to see what the rest of the week brings us. Feels like Vegas in this low O2 environment. Bots in charge, so I don’t overexpose myself, but I still play. Current Pos. L.: HL, GDX, SQQQ, VXX, UDN: small pos. added today, and of course cash. Will get rid of losers once whatever trend takes off.

  • http://www.ProfitFromPatterns.com/ Ivan K

    Trading can be so laid back … when adopting a laid back approach … and getting on with life in the meantime.

    Textbook top in S&P 500 before the bs!

  • SS_JJ

    I’ll drink to that! 😛

  • jigdaddy

    ivan, a while back scott mentioned you take on students. how does one get involved with that?

  • Skynard

    Good plan:)

  • http://evilspeculator.com molecool

    Yes, but you would have to:

    1. Trade the 360 consistently – how many CI subs are doing that right now?
    2. In this particular case trade the SPX but take entries off the ES futures. Unless of course you are prepared to hold SPX positions overnight (in this environment).

    Everything is 20/20 in hindsight and why didn’t you show up here and post this setup ahead of time as opposed to after the fact? That’s how I post setups – AHEAD OF TIME with all attached consequences (i.e. most likely being wrong).

    There are many reasons as to why we decided to not offer the SPX or the ES for CrazyIvan. In essence they suck and the edge is marginal. You guys know the patterns as they have been documented in the CI pages, so go and see for yourself. If you can trade the 360 on the SPX via the CI rules effectively and with any significant edge then please contact me and Scott.

  • CorporalCarrot

    I’m liking the intersection of the 25 hour (red) with the 100 hour (blue) with price rising from above for a trade. Yesterday’s volatility means preference is for short but will flip long if necessary.

  • Skynard

    Wow, currencies are wacked today!

  • http://dartht.blogspot.com/ Heisen_Gerb

    more than usual? 😉

  • Skynard

    WTF, hung on to AUD short with the dollar strength and it rallies!

  • Skynard

    Looks like time for /SB squeeze.

  • Rightside_ot_trade

    /CL 1% bounce at the M 100 and W 25 MA’s

  • Skynard

    Also shorted /NG last night and will flip it before report for a long entry. See if the evil plan works:)

  • http://www.ProfitFromPatterns.com/ Ivan K

    Regarding Hindsight vs Real Time

    A famous quote comes to mind … “by studying the past we can gain an insight into the future” … hence hindsight is not to be derided in my view … it can play a great role in learning and growing … on all levels … in all fields.

    When one has a rigid, black and white set of rules, the only difference between something in real time vs hindsight is the integrity the observer. Naturally, the ability of the observer plays a pivotal role as well … in other words, their ability to see a setup quickly enough to document it before the moment passes.

    A simple event such as a FakeOut, or an IPu or IPd, take but a nano-second to spot … it is not a matter of being right or wrong … real time or Harry Hindsight’s version … either it is or was there or not …whether such event leads to a profitable outcome is a different issue altogether.

  • http://www.ProfitFromPatterns.com/ Ivan K

    On the topic of what instrument can be traded using my setups … there are many choices that are available … alas some are denied to USA citizens … I am referring to CFD’s (Contracts for Difference) … an OTC product that has been around for a decade or so … CFD’s allow for accurate position sizing that is otherwise a challenge with the ES or YM futures contracts.

    EDIT: Additionally, CFD’s are not subject to the lag effect of ETF’s.

  • sburtt

    Mole – you have my full support on this. It’s always easy to talk ex-post posting ad-hoc charts, most probably an adaptive MA would have given the same output on the chart above

  • http://evilspeculator.com molecool

    I am not even going to get into this with you Ivan as I have been warned by various people who have studied with you in the past. So do me a favor mate – continue posting the same SPX 360 charts with entries and exits for the next three months and then we talk. I’ll still be here…

  • CorporalCarrot

    Added to shorts in and around the cross as per earlier post. Trade clusters indicated in addition to shorts on Dow from yesterday.

  • http://evilspeculator.com molecool

    See my comment to him below. I admire Ivan’s work but on a personal level he suffers from a chronic guru complex and as such I will not be sucked into his game. It is extremely deceptive to post a series of winners and omit all the rest – especially given the fact that trading the SPX cash via Ivan’s patterns is supremely difficult and probably almost impossible to do in a disciplined manner for the average person here. As I said – if there was a good edge in trading the basic Ivan patterns on the SPX then we’d be offering it here.

    I however encourage all of you who are interested to get in touch with Ivan and go through the process with him. Then come back and show me how you traded the SPX via his patterns effectively and consistently with an edge and risk tolerance that worked for you.

  • http://evilspeculator.com molecool

    You posted an SPX chart and omitted some very critical but crucial details. And how many people here are going to trade CFDs or binaries… this point is absolutely unrelated.

  • ridingwaves

    did you flip it yet?

  • Skynard

    585 for a retest, see if it triggers

  • http://www.ProfitFromPatterns.com/ Ivan K

    It is actually a CFD chart based on S&P 500 cash index.

  • ridingwaves

    looks like good place for it on charts

  • Rightside_ot_trade

    Yep could happen higher spike highs and lows in numerous short term charts so far

  • http://evilspeculator.com molecool

    Nice one.

  • http://evilspeculator.com molecool

    Was knocking against the 25-hour SMA which was a good spot for a reversal.

  • http://evilspeculator.com molecool

    EURUSD just fell through 25-day SMA. They tried this before and it pulled back. Let’s see what happens here – very interesting… may be tempted to short with a tight stop above the SMA. Long on close above the SMA.

  • CorporalCarrot

    Took some profits at 1756.75 / 15,560 and moving all stops down.

  • http://evilspeculator.com molecool

    EURAUD – interesting…

  • http://evilspeculator.com molecool

    Waiting for short term entry…

  • Skynard

    Like the hammer:)

  • BobbyLow

    AUD/CAD finally broke to the downside. Got stopped twice and third time was a charm. USD/CHF still kicking ass to the upside and you might want to take a peak at the GBP/CAD to the downside.

  • http://evilspeculator.com molecool

    So I finally caved and started a facebook page – Scott suggested it as a way to expand my audience a bit. If you’re a FB addict then I would very much appreciate a visit and a few thumbs up. Perhaps even pimp it to your friends?

    Unfortunately FB.com/evilspeculator was grabbed by some *@&^@ (be nice Mole) ex-sub who didn’t respond to me. Didn’t stop me though and I thought of a pretty groovy facebook profile:

    https://www.facebook.com/despiculator (get it? – despicable speculator – hehe)

  • http://www.ProfitFromPatterns.com/ Ivan K

    If you profile SPX regarding range expansion (volatility) and also regarding OPd days, you may be surprised with the findings

  • Skynard

    Long /SB 34

  • http://evilspeculator.com molecool

    Plenty of action today on the FX side. I’m posting setups to my FB page today – so you find me there!!

    https://www.facebook.com/despiculator

  • http://evilspeculator.com molecool
  • CorporalCarrot

    Fuck ye mole. Am I gonna have to break a lifelong principle and join Facebook now? 😉

  • http://evilspeculator.com molecool

    I know I know – but can you blame me? I’m like Mr. 5 Billion and 1…. I hate social media but it’s great for bzns and this game is very much a viral one. And let’s face it – we need new blood in here.

  • BobbyLow

    Would this make ES available on Facebook only? There are a few sport pages that I follow. They tried to make it so that we had to join FB in order to partcipate. There was such a backlash that they went back to the old venue.

    No big deal, but I for one will not join FB.

  • http://evilspeculator.com molecool

    Soft support on the SPX – if you are looking for a possible long opportunity watch the spoos and pick a bonafide hourly long price signal (i.e. IP-L, RTV-L, FO-L, you get the idea).

  • http://evilspeculator.com molecool

    No worries – the blog here will continue as is. I won’t force anyone to use FB comments or profiles. No changes – just will post some of the free ideas on FB.

  • bdoone

    From business standpoint, yes you gotta do it so good luck with it…funny sign I saw picking up pizza: “May your life be as awesome as you pretend it to be on Facebook”

  • BobbyLow

    Good. 🙂

  • CorporalCarrot

    Didn’t get long but took profits on all at just under there.

    Europe has gone decidedly green and would like to see another attempt at the 100. Hour.

  • http://evilspeculator.com molecool

    Well, it’s not about me personally – it’s about what I do at ES. And the viral aspects of FB cannot be underestimated – actually I did that for too long. Fact is that if you enjoy what I do then that’s great but it’s even better if your friends see it too – if they’re interested they can take a peek. Very hard to get that type of traction via twitter even – too much noise.

  • http://evilspeculator.com molecool

    Nah, I wouldn’t do that to you guys. The blog lives on as always and will be my first priority.

  • http://dartht.blogspot.com/ Heisen_Gerb

    SBUX hourly, volume and recovery. no whip.

  • http://ibergamot.blogspot.com/ i Bergamot

    bears are extinct

    “Extinction” from Wiki:
    In biology and ecology, extinction is the end of an organism or of a group of organisms, normally a species. The moment of extinction is generally considered to be the death of the last individual of the species, although the capacity to breed and recover may have been lost before this point.

    How will forest survive without these ‘species’?
    Or may be this time is different…
    Right

  • Rightside_ot_trade

    I’ve got a NLSL at 18.46 on the 3 and 4 day charts which lines up with that hourly 25 ma, long above there

  • http://dartht.blogspot.com/ Heisen_Gerb

    silly Berg, it’s called hibernation. they’ll be back.
    in the meantime, pass me a cup of Zimbabwe tea will’ya?

    (looking at the ES hourly, looks like phase has changed from trend- up to neutral)

  • ridingwaves

    Entered position on ACRX capitulation plus 360sma bounce..Theory being most retail traders don’t make it thru the shakedown to the 360sma, stops triggered and shorts exit there..

    http://s18.postimg.org/dv2y20ha1/ACRX_daily_360sma_bounce.jpg

  • Rightside_ot_trade

    /ZW watching the hourly inside bars at the weekly 25 ma

  • http://ibergamot.blogspot.com/ i Bergamot

    Pff, fairy tales

    they all been killed in their sleep by Mighty Bernie The Beard, the purveyor of Zimbabwean Tea

    (o, wait, I forgot – there is no QE)

  • Skynard

    Long now AUD .9428

  • bdoone

    I know its a business FB page…I just thought sign was funny, and accurate…I’m still a FB holdout, like a bear in this market, a dying breed:)

  • http://evilspeculator.com molecool

    Talking about their existence is useless as the bears are a very small minority in the markets, most of which get killed during real bear markets (usually they miss the boat on market turns).

    The game isn’t about the bears – it’s about a lack of bulls – or as a better parallel – it’s about the very last sucker buying the top.

  • http://evilspeculator.com molecool

    Whatever it is – please keep posting the same chart here every week with entries and exits. We’ll see how it goes over the next few months 😉

  • sleipfisk

    At least we have enough of euphoric bulls.

  • http://evilspeculator.com molecool

    Kevin suggested that the ‘despiculator’ sounded like an unpleasant clinical instrument. And he’s right! It’s a surgical tool used on fledgling traders when removing their hopium gland. It’s less painful than it looks. We actually have an image:

  • http://ibergamot.blogspot.com/ i Bergamot

    True
    All these “last’ buyers have been richly rewarded during past few months
    I am not talking about day-trading, but more intermediate /swing etc

    Think about it:
    the only way to hold an index position since spring was to NOT take a stop, be it support, ma, ntsl – just disregard. Market will be higher anyway

    and I think this thinking is firmly cemented in peoples minds, so much so that masses completely disregarding internal weaknesses in markets, Naz and NYSE computers breaking down almost daily, interest rates doubled in 1 year, etc etc and no liquidity at-all
    Say nothing about fed, just look at individual stocks – staff that used to be as liquid as ocean, now has bid/ask spreads so wide – you can drive a truck thru it

    (no , I just will say nothing about politics … I will not)

    everybody is a long-term investor now

  • BobbyLow

    OK, it’s error time. After a previous stop out for a -1 R loss on my AUD/CAD Short, my rules for rentry were still valid. But for whatever reason when I reentered the short this morning, I reduced my position size. This meant that I did not maintain consistency within my trading plan.

    Of course so far this morning, the pair has tanked since I reshorted. This means that as of this moment, I am at a combined even on the pair when I should be up about +1R.

    I think this is what Scott meant about trading correctly and sticking with the plan which I did not do. Another lesson learned.

  • SS_JJ

    Not short bucky anymore, but not long either (not yet)

  • http://evilspeculator.com molecool

    Yeah, I wasn’t really so hot about that setup. But your trading plan has priority – always.

  • http://evilspeculator.com molecool

    Chart of the day… the Zero at today’s lows.

  • Rightside_ot_trade

    Was just stopped out of my overnight long on the 8hour

  • http://evilspeculator.com molecool

    It’s one of the reasons we are putting so much time/effort/work/sweat/blood into automation, despite it being inferior to a well trained human trader. Doing this day in and day out is basically like fighting an addiction – you can never be cured, you can just refuse to fall prey to your weakness.

  • http://evilspeculator.com molecool

    politics – yeah – let’s not go there or I won’t get any work done today…

  • Skynard

    Was luck for me to hold short, retraced the entire move. 94 looks like good support now but will find out tonight unless taken out. Seems extremely bullish.

  • Rightside_ot_trade

    Weekly chart still possibly in an upmove
    Sitting right on two trend continuation lines for me , the 8 and 21 EMA’s. Daily possibly reversing, higher high and low so far

  • http://evilspeculator.com molecool

    Luck – ouch!!! See above – we may have to use the despiculator.

  • Skynard

    LOL, ouch!

  • BobbyLow

    That makes sense. Most people probably think that decisions by institutions are made whether to buy or sell stock based on crunching numbers of financials and or PE Ratios of companies everyday. When in reality, most buying and selling decisions are based on “if then” computer programs. So automated vs. automated seems like the right idea. Although automated ain’t as much fun as doing a “David vs. Goliath” battle every day. 🙂

    I’ve tried very hard to make my trading decisions totally binary. I’m almost there. Occasionally a human defect will rear its ugly head like fear did this morning. This is why although nothing new, I’ve added a mistake column to my trading log that must include what the mistake was and why I made it.

  • Rightside_ot_trade

    uh oh

  • Skynard

    /SB run up into close should give a signal.

  • http://evilspeculator.com molecool

    Mistake column = very good idea.

  • Rightside_ot_trade

    first it picks up some contracts at -2 sigma vwap area (look at the volume on a 10 minute chart), right here

  • Skynard

    Flat as a pancake, like my first girlfriend:)

  • Skynard

    Have full short on /ES now, let R rip:)

  • http://ibergamot.blogspot.com/ i Bergamot

    one remains, so not completely extinct
    Sky, do you breed …?

  • wandering196

    looks like something they used for delivering babies

  • Sean

    You must have “friends” in high places… what was your trigger to short this? I’m not seeing any reason to short yet…

  • Skynard

    Hehehe, stop run before sell off:)

  • Skynard

    Took off AUD for potential better entry. 4444

  • Skynard

    Was short from 1760, full short now.

  • 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„¸

  • http://evilspeculator.com molecool

    pictures?

  • Skynard

    Actually, have only one son and his semen is in cold storage since he is also the last of my blood line that I know about:)

  • http://www.ProfitFromPatterns.com/ Ivan K

    Perhaps a more positive heading is “Opportunities” as opposed to “Mistakes” … opportunities to improve what and how one does something … you are beginning to (or have) realise how much of a head job trading is … why not assist your subC to assist you as well.

  • http://www.ProfitFromPatterns.com/ Ivan K

    As the exact requirements of my setups are available on this site, it really matters not if a chart is produced in real time or not … either the setup is / was there or not … but then it does matter if one wants to piggyback on someone else spotting a setup … and that can be an extremely dangerous idea.

    Anyone with a desire can take the time to mark any or all the setups on any chart of their choosing … in fact, this is something I strongly urge as this empowers the person to exercise their own creativity and begin to recognise the characteristics of any setup, or idea … it also allows then to work with various exit strategies to establish which one, or ones, produce the outcome they desire … and also fits in with their own temperament.

  • http://www.ProfitFromPatterns.com/ Ivan K

    Thank you for your invitation … as you have already paid me the compliment of spelling out the requirements for my setups on your site here … the exercise would be much better served (for everyone) by opening it up to crowd-research … after all, just 5% of the efforts of 100 people can produce more that 100% of one’s own efforts.