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Mom-O-Matic
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Mom-O-Matic

by The MoleSeptember 13, 2016

We seem to be reverting toward Friday levels across the board with equities still holding most bullish. Instead of trying to guess which next turn this hare from hell may run I thought it to be more productive to put together another momo update. What I finding is rather surprising as it’s either very bullish or very bearish, all depending on how this week resolves. No worries – I’ll walk you through it step by step:

2016-09-13_volatility

Realized volatility has been extremely revealing over the past few weeks. First we started seeing it mainly on spikes to the upside, which was of course rudely interrupted Friday when the bots flipped on a dime and started selling everything but the office furniture. Equities, bonds, gold, silver, crude – everything had to go. If you look at the price pattern on the hourly then it becomes questionable whether there was any human trading action involved at all (no we retail schmucks don’t count).

Then yesterday we got the exact inverse – everything was bought back at discount and we almost filled the entire route down painted last Friday. And now everything is once again weakening but there’s one big difference – the tape is starting to look relatively ‘normal’ again. And by that I mean some red candles followed by a small retracement followed by more red and then an attempt to build a base. It seems like the bots are done playing their games – for now.

Watch Your Six

Clearly there is a lot happening behind the scenes here that we are not privy of and about which I do not care to speculate. All I know however is that this most definitely not the picture of a healthy market and that in turn is the reason why the alert level in the evil lair has been switched into Defcon 3. I strongly advice all of you against taking any large positions, as a matter of fact I suggest that you keep a majority of your assets in cash. You have been warned.

2016-09-13_vix_vxv

So let’s talk a bit of momo, starting with the VIX:VXV ratio. In terms of bearish potential we’ve got a lot remaining but judging by the signal range between March and June those conditions can sustain for quite a while. Which brings me to what I briefly touched upon in my introduction. It’s possible that this was it and we once again continue to curl around above the lower trend line. But IF things descend lower from here then the potential for continuation is considerable.

And that is the double edged sword of these types of surprise moves. They do clear out some bearish potential on a short term basis but they do not produce conditions that invites significant buying interest on a medium term basis. I hope that point comes across, as it is crucial.

2016-09-13_vxv_vix

Here’s the inverse VXV:VIX – I like various perspectivs on this one. We haven’t been pushing a ratio of 1.2 plus for more than a few days for a long time. Usually we get one big spike > 1.2 and then comes the sell off. That situation started to change earlier this year and given where we are economically, geo-politically, and a tiring bullish trend an extended signal range like this is actually quite brazen.

2016-09-13_vxv

I noticed something on the VXV to VIX overlay that I never really fully expressed and appreciated before. Namely that price extremes to the up or down side were usually accompanied by the VIX leading the VXV. I know that this is not reliable predictor but if we start seeing a spike (up or down) followed by a reversal then it’s possible that either a high or low is in place. For now I do not see a distinct pattern that would suggest that this sell off has run its course.

And here is where it gets interesting…

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About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at various social media waterholes below.
  • AcoBrasil

    Great post.

  • Mark Shinnick

    Thanks.

  • http://evilspeculator.com Sir Mole III

    I aim to please.

  • Ladywandering

    great info thank you

  • AboveTheNoise

    Great stuff, Mole. FX markets continue to chop around. Yesterday’s trade reversed from +0.5R to take me out for a loss. 3/4 of my last trades have followed that pattern. Don’t see anything today, so time to sit and chill.

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

    I strongly advice all of you against taking any large positions, as a matter of fact I suggest that you keep a majority of your assets in cash. You have been warned.

    Amen.
    I don’t say it much (a couple times per year), but I can safely say today. “Don’t Be Long”

    [BPSPX]
    http://stockcharts.com/h-sc/ui?s=%24BPSPX&p=D&yr=0&mn=4&dy=0&id=p99999887816
    -GG

  • ridingwaves

    funny how yesterday tested the breakdown area and backed off…that 2161 is resistance right now, long term support line now turned bearish…

    so far the 7/8/16 breakout candle is holding on daily SPX…

  • Yoda

    Most excellent post.

  • Billabong

    You did good if you kept your short position over-night.

  • ridingwaves

    stopped out yesterday on one play, the other provided me some taco bell for a year
    yo queiro taco bell
    https://www.youtube.com/watch?v=BwdO-87UY-Y

  • Mark Shinnick

    Brilliant ad. ES came right up to my resistance yesterday so I ’em have it again near the close.

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

    Did I, or did I not say 2160, bear’s F’ed last week?
    LOL.

  • Mark Shinnick

    Those charts you show are pretty good.

  • Yoda

    So far it looks like bots are behind today’s drop

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

    some of today is about treasury auction drain, I was including this in my plan…

  • Yoda

    AAPL ain’t looking very much bearish to me:
    http://stockcharts.com/h-sc/ui?s=AAPL&p=D&b=5&g=0&id=p75991694756
    As the saying goes where AAPL heads to, the rest of the Market follows. Today, could also be Turnaround Tuesday, so general tape fuckery could be in play.

  • Mark Shinnick

    I never really know what the chicken or the egg happens to be….seems that hitting resistance near yesterday’s highs might have had something to do with it.

  • http://www.linkedin.com/in/sharondsessions/ Sharon

    Will continue on the sidelines. What a wild tape. Thanks, Mole, for the update.

  • Mark Shinnick

    Short the damm thing at least a little if you can.

  • Yoda

    I’d say Friday’s low needs to hold today for the bulls’ trend to remain valid

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

    the QQQ’s (vs. Dow/S&P) aren’t exactly leading to the downside percentage wise.
    we must be cautious

  • evilasevildoes

    GREAT POST MOLE

  • Mark Shinnick

    Watch out for recency bias crept into the psyche over the past weeks; we appear to be in a time of expanding ranges. That low can be breached but still not break a daily uptrend line. Its still a pretty safe short so far as I can see…but the recency bias will keep one holding back – its a insidious phenomena.

  • kim

    it could start dropping any minute :)

  • Yoda

    What bulls should be really concerned about is the strong negative zero signals on both hourly and 5 min timeframes. I haven’t seen those in ages.

  • Mark Shinnick

    Sounds like they might help add confidence to a short position ?

  • Mark Shinnick

    BTW…coming up on bull support here…if breaks all hell could break loose.

  • Yoda

    Zero signal strength is mind-blowing. Some massive selling is going on.

  • Tomcat

    Mickey forming a double bottom???

  • Billabong

    Anyone see the pop in CL @ 11.17 EST? I didn’t see the size of the order but it was enough to move it up 0.06%.

  • Yoda

    There is a nice speculative L play in FCX if yesterday’s low holds.
    http://stockcharts.com/h-sc/ui?s=FCX&id=p75991694756&listNum=1

  • Billabong

    Atlanta Fed Lockhart stepping down in Feb 2017. Are the rats leaving a sinking ship or are they just plain frustrated….

  • Yoda

    very tight BB on the 5 min

    big move is next

  • Billabong

    FCX … Now there’s a company that tried to diversify out of mining (copper) by moving big into oil 3-4 yrs ago. Bad timing! It’s always a good stock for volatility. Icahn purchased 8.5% ($900M) of the company summer 2015 at the same time Soros bought ABX. Soros has since sold ABX but no mention of Icahn selling.

  • ridingwaves

    interesting note on china yesterday, copper and oil imports have strengthened this qtr….

  • Yoda

    In the past 7 years, when bots were controlling the tape, it usually resulted in an uptrend day, now it seems that the opposite is going on.

  • evilasevildoes

    caught it and jumped off short tube

  • evilasevildoes

    yield curve /ztx6-/zb

  • AcoBrasil

    Hm. I just notice SPX is sitting a few ticks above its 100 SMA, which also provided the bounce yesterday.

  • Yoda
  • Mark Shinnick

    Yeah…always interesting to see where various calculated technicals more-or-less nest…often for at least a while. Especially where we see them nesting and price not instantly reacting (i.e. bouncing) we might expect some significant number of market participants to be taking some counter-trend positions…providing fresh fodder for the dominant trend in play.

  • AcoBrasil

    In several recent corrections, the 100 SMA was hit after a week or two of selling, so it is relatively higher. Of course, it was breached also during those selloffs, but for a limited time.
    I am expecting it to provide some level of support. The question is for how long and how strong a bounce would be.

  • Mark Shinnick

    Yes, In my view if a techincal again soon again becomes under attack, that’s telling us something.

  • Mark Shinnick

    BTW… “War is simple, direct and ruthless…”

    George Patton

  • AcoBrasil

    What instruments are you using?

  • Mark Shinnick

    For this scenario this past couple of weeks just the SPXU and TZA.

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

    backside of the Matterhorn in my lens.

    check out the 5 year daily chart.

  • AcoBrasil

    TZA looks like it has room to run

  • ridingwaves

    condition says we should bounce but this seems more than some standard play…..that PNF chart on VXO is still in play at 28 along with the 2100 line in the sand….2120 needs to happen and fast…

  • ridingwaves

    30 yr auction starting now….lets see if some fresh fed greenbacks works its way back into the matrix….

  • AcoBrasil

    What’s the significance of 2100?

  • Mark Shinnick

    Did the Matrix ever figure a direct method to calculate for fear?

  • Ronebadger

    Saw this on Twitter:
    “a moment of silence for the first round of dip-buyers”

  • ridingwaves

    7/6 candle after hammer on 7/5, looks like some kind of pivot considering the dailies around that number

  • ridingwaves

    picked up some XIV here at 100sma…stop just below…

  • Mark Shinnick

    Interesting…very tight stop no doubt.

  • AcoBrasil

    Good entry. I think we drift higher through EOD with bond sales over.
    Reams of data from Europe and the US could add to the churn throughout the week.

  • http://evilspeculator.com Sir Mole III

    hehehe…

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

    Zero snappy:

    .

  • Yoda

    getting some positive divergence

  • Mark Shinnick

    He is so beautiful.

  • Yoda

    It’s about to explode higher

  • http://evilspeculator.com Sir Mole III

    Thank you good sir (or madam).

  • http://evilspeculator.com Sir Mole III

    Absolutely right.

  • http://evilspeculator.com Sir Mole III

    Your words of praise please the Mole.

  • http://evilspeculator.com Sir Mole III

    How’s my crew? I take it nobody got taken to the woodshed?

  • Yoda

    Still alive and kicking

  • ridingwaves

    and has a tight water stop….

  • ridingwaves
  • Yoda

    Bears need to pay attention to VWAP here. If the breach holds, they could end up in a world of pain really quickly. It’s theirs to lose.

  • ridingwaves

    vwap number?

  • Yoda

    about ES 2124-25 right now

  • Ronebadger

    perhaps this will be someone’s new avatar?

  • Ronebadger

    Holding short position

  • Ronebadger

    “…probably not a trend day”?

  • http://evilspeculator.com Sir Mole III

    Ahaaa – NOT a Zero sub. Shame on you!!! 😉

  • Mark Shinnick

    Very nice.

  • ridingwaves

    that stop was close to being hit but it’s higher along with reverse instruments

    what happened right now…

  • ridingwaves

    VIX L and S instruments are psycho right now

  • Mark Shinnick

    Yes..excellent behavior….perhaps fear / confusion can kick-in.

  • AcoBrasil

    Bayer raised offer for Monsanto

  • ridingwaves

    thought my stop was gone on XIV as it dipped to 30.08 but it climbed with the L instruments while vix rising…could be a clue on direction or not

  • Mark Shinnick

    Yeah…looks like some important point here…

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

    Judging by the zero signal, I see a lot of energy is being spent on shorting the tape but without much price movement to show.

  • Yoda

    Sale on PMs. Grab dem while they last. 😉

  • Mark Shinnick

    Quite a good point….volatility seems to have hit a measuring objective too.

  • OJuice

    I believe it’s the opposite. Buying pressure is unable to lift the zero above neutral and the price above vwap.

  • CandleStickEmUpper

    Saw TICK reading of -1700 few mins ago. Never seen it that low before.

  • Mark Shinnick

    Yes….could be exhaustion for the time being if we don’t see confirming price movement.

  • CandleStickEmUpper

    yea looks like it based on the higher green candle right afterwards on ES and NQ’s 5 min chart.

  • http://evilspeculator.com Sir Mole III

    NEVER? How long have you been trading?

  • CandleStickEmUpper

    lol ok I shouldnt say never EVER, but I havent seen it that low in a very long time.

  • Mark Shinnick

    We have all been horribly conditioned by this last several years’ phenomena.

  • evilasevildoes

    trin trade

  • http://evilspeculator.com Sir Mole III

    I just did a Myer Briggs personality test and this is what I got:

  • http://evilspeculator.com Sir Mole III

    You know what that means…

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

    or you’re going to throw trader-mom onto the train tracks?

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

    ok, my turn.

    ..and yes, I know how to fix most anything.
    😉

  • http://evilspeculator.com Sir Mole III

    You’re like my mirror! :-)

  • http://evilspeculator.com Sir Mole III

    Psssttt

  • http://evilspeculator.com Sir Mole III