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Momo Update W1617
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Momo Update W1617

by The MoleApril 20, 2017

We’ve watched the tape gyrate on a slow downward trajectory for several weeks now and a final resolution, to the up – or down – side, continues to evade us. Which I’m sure has been jittering quite a few nerves out there, especially given that many participants are unaware of or unwilling to embrace the reality of distinct market cycles. Which unlike our seasons seem to come and go in fairly unpredictable patterns, much to everyone’s chagrin. However acceptance of a cyclical market is tantamount to survival as a trader, as has been the recognition of and then response to climate variations throughout our evolutionary history.

2017-04-20_spoos_update

Now maybe you were smarter than me and did not decide to move your stop to 0.5R yesterday which would mean that you’re probably still in the game. Yes, I am just that lucky it appears. But given the continuing level of intra-day volatility in equities I am not certain that another stab lower isn’t in the cards.

However with all that going on I decided to consult my momo charts in order to get a better idea of where we stand and whether we should expect further downside as we push into May. Let’s first consult our seasonal outlook courtesy of Financhill – click on the chart or here to look at a dynamic version plus some juicy stats.

2017-04-20_seasonality_1

So apparently April into May is seasonally bullish – these are the stats:

  • Over the next 4 weeks, SPDR S&P 500 has on average historically risen by 1.9% based on the past 24 years of stock performance.
  • SPDR S&P 500 has risen higher in 17 of those 24 years over the subsequent 4 week period, corresponding to a historical probability of 70%
  • The holding period that leads to the greatest annualized return for SPDR S&P 500, based on historical prices, is 1 week. Should SPDR S&P 500 stock move in the future similarly to its average historical movement over this duration, an annualized return of 71% could result.

Okay, that’s all a bit theoretical but is giving us something to work with. Whether or not it explains the market’s inability to produce what I would call a technically healthy correction is of course open to debate. But instead let’s be constructive and look at our momo and breadth charts:

2017-04-20_SKEW_VIX

If you are a sub then you may recall this chart which I posted late last month in my momo update. It’s a rather exotic ratio between the CBOE’s SKEW and VIX indices. I then added a Bollinger Band (BB) which supplanted manual channels I had drawn earlier – as a matter of fact this chart has gone through several evolutions over the past few years. The current version of this ratio is slightly smoothed but still seems to do a great job of highlighting potential reversal periods, to both the up and down side.

As you can see the ratio is currently pushing below its lower BB, which judging by prior precedence appears to accompany selling exhaustion after a pop back inside its BB. I know what you’re thinking – WHAT selling exhaustion?

2017-04-20_VXV_VIX

But let’s not jump to conclusions just yet. Here’s the VXV:VIX ratio onto which I have drawn two parabolas once again demarking reversal zones – I’m sure you can guess what the green and red colors mean. Once again we are way above the current bullish reversal threshold, but just like with the previous chart we need to wait until we see a drop back below our threshold.

Of course there’s more – please join me in our private lair:

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

    @HD continuation from the previous discussion on EWT:

    Whatever Scott or I have been offering is not personal – we are just trying to make you aware of the possibility that you are fooling yourself. Sunk cost effect is a strong cognitive bias. I however challenge you to statistically correlate your ‘calls/counts’ with your actual entries and if you can PROVE to us that your counts have a strong edge then we are happy to eat humble pie and help you perfect your methods.

  • HD

    TY, I replied in the previous post. I have some opinions about the VIX so we may be even on cognitive bias. :-)

  • Mark Shinnick

    Looks like momo loss in volatility.

  • ridingwaves

    EW-moved stop up to 96.50

  • HD

    10 handle rally, SPX. BOTs love to fade that

  • Darkthirty
  • HD

    you guys are hilarious.

  • ridingwaves

    I was noticing the last time SPX sat under the 50sma for more than 4 days it churned sideways for 45 days before the fall of Maximus….

  • Mark Shinnick

    That observation is consistent with the model of time vs price correction method of emptying the bus; we are an impatient species :)

  • HD

    potential 335 abc off .382 GC. aka Rising wedge 5 min. Seller against HOD

  • Darkthirty

    Blasphemy!

  • ridingwaves

    9-12-16 thru 10-30-16 or there about’s…

    feels similar, fractal looks similar so far and the rising 200sma stopped the losses at 150SPX points…PMO looks similar, the tell might be the break below 0
    https://s21.postimg.org/e16u7ijjb/SPX_under_the_50sma.png

  • Mark Shinnick

    Yes, thanks for pointing it out. We have keep reminding ourselves to step back and look.

  • BKXtoZERO

    Silver below your stop. I was watching that one.

  • HD

    beauty! and closed

  • ridingwaves

    Sweet entry….

  • HD

    I think ES can pull back here from (55) SPX

  • Darkthirty

    2356 ES target

  • Darkthirty

    Batwings, Head & Shoulders, triple peak domed houses with glory holes, island reversals, triple tops, and for some reason fib #s are OK. But EW is “that which shall not be named”

  • ridingwaves

    triple peak domed houses with glory holes…

    San Fernando Valley?

  • Mark Shinnick

    This really is amazing to watch all in slow motion…price keeps moving against volatility’s expectation of something else.

  • ridingwaves

    SPX stopped at the spinning empty candle 7 to the left….

  • Darkthirty

    glory hole- volume hole whats the difference?

  • Darkthirty

    price moving against everything is normal in a computer controlled “market”

  • Mark Shinnick

    Really does have a machine-like quality to it I guess…or a all-too-subhuman soulless psychosis. Its amazing violence we are privy watch.

  • Darkthirty

    15 es points without more than a 1 point correction. Nope, a normal market

  • ridingwaves

    a bj

  • HD

    I’m in S and it feels terrible. Prolly early in price and time.

  • Darkthirty

    maybe, got 786 from the 2360 top on the 10th. AKA ii of 3

  • Darkthirty

    get that at any bar at closing time!

  • HD

    good eyes! was seeing the symmetry in 3 waves from 4/13 2329-2349 & 2335-2355 but…

  • Darkthirty

    The 2356 comes from the differential of a=c starting at the low on the 17th. c could over run , but rarely short

  • ridingwaves

    Poor Maximus, still waiting to join his family, looks like a couple more fights left….
    every hope of a bear resurgence are waylaid by the sword of the bull

  • Mark Shinnick

    Yes. Patience is long suffering.

  • Darkthirty
  • ridingwaves

    420 day in GG Park, I hear the helicopters flying over the crowd now, a huge bastion of pot eating, smoking, bonging, whatever consumption method they prefer. I usually take a walk with dog into the crowd and get a little dumb because everyone is so stoned, they can’t talk and most of them come from Oakland to fuck up the park…..the kicker-the event is right next to childrens playground…..

    stupid is as stupid does…

  • Darkthirty

    Damn, missed a point

  • Mark Shinnick

    Other than some superficial drug-trapped example of freedom’s exercise, of Its not the America I was raised to believe in as the opportunity for each to achieve freedom of his God-given best.

  • ridingwaves

    actually it’s just a reason for most of the gang bangers from Oakland and East bay to come over and raise havoc in San Francisco, leaving the park a mess and causing all sorts of issues with residents. I could care less about pot smoking etc, but me paying taxes to clean up their shit pisses me off until no end…

  • ridingwaves

    L SAEX at 5.58

  • Mark Shinnick

    I wonder if law enforcement uses it as some sort of data opportunity…hope against hope there is some silver lining …..somewhere :/

  • Mark Shinnick

    Yes, generally par price-wise. Here is what I mean about vol; its own more-normal character of rapidly getting crushed has been relatively slow this time to get the message of price itself.
    http://stockcharts.com/public/1092905/chartbook/428507379;

  • ridingwaves

    2 many people….cops are low key…you can buy almost anything in make shift tents where the party is…..baked goods from someone you don’t know coming from Oakland….right….it has plenty of funny moments too…

  • Darkthirty

    I scalp weekly options in this shit storm. Low risk – good return. If it feels bad, kill the trade and walk away.

  • Darkthirty

    I thought the market had an effect on the VIX. Seems VIX runs the market?

  • http://evilspeculator.com Sir Mole III

    Okay, it’s been a long time coming but Evil Speculator now also accepts direct Credit Card payments. Any volunteers? 😉

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

    Good onya Mole.

  • http://evilspeculator.com Sir Mole III

    I hope it works – it was a pain to set up.

  • Scott Phillips

    Don’t worry those things suck too!

    As a matter of fact, if you use ANY technical analysis concept and haven’t taken the time to test it you are an idiot.

    It is beyond question that around 80% of technical analysis is complete shit. This is because 30 years ago before commonplace computer backtesting the easiest way to be “someone” in the investment world was to invent some indicator or cycle theory, etc.

    But the guys doing the inventing were mostly guys like Richard Arms (TRIN) who don’t actually trade and have never traded. Or Steve Nison, the Jap Candlestick guy who doesn’t trade and has never traded. Like Robert Prechter, who doesn’t trade and has never traded.

    See the pattern?

    Would you accept advice on building your house from someone who had never swung a hammer?

    Would you let a surgeon operate on you for the first time?

    ANY concept is testable.If you use it and haven’t taken the time to test it, then sure as shit when you have a few losing trades, you will abandon it, and move to the next method. Which also sucks.

  • HD

    Here’s the EW trade in GC today. Not really that hard is it? #wavewanker https://uploads.disquscdn.com/images/544ee61a1f273a73642321f98812c2ebad5a1f0fc45f483057f149c3aedb9325.png

  • Darkthirty

    Most architects ARE drooling idiots! When it comes to constructing their “idea” you gotta ad lib. Anyway I agree with your post 100%.

  • Scott Phillips

    Actually this is extremely normal for intraday ES. Over a period of multiple days ES has a strong statistical tendency to mean revert, but intraday the OPPOSITE is true. Once the market chooses a direction in a single day, big moves with no mean reversion are very normal.

  • Mark Shinnick

    Seems so chicken-and-eggish but in general volatility setups of momo loss appear predictive or at least consistent with impending equity rally, with crushing after or as the rally begins.

  • Darkthirty

    Seems to be a newer phenomenom. I don’t remember it 10 years ago. Might be mistaken, but I’m thinking it’s more of a HFT/algo thing…

  • Darkthirty

    Don’t pick on us sub-human, soulless, psychotics….we’re sensitive

  • Mark Shinnick

    Bot tza, very very tight

  • Darkthirty
  • Darkthirty

    Have you done an overlay? Mercury retrograde and viruses trashed all my electronics this round…..

  • Mark Shinnick

    Standing aside…for now…puckered.

  • Darkthirty

    good idea, things has been hinkey for a couple days now……..

  • Mark Shinnick

    Used have the whole model on one realtime display, but that was a DOS system I haven’t upgraded yet….would really save me big energy capital to do so.

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

    Well, for now this is really EZ es chart resistance and all the monkeys will get excited there.

  • Darkthirty

    Dji/es dislocation appears to be a concerted effort to what end is the question