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Now Or Not
173

Now Or Not

by The MoleJanuary 5, 2011

Last month I showed you guys my spiral calendar chart which suggested that we may see a meaningful retracement in early January:

As you can see there’s an F17 and a F21 coming to a point either this or next week. This occurs at the very same time a large number of bears are expecting a pull back – which is exactly what’s making me so nervous. Usually, what everyone knows is not worth knowing, so I’m looking for clues that may either support or discredit this time cycle date.

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Charts and commentary below for anyone donning a secret decoder ring. The rest of you guys will have to wait until tomorrow – sorry. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.
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This is a very simple DJX chart with a standard 2.0 BB on it. Despite being a common TA indicator it’s however very accurate in predicting medium term pull backs. And based on what I’m seeing a retracement within the 2.0 BB may be in the cards.

Another BB chart – slightly different and overlapping settings. I’ve shown you this chart in the past and I use it as a long/medium term mix to evaluate probabilities of a pull back. If we’re outside the green a continuation is sometimes possible (see March and October of 2010). Outside both BBs and a reversal is all but guaranteed.

Now what I’m seeing is a healthy setup for a inside-BB reversal – but nothing that screams long term reversal to me. So, this chart stands in conflict with the spiral calendar chart – there seems to be plenty of space for a continued melt-up, assuming we get a health shake out and then push higher.

Similar BB chart on Mr. VIX. I’m seeing it walk down the center 25d MA line (on which the BB is based), but thus far it has not been able to breach. And even if it does breach it would push outside its BB around 20. Assuming things get out of hand (HFT style) it would be outside the 100d band at 26. Not exactly a setup for a deep retracement if you ask me.

My momo charts are all over the place right now. The clearest chart is the NYSE volume ratio – which actually is in bounce territory – go figure. So, nothing really makes sense on that end. Moving on.

On the sentiment side we know that the ISEE keeps painting extreme readings. But thus far that has not yet lead to a meaningful retracement like last year. This tape simply seems to be impervious to any pull backs.

Last but not least – the daily Zero. Which suggests that we actually had a sideways correction late last year and then just kept marching on. No divergence right now – even the smoothed panel is pointing up. Not a good sign for the bears.

Bottom Line:

The setup for a retracement is there – in terms of guarantees that of course means nothing these days – in terms of odds it’s a reasonable setup for a short to medium term pull back. The timing is right, the conditions are right, and many charts are pointing down. However, I am also not seeing much downside potential just yet. Before we’ll see a big retracement it would be nice to see a small or medium one. Because that is usually the setup for bigger and better things to unfold. Maybe all those charts are wrong – I’m not being sarcastic here – it’s always a possibility. But the odds right now do not support a major reversal as advertised by my spiral calendar chart – I wish it wasn’t so but here we are.

So what I’m seeing on the horizon is a pull back that will be bought rather quickly. Many support levels lurking below, thus many opportunities for dip buyers to use the huge amount of outstanding POMO cash to prop things back up. And I haven’t even updated my POMO chart just yet – don’t really have to as we’d have to see a complete reversal to zero before anything really nasty in equities should be expected.

Finally, in terms of timing – January is really it. If the shorts don’t muster up a reasonable pull back here then it’ll be a loooong cold winter for the grizzlies. So, let’s see if it happens – but now or not is my general POV.

Cheers,

Mole
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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.
  • ds2

    Thanks Mole. I remain mostly long w/ hopefully wide enough stops that I don't get shaken out. Not much else to say…

  • rg64

    As long as EW is still calling for the big top your long is the right move ds2.

  • rg64

    I got out of short mid day about even from where I put them on. Should have reversed long.

    All cash waiting..

  • SW6

    Repost, RBW,prior thread:

    Did you notice that SLV/GLD closed above the MA(close,20)?

    http://content.screencast.com/…

    SLV closed under MA(close,20) but above MA(low,20):

    http://content.screencast.com/…

    Both SLV/SPX . . .

    http://content.screencast.com/…

    . . . and GLD . . .

    http://content.screencast.com/…

    moved the full distance of the bands while GLD/SPX closed outside of them:

    http://content.screencast.com/…

    I have a couple scenarios in mind and will take a nap now in hopes of dreaming about them.

  • chronographics

    Thats the problem with calling “wolf” all the time, eventually no one listens, even when you may be right. EWi will take all credit of course for calling it… :-)

  • chronographics

    Euro
    Daily Chart
    I am already short from the last poke at the BB's (using shorter timeframes) but will add aggressively if we break lower.
    http://screencast.com/t/11QPHs

  • SW6

    I did not notice the fine details you point out as I do not use layered BBs. I am not averse to doing so, I just don't know if i can layer BBs in stockcharts. (Is it possible Ultra?) But your layered BBs allow for finer description of the trend and that is of course a good and beneficial thing.
    —————————–

    Am I interpreting the observations of your feral senses correctly?

    “Did you notice that SLV/GLD closed above the MA(close,20)?”
    Metals weakness appears to have cropped up, but Silver continues to be relatively stronger than Gold.

    “SLV closed under MA(close,20) but above MA(low,20)”
    Silver has weakened and it's volatility has calmed but it is not falling off the plate.

    “Both SLV/SPX . . . and GLD . . .moved the full distance of the bands while GLD/SPX closed outside of them.”
    The froth on top of the lager is coming down. The $spx still has some froth, is that coming to an end? This depends on whether metals/commodities are acting as a leading indicator for broad mkt direction.

  • SW6

    “EWi will take all credit of course for calling it… :-)”

    Ugh!! You are so right. How nauseating it will be to see Prechter and gang throw their self-congratulatory party-YUCK!

  • chronographics

    Think we all here will get an invite? =:-0

  • convictscott

    Me too mate, short on the daily from the break of yesterdays low.

    I'm in two minds as to whether to take some profits as it approaches the lower bollinger band (daily), if the band turns down it could be the start of a really massive move.

    http://www.masterkillers.com/w

  • raised_by_wolves

    I don't know that I disagree with anything you've written there. I look at a lot of charts and post some of them but usually make decisions from fewer and don't always post the ones I make decisions from since they also tend to be the least clean. Not counting several intraday charts I made decisions from intraday, the one daily chart that I've really made a trade decision from this week is my old $SPX chart with $SPX/SLV and $SPX/GLD overlay. It's similar to all these variations but the overlays are lines instead of candles and they are upside down.

    http://content.screencast.com/

    Basically, this chart tells me that it is permissible to have short SLV positions as long as the silver overlay points up (perhaps tomorrow it will reverse direction). That's the most important thing it's telling me. However, I significantly reduced my silver shorts 16 hours ago because I got perfect sell now signal on my intraday charts when the copper to dollar ratio diverged from silver, silver was falling hard, and volume start spiking. So, that daily chart I just linked gave me the framework and then I acted on some more specific information on the intraday charts.

    By the way, I used to have a rule that the less volatile $SPX also needed to be downtrending before shorting silver. I pretty much chucked that rule. Instead, I keep an eye on my risk-on-risk-off indicator.

  • raised_by_wolves

    I'm thinking about making some near future trade decisions based on the (SLV*47+GLD*10)/($SPX) ratio that I posted in a previous thread.

    http://content.screencast.com/

  • raised_by_wolves

    I banked more coin shorting SLV the last couple days than all the SPY long trades I've done combined last month. I can successfully long or short when intraday volatility is high as it is for SLV right now. I can't even make money longing SPY anymore. Intraday volatility is so low. I mean, I won the last 5 SPY long trades I've done but they were hardly worth it. Doesn't matter if it keeps making new highs if it does so on plus 0.1% to 0.5% days.

  • raised_by_wolves

    Haha, ES makes new highs while silver futures breakdown. I call this free entertainment. Boy, I love this.

  • raised_by_wolves

    "As you can see there’s an F17 and a F21 coming to a point either this or next week. This occurs at the very same time a large number of bears are expecting a pull back – which is exactly what’s making me so nervous. Usually, what everyone knows is not worth knowing, so I’m looking for clues that may either support or discredit this time cycle date."
    I think it could be a violent move up if it's not going to be down. I for one welcome a strong move either way.

  • bluprint

    Long EUR at 1.3108 on a bounce off the trendline shown yesterday by myself and I think ultra. Stop around 1.303. I'm looking for a run back up to 1.34 again.

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

    $XEU – further to that, be ready for that potentially failing and then a sucker drop to ~130 and the longer term support line

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

  • captainboom

    I'm curious why you use constant multipliers of 47 and 10 with SLV and GLD respectively? Scale factors to make the ratio cleaner?

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

    Looks like it's through the line of the up-trend. Time to go long!

  • raised_by_wolves

    $28.61 (price of SLV) * 47 = $1345

    $134.37 (price of GLD) * 10 = $1344

    My idea is to give equal dollar amounts to SLV and GLD, add them together, and then divide by $SPX. I use to multiply instead of give equal dollar amounts. Those two methods yield somewhat different results. If you have TOS, you can experiment for yourself and tell me what you think.

  • raised_by_wolves

    Nice ramp!

  • raised_by_wolves

    Copper to dollar isn't as enthusiastic though. I'm not saying that necessarily means anything, I'm just saying. :-)

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

    Like the convict says – it's when the retrace fails that you want to dip to your conkers…

  • volar

    so food for thought…. random chart of risk trades

    http://content.screencast.com/

  • ronebadger

    The Zeroes doing something? Any analysis? Comments? I'm not a big Zero interpreter.

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

    That would be what is known in the trade as “pointing due south”. Could be the start of something, although bear in mind that the signal is not that strong as of yet. Plus we are not seeing much follow from prices. So far.

  • EvilTrader
  • AlohaBear

    AEO this morning oppend 8% down do to miising forcast, it is up 10% on speculation news that it canceled out of next weeks ICR Xchange conference can anybody explain Y? PLS and TNK you

  • SW6

    I was short $spx yesterday. The futures went precisely to my stop and then ceased their advance. What a difference one point higher would have made. It left me feeling like I was a little to surgical when I decided what my stop would be, *grumble*.

  • http://thefxspeculator.blogspot.com Onorio

    Ok FX alert!

    We`ve a EURCHF sell signal. Price oscillator divergence in the last high and cross bellow Kijun-sen. We might test 1.24 again.

    No time for chart now, sorry :/

  • AlohaBear

    looks like they are going private, like that play sell it down real low over night then come out with the news that matters LOL

  • EvilTrader

    we want a flash crash !!

  • ronebadger

    Stops can be a bitch, I feel your pain. I can't count the number of times my stops were hit and went the other way….by either a fraction of a point or percent. So, tight stops need loosening in volatile markets, that's my motto.

  • AlohaBear

    I have prophet charts how do I make charts to down load to this site?

  • http://thefxspeculator.blogspot.com Onorio

    Easy coin :)

  • http://evilspeculator.com molecool
  • http://evilspeculator.com molecool

    Someone is having fun…

  • http://evilspeculator.com molecool

    Make sure you enable level 2 if you are using ThinkOrSwim for instance. In the latter you then can see the volume at certain levels. The bots love to hit those high volume clusters. Also use VWAP StDev levels or pivot levels and go slightly beyond them when setting stops.

  • ronebadger

    I'm learning….good safety tip!

  • AlohaBear

    http://screencast.com/t/ujRkN1… here a Chart of AMZN on the 2yr like the channel for drop. first time with Jing hope this works Thank YOU MOLE

  • ds2

    I use a program called Jing. It allows you to screen capture your chart (or anything else) and post it to an online server. It's free.

  • BobbyLow

    Good afternoon folks.

    Market is still doing its “thang”. I guess insanity will rule until it doesn't so I'm just going along with the flow for now.

    Being short Retail Via Short XRT has worked out pretty good. As an offset, I'm still Long Utilities through XLU, although I was close to being stopped out on that one this morning. I'm also Long Big Banks Via Long KBE.

    All and all, my account is treading water but at a small positive pace so I can't complain.

    And what's not to like? Would you all please join me in the new Wall Street Anthem? All together now:

    Home, home on the range,

    Where price goes up everyday;

    Where seldom is heard a discouraging word,

    While Ben leads us up and away. :)

  • http://www.patternstocks.com/ marketlines

    Stocks Buy List with charts : http://bit.ly/fYdPHY

  • chronographics

    Hi CS :-) Well took some profit on approach to daily BB, but not confident this was a good idea. Will re sell if we dont bounce here, Agree we could see a massive move down here. Hope you had a good break.

  • convictscott

    I just jumped out at the daily BB as well, for a neat 2R win. I suspect there is lot more in it, and like you I will get back in if we dont bounce here.

    If we are going to bounce here is the time

    http://www.masterkillers.com/w

  • convictscott

    Awake early hey?

  • http://evilspeculator.com molecool

    If you post the actual image – not the screencast page link disqus will turn it into a comment attachment with a thumbnail.

  • http://evilspeculator.com molecool

    Possible scalp setup on Zero Lite chart.

  • http://evilspeculator.com molecool

    Anyone trading today? Sheeesh – this is getting boring…

  • volar

    wow liking the dollar right now on the daily and weekly chart. AUD looks potentially toppy too… and copper/$ divergence galore

  • bluprint

    I flipped my position on the EUR and got short at 1.3099 for a small loss. Made it back since then. Watching the 10 min for a sign to cover the short…

    http://screencast.com/t/SArsif

  • BobbyLow

    Early Afternoon Crossing VWAP on ES. You can almost set your watch by it.

  • ds2

    Holding my longs. Light POMO yesterday. Bigger ones coming up. Today looks like consolidation to me.

  • gsavli

    this sure feels like some kind of exaggerated blow off top.

    anyway, went short NQ here, excellent risk-reward , i will just cover it if it goes above 2280.

  • http://evilspeculator.com molecool

    Damn it – got stopped out. May try again if we drop through VWAP again.

  • http://evilspeculator.com molecool

    Yeah, I felt that one … Obligatory revisit now.

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

    Before launching at the upper BB?

  • AlohaBear

    trying again instead of screencast do I copy or save it.

  • Battlezone

    Yes that is a tempting short… but sucky choppy… lots of ma's crossing in here. I hung in there short, but now I'm very nervous.

    If the dollar hits new highs that should pop a lot of stops, it would be nice to be short the /es. So think the bears…
    Then again, going long off the 5-min 50ma will be on a lot of bulls' minds…
    Which of the two groups would be easiest to roll over?

    Think how many bears will jump in to short at the 50ma now (5-min /es) ? they might be easy lunch, even if they're right.

    I'm staying… trigger happy.

    BZ

  • Darkthirty

    @0 day on ES appears to be an ED, 3 wave moves. Next one should be to 1262 or less

  • Battlezone

    Yeah watch out for that dollar, it's pushin…

  • Battlezone

    C'mon, sell the bottom! -;)

  • convictscott

    Feel the same way. AUD wiping off this much without a retrace puts me on high alert for carry trade unwind, the rarest of rare black swans.

  • BobbyLow

    Here is a little anecdotal story that “The PTB Master Plan” might be working at least a little bit.

    A friend of my wife who she and her husband make pretty good money, told my wife to tell me that TD Ameritrade was having a trading seminar in Raleigh and asked me if I wanted to go to the seminar with them. Apparently my wife's friend's brother who began trading last year has kicked ass in the market and they want to do the same. I respectfully declined her offer. LOL

    Brings back memories of Stewart. Let's party like it's 1999! :) Can't lose right?

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

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

    Classic. Never seen that before. Bit of a difference this time tho – what is it, 18 straight months of retail fund outflows or something? Now they just make you invest in the stockmarket through the debts of your grandchildren. LOL!

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

    EURUSD looks to be painting a triangle on the 3m – right on that long-term support line.

  • elliott_surfs

    [removed]

  • elliott_surfs

    spiral this, fib that.
    here's Baltic Dry's latest plunge – http://screencast.com/t/l9IcNl
    look out belooooooooow – YEEEEOW!

  • ds2

    That VIX buy signal in early Dec worked like a charm.

  • bluprint

    Yeah, three times its hit that support….

    A continuation pattern?

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

    Ja, ja.. also supposed to herald the final subdivision of the move. So… spike south fairly imminently, followed by swift reversal higher? On the other hand if it does break this support then the next is… haven't worked out where yet, tbh. Quite a bit, er, lower.

    Let's see what happens.

  • http://evilspeculator.com molecool

    “A friend of my wife who she and her husband make pretty good money”

    That sentence construct gave me a epileptic fit, jeeezzzz – LOL

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

    Jeez. Stop teasing us with your bear pr0n, will ya?

  • elliott_surfs

    it's all for you, dami- ….. ultra 😉

  • BobbyLow

    That commercial came on about the same time frame that I began trading. It was addictive. All you had to do was buy Tech – Any Tech and you made money. It seems like I've been chasing that beginners high ever since. LOL

    What's scary this time around is how this market is not allowed to correct at all. Just have to let play out I guess.

  • raised_by_wolves

    That's the difference between what is and isn't affected by POMO.

  • BobbyLow

    Hey whatdoya want from me? English is my first language. LOL

    Mind get's very fuzzy this time of the day especially watching a 6 or 7 point ES Range while the rest of the market (if you can call it that) tries to keep on rotating. :)

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

    …whereas the literally back-to-back sell signals in the middle of the month counted for precisely, um, jack shit

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

  • convictscott

    I believe euro is potentially setting up for a great position trade. More info on my blog, but the gist of it is here

    http://www.masterkillers.com/w

  • convictscott

    And euro is a monthly retest variation sell, very reliable pattern on the monthly chart. If we have a monthly and weekly sell signal things could get ugly for euro
    http://www.masterkillers.com/w

  • convictscott

    I banked profits and got out, I couldnt see the odds of continuation being anything other than 50/50. Certainly nothing bullish about it, but a little bounce here wouldnt be unreasonable. Longer term if it goes down from here I'd be looking for 1.25, and if it gets thorugh there, targeting 1.18

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

    Ok, I worked out where the next support is after where we are now..

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

  • raised_by_wolves

    Risk-on-risk-off is nestled between the MA(5)s and the MA(20)s.

    http://content.screencast.com/

  • bluprint

    My plan today has been to exit shorts if the 10m closed above the 20ema…with the idea it gives me minimal risk for more potential downside. Just my 0.02

  • bluprint

    1.25 looks like it should provide some support…no?

  • convictscott

    As crazy as it sounds, the monthly chart supports that view as well

  • convictscott

    Bobby, I was chatting to Mole early this morning (for me) and watching the zero lite, and it occurred to me that a simple filter could save you from screen watching the boring days.

    Load up a chart of breadth, advancers minus decliners (on esignal its $add)

    A reading from -500 to +500 basically means nothing at all, no conviction to either side, and a very low probability of it developing into a big move trend situation. Basically bulls and bears are evenly balanced and having a tug of war. In this situation, intraday I'd keep trading to scalps and be very aggressive banking profits.

    Basically the same as low participation on the zero lite.

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

    Yup.

  • BobbyLow

    Thanks Scott.

    I've been forcing myself to watch the tape anyway because I'm now trading Sector SPDR's using my rules. I'm in the process of trying to follow the bastards around as they rotate from sector to sector. I am also trying to get a feel for how they trade throughout the day. So far, the main thing I like about the SPDR's is that they are not as subject to getting jerked around by individual stock upgrades, downgrades, earning warnings etc while at the same time not being as massive as trading the entire S&P 500 through SPY. There are a little over a dozen SPDR's that I'm following and am currently Short Retail (XRT), Long Utilities (XLU) and Long Giant Squid Banks (KBE).

    Everything is related so if we do get a further dump in the EURO and the Dollar ramps up then Oil should go down leaving Oil and Gas related stocks vulnerable such as XLE, XOP and XES. These three have has a big run and are almost ready and once they hit my requirements, I'll probably open shorts on them on a first come first served basis.

    I've also begun working with adding Pivot Points to my charts (I think this is DeMark stuff). So sometimes slow days like today are a good opportunity to experiment with new things while keeping my basic rules intact.

    In the mean time, I'm not setting the world on fire with my trading mainly because I'm still trading with small size. However, I'm having positive results with solid expectancy so I'm cool with that. (Each and every new closed trade gets put into my averages)

    In any event, I'm still optimistic with my current trading plan and expect to crank up size when we get out of this overall tight range.

  • ronebadger

    DZ been updated??? I just see three days in 2011….am I missing something?

  • convictscott

    Fwiw I got a sell signal entry on crude yesterday

    Sent via BlackBerry® from Vodafone

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

    So far, the main thing I like about the SPDR's is that they are not as subject to getting jerked around by individual stock upgrades, downgrades, earning warnings etc while at the same time not being as massive as trading the entire S&P 500 through SPY.

    welcome to the ETF club BL.
    When it comes the SPY as a whole – IMHO – You will never find a more wretched hive of scum and villainy (HFTs)

  • chronographics

    Hey nice trades there!
    yes was up early – just looking after my Mum who has moved to NZ so wasn't at home and haven't had much access to the web as I would like. Don't like trading without my usual screens around me – habit I guess. Anemic bounce so far, was hoping for more zing really, makes a more bearish structure I think – like a series of one two's rather than the final fling of something… Guess will wait and watch :-)

  • rg64

    bears are getting ever more excited. head handed to them ever time.

  • http://thefxspeculator.blogspot.com Onorio

    Like i`ve posted yesterday (check out bellow) we had a sell signal on EURCHF…

    http://www.screencast.com/t/Kt

  • volar

    Silver and gold… broken trends…might sell the retest. Copper small throw over of a channel…. good food for thought.

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

    So long as we got you here to keep us honest, matey…

  • Bob the Horse

    Would rather be short Euro than equities for sure. Seems to me that the bear case on equities is basically relying on the FX correlation holding.

  • Bob the Horse

    Do you know what the R^2 is between the BDIY and the S&P? I'll give you a clue, it's a round number and rhymes with hero.

  • EvilTrader

    jobs report failed.

    If this is the catalyst, stage is set for a stronger correction, if not today, then next week.

  • Bob the Horse

    Jobs report is actually quite good when you look at the detail. You have to look at direction of revisions, hours worked and hourly wage. All in all, private sector income (i.e. # of workers * hourly wage * hours worked) is trending up. Still needs to improve but heading in the right direction.

  • volar

    got to love the labor force participation rate….

  • gsavli

    market manipulation at the open? Scott, you are the expert on this topic, could you check it out?

  • gsavli

    What do you think of say AMZN's PE and PEG? Is this bubbly or not? Do you still think stocks are cheap in general or must they be carefully selected?

  • BobbyLow

    I don't believe anything about the The Jobs Report Numbers. They might be good or they might be bad. By the time these numbers are massaged to be seen in the best possible light and then spun by the MSM, who knows how good or bad they are. I certainly don't.

    The numbers that are put out by the Government/Banking Partnership will be accepted until they no longer are. In the mean time, until I see some of the boards come off store windows on Main Street, I'm not going to believe anything anybody says.

    As far as the market goes, I'll trade price and only price. The Stock Market has proven to have absolutely nothing to do with Jobs, Housing, Deficits, or anything else in the relative short term. The Stock Market is purely a Casino and nothing else.

    JMNSHO

  • convictscott

    thats my exact plan mate

  • Bob the Horse

    I am no expert on Amazon but I would not buy it. The latest move has not been supported by earnings upgrades and looks to me like a blow-off top. But the key on these stocks is picking the momentum change. It's amazing how long these things can go on as long as earnings are getting upgraded (see 1999 for details!). Consensus seems to have this on 40x 2011 which is clearly a growth multiple. But there is enough froth in their that you can wait for the 1st downgrade. What is the right multiple for a stock at peak earnings? Probably sub-10 so a stock like this can fall 80% from the highs when things turn. That is enough for you not to need to predict the top – watch the earnings and chase it down.

    In general stocks are cheap but a lot cheaper outside of the US. It basically comes down to the whole inflation debate. If nominal GDP growth is going to be high single digit (i.e. 4 or 5% real plus CPI) then with operational and financial leverage, earnings can grow 15% to 20%. Compare that to a 10yr bond paying 3.5% and losing purchasing power every day. You should really be prepared to pay 20x eps for 20% growth.

  • Bob the Horse

    Current P/E on S&P btw is 16x. So if you think it can re-rate to 20x (not saying I do but it's not a crazy idea) then that is 25% up on multiples alone. Add 20% eps growth and that means a 12m target on the S&P should be 1900.

    To be short here you have to think the earnings are going to collapse or the multiple will contract, neither of which I would put much money on.

  • rtlguru

    I am an expert on AMZN so I'll chime in. I've been trading this every month for years long and short. If you recall, back in Septermber, I thought it had it's blowoff top and attempted a short. I realized I was wrong a month later after their earnings report and went long at 160 and have held since. I'm now covered with calls and basically neutral into earnings and plan to be out by the time earnings roll around.

    You cannot measure AMZN's “worth” with PE and other traditional measures. Why? Like NFLX, it is the dominant leader in its space. Therefore, the fund managers that buy it and hold it are using future potential. For AMZN's valuation to be justified, you have to assume a few things – one, ecommerce will continue to grow rapidly for years to come, amzn will continue to dominate, and it will be able to expand margin rates when both things happen.

    Back when I was just a perma bear, I used to only short AMZN and didn't understand why it was so “overvalued” Heck, i remember being short it back in 08 when it was 28! I thought back then, it was still overvalued.

    Now, I use AMZN almost exclusively for my online shopping needs and have probably spent 20k in the last two years after signing up for prime. I bought the newest Kindle as research for me and my gf as well(the Kindle is great btw). One of my basic rules is to trade what I know. After forcing myself to use AMZN, I can now appreciate why it is so loved by the fund managers and feel i have an edge. I buy toilet paper, pet supplies, electronics, dvds, cd, food. You will never understand the AMZN story unless you have tried prime on a regular basis.

    Here's my advice. Don't trade stocks like AMZN if all your research consists of looking at PE and PEG. You're just like the many others who short based on that and have their head handed to them. Also, it doesn't really work if you wait for a break and short into a breakdown. Just look at earnings two quarters ago. Disappointed and stock traded down from 120 to 100 AH and look where it is now. Imagine if you just shorted the stock based on that thinking “this is it”. If you really followed AMZN and knew it's “story” you would have known the disappointment was due to unexpected capex spending for the rest of the year because business is booming and they were building more fulfillment centers. So smart money was actually buying into the earnings collapse why dumb money bears who only look at PE were shorting in the hole.

    Now if you still want to trade it, here are my thoughts. Do I think AMZN is a good short still? Long term, yes. I personally think AMZN is never going to meet the lofty expectations and margins will never improve to justify the valuations. When would I personally short it? I won't short it until the economy is clearly in a downtrend and earnings compression is happening before our eyes – 2001 and 2008 and perfect examples. Only during times like these is the AMZN story stripped bare and you can see AMZN naked and a fraud. Right now, it has too many things supporting its growth story.

    Currently long with 1/2 covered 185 calls and 180 covered calls. Also naked short 185/190 calls. Expected price support into earnings as the “story” is alive and well (online sales huge in q1, capex spending ending) but gains should be capped to 190 max into earnings. Expected close on January 21 opex of 180-185 into earnings. Will be out before earnings though.

    You can apply what I wrote for all the PE momo stocks out there like NFLX, CMG, CRM, etc. If you want to trade it, try to fully understand the bull case as well.

  • ronebadger

    FYI

    ISEE started off at 440, just now it's 305 after this “little” downturn

  • rg64

    keep calling those tops evil and lose your bank roll right along the way

  • BobbyLow

    Disqus has been in a pissed off mood this morning! :)

  • http://evilspeculator.com molecool

    Welcome! Now you can start trading without bias 😉

  • http://evilspeculator.com molecool

    Seems to have issues, yes..

  • amokta

    Is it just me or is disqus playing up?

    Anyway, i see the 'Raging Bull' is still showing at a cinema near you.

    The only thing im short now is Bank of Ireland

  • amokta

    Welcome to Vegas – now do you plan on beating the 'House'?
    (actually there are some folks who can beat the casinos..mysteriously they are 'encouraged' no longer to frequent the strip)

  • bshah

    i know, we may not particularly look at any one stock, however, has anyone checked “OPEN” ?
    it went high on drugs and now should come to reality ?

  • malverd

    anyone having connection issues with TOS?

  • gsavli

    thanks for your response, i'm glad you're here. certainly an interesting thought about SP at 20x and 1900. certainly a possibility.

  • gsavli

    i agree with you, but was asking, if this smells like a bubble, not if AMZN is a short. momentum is just wild and crazy, but eventually PE and PEG always win, i can still remember sun microsystems, going strong at PE 300 in the nasdaq bubble. it did not end well.

  • volar

    Nasdaq going back thru resistance

  • BobbyLow

    “now do you plan on beating the 'House'?”

    No, but as of this moment, I'm running at 58% on the number of Winning Trades and 66% in terms of Winning Dollars. (These have all been small sized trades while I continue to work my relatively new set of rules) Like I wrote yesterday, I'm now working with Sector SPDR's and trying to catch rides on the Caboose as the Giant Squid rotate and move the Train.

    Best one so far has been shorting XRT (Retail). However, I'm getting hit today on my Long KBE (Big Banks) This is partially offset by a Short KRE (Regional Banks) that I added this morning. My Long in XLU (Utilities) is Flat.

    These are all Swing Trades and I'm not married to any of them. I don't play chess, but right now I'm imagining that playing chess against a well programmed computer is similar to playing the market right now.

    Do I plan on “beating the house”? Hell know. But I do plan on picking a few coins up off the floor while they're not looking.

    The bottom line is that I'm not ready to give up until they pull my computer “from my cold dead hands”. :)

  • mothwhoflysbackwards

    Another tease? Perhaps, but I like to see those banks on their knees. If they were a girl I'd grab their hair… ohhh yeah thats it baby. Maybe my jan 22 9 straddle on FAZ will work after all. First time in awhile that banks are underperforming market. Could this be because of the Mass sp. ct. ruling detailed by KD?

  • roncofooddehydrator

    It has to be – not much was happening until that ruling hit and then FAZ took off.

  • ds2

    Come on POMO!!

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

    Another great observation from Scott: you can, by and large, discern the character of the day from the first half hour's TICK readings. Mostly in the red today..

    http://bit.ly/e0nRPF

  • ronebadger

    Mole drew a line between two crests today's Z-lite. How about an almost straight line connecting the last 5 troughs on the same chart?

    Meaningful?

  • BobbyLow

    And here comes Pac Man. Could have begun a couple minutes early at about 12:50 PM on ES today. Only a couple of points to reach VWAP.

    “Hear that train a comin” (That's an old Johnny Cash Song) :)

  • mothwhoflysbackwards

    Say the move was inspired by the ruling… it always surprises me when you get a quick short term (?) move based on facts that will play out over a longer time frame. Banks seem to be caught by a boa constricter (insolvency) and one more loop of the snake more or less dosn't mean death is imminent. So it maybe less the “extra loop” and more the fact that its not slithering away. In other words it takes away hope more then it inspires fear.

  • mothwhoflysbackwards

    Ahhhh, one of those eh? a pomo vex you well? (not that there is anything wrong with it!)

  • amokta

    Great that you are having consistent success (even if currently small-size trades)! As CS says re 'positive expectancy' re rule set etc

  • amokta

    Nice gem (too many gems to collect!)

  • amokta

    Am i living in the Twilight zone, but some of the double/triple etfs pay dividends, both long & short funds – now how can a short fund pay dividend? (or do some leveraged funds 'unload value' from time to time as a divi, while other reflect total value in price alone)

    e.g DIG and DUG

  • ds2

    What's the horizontal blue line on the Zero?

  • ds2

    Bank it however it comes.

  • amokta

    May be i'm dim, but isnt it just demarking zero(0)-value on y-axis, so as to see if zero signal is in pos or neg territory?

  • http://evilspeculator.com molecool

    Yup…

  • amokta

    You mean im 'dim' or im 'correct', or both? !!!! :-)

  • aussiebinlaughin

    The UK may have many problems with its economy, but this article warms my heart and isnt typical in our modern 'democratic' western world. Not only is a member of gov (MP) going to prison, his sentence is more severe due to a breach of public trust! Nice work.

    Of course, in another way its tragic that such a small player gets put away whilst our dear leaders & their esteemed mates steal far more than a paltry 22k off us.

    http://www.independent.co.uk/n

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

    You hit the nail on the head there alright. Cast one of the expendables to the wolves and hope it sates the proles' bloodlust..

  • skynard

    Here piggy, piggy, piggy!

  • ricebowl

    Shorted AMZN from $185.50 and went long SPY at $126.40. I should close the AMZN position in a couple of months. This market is too predictable.

  • http://evilspeculator.com molecool

    Both 😉

    Well, it's time you guys are starting to read the signal, which is why I don't always want to spell it out. Would be nice to see a pertinent discussion here.

    Quite frankly, folks – this board could be so much more effective if you guys would collaborate and exchange ideas. Today's breach and touch of the zero mark was a textbook example pointing toward the probability of a VWAP touch. The ZL simply kicks ass – unfortunately many don't take the time to learn and read it.

    I keep getting emails suggesting that many traders are not 'experienced enough'. Quite frankly, it does not take that much experience to learn how to use the ZL. In the past two years I have posted literally hundreds charts and examples – there are dozens of posts right here under the 'zero' category.

    What really eludes me is how such a great indicator can be ignored or misinterpreted by so many people. I really have done my best to spread the word – and I hope I'm not wasting my time.

  • http://evilspeculator.com molecool

    Why? What told you to short AMZN of all symbols?

  • http://thefxspeculator.blogspot.com Onorio

    FX SIGNALS

    AUDUSD, long signal, 2H divergence and a close above 9960 activated the signal.

    GBPCHP, top forming we have divergence now we need a close bellow 1.4950 to activate de signal.

    Mole, can i email you this system just for you take a look? If you want or have the time…it`s been pretty accurate lately.

  • BobbyLow

    Out on XRT Short for only a .5R Gain. It turned out to be a 3 day swing trade and price had gone down 4 days in a row. Price blew through Lower BB this morning and then worked its way back up and looks like today's candle could turn into a Doji. It's probably a fake out and I'll reshort if it looks like it wants to continue down. But in the mean time, I don't trust anything and will take a “bird in hand”.

    Paired trade of Long Big National Banks KBE and Short Regional Banks KRE might be working out as the Big Guys seem to be coming back (surprise, surprise) but the Regionals seem to be struggling. Long Utilities XLU is as flat as a pancake and might have to go bye bye next week.

    Maybe someday we'll get a decent size correction but it doesn't look like it'll happen today.

  • ricebowl

    This is common for all of the ETFs. There was an article written about it; you should Google it. One of the ETFs distributed 80~90% of its share price at the end of 2008 to its shareholders. AFAIK they're classified as capital gains and *not* dividends which is significant in the US because dividends are currently taxed at a lower rate.

  • raised_by_wolves

    Risk-on-risk-off is well below the MA(20)s, half way between them and the lower BB(20)s. (I would post a chart if I were on my Mac). My guess is that there will be a trip down to the lower BB(20)s next week. Whether or not it happens, there is at least room for risk asset downside. Keep in mind that I consider SPX a safe haven asset. It's barely down today compared to RUT and EEM.

  • BobbyLow

    Hello VWAP!

    Looks like 15 Minute ES wants to close above. Going green for the weekend.

    This must be magic. :)

  • ricebowl

    The market is pricing AMZN with the expectation that scientific inquiry will reveal that Jeff Bezos shits gold bricks. The stock isn't bad, but the P/E is 75, and it seems way overvalued to me. For the moment the trade is a spread trade, betting that SPY will either advance more or fall less than AMZN. If we hit 130+ on SPY, then I will probably close out my calls and keep the naked AMZN puts.

  • ds2

    Mole – How's Geronimo doing? I almost never hear you mention it. Any stats you could share? I might sign up if I had more info. Also you mentioned putting a system on C2. What's the progress on that?
    Thanks!

  • raised_by_wolves

    Would any TOS Prophet user mind posting a chart of

    (SLV*47+GLD*10)/($SPX)
    ?

  • volar

    http://content.screencast.com/

    LMK if this works- this is daily

  • volar
  • bluprint

    Here is what I got from my TOS prophet chart.

    http://screencast.com/t/qufP1h

    I have never used that functionality in TOS so big grain of salt…

  • amokta

    1) Sometimes difficult to work out what zero means (like a pilot one needs so many 'hours' before able to fly perhaps)
    2) In terms of use, i can understand how divergences and non-confirms can help as there is enough of a time-gap before any change in price action, that you can apply a trade set-up (or exit)
    3) regards 'Today's breach and touch of the zero mark…probability..VWAP' – is zero sufficiently ahead timewise of price-action in order to 'bag' a trade? (easier in hindsight, but what about in real-time)
    4) would zeroATR help re (3)

    can you come up with a 'CNBCzero' that just gives 'buy' 'hold' 'neutral' 'sell' signals (now if investing/trading was that simple!)

  • raised_by_wolves

    When I graph (AMZN)/($SPX), I don't see the ratio outside of Bollinger Bands or anything like that. What I do see is lower highs and higher lows as if this is a consolidation period possibly before another move up.

    What are you looking at that shows you a different picture?

  • raised_by_wolves

    Thanks! If you look closely at the 60 minute, does it look more like a bottom or a consolidation before a further move down?

  • raised_by_wolves

    Something is wrong with your daily chart because the last day shown appears to be 1/4. Today is 1/7. After those two strong down days, there have been three weak down days including today.

  • raised_by_wolves

    Sweet, would you mind showing the 5 day, 5 minute chart?

  • gsavli

    what a load of bullshit this market is. i would almost bet, there was some heavy manipulation today.

  • 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

    Quite obvious – yes. The ZL shows exactly when and where.

  • http://evilspeculator.com molecool

    Doing very well actually – not sure why nobody is subscribed anymore – LOL :-))

  • raised_by_wolves

    What are you trading? I stopped trading SPY put options awhile ago because of POMOs. More recently, I stopped trading SPY call options too because of lack of volatility.

  • gsavli

    futures, NQ and ES only. and scalping only for last few months (about equal number of long and short positions), although, i am in a longer term trade from yesterday (or at least i thought so, right now it doesn't look too promising anymore – NQ short with mental stop somewhere above 2280).).

  • raised_by_wolves

    Have you ever charted

    ($NDX)/($SPX)
    in TOS Prophet?

    Relative to $SPX, $NDX has been moving sideways on the weekly chart, coming inside the upper BB(20) and moving toward the MA(20). This week, the first positive week in six weeks, appears to be a move off the MA(20).

  • ricebowl

    First of all, this isn't a day trade, and I've got time to burn. Second, I'm looking at a stock trading a 52-week highs. Historically stocks see ~20% volatility, so operating on the assumption that we're near the highs, AMZN should trade down to ~$148 sometime this year (on average). I'm also looking at a stock with a P/E of 75 and beta of 1.16 in an unstable environment. I think AMZN will do well as a company, but the beauty about long squeezes is that the selling is indiscriminate.

  • raised_by_wolves

    “I think AMZN will do well as a company, but the beauty about long squeezes is that the selling is indiscriminate.”

    Excellent point.

    Historically stocks see ~20% volatility, so operating on the assumption that we're near the highs, AMZN should trade down to ~$148 sometime this year (on average).

    What would invalid your assumption that we're near the highs?

  • ricebowl

    Well, for my trade I'm not assuming that we're at the highs. If the high ends up being $200, then it should trade down to $160. I just had to pick *some* number to explain what I meant by volatility, that the low is typically 80% of the high. No one can predict when the high will come, and rather than trying to make a prediction,

    Right now I'm partially hedged by betting that AMZN/SPY will fall rather than betting that AMZN will fall outright. I figure that when the correction comes, though, AMZN is going to get hit harder than SPY.

  • raised_by_wolves

    Okay, I get it. Thanks for explaining your “low is typically 80% of the high” observation.

  • volar

    sorrry abt the daily

    — lots of support @ 2082ish 5min 5dy

    http://content.screencast.com/

    15min since NOV

    http://content.screencast.com/

  • bluprint

    http://screencast.com/t/lj4yyb

    Why Prophet? I don't see its really providing any information different than any other chart…