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Once The Last Bear Has Left The Bus
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Once The Last Bear Has Left The Bus

by The MoleJune 11, 2014

Just yesterday morning as we were scraping all time highs I suggested the following: After a three week melt-up the bears are feeling pretty crappy right now – there’s very little desire to short this rally and in combination with yesterday’s doji we may be due for a small correction. Apparently the last bear had finally left the building and after some consideration I believe we may be getting more than just a little dip lower – let’s review:

Let’s start with the obvious – as you recall the GBP/JPY was pointing down strongly and gravity has finally set in on the equities side. Some prefer to follow the EUR/JPY which actually is looking even more bearish.

This is the ratio between the SPXA50 and the SPXA200 – this refers to NYSE stocks above their 50 and 200 day SMA. The ratio shows us inflection points when we should expect normalization – i.e. medium term corrections. Since about early 2013 the 1.0 mark (i.e. par) appears to be where we should expect a shake out and we have pushed a bit beyond it last Monday.

On the volume profile side we never had much to work with since about 1890 – remember how long it took to overcome this? I see us either holding right now and right here in which any of the below becomes moot. Or we drop to 1925 for a bounce. There again we either hold or slide quite a bit lower.

Here’s the hourly SPX – I always like to look at the cash which guides my activities on the futures. As you can see we finally gave up the 25-hour SMA and now it seems the 25-hour Bollinger is being breaches as well. Again, unless we see a recovery here late today we are probably due to visit 1925ish (which lines up with what we see on the volume profile chart – nice!).

The Dollar meanwhile is pushing against its 100-day SMA and I fear that the buck literally stops here. A continuation higher would be very positive as it not only would get us above both SMAs but also interrupt a sequence of lower highs and lower lows. I would very much welcome such a move but call me skeptical.

But we’re just getting warmed up – I have a few more goodies up my sleeves plus I’ll tell you how to best get positioned here. Please step into my lair:

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Bonus Chart:

If you ever called me an idiot you may be on to something. I don’t know why I bother trading complicated setups. I should just go long on three consecutive green candles and short after three consecutive short ones. I mean is this the easiest futures contract ever? Literally a trend trader’s wet dream. We should consider trading with the trend here on a regular basis. I think I actually pointed this out in the past – this is a very well behaved contract. However it’s thin and you probably get a bad fill so it’s not something to jump in/out in – be in it for weeks at minimum.

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.
  • ridingwaves

    spy/vix algo at it again…

  • Skynard

    Placed a full short on the squeeze me:)

  • BobbyLow

    Interesting that you mentioned the weakness in the GBP/JPY because the (mistake) marginal trade that I took this morning was a Short of this pair. This one has been on kind of a roller coaster over the last three weeks then had two doji’s and a big move down on the daily yesterday and more of a continuation down last night. This baby really moves so the danger is a deep retracement upward (among other things). :)

    Anyhow, it’s still open and has been pretty much flatlining over the past couple of hours. Time will tell if she makes it through the night.

  • BobbyLow

    The “Gunslinger”. :)

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

    and it matters not … as the Sun will still rise in the East.

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

    http://4.bp.blogspot.com/-buUQTW81ozA/UFSux8rHDWI/AAAAAAAAC_E/f6ol78eJ59o/s320/Way+of+the+Turtle.jpg

    I returned, and saw under the sun, that the race is not to the swift..

    nor the battle to the strong, neither yet bread to the wise, nor yet riches to men of understanding, nor yet favour to men of skill; but time and chance happeneth to them all.

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

    Perhaps a little like my prescient comment 2 days ago regarding the window for the message from the daily OPu in the S&P …

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

    Good Morning Ivan,
    can someone please translate?…I don’t speak Bislama.
    😉

  • ridingwaves

    started using some of your candlestick patterns in bio space and it applies just as well

  • BobbyLow

    Yep. Just “one of the next thousand trades”. :)

  • Scott Phillips

    Ivan has his own language for everything. Everyone else in the world calls a trading system a “system” he calls it an RuleBasedTrade.

    Once you know him you can see how his contrarian nature makes his systems a perfect fit for him.

    OPu is outside period, up close.

  • Scott Phillips

    Careful using Ivan patterns on daily charts – the extra gap risk turns them into a negative edge. Weekly they work very well

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

    From my bislama retreat I spend time focusing on the Language of the Market (LOM) … I have shared same with Scott et al … LOM is the way that the market shows its hand as to which way it wants to move … and which way it does not.

    OPu (Outside Period up close) is part of the alphabet … Scott even wrote about OP’s here ages ago.

    Additionally, recently I threw out the bone of doing one’s own research regarding OP’s … I / we are still waiting for feedback regarding that concept.

  • ridingwaves

    thanks for heads up..do you still toggle in between to define edge?

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

    As you know Scott, one of the biggest challenges in trading (and most endeavours) is the little committee on the shoulder … aka one’s subC … hence my term of RULE-based Trading (RBT) is designed to emphasis the RULE aspect of my approach … after all, our education system is designed to get us to follow rules.

  • Scott Phillips

    It probably hasn’t been shared in enough detail here, but for example Ivan’s Inside period setups require an open within the previous days range. An open outside the day’s range has a gap fill effect that throws off the edge.

    Since the edge is very small with these patterns (but tradeable) even one gap could represent a 3R loss. If that happens one out of every 20 trades (entirely possible) it would negate the strategy to a large degree, sapping .15R expectancy per trade.

    I’m not a good stock trader so take this with a grain of salt

  • Scott Phillips

    repetition repetition repetition

  • vladv

    “Today, Monday June 9, is the formal ‘expiry’ of the OPu message of the daily S&P … so far the supporting evidence is in line with the message of the OPu.” – isn´t the message a little ripe if it expired on Monday?

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

    Still the mind also works a treat!

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

    Part of my LOM is the range of each bar … they were contracting as the S&P rose … the icing on the cake, so to speak was the daily bar at the top (yesterday) … was one of the setups in my toolkit … the latest day provided the opportunity to profit both from the LOM and the setups.

  • vladv

    hmmm…..i will have to look into that with more care and attention.

  • http://evilspeculator.com molecool

    Unfortunately prose or poetry are completely wasted on me – major personality flaw I guess but it is what it is…

  • http://evilspeculator.com molecool

    Be careful trading these carry trade pairs as there is a lot of inherent activity which are often exacerbated by events. I recommend 1/2R sizes at most. The other issues is that they’re thin and it’s often hard to get out, especially when you’re losing – you may have been better off with the USD/JPY or GBP/USD instead.

  • Billabong

    You’ll be waiting a few more days unless someone else has also taken up the challenge.

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

    Patience is a virtue … possessed by few … admired by many.

  • Billabong

    About time for breakfast?

  • Billabong

    I would suggest bia but it’s a little early in the morning.

  • ridingwaves

    ok, more studying then…I’ll try the weekly and write down the trades against it to sample results…after your comments the other day I almost sold out and took 1/2 yr off to study, concentrate and remove stigmas….very hard to do when you work full time, have an aussie shepard, wife and kid in college…got to start somewhere,..thanks for thoughts…

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

    Breakfast long gone … time for a quiet contemplation listening to the gentle ocean waves … and a bit of dolphin spotting.

  • Billabong

    My type of Zen…

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

    Great to still the mind.

  • http://evilspeculator.com molecool

    What is your take on that wheat chart?

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

    A chart of wheat!

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

    The markets have been around for yonks … and will probably outlast us (at least in some form) … so why not bite the bullet?

  • ridingwaves

    No doubt the markets will be here when I’m dead, but because I have learned market patience and don’t trade every day, my thinking is I’ll reduce my trades further while picking apart my stigmas, I’m not an index player and have a niche that has paid off fairly consistently. so if I see a great setup I’m going to take it while finding trading zen…

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

    ‘No doubt …’ talk about linear projections … and hence the now famous Black Swan!

    Sounds like a brain surgeon (in training) doing the ad hoc operation or ten on a relative… whilst acquiring the necessary skills to perform the operations.

    If indeed the belief is that the markets will continue in their current modality, prudence would say why not take the time off to deal with ‘stigmas’ and establish a clear and measured road ahead?

  • Scott Phillips

    Personally I no longer trade that way, though I find Ivan’s language of the market (I won’t use an acronym) *incredibly* useful as a tape reading paradigm.

    In all my current production systems I only trade in the direction of the trend on at least 3/4 of 60/240/daily/weekly. I also only trade in a pullback of that trend and take Ivan’s patterns as supplementary setups

  • Scott Phillips

    In Van Tharp’s program students sign a written commitment to stop trading until success is not a matter of luck but guaranteed.

    It’s going to take you a year of real soul crushing work, minimum. Took me 13 months.

  • Scott Phillips

    Beware very obvious patterns. This market is stuck in an obvious range trade, and will race to support and fall deceptively quickly to resistance. While it is somewhere in the middle like now (and close to the breakout point of the triangle) it is literally a coin flip.

  • Scott Phillips

    And you need a new name. Wave theory will take your job, wife, have the kid working at mcdonalds and rape the dog if you aren’t looking closely

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

    This is exactly the same as I get my students to do (minus the signing part) … with the added Commitment at the other end, so to speak … a signed and dated commitment to follow their own detailed RBT for ‘x’ months … or until ‘y’ drawdown occurs … whichever comes first.

    In this fashion firm goalposts are set by the student … which, in turn, has the effect of lessening the fear of the unknown future … it works.

  • ridingwaves

    I like waves in Hawaii, Costa Rica, Mexico and good ole California… Wave theory not so much…..too technical for my brain….My stigmas are overtrading, not letting winners run and believing in the setup in front of you

  • Scott Phillips

    :-)

  • ridingwaves

    my relatives are safe so far as they are not investors with me…
    I have a learned a lot from the host and posters here such as yourself. My stigma of over trading has been the self focus of looking in and it has been rewarding. I trade much less. I agree that learning the road ahead makes travel to your destination less stressful and more sanquine..

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

    and yet ?

  • phylum

    Interesting structure in EURAUD today ….

  • Billabong

    Yes, 10K trades the same. Each one is one of a campaign,

  • Billabong

    Trading lets one appreciate how most people work from an emotional level and not from a rational point of view. One can always see a person working from a calm sea; quiet, unassuming but strong.

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

    It is all about process, process, process.

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

    When I first introduced the mantra of 1 of the next 1,000 … my choice of 1,000 was not arbitrary … rather it was linked to one particular RBT that has a goal driven lifespan of just 3 years … which equates to about 1,000 campaigns.

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

    From my perspective trading is only about how and what I do … how I follow my process … to that extent ‘how most people work’ does not come into that equation … trading is me vs me … not against someone else.

    EDIT: Ditto Life … it is absolute as opposed to relative.

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

    One real challenge with a triangle is that, by definition, the price must break up or down as a triangle contracts … it has been my observation that ‘true’ breaks occur around the 2/3 area of a triangle … by that criteria, any break that occurs now from the triangle you have marked above will probably be reversed pronto … time will tell … I am not attached to that outcome.

  • Skynard

    Time to watch the dollar, tried a short AUD:)

  • Skynard

    Shorts looking good, break of yesterdays low should get things moving along:)

  • bdoone

    Or scare the children…something I learned from CS a couple years ago: significant highs are almost always retested..

  • http://evilspeculator.com molecool

    Keep an eye on the Zero Lite – so far the signal is not looking convincing.

  • http://evilspeculator.com molecool

    Forgot to post this yesterday.

  • http://evilspeculator.com molecool

    Would agree – I think we’re going to see a few chops before it hops.

  • http://evilspeculator.com molecool

    Let’s watch instead of yielding to hunches.

  • Skynard

    suspicious activty in crude and commods here.

  • http://dartht.blogspot.com/ Gold_Gerb
  • http://dartht.blogspot.com/ Gold_Gerb
  • SS_JJ

    I’m also watching a potential break of that channel

  • SS_JJ

    broke it as soon as posted my comment. Let’s roll!

  • Skynard

    Support gone, screw the long. ST 1925 /ES

  • SS_JJ

    yeah, you can watch me banking coin 😉

  • SS_JJ

    Ataboy!

  • http://dartht.blogspot.com/ Gold_Gerb
  • Darkthirty

    Have mercy! Been waitin for the bus all day…………………….

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

    Good place for a bull recovery, if not look out below! Watching 5 min

  • bdoone

    Running Sep contract?

  • ridingwaves

    SPY 194 needs to break for bears..

  • Skynard

    Refering to SPX

  • Skynard

    Classic action to VWAP, see if the bears have any balls today.

  • Skynard

    Stuffed at resistance, stop above spike high.

  • http://dartht.blogspot.com/ Gold_Gerb
  • SS_JJ

    We are back inside the channel

  • SS_JJ

    time to take temp profit

  • Skynard

    If the trend has momentarily changed, many times my stop is placed just above horizontal resistance.

  • ridingwaves

    Ivan candle play on weekly, CS mentioned weekly works better on symbols….that entry on IP and tail makes sense… I was looking at NUGT…kind of looks like accumulation in miners…

    http://s24.postimg.org/us90r6o51/Gerbs_weekly_GDX_chart.png

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

    there’s been overhead resistance for months.
    it would be great to see a pop to the upper bands. yet, wishful thinking is not a strategy.

    http://stockcharts.com/h-sc/ui?s=GDX&p=W&yr=1&mn=6&dy=0&id=p25488627625

  • SS_JJ

    I’m still in the trade…for now

  • SS_JJ

    Wheeee…

  • ridingwaves

    NUGT is resting on 360sma on 60min chart..

    Scalping in CLDX and CLVS today has been profitable…the symbols are so strong they shake off down move fast…CLDX gets thru that volume hole…27 will happen fast

    http://s30.postimg.org/att0eiqu9/cldx_double_top_bkout.png

  • Skynard

    Bears piling on here.

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

    just remember those little columns can have months in them (!) 7/9/A/1

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

    wha? you doubt the Bullish Bearish Percent indicator! ;-))

    http://www.superbearblog.com/uploads/cgblog/id35/Bear_Pile.jpg

  • mugabe

    is that one of the dogs of the Dow?

  • Skynard

    Check out the wedge on the 5 min.

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

    Joffrey’s bitch. (Game of Thrones)

  • SS_JJ

    yup

  • BobbyLow

    /DX been Rising over the past hour. Let’s be careful out there. :)

  • Skynard

    IMO, VWAP is critical for bulls at this moment.

  • SS_JJ

    agree. I’m also watching a break of the IP on SPX 60 min

  • Skynard

    Ah, yes.

  • BobbyLow

    Backing off now.

  • ridingwaves

    and there she blows..

  • http://evilspeculator.com molecool

    Yo Skynard – for once the tape is going your way 😉

  • SS_JJ

    On cruise control now.
    5 min, 60 min Zero and GBP/JPY should give us enough warning as to when to take profit

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

    Hum, shall see. One of many tapes:)

  • SS_JJ

    Judging by 5 min ZL there is hardly any fear.

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

    daily sentiment in April reversed and only lasted a few days.

    it’s still in bull turf IMHO. I’m the last to declare any top. stops in place.

    http://stockcharts.com/h-sc/ui?s=$SPX:TLT&p=D&yr=0&mn=3&dy=0&id=p05762346020

  • SS_JJ

    Not calling a top, but just trading what I am seeing.

  • Ronebadger

    TRIN 1.34 … don’t usually see it that high

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

    I love cooking.

    Spoos Inverse-T look.

    http://s30.postimg.org/idwrb7en5/invere_T.png
    Meth Tooth pattern in progress.

  • http://evilspeculator.com molecool

    You have WAY too much time on your hand!

  • BobbyLow

    I know correlations only work until they don’t but. . .

    I’ve had a couple of different short USD pairs on today. I’ve also been keeping and eye on the /DX. I happened to notice that when the DX rose Emini’s would tend to rise and when the DX fell so would the Emini’s. On other days, I’ve seen exactly the opposite happen. If this is a currency/liquidity driven market then these types of movements can make sense.

    On a lighter note, price action on currency pairs remind me of my two cats Ozzie and Sylvester. Every day my cats have a routine where Sylvester chases Ozzie from one side of the house to the other. Then they reverse places and Ozzie is chasing Sylvester from one side of the house to the other. When I see them doing this, I’m reminded of currencies chasing each other in the Forex Market and I can’t help but laugh a little. :)

  • ridingwaves

    No reason SPY shouldn’t give the 20 day a test at 191.60

  • http://evilspeculator.com molecool

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    ¨°º¤ø„¸F R E S H „ø¤º°¨

    ¸„ø¤º°¨ M E A T“°º¤ø„¸

    ¸„ø¤º°¨¤ø„¸¸„ø¤º°º¤ø„¸

  • SirDagonet

    Mole,
    You may be correct that (Dec) wheat trends well, but do you mean recently or historically?

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

    I do feel like I am barking in the wilderness … detail deatil detail … the instant gratification of the last bar comes from far more than just the obvious humble IP … when that penny drops it will be a real step forward.