Trend or Range

Everyone likes to think that after an uptrend comes a downtrend. But objectively the odds heavily favor a trading range, and not necessarily a nice smooth one either. A useful rule of thumb is that after 20 bars of inconclusive action the influence of the previous trend is weakened to the point of irrelevancy.

range1

How do you play a trading range? You buy at the stop, sell at the bottom and SCALP. Someone in the comment section was talking about banking shortside profits, and win/lose/draw that was the smart play. Low risk buy point is anywhere in the yellow zone. Now that does not mean we don’t go lower from here, just that a good risk/reward opportunity exists. There was a bunch of complete horseshit in the comment section over the last few days (and some good discussion as well) about predictive methods. Let us be very clear. If you believe in a method which claims to predict the future you believe in the easter bunny. The future is NOT predictable, and the only path to trading profits is to take trades with a good risk/reward ratio. And please don’t tell me “oh but this guy has consistently got it right through prediction” There are thousands of people predicting all kinds of market action all over the internet. Logically some of them have to be right, for extended periods. Risk/reward does not depend on predicting or timing the market, and also has the advantage of being way easier.

range2

Market internals are very muted here – they neatly nailed the low and breadth is a little stronger but still weak. Whether this is a dead cat bounce or not is a coin flip. I’d stand aside here if you are not positioned.

range3

This is a setup I like today

Scott Phillips

Mexican Murpy

And of course this just had to happen. I mean how many vacations have I taken in the past seven years since I started Evil Speculator? Three perhaps – none of which lasted more than three or four days? And the one time when I finally decided to go off the grid for a few days the damn site melts down. Incredible! As you (may) know this almost never happens – except of course when poor Mole take a few well deserved days off. Unfortunately I also managed to forget my mobile phone at the club – typical. So I didn’t figure the site was down until early evening when I returned from a beautiful day on the Marietas Islands.

sunset_PV

In the end the culprit turned out to be some missing PHP updates which caused some incompatibilities with the newest version of cPanel. My most supreme hosting company however was on the case right away and by the time I woke up this morning everything was upgraded and properly fixed. I seriously don’t pay these guys enough – best hosting firm I have ever come across. Of course if you for some reason experience any problems please don’t hesitate to zap me an email. Again, allow 24 hours for a response as I’m in Mexico with a spotty Internet connection.

By the way, I humbly thank all of you who responded in kind to my email. As a matter of fact I didn’t receive one single angry email, which speaks a lot to the caliber of people who frequent and support Evil Speculator. Thanks guys – this actually makes me look forward to returning to work next week.

Now Scott was obviously unable to put up a new post yesterday and after such a lengthy outage there’s simply now way I’m going to leave you guys hanging. So here we go – a quick update on the current price action.

2015-03-25_spoos_update

The E-Mini is actually in a very interesting spot here. The red arrow points at the spot where we touched the upper 100-hour BB and then started to proceed sideways. I’m not convinced that we’ve got a double top situation here – just yet. The tape since then has been indicative of wearing out some of weak hands. The first real level of support I’m seeing now is near 2076 where the lower hourly BB meets our NLSL. Now if we fail that one then it’s quite possible that we’ll revisit the 100-day SMA near 2050. But even then the bulls still have a pretty good chance at to jump in there and take advantage of that rising SMA. Let’s see what happens today/tomorrow – the price action will give us further clues – look at velocity, participation, UVOL/DVOL, all that good stuff. And of course the Zero!

2015-03-25_YM_update

The YM is actually a bit ahead of the ES here and although I would trade the latter I would take early clues from the former. Bottom Line: I would be long right here with a stop below the daily NLSL – at this point I would not be interested in short positions. I am using the conditional as I am obviously not trading whilst on vacation with Mexican Internet connectivity (actually it’s not that bad – upload speed is the biggest problem).

I got a few more goodies for my intrepid subs – please step into my Mexican lair :-)


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Alright, that’s it for me until sometime mid next week. Obviously you are in good hands – Scott did an awesome job in nailing the recent highs.

Cheers,

Double Top Increases In Probability

This rally in equities is running out of steam, but we do not have enough evidence to get short yet. Technically we are still retesting the old highs, but as we rally it is attracting early bears getting short and bulls scaling out of positions. This is consistent with a market trying to form a trading range. A double top (which is actually quite rare) is now the highest probability)

tuesday1

tuesday2

Both of these setups I like for today, essentially USD reversal setups following on from the thesis of yesterday’s post, which gathers evidence as being the highest probability

tuesday3

tuesday4

Scott Phillips

 

 

 

 




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