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Skeptical

by The MoleAugust 15, 2017

Something doesn’t add up here. We got our VIX Buy Signal confirmation and that is short to medium term bullish for equities (again, the buy refers to the latter, not the former). However I’m smelling a potential rat as the Dollar finally looks like it may be ready to squeeze the heck out of the shorts. And usually that is not exactly bullish for equities, is it now? Let’s look at some key markets and then decide the best course of action:

2017-08-15_VIX_Buy_Confirmed

Alright, so there’s the lower close on the VIX which, per the rules discussed yesterday, officially puts a confirmed VIX Buy Signal on the map. No, there won’t be a parade, sorry. First up it’s too hot and because of Antifa I can’t afford the insurance.

2017-08-15_spoos

The E-Mini looks as bullish as it looked bearish late last week. Even in a bull market it’s rare to see such a systematic squeeze higher. Clearly this was nothing but a very convenient shake out courtesy of nuclear Kim Jong Boom clickbait.

2017-08-15_spoos_volume

The volume profile has us back in the old ‘shake out zone’, meaning the volume hole between 2450 and 2460 was successfully breached on Monday.

2017-08-14_Zero

Participation gently pointed higher last Friday and I’m sure you recall the Zero plotting in the positive all session. Which continued yesterday but almost without any participation.

2017-08-15_DVOL

And here is where things get a bit iffy. NYSE DVOL was completely flat yesterday, I don’t ever recall seeing such a lack of selling interest. The two charts combined strongly suggest that yesterday’s buy spree back was purely institutional, retail got a good ole’ fashion kick in the nuts here – twice.

2017-08-15_Dollar

Now here’s the Dollar which has managed to overcome two consecutive NLBLs after touching a long term inflection point near 92.1. I would usually label a formation like this as bullish as f### and then look for entry opportunities.

2017-08-15_EURUSD

And it’s not just all smoke and mirrors, the EUR/USD is now in a corrective pattern and after a failure to overcome a daily NLBL it is now heading toward a NLSL near 1.1689 and change. However there is the matter of that 25-day SMA plus the upper 100-week BB, which without doubt are expected to put up a bit of support.

2017-08-15_USDJPY

The USD/JPY is also in the process of bouncing after approaching what traditionally is BOJ Defcon 2 levels. It managed to push through its first daily NLBL and is now pushing into a whole cluster of Net-Line-Buy-Levels starting at 110.827.

2017-08-16_events

Of course I kept the best for last, which is tomorrow’s event calendar. When you guys back in the U.S. are still in deep slumber Europe is getting its Q2 GDP reports. And if those are positive then I’m sure the Euro is going to punch higher and stronger than Wladimir Klitschko in his prime. He will be missed by the way, what a fight but it was clearly time to hang up those gloves.

And then at 2:00pm Eastern we’ll be blessed with the FOMC minutes which are a complete mystery at this point. Who knows what the Fed is going to do this time and the slightest bearish sounding soundbite could send the Dollar back into a tumble.

Bottom Line

We are dealing with a pretty fluid situation here which depends on variables we have zero control over. Under normal circumstances I would suggest a binary setup with distinct inflection points but given this particular furball I think it’s best to remain on the sidelines until we gain a better sense of the situation. If you think you have a good handle on what both the Fed and the ECB are going to deliver tomorrow then a lottery ticket may pay off handsomely. Puts would be good for playing the short side and perhaps a bull call spread on the upside. Volatility has dropped quite a bit again, so the risk of getting vega squeezed has diminished somewhat.

Campaign Update

2017-08-15_ZB_update

Bonds are also falling hard since yesterday which resulted in my campaign getting stopped out at break/even. I think I actually got pretty lucky there and got away clean per the rules, so no regrets.

2017-08-15_gold_LT

Gold is also pointing lower again but I wanted to share a more long term perspective. Look at weekly and monthly panels above – the latest reversals has confirmed a diagonal resistance zone which currently extends into 1290 plus minus a few handles. For now gold and precious metals in general are off the table, at least until gold pushes into 1248 near its 100-week SMA.


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.
  • Brishort

    Mole, this type of post with the agility to question and analyze on the fly the facts rather than opinions is the reason why, on the anniversary month of being a paying member of ES for 7 years now, ES remains so good and so relevant. Thanks again for all you do.

  • Ronebadger

    What am I missing here…how is the VIX buy signal confirmed…today isn’t over yet?

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

    Yes, something isn’t right.
    As Scott said, could be limited upside.

    Time to hold nose and change the diaper. give it a try.
    May not (or may!) work.
    https://uploads.disquscdn.com/images/2ef1f575942ffcd15b0a6d6c5453003427c63f2b6a6bce8e375117ce9924583d.png

  • OzarkHillBilly

    Nice post, Mole. Something could happen shortly to change my mind, but for now I’ll be on the sidelines. I see too many scenarios lining up, and I don’t feel like being a total ticktard over the next few hours or days, for what appears to be a possible slight return. Better opportunities will be had in equity indices if we wait a bit. The dollar, however, looks like a legit setup.

  • Mark Shinnick

    Agreed on the $

  • http://evilspeculator.com Sir Mole III

    Have you heard from Scott? I sent him a message yesterday and thus far no response. I hope he’s okay.

  • http://evilspeculator.com Sir Mole III

    Damn, you just made my day, Brishort. I’ll try to keep it interesting :-)

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

    no. We’ve never communicated. Check with Bobby.

  • OzarkHillBilly

    If he’s feeling better, he probably has a ton of shit to catch up with.

  • Brishort

    I will try to participate a little more as well. Albeit time is sometime running out on my side to answer quickly and then my comment becomes stale…Great people on the blog, so I will try to add as much as I can!

  • http://evilspeculator.com Sir Mole III

    Damn, it’s a national holiday here in Spain. Just drove all the way to the gym and back for nothing :-/

  • Julie

    Out of BAC as it filled the gap and pulled back this a.m.
    JULIE

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

    so you’re basically screwed for September?
    😉
    http://www.officeholidays.com/countries/spain/index.php

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

    you play with the snake, it will bite you. Eventually.
    http://www.californiaherps.com/snakes/images/cruber5094.jpg

  • Julie

    GG Just being nimble as I do not trust zero about this market presently. I have a target USO at 9.65 and today’s low 9.63 No execution yet …. Evaluate EOD
    JULIE

  • http://evilspeculator.com Sir Mole III

    No, these are all regional holidays outside of Valencia. But on 10/09 there’s a big one, they even named a hospital after that one (Hospital Nisa 9 d’Octubre). It’s the day when King James of Aragon kicked the Moors (Muslims) out of Valencia.

  • Julie

    Mole is correct best to be on sidelines ….. I have plenty of dry powder and evaluating setups only if they come too me. Presently if I take a trade it is short term with finger bracing sell or cover short key. OZHB doing the same as he bailed out of SPX yesterday…..
    JULIE

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

    talk about stuck in a rut. Traditions should be limited to 500-600 years (10 generations) and then Start Fresh.
    😉

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

    not much left to happening this week.
    FOMC minutes are usually a snoozefest.

    http://finviz.com/calendar.ashx

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

    anyone remember AutoZone?

    still down in the mud, for the WEEKLY.

    http://stockcharts.com/h-sc/ui?s=AZO&p=W&yr=2&mn=2&dy=0&id=p97171081357
    -GG

  • OJuice

    I’ll check on it after the meeting announcement. Re-test of the highs after the announcement might present a decent short entry.

  • OJuice

    p&f target of $353 ouch.

  • HD

    Skeptical indeed. But hey- it’s a mechanical set up. Plug your nose and pull the trigger, right? Which is why I don’t trade that way. Human judgement required in every trade no matter how automated you make it. Still very curious how it trades.

  • Mark Shinnick

    The target is always moving; only HFT allows pure machines to make it…for us it tends to become more of a management art.

  • HD

    I spent some time a while ago trying to automate an exit strategy. Hate getting out too early if it’s working. Didn’t go so well. Moving stops and letting the market kick me out vs using the oscillator to let me know we were at extremes. Each has its own pros and cons.

  • Julie

    MARK GDX Applicable LEVEL 3
    25.28 Level 2
    25.00 .76393
    24.83 .61803
    24.70 .5
    24.56 .38196
    24.39 .23606
    23.12 Level 2
    23.95 .76393
    23.84 .61803
    23,76 .5
    23.67 .38196
    23.57 .23606
    12.40 Level 2
    12.26 .76393
    23.18 .61803
    23.11 .5
    23.04 .38196
    22.95 .23606
    22.82 Level 2
    22.68 .76393
    22.60 .61803
    22.53 .5
    22.46 .38196
    22.32 .23606
    22.24 Level 2
    22.07 .76393
    21.96 .61803
    21.88 .5
    21.79 .38196
    21.69 .23606
    21.52 Level 2
    21.24 .76393
    21.07 .61803
    20.94 .5
    20.80 .38196
    20.73 .23606
    20.36 Level 2
    JULIE

    .

  • Mark Shinnick

    Here is some expected support cytr.

  • Mark Shinnick

    U L or S ?

  • Julie

    Neither Mark I am watching GDX ….. 3 wave moves in both directions since March forming a triangle. I think that there is going to be another minor leg up to finish a 3 waver up from July. The pullback from Monday has retraced 61.8%. May go long on the 60 min chart with a bullish candle closing above 22.61 which is the daily ichimoku cloud conversion line and a Level 3 22.60 (22.60 is important as it is a .61803) I like the .618% retracement to upper boundary of the cloud JULIE https://uploads.disquscdn.com/images/4922c3b81e0a163c6f9e2bd4b1b0acfa4202f2478d8abf751f2772bcd7a6bd65.jpg https://uploads.disquscdn.com/images/4922c3b81e0a163c6f9e2bd4b1b0acfa4202f2478d8abf751f2772bcd7a6bd65.jpg JULIE

  • http://evilspeculator.com Sir Mole III

    It’s a big deal for them. And 500 years is nothing over here in Spain 😉

  • http://evilspeculator.com Sir Mole III

    So do I get the day off tomorrow then? That’s what you are offering, right?

  • OzarkHillBilly

    One day off is cool. Maybe two. Longer than that, and we all know what happens to the market.

  • http://evilspeculator.com Sir Mole III

    AZO used to be the gift that keeps on giving.

  • http://evilspeculator.com Sir Mole III

    LOL

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

    I’d better pickup a Kayak, this retail market is going for a SWIM.

    https://uploads.disquscdn.com/images/c8a26961d7d6b11f714f155105efadd70f7243bb98ca7a9aec4d3ad074404f65.png

    Scott hated fib fans, if he’s out there, this will pull him in..
    😉

  • OzarkHillBilly

    Ironically, this is the time of year real kayaks are on sale.

  • http://evilspeculator.com Sir Mole III

    How’s my crew?

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

    Doing great chief ! GDX Je ne sais pa ! I believe that means no way in French ! Bounce looks corrective. May take a long USO at the close i.e. small position with a tight stop USO per post below had a 9.63 target for a pullback
    JULIE

  • Julie

    miss type 9.65 not 9.63 9.63 low of the day
    JULIE

  • Julie

    CDE A silver miner coming down to a level that is peaking my interest. WEEKLY CHART. Today a bounce and perhaps tomorrow a bullish close above it.s daily 5 ema approx. 7.70 which is also a horizontal resistance may buy
    JULIE https://uploads.disquscdn.com/images/b797fd04d1795652c18d78b69e6cd1fab2c8e8743deff6686a936fef3e2480f7.jpg

  • Ronebadger

    RSOE EDIS Event Report – An earthquake registering 2.6 on the Richter scale reportedly struck an area near Pyongyang. There is no indication yet from state propaganda that a nuclear test has happened, or was even planned. But today is a national holiday in North Korea – and the regime has often used such occasions for big weapons tests. The quake struck a long way from the Punggye-ri Nuclear Test Facility, where Kim usually detonates such weapons. Kim Sung-han, a Seoul-based weatherman, reported the quake on Twitter saying it covered a 3km area. Today is National Liberation Day in the North, marking the victory over …

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

    Sure.
    just keep an eye on the systems.
    You know how they like to break.

  • OzarkHillBilly

    Mostly just enjoying the weather outside today and getting chores done. Better than watching paint dry.

  • http://evilspeculator.com Sir Mole III

    Ah – some bait – smart.

  • https://scottphillipstrading.com/trade-setup Scott Phillips

    Re: VIX buy signal. I don’t think we have sufficient data to make a conclusion as to whether it really is an edge. Or if we do, I’ve never seen it posted here.

    Given that VIX is strongly mean reverting I’ve got my doubts about this one.

  • https://scottphillipstrading.com/trade-setup Scott Phillips

    It’s a log scale, so 2.6 would sound like a truck driving past. Quakes in this range happen hundreds of thousands of times a year in Japan, etc.

  • https://scottphillipstrading.com/trade-setup Scott Phillips

    This is very similar to one of Gabriel Grammatidis setups. What he does is wait for price to fall below the range, then rally and fake out the shorts. Then he buys, because at that point he can do so with a very tight stop (better risk reward)

  • https://scottphillipstrading.com/trade-setup Scott Phillips

    You got me :-)

    I hate using TA without taking the time to collect the evidence.

    If you use fib fans every single day of your life for everything, have at them. If you randomly, today, just picked up a fib fan, you are fooling yourself. Seeing what you believe instead of believing what you see.

    We are all capable of the most incredible self delusion. Especially me. So giving myself the freedom to eat from the buffet of technical analysis is extremely unhelpful.

    You might be different, but odds are that you are not a Gerb, but an Ape that wears shoes that doesn’t think he’s an Ape (like me).

    I repeat for those who haven’t heard it a thousand times before. If you use TA and you haven’t taken the time to test it yourself, you are lazy and you are being scammed.

    We evolved to match patterns in things. We see patterns everywhere, even when none exist. Ancient people didn’t understand the sun so worshipped it as a God. Modern people don’t understand markets, so worship the black magic that promises to explain it.

  • https://scottphillipstrading.com/trade-setup Scott Phillips

    Using both together in concert is generally the better path.

  • https://scottphillipstrading.com/trade-setup Scott Phillips

    Oh Bobby I owe you an email. Apologies mate :)

  • Julie

    Hi Scott Glad you are checking in …. Hope you have a speedy recovery and feeling better
    JULIE

  • Julie

    Yes indeed Scott A failed breakout or breakdown I try to look for. Volume is the giveaway IMO Thanks for your input
    JULIE

  • Julie

    Scott This is a chart I use i.e. relationship with it’s 10 ema (above or below 10% or a spike at 35%) and ROC (12) 20%
    JULIE https://uploads.disquscdn.com/images/f8eb20faff4d096a361def9b81998d976886c4da80ab10f134bc9d340703b4ad.jpg

  • https://scottphillipstrading.com/trade-setup Scott Phillips

    Thanks Julie :) As I’ve previously stated you make a grave error when you chart on VIX with indicators etc. Even bollinger bands behave differently when you put them on VIX, and the relationships which hold in real markets fall apart.

    This is because the VIX isn’t a market. It’s a mathematical formula. There are no buyers and sellers. The scale doesn’t work the same way.

    You cannot trade VIX, either, only VX futures or some ETF.

    In statistical terms a derivative of a derivative (an indicator on a math formula) introduces an unacceptable level of error.

    But PLEASE don’t take my word for it. Take some time to test it. Test everything, test all of your assumptions.

    When I started testing the technical analysis I’d used every day for many years, I was very surprised to find I really believed a number of things which weren’t actually true 😉

  • https://scottphillipstrading.com/trade-setup Scott Phillips

    Thanks Julie :)

  • https://scottphillipstrading.com/trade-setup Scott Phillips

    That being said, the premise of your chart seems pretty fine

  • https://scottphillipstrading.com/trade-setup Scott Phillips

    We have an uptrend with a massive spike in volatility.

    Typically that means we are not necessarily at the end just that counter trend setups and with trend setups should be considered of equal weight.

    In a lower volatility environment, typically counter trend setups don’t work as well.

  • Julie

    Scott Something that you may find useful is to substitute $XII for $SPX. The $XII is the Institutional Index and is not traded and therefore not subject to shenanigans. Also MTUM Heiken Ashi candles to guage momentum JULIE https://uploads.disquscdn.com/images/4b1ef04307e5c844c209f6c28f3fc68d818cc82c71c3d5c0efc528d147e199e5.jpg

  • https://scottphillipstrading.com/trade-setup Scott Phillips

    Heiken ashi makes it nice and obvious doesn’t it

  • Julie

    Yup Scott !
    JULIE