Now Reading
Socrates Nailed It
272

Socrates Nailed It

by The MoleAugust 24, 2010

I think we should just feed some artifical A.I. with a bunch of Socrates quotes and then let it loose on the market. Looks like the old robe donning Greek nailed the support line he proposed yesterday spot on. I can tell you, Plato is in a bad mood right now as he was on the other side of that trade. But he should have known better as he himself said:

I have hardly ever known a mathematician who was capable of reasoning.

Someone should pass that quote on to the respective originators of various toxic assets that pushed our financial markets toward complete melt down – i.e. MBS, CDOs, CDSs, etc.) – most of which are still traded over the counter to this day I may add.

Plato pondering about Mousaka Baked Sedatives.

So, let’s revisit yesterday’s chart and then look at where we are in the ole’ wave count:
[amprotect=nonmember]
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.
[/amprotect]
[amprotect=1,9,5,2]

Ever so often I (or my genetically enhanced Socrates clone) get it right – we bounced right at the 25% mark of that channel I proposed yesterday. This confirms to us that this channel is valid, despite Mole’s raving insanity. Which also tells us that this line must be breached shortly, otherwise we may just return from whence we came – or worse push higher and drive the grizzlies off the cliff for good.

The TNX/ES futures correlation chart has been a lot of fun lately. Two things stand out – one is more long term in that the ES eventually seems to revert toward the TNX. Thus, getting positioned according to our momos and then seeking confirmation here may not be the worst idea. More medium to short term the TNX is completely embedded, which means long squeeze mode for anyone tryong to pick a bottom.

A very painful (and expensive) lesson that many novice traders run into are embedded stochastics. I actually love stochastics, but it took me a long time to figure out how to use them. Case in point – all those wiggles in the past three months. Completely useless, except for the pushes above the 20% line. It’s now deeply embedded below and I would suggest to even think about picking a bottom unless it again pokes above the 20% mark. Which may happen tomorrow or a few weeks from now. BTW, the TNX is the yield of the 10-year treasury note and it runs inverse – meaning investors are plunging into low yielding bonds and notes.

I also got pretty lucky with picking my bounce target over the weekend – Socrates seems to have a good influence on me. But in this game you’re only as good as your last prediction – n’est-ce-pas? So, where do we go from here?

Well, the way it’s unfolding we should continue to sub-divide on the way down. A little push up here would not be a problem but we don’t want to see a gap fill as that may be too much of a good thing. Similarly we don’t want to breach that yellow region at 1080 or bad things may happen to the bears.

And that’s pretty much it – we shouldn’t overthink the situation at this point – just let the tape do its thing. If we bet the right way then equities should continue to drop lower into early September. If we get a meaningful bounce before that (i.e. 20 SPX handles or more) then something else may be going on. Let’s keep it simple stupid and leave the worrying and second guessing to everyone else.

BTW, today is a POMO day and you may see some volatility toward the close.

UPDATE 5:00pm EDT: Here’s some bear p0rn for you guys:

The expectation of volatility until September remains to be mild among market makers, which is exactly what keeps driving this tape down. Hence, the VIX has been skirting the upper BB boundary without closing outside of it. Quite frankly, it doesn’t get much better than this. The band is now expanding and with some good luck we get a slow creep to the upside that stays contained inside until we see a big move down in equities.

Either that, or it’s another bear trap 😉 Seriously however – we are not anywhere near we should be at this stage. A breach of 1110 by the end of this month would be a good start, otherwise I am starting to doubt that we’ll see a significant drop by early October. There are no more ifs and buts at this point – we need to continue down post haste.

Cheers,

Mole

[/amprotect]


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.
  • BobbyLow

    Well this is a fine how do you do.

    It's a good thing that my mind has gone numb by now.

    OBTW, it looks like we'll at least hit average SPY Volume Today as it seems to have come out of hiding. :)

  • equity_momo

    Mr Nenner on CNBC now talking DOW 5K. Bob Pisani pissing his pants and doesnt really know what to say. CHEERLEAD BOB CHEERLEAD , YOU CAN DO IT.
    Ron Insana trying to defend the bulls but fence sitting.
    Probably a good time for a bounce here – too many Bears on CNBC today (Nenner , Rosenberg)

  • sloth_bear

    Really love the Moussaka chart! Let's get rid of this levels once and for all!! Getting really tired of this non trending market…
    For the stochs, when it gets embedded, I see it as the proof that a longer timeframe stoch is playing out, and I zoom out until I find which one, it is a really nasty indicator for sure, but nice to spot divergences…

    Good to see you well positioned,
    Cheers

  • BobbyLow

    Ron Insana has been Bullish since 1999.

    Pisssani belongs on the Home Shopping Network.

    These guys are poison.

    Of course all in IMVHO :)

  • jigdaddy

    dont forget that fucktard Dennis Kneale…

    I hate that guy with a passion…

    so happy i dont watch that garbage anymore

  • raised_by_wolves

    In this game of chicken, bond bears have refused to move (purple). Now, let's see able 'em bulls (green). Note that the current white candle is actually red.

    http://content.screencast.com/users/raised_by_w

  • amokta

    just watching cramer cnbc – he says geitner/bernanke are saviours, but doesnt like obama
    anyway, stoxcks still weak aswe approach eod

  • equity_momo

    No need to be so humble with that opinion bobby. These guys are grade A douchebags.
    I just subscribe to the channel so i know when to buy stocks – what i mean by that is i need to know when its turned into a full time Sports Station (one of Jim Grants favourite sayings)
    -should have replied down below , sorry.

  • http://evilspeculator.com molecool

    Instead he puts up with my insane ravings now on a daily basis – talking about jumping from the fire in the frying pan…

  • Brishort

    Dear Mole,

    Bravo on 1082, I actually had not noticed the level rightfully. Would of put perspective on my 1087 spx target yesterday for my c missing wave…. which can only be counted as truncated if that count was ever even valid.

  • http://evilspeculator.com molecool

    I would like to dedicate today's daily Zero to Jim Morrison:

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

  • DudePlunger

    Oil close to going under $70? Looking forward to cheaper prices at the pump, I sure do need it on my 10mpg GMC Jimmy!

  • equity_momo

    Hey Boss Mole , dont mean to be a d*ck but check out golds price action today. I have nothing to gain whether you go long or short the yellow metal but its a great pairs trade to play against stocks. Everyone should have a little backbook position with 1 part long GLD 1 part short SPY imo. It'll be a nice quiet banker trade that will pay the mortgage for a year on a relative basis.

  • http://profiles.yahoo.com/u/6NFOSGRXKB4LMGOAXV3ZY6IWZA Grainman

    Charles Nenner started the action on EOD….unless it was one of you grizzlies..?

  • http://evilspeculator.com molecool

    Why would I call you a dick? Pair trades are a good way to limit risk and to exploit inefficiencies. Keep posting them here.

  • equity_momo

    bro , those scuzzbuckets have a totally bad skew on their prices – we get a 5% pop in oil and pump prices up 7.5%. Vice versa we lucky to get parity. And dont forget the laaaag.
    Im bracing for the Hippies to tax gas soon. Dust off the skateboard , expensive gasoline is here to stay.

  • equity_momo

    Any Ellioticians have a view on Apple. I shorted the I-Pad hype but have since covered and now see a breakdown coming. All that cashflow and no where to go…. but DOWN! 25% mcap of Nasdaq. Boy , thats a fireworks party i dont want to miss out on. Stampede!

  • DudePlunger

    I was being a little sarcastic, but thanks for ruining my hope that I could save enough money on gasoline to pay for my car insurance. Actually, fuck you and fuck the democrats, $1.99 gas, Here we come! :D.

    And I don't know how to ride a skateboard. So I might be the one fucked after all! Unless of course that prop shop is legit and I can bank $5,000 a month, then Honda Civic here I come!

  • http://evilspeculator.com molecool

    $1.99? Kid – that would be a great deal here in L.A.! Where the heck do you live??

  • DudePlunger

    Brooklyn, NY. I think the great city of NY has the 3rd or 4th most expensive gas prices in the nation? We are currently at around $2.93 for regular.

  • http://evilspeculator.com molecool

    WOW – that is bad even at L.A. standards. My condolences.

  • DudePlunger

    What is it in LA!???

  • equity_momo

    I know golds an emotional subject thats all . As a fellow deflationist i know why youre not a fan but we all need some protection and the deeper the deflation , the more theyll try to burn Fiat. hedging it with SPY just takes away some tailrisk. It will handsomely outperform stocks for the next 2 years my conviction.

  • DudePlunger

    keeping gold as a light hedge isn't a bad idea, I've considered running a long term “Long Gold Short Nasdaq position” but don't feel comfortable in my abilities to manage a spread longterm. Based on the way it's been acting, I think it might hold off deflation longer than any other commodity, and if it ever does experience a serious downfall, I think it will be very fast and very violent as the trade is getting more and more crowded by the week with no end in sight.

    Having said all that, I think I may sim that spread, see how it works out.

  • http://profiles.yahoo.com/u/6NFOSGRXKB4LMGOAXV3ZY6IWZA Grainman

    SPY down almost $5 in less than a week

  • OldChicago

    EW aside, Yen has been propped to the sky and the Japanese don't like it. JCB has been making noise for a couple of weeks, a precursor of possible Yen intervention. EWJ attracts relative big vol today.

  • Sleepynaptime

    Jeez, in Seattle, I can't even remember the last time gas was under 3 bucks. You all need to suck it up!

    http://www.seattlegasprices.com/Map_Gas_Prices….

  • OldChicago

    Try Chicago. All gangster have greasy fat fingers.

  • DudePlunger

    Can't you fill up your tank with coffee instead? Oh wait, that's $5 a cup, my bad.

  • OldChicago

    Someone hit me hard so that I will dump VXX for good. VIX's up 7-8%, while VXX is up only 2.62%. It never rallied to the extend as VIX this afternoon. What's up with that? Management commision?

  • SW6

    AIG is, I believe, a definite sell. A triple top has formed and it has not been able to advance since April. SBUX is falling apart. Another triple top in place. Some may wish to see the SBUX pattern as a head and shoulders. I think a triple top with peaks in April, May and June is easier to see.

    It is amazing…I perused the Barron's website last night and in one of their videos they were promoting Starbucks as a stock to OWN! Their reason,”Starbucks has tripled in value since last March.” Translation: um, you mean it tripled in value during a bear market rally, it hasn't had a good retracement, I might be trying to put my kid through college but I should buy the stock, uh right! The bull culture is really something else.

    http://stockcharts.com/h-sc/ui?s=aig

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

  • Brishort

    All I can recommend is to go to “Vix and More” and search on vxx. They have explained in detail why vxx has such a bad tracking. Once you read the few articles on the subject, you will drop vxx for good forever by yourself.
    Hope this helps!

  • equity_momo

    Going back to margin/leverage , if you do this spread without extending , youll be sitting pretty. I know youre starting out so this wont be for you as its capital intensive and isnt going to yield more than 60,70% return over next few years , but i do think youll see those kind of performances in the long term. ie ,Dow to the lows whilst gold to new highs (after some profit taking/margin selling)
    I dont want to micromanage the spread so you just put it on and let it eat Fed poo.

  • raised_by_wolves

    Gotta love AH, this is when the real selling occurs anymore.

  • convictscott

    Take EW out of the equation I see the price action as being topping type action (I can post detailed reasons if you need) On the weekly chart its a sell on break of the weekly inside week, which happened yesterday, without much confidence as its clearly a “border dispute” around its moving average support, which renders pattern based TA lower probability.

    However, as a general proposition market leaders dont make great shorts until well into a new bear market, aapl should hold up quite well in equity weakness, in a choppy, annoying to hold a short or a long type fashion.

    IMO apple stockholders will be a little like apple gadget fanboys, they have enough good memories that they will be strong hands by now. AAPL will be a great short, but its a little too early to call it a high probability trade yet.

    IMO there is a universe of shitty stocks out there to short, whenever I am attracted to selling strength and buying weakness I'm usually trying to be right rather than rich :-)

  • Sleepynaptime

    Plus all that whipped cream can mess up your engine.

  • Brishort

    P&F recap:

    all quiet on that from, all the breakdown signals mentioned in previous post intact. No movement triggered any P&F.

    If you look for fractal nature, we are currently in what is looking a lot like where the market was in P1 when 1361 was last touched (may 2008 I think) and led to the 666 low.

  • finansreven

    Closing the rest of my short and will probably call it a week. Will wait and see if someone who wants the market up will offer some new tricks and an opportunity to short higher again next week.

    In this market, I can see some bounces at the 1040-50 area.

  • tradingmom

    I looked at those charts and I agree…with reservations. AIG looks like it might get a little bounce off the 200 today — a chart purist might wait for a break of the 200 MA or just keep a really tight stop on an anticipatory break. I have never understood how Starbucks has continued to make it in this environment. I have always thought that the overpriced cup of coffee would be the first thing to go when people cut back. I used to follow Mike Morgan (back in the pre-heart attack days) and he was totally convinced that SBUX would go bk in the coming crisis. This is a really interesting chart because SBUX seems to really lag the rest of the markets. See how it made two higher highs after the April 26th high? Yesterday was the perfect day to go short — see how it just dripped off the 200? And then today it gapped down, made a new low (lower than July 4th) and closed at the lows. It looks totally broken to me. Here is a bigger picture chart…there is a little support at the 21.06 level and then nothing. http://screencast.com/t/NDQyZmJh

  • OldChicago

    Thanks. I now recall he wrote up about it before.

  • raised_by_wolves

    Would you expect symbols that outperform during minor 4 of intermediate 1 of primary 3 to generally outperform during intermediate 2 of primary 3?

    http://evilspeculator.com/wp-content/uploads/20

  • OldChicago

    I think it is in trouble, at least in the near term. Turned from from 20MA on weekly. resistance @ $245.

  • convictscott

    IMO this is shaping up rather nicely to actually be the mythical turd of a turd of a turd… Currencies are lining up nicely with it. dx is an inside day BTW, I'm taking dx long from here on break of daily high, with a stop on daily low, risk $425 on dx u0

    Lower bollinger band on $spx turned down, which according to my takeprofit ruleset means I trail a loose stop for now, dropping to each successive spike high (swing high) as they form, so current ES stop is 1080.50. I wouldnt tighten the stop on an attempted gap fill.

    I'm interested in what methods other rats use for taking profits or setting trailing stops. I'd appreciate it if people could indicate if they

    – Seat of their pants it, based on what they see on the charts each day
    – trail a stop the same way each time, and what method?
    – Take partial profits and go for targets/trail stop or some combination therof
    – Use bollinger bands/keltner channels etc
    – EWT targets
    – Nothing, I'm riding this trade all the way.

    IMO the greatest improvement to my futures trading profitability was when I started paying as much attention to profit taking as I did to the entry.

    I think this is one area where we could help each others trading a bit, I know personally I'm a bit closed minded.

    BTW If this month doesnt fuck itself, August is shaping up to be the best month ever, despite the very difficult tape, month to date 55% in my trading accounts ! Touch wood.

  • Brishort

    Don't know how Convict will answer this with an adequate rationale (I know he can handle it! ;-), but this is one cool question as an intellectual challenge!

  • http://evilspeculator.com molecool

    I added a chart – please reload this page.

  • Vishwaksenudu

    mole .. You said “nothing”.. I did exactly that .. loving it so far ..!!!

  • raised_by_wolves

    I seat of the pants it (e.g. watching out for a move higher above shooting stars candle patterns). Keep in mind that Raised By Wolves is at least slightly insane.

  • http://evilspeculator.com molecool

    Well, it's not that I bet the farm on this market tanking. It's more like that all the evidence is here and things are moving in our favor. And that's all there is – it's a predisposition and nothing else. Prices have to follow suit and there is nothing to be done until we are either at target or at our stop.

  • SW6

    hmm, simple as pie.

  • raised_by_wolves

    Actually, I am revising a plan to start taking partial profits and go for targets, but that will be only during the day. I will always reshort by EOD unless/until I think the trend has changed.

  • convictscott

    RBW – thats a tricky question and truthfully, outside my core area of competence (I trade stocks but I'm a much better futures trader than stock trader (stock trading accounts a little bit better than flat for the year compared to futures results which are outstanding)

    My guesstimates would be as follows. A wave 4 isnt a wave 4 because elliot named it so. Its a choppy bullshit time in the price action because it represents the chop between different sets of investors. Bulls who get too greedy and sell out for a good profit. Latecoming bulls who cant resist buying the pullback. Trend followers who keep “going to the well: buying every pullback until it stops working. Top picking shorts thinking they have nailed a change of trend… etc.

    Therefore to me, what a wave 4 represents is “wind against tide” type unpredictable action. Basically I dont read shit into what happens during the wave 4 other than noting when its obviously going on. Strength and weakness are a result of imbalances in supply an demand forces which arent really measurable in the usual context of trending price action.

    So someone more expert in this area than me could disagree (my approach to wave theory is radically different to most, as I love wave theory but disagree completely with some of its core assumptions) But I wouldnt read too much into a large amplitude wave 4.

    As a general proposition former market leaders are supported by fucktarded money managers who happily put their funds into former market leaders when they pull back a ways, even when its obvious to anyone with half a brain that the bull market is over (own stocks for the long run ha ha ha – wheres my bonus!). IMO you could expect a deeper wave 2 retracement from the market leaders than other stocks.

    Whats a market leader? The first stocks to pull out from the bear market and make new 52 week highs. The ones in an industry which have retraced the greatest % of their losses from the bear market.

    IMO if you miss the boat on shorting the market perhaps the best thing to do is to start stalking these strong stocks for shorting opps, not now, but in a few months time at the top of the coming wave 2 (after the funtime coming up now)

  • convictscott

    Considering that *every single time* in the last 2 years the high of a shooting star candle has been breached it resulted in a considerable upmove… I'd say thats a pretty sound tactic here :)

  • convictscott

    Basically I'm after ideas from evilspulator rats. The core problem of taking profits is quite simple.

    Sometimes taking profits on a target works best
    Sometimes trailing a stop works best
    Sometimes pyramiding up works best

    I'm after a RULE BASED APPROACH to switch between trailing stop and profit target modes, perhaps taking partials at certain points. If an adequate ruleset could be generated it could take quite a lot of the angst out of trading.

    I'm happy to share the current iterations of what I'm working on, but I'm looking for new ideas and improvements.

  • convictscott

    AUDJPY vs ES U0 pair trade is free money right now

  • DudePlunger

    I wanted to keep things loose as well, but I had a fucking terrible June and July, so given that I was short from 1072, I wanted to book 20pts today…which I did. I got myself back into a sim trade, shorting 1053 with a stop at 1060, and I don't think I'll place another real money trade this week.

    If I had been doing better, my stop would be at 1080.50 just as yours is, I'd be going for the big 50-70pt trade, as opposed to the 20pts I took.

  • raised_by_wolves

    I wouldn't go long during a minor 4 but I would go long during an intermediate 2. Maybe the best approach would be to buy what goes down the least (or doesn't go down at all) during minor 5.

    As for shorting intermediate 3, I really want there to be a setup to sell the shit out of SLV. That's when I will also sell AAPL.

    Thank you for your insights.

  • SW6

    I agree with you on AIG. Today's candle glanced off the 200 MA like a feather. As far as precise timing goes I would position for a downside break of 32. AIG went to eight dollars last go round.

    How has Schultz been able to keep his company going? Remember in the wake of the 08'-09' crash malinvestment became openly recognized as a strain that had been running through the U.S. economy. I know that Schultz hunkered down and shut a lot of locations. Of course, if one is to do this, it has to be done in a strategic manner. A Starbucks in Boise is getting closed yesterday, a Starbucks in Times Square is so staying open. For the time being Schultz has been able to plug a leaky ship. But if the depression gets worse, Starbucks will suffer more closures.

    I see what you mean about Starbucks looking broken. Right now I get the same impression from AIG – it looks punch drunk.

  • legobear

    Haha, you guys don't know how cheap that is. Here in oil rich Norway we pay almost three times that price.

  • convictscott

    Corey on blog.afraidtotrade.com did an analysis of sbux today, could be worth a look. FWIW his blog has consistently outstanding analysis, simple and very objective.

  • finansreven

    But we got so cheap beer.

    Yearight.

  • legobear

    There's that ;P

  • SW6

    Yes, he zeroed in more than me.
    And he is one hell of an analyst.

  • DudePlunger

    I need to remember to skype you one of these days. I forgot your name. Unfortunately, I've been pre-occupied with other shit these past 2 mornings, and will be again tomorrow, but I am working on exactly the same things you are. Profit taking is so fucking important, how can you ever expect to be profitable if you don't know how to take profits?

    Ideally, I'd like to leg in and out of positions, having multiple stops, multiple entries, multiple profit taking spots, and certain spots where I would drastically increase leverage if the setup is ripe and my results have been stellar. Unfortunately, this requires trading 2-5 /ES contracts, and that kind of leverage would blow me out after a few losses.

  • convictscott

    Dudeplunger, its scottphillipsau on skype. I have some innovative strategies which might suit this sort of trading, based on using the same patterns which appear on daily and weekly charts, also occurring on 15, 30, and 60 min charts. When I'm feeling in sync with the markets I often try to roll a 30 min trade with a few points of risk into a 1-3 day swing trade. I'll post an example from my trading log later on today.

  • raised_by_wolves

    What about a rule to take profits at/very near a 10 day 1 minute 3.0 standard deviation band? So far, this rule would have worked great.

    August 19th . . .

    http://content.screencast.com/users/raised_by_w

    Today . . .

    http://content.screencast.com/users/raised_by_w

    I can imagine the tape going through the 3.0 but don't remember ever seeing it happen.

  • DudePlunger

    I got away from using any time frame lower than the 1hour for entries. It has gotten me to trade a lot less, and stay in trades longer. I glance at the 15min chart once a day, just to see how the first 30-45minutes went, but other than that I stick to the hourly and daily.

    Do you only trade /ES? Ever try oil, nat gas, or any of the currencies?

  • DudePlunger

    This is pretty good stuff, have you tried it on a longer time frame? The last time I used 1min charts was the fall of 2008, and every minute increased my heart beat.

  • ShadowTrader1

    Mole, did you mean to say a breach of 1010 on the S & P by the end of the month?

  • http://evilspeculator.com molecool

    Yes, that would be the ideal case. We are running out of time for this setup to complete. IF we start pushing to the upside in a more meaningful way (i.e. 20/30 SPX points) then we probably will miss that important Sept/Oct window.

  • OldChicago

    Like his blog too. Very educational.

  • raised_by_wolves

    Yes, I use this ChartPeriod VWAP on other time periods. No, I haven't tried this 3.0 SD rule on other timeframes. I'll experiment right now.

  • ShadowTrader1

    Personally, IMO, I get a strong feeling that we will see the market reach the 1010 level soon. Then an ABC bounce before starting wave 3 down hard. I understand we are probably in wave 3 right now, but this should be wave 1 of 3 and IMHO we will see the huge emotional downside move you are looking for then. Just a thought.

  • OldChicago

    Glad you mentioned FX. Lots of confluence here:

    – AUD/JPY sold off on hung Parliament, but bounced of support TL (daily chart).
    – EUR/CHF crashed more than SPX. Someone pointed out that Ireland's credit spread widen, renewing debt crisis.
    – Yen is about to be proped up, most likely against USD. This should help USD.

    SPX seems to holdup better than EUR. It has better follow suit, soon. Otherwise when Euro turns up, SPX might run with it, toasting this bearish penguim!

  • ShadowTrader1

    Bonds, IMO we are seeing a bubble. A huge one that will take a lot more time to top and rollover than anyone would expect. This bubble is 30 years in the making. I personally believe we have started the final stages to the upside. Parabolic move up. A couple hard pull backs before each bigger move up will be very telling. Look at oil two years ago about this time. The moves were very similar to the bonds. I would only be guessing but we are probably where the oil was when it reached 110 or so after pulling back from its first touch of 100. The first touch for the 30 year bond would have been last years move. Keep in mind this has been building for 30 years now.

  • http://evilspeculator.com molecool

    Agreed – at some point folks will suddenly realize that treasuries are not as risk free as they imagined. The Chinese are already scaling out of the long end into the short end. Once they pull the plug altogether I expect to see a major bond market dislocation. At this point we will see bonds down, stock down, Dollar down, gold down (I know – don't start with me), everything down. An ugly scenario indeed.

  • Darkthirty

    You've pointed out just how ugly it'll be…you can't eat gold.

  • ShadowTrader1

    I have to say Mole, this is also how I see it. All down and very fast and hard. World markets will tank as well. On the flip side, IMO, the agriculture stocks and food commodities (and related items) will drop less then quickly explode upward. Over the last couple of decades, we have seen new bullish patterns show a glimpse of their coming move just before the market corrections and economic turndowns. This is especially prevalent in wheat, and furtilizer stocks right now. These large commodity companies are on to this and looking to diversify quickly. IMO, they know a correction is coming and cheaper prices as well, but to wait to buy stocks like Potash will only leave it open to others seeing what they are seeing. Watch for massive M&A in others soon.

  • ShadowTrader1

    I agree with your statement. IMO, the future will bring deflation in all that is luxury and discretionary, but hyperinflation in all that is necessary. Meaning FOOD.

  • Darkthirty

    Won't bother us common people as much as the entitled class. The anarchy will be fun, just wish I was younger

  • OldChicago

    Another scenario is Gold. the economy isn't exactly booming. I think it will go higher after the first meaningful pull back, or until stock capitulated. Someone attributed this bubble to 1999 and 2000 internet bubble. Shorting too early will be suicide in this case. The hype in bubble so far has not translatedd to fear in equity.

  • DudePlunger

    Why do you wish you were younger? I was born in 1989 and wish I was born in 1979 to enjoy all the riches of the 90s and the fun of the 2000s. Instead my generation struggles to find a fucking job.

  • OldChicago

    More and more TA analysts are calling a hard drop in September to 900-850, when beaches are closed.

  • raised_by_wolves

    I'm starting to hallucinate due to sleep deprivation. I intend to get back to you after a nap. I will say that I think the way to go is opposite of what you were thinking, that is, the way to go is smaller scale—perhaps 133 tk.

  • raised_by_wolves

    Hehe.

  • Darkthirty

    You mean a Fucking paycheck. I fired 37 of your generation last year, none of them could do much real work, show up on time sober, or retain what they were previously taught about the job. I'm not picking on all of you, but times have changed, most of my generation were on their own at 18 or younger. Aw hell, waste of time, end of rant.

  • DudePlunger

    Fuck them then. In every job I've had in my life I've been the youngest employee, except one, in which I was the oldest and the fucking head referee. If you need a responsible Gen Y, you can give me a call….and I'm living on my own, so fuck the rest of my worthless generation.

    What do you do again :D?

  • Darkthirty

    roofing

  • DudePlunger

    My dad was a painter his entire life. While I can do manual labor, I prefer numbers and arguing with people. But my generation is fucking disgusting when it comes to real work, they're like paraplegics who expect everyone to feed them jello from a plastic spoon.

  • Darkthirty

    Damn, you're real! Actually, I feel sorry for all the professional vultures, when their mommies die, they won't have anyone to take care of them.

  • bluprint

    All true and it will be followed by massive money pumping by BB. I think such a scenario is simultaneously a wet dream and a nightmare for him. The dream b/c it's like he gets to fight his dragon; make his mark on history.

    In such an environment, I think commodities will do best. Obviously storing large amounts of corn or heating oil is a pain in the ass. (I'm talking currency collapse here) People will still survive and will (as always) want money (not US dollars). Gold is not the best choice imo, it will likely be outlawed. Silver will probably do better both b/c it sort of flies under the radar and it is more easily traded; being of less value per volume.

    Something like platinum might be better for storing larger amounts of wealth. An operating farm stocked with newish equipment and extra parts will probably be an even better way for a wealthy individual to get by, and profit in the process.

    For people currently of “average” wealth, having a couple acres and knowing how to make moonshine and grow your own food/weed will likely be the best way to get by.

  • http://evilspeculator.com molecool

    Beginners guide to trading pit hand signals: http://content.screencast.com/users/evilspecula

  • http://evilspeculator.com molecool

    You can try but it digests very slowly.

  • http://evilspeculator.com molecool

    Heheheheeeheeheeeee!!! :-)

  • Tooncez

    Interesting, I was just backtesting your previously mentioned rules and found that the exit (obviously) made a big difference in return. So far I have FakeOut, InsideDay, and GapOpen. The only one I like of the three so far is InsideDay. This is is with my favorite simple stop rule… so far. My backtest is conservative in that I assume whatever is worst case (high or low of day) for entry, exit and scoring purposes.

    http://screencast.com/t/N2VhZTU0ZT

  • DudePlunger

    Yeah whatever mole, I hope you enjoyed all those girls you fucked while working for the NFL and what not. I'm sure you lived the LA Entourage lifestyle, with the hot bitches, porn stars, and vulgar agents. Meanwhile I have to enjoy my smartphones and high definition televisions, ooooh pixels, fuck me.

  • Tooncez

    http://www.youtube.com/watch?v=GZo0cqXrYEE

    Ok, Ok, I'll create an army of clones to come up with a better exit strategy… this may take a little thinking to tweak the genes…

  • http://profiles.yahoo.com/u/6NFOSGRXKB4LMGOAXV3ZY6IWZA Grainman

    you are going to the the US wheat market acreage explode this winter.

    with crude so low and tending to go lower through Q4 be careful buying wheat if it pops before the crop really gets going into Jan-March.

  • http://evilspeculator.com molecool

    Agreed – the current generation is completely spoiled and basically optimistic numbskulls. The good news is that the next generation (the ones in their early teens or younger) will be humble and work extra hard to get ahead.

  • http://evilspeculator.com molecool

    Hot bitches indeed – but all that is behind me as I live like a saint now (ahem).

  • http://profiles.yahoo.com/u/6NFOSGRXKB4LMGOAXV3ZY6IWZA Grainman

    sometimes, this is only thing that matters.

    http://new.music.yahoo.com/billy-currington/vid

  • yudhisthira

    /TF July low was 584.3
    Todays low was 586.4
    Boy that was close. Whew!
    Try again tonight?

  • rg64

    Dollar and Bonds will be the few that weather the storm….Gold will not.

  • DarthTrader

    Not if you drink it

    Goldschlager

  • bluprint

    Not to worry, there shall be deflation in bitches as well. Hot girls will get cheaper. lol

  • convictscott

    Tooncez, there are several tweaks to inside days that dramatically improve reliability, and a few general things on inside days. In no particular order…

    – Beware the large range inside day, it represents a trading range and you stand a good chance of buying the high or selling the low
    – Narrow range inside days have a higher probability of explosive moves, as range follows a natural cycle from range expansion to range contraction. Toby Crabel did the original work here, it was built on by Linda Radsche, who defined a tradeable inside day as NR4 (narrowest range of last 4 trading days)
    -An inside day preceded by an outside day (I call it an OPIP or outside period inside period) is a higher probability trade, particularly when stalking a reversal
    – inside periods close to moving averages THAT ARE BEING RESPECTED BY THE MARKET should not be taken, as price tends to become a tug of war around moving averages, and it triggers stops too quickly on inside days
    – a double inside period (2 in a row) is obviously a mini flag/triangle type thing and is higher reliability, although profits must be agressively taken as breakouts from triangles tend to be the end of moves
    – The BEST inside period trade is a fakeout inside period, it has only 50/50 reliability as a continuation pattern, but a 75% success rate (based on my own real trades across futures and currency markets over several hundred trades) as a reversal pattern

    Definition is (for FOIP sell)
    1) Spike high (bar with a lower high to the left and a lower high to the right)
    2) Second spike high crossing through the high of (1)
    3) In the bar immediate following (2) An inside period
    Sell on break of the inside period, stop at high of inside period. do not take in opposite direction

    This is the most recent example, nailing the top of the euro rally
    http://www.masterkillers.com/wp-content/uploads

    Inside periods are statistically valid on intraday charts as well, but filters need to be applied, they cant be traded mechanically

  • convictscott

    Taking profits at the end of a powerful trend day is good :-) I think I'm going to add a rule for that into my list :-)
    I also trail the swing high/swing low stop, but only when price is walking up the outside of the bollinger band. IMO its an optimum exit in this situation
    I've never tried trailing sotps based on EMAs, thats going on my backtesting list.

    As a general comment, please dont take this the wrong way :-) Your performance last month should have NO bearing on what the optimal place to get out of your current trade is. The fact that its an issue means that you are operating on filtered information, and possibly indicating you are trading too large for your account size, trying to “get back” at the market. Each trade is a blank slate, ready to fulfil all your wildest dreams and be pyramided into a magnificent fortune.

  • convictscott

    Thats a good idea, going on my list :-)

  • convictscott

    last year I traded roughly equally between gold, silver, NG, crude, heating oil, wheat, soybeans, bean oil, euro yen, cable, aud, dx, corn, sugar, coffee, cotton, oj, copper platinum, palladium, I'm pretty familar with the markets and still followed them.

    Trading results were good but I would get a black swan day every few months when 10+ positions would get stopped out (at better than 60% win loss ratio that shouldnt happen, but did quite regularly) eroding a months worth of good trading overnight.

    I discovered that markets which have a physical as well as futures, the results are dramatically improved taking signals off the physical. Both in accuracy, and expectancy. This year I have concentrated on es futures, but I still take other trades, for smaller sizes.

  • Brishort

    Mole,

    Thank for the VIX update chart. I love it that you always come up with the right chart at the right moment!
    This led me to fool around with a P&F VIX, but with a 60 minutes focus which is where it seems to become the most relevant.
    Surprise, today the first bullish signal since July when (i) completed….
    I will add it to my toolbox of indicators I follow. Since I had never addressed vix in those terms, I will monitor its evolution and relevancy and report back!

    http://stockcharts.com/def/servlet/SC.pnf?chart

    BTW, you never comment on my P&F charts but I assume you are ok with me posting them here?

  • chronographics

    was that a typo? was it supposed to be “amen”?

  • chronographics

    Dude all I can say is you have the right attitude to do well – just generally takes time. keep trading just don't over trade and always remember the market is smarter than you so be humble when you are coining it or it will bite your ass! :-)

  • DudePlunger

    Do you really think that past performance should have no bearing on current trading? I can't possibly agree with that. I can't lie and say my confidence doesn't hurt when I lose $4,500 in about 2 weeks. Banking 20pt trades helps improve my confidence, while seeing my profit erode is a fast way to hurt that confidence. Sure, you want to say that each trade should be a blank slate, and it usually is for me, unless I've suffered some bad losses and need to get my mind back to normal. I had the same thing happen to me a few times in the past, and each time I took the same approach to get myself back to normal, banking solid profits early and paying myself, and then as the weeks went on my confidence would get back to normal and I'd be back on the right track.

    But why am I not consistent? Well, because I honestly have had some personal issues stemming back to a wrong decision to attending a wrong college, subsequently dropping out, and having a few problems with my prior living condition. I think I corrected those mistakes, and hopefully am in a better state of mind now where I don't need to rely on trading profitably to reach a certain state of happiness…..but time will tell. Trading and life is all about a constant state of self-evaluation and reflection. The day we stop learning is the day we die :D.

  • DudePlunger

    “just generally takes time….keep trading just don't over trade”

    Thanks for the rest of the kind words as well, much appreciated.

  • http://evilspeculator.com molecool

    Trading takes a solid foundation. You are young and your life is in flux. Accept that as something that is not necessarily negative. After all we all need our time to gain experiences, learn things, expose ourselves to new things. Part of that is change: apartments, women, lifestyles, perspectives, jobs, etc. Don't cut yourself short by trying to force a situation upon yourself which may make you unhappy over the long term. It's not good to settle too early at your stage.

    You can still be a good trader. Just choose to trade when you are in a stable situation or when you're feeling settled. And yes, profits won't make you happy, just a bit more comfortable and that's a double edged sword. You'll figure it out – don't force it.

  • DudePlunger

    I took the entire late month of July off, and the early part of August as I was moving and getting myself in the right frame of mind. Settling wasn't what I wanted, it was getting the fuck out of my parents, something I wanted to do since I was 14 but made the mistake of not doing when I was 18 (instead went to a crappy honors college for free.)

    I feel good now. I balance between a rather mechanical 1-2 trade per week system I've developed, and a discretionary style that I'm simming. Profits are not my concern, but simply managing risk and executing the proper trades.

  • http://evilspeculator.com molecool

    No worries – but I do prefer the bigger text versions. Also, I like 14 as the ATR (like the turtles) – which shifts things around a little.

  • http://evilspeculator.com molecool

    I think you'll do just fine :-)

  • http://evilspeculator.com molecool

    I hope so – too many spoiled skanks here in L.A. I remember growing up as a kid in Germany in the 80s – man… pussy galore. I really feel for those poor boys over here – they have to work so hard for so little – LOL :-))

  • http://evilspeculator.com molecool

    I had to look that one up.

  • DudePlunger

    I appreciate all the support and guidance. I look forward to doing just fine :D.

    And of course mole, your work on this site is always greatly appreciated. I was a bit worried back in 2009 that you might close up shop, but I'm really glad you changed things up a bit, kicked some ass, and whipped this bad bay back into 2008 shape, way before the market obliged.

  • ShadowTrader1

    What was that ice cream dessert being offered in New York or Vegas? It had gold flakes on it. I believe the serving cost around $10,000.

  • raised_by_wolves

    I almost overdosed on color. I feel like puking again.

    http://content.screencast.com/users/raised_by_w

  • ShadowTrader1

    I hear what you are saying, but governments around the world will start hoarding food. Regardless of the current or future crop growth money will have to go somewhere. IMO, China will start hoarding it first because food is where they are most vulnerable. Their population says it all.

  • raised_by_wolves

    Although I don't know yet if I can come up with any rules based on the 5d 333t, I am liking what I'm seeing when I use the ChartPeriodVWAP. I suspect I'll need an additional standard deviation or two for wave threes.

  • convictscott

    Dudeplunger, from the limited information in your posts you show you are already an excellent analyst and have the attributes necessary to be an excellent trader. Please understand I am not being critical and have made this mistake many many times myself :-)

    Once you are in a trade you have really 2 successful ways to go (or combinations of these).

    1) Follow a written down, set in stone plan for managing the trade, that doesnt depend on how you feel each day. NOBODY ever got smarter once they got into a trade.

    2) Is much harder, but more profitable. Once you are in a trade listen to the flow of information the market is giving you and determine from moment to moment if you should continue to be in this trade, get out, or reverse into the opposite direction.

    Once you are in a trade the market does not care for your outstanding analysis, or wave count. It also does not care about your previous drawdown (I have discovered this painful lesson several times and tried to overtrade to make back a drawdown, falling further behind, and trading worse still as a result) Sadly, the market does not care about your confidence, which is its own kind of double edged sword leading to expectancy bias, where we ignore evidence that does not fit our view.

    In actual fact all of these things contribute a kind of distortion to the information we are being presented by the market, causing us to miss small but crucial information. It is the most natural thing in the world for a human to be effected emotionally by a drawdown or losing trade, or winning trade for that matter. 95% of traders lose not because they wrongly pick the market direction, but because of the way they think. These emotions come from having caveman DNA shoved into a 21st century meat carcass, our hunter-gatherer emotions do us a grave disservice in the markets.

    You CAN master these strange feelings, drives, and impulses. Its just not easy.

    My personal experience is that a trading psychotherapist will repay the money spent many times over. Not necessarily someone who knows about markets. I can highly reccomend this to anyone struggling to make the jump from passionate and knowledgeable about markets to consistent profitability :)

    Your $4500 losing trade has cost you twice now. Once when you did it, and again yesterday when you got out of a winning trade prematurely because your motivation was a fear of loss.

    ANY decision motivated by greed or by fear is not motivated by the information coming from the market. Greed and fear based decisions come from within.

    This is, quite literally, the task of a lifetime to master. You may as well start now :)

  • Bob the Horse

    Good advice but everyone has to learn their own lessons in trading. The one thing I have learnt from trading is that you cannot teach another trader.

  • raised_by_wolves

    I'm still not entirely pleased with the aesthetics, but the chart is more readable now. Tradable? Now that's another matter 😉 It's missing all the correlations I use. Time to re-anchor them? Nah, I'm going to bed early tonight.

    http://content.screencast.com/users/raised_by_w

  • chronographics

    Hmm think there is only one solution and that is a tested and tried plan. Listening to market information once you are in a trade will open you to all sorts of things such as emotion etc. Also this is not something you can back test to see how you would have reacted.
    I spent a bit of time with Robert Krausz of New Market Wizards and I can tell you all he kept harping on was systems systems systems and he was from a psychological background and the role of the subconscious. Without a trading plan you are lost.
    If you are a market maker trader its different (I spent many years in MM dealing rooms) have real information flow you can trade as you suggest CScott but otherwise all you will do over time is lose your pants. Good Luck :-)

  • chronographics

    True Bob you cant teach them how to trade but you can teach them the disciplines needed :-)

  • chronographics

    Wow Cub, had to put my shades on :-)

  • raised_by_wolves

    Try glacier glasses :-)

  • chronographics

    Cool :-)

  • convictscott

    Agree 100% on all points :)

  • chronographics

    Nice little poke up in Euro here so long as it doesn't go much higher looking to sell it when osc cross down,,,,

  • gsavli

    I think we might be into some “rally time”. This bounce looks firm so far. Europe is green, so is US premarket.

    We' ve been in oversold area on hourly for 2 days or so now and these things usually resolve with a relief rally.

  • chronographics

    Certainly looks like it could think we need 1.2725/40 and 1.2785 to break
    However looking at the reaction to the better than expected number in Germany they have tried to rally the Dax but it just does not seem to be able to manage it. If an oversold market can't manage a relief rally that is very bearish in MNSHO Lets see how it plays out :-)

  • gsavli

    “the better than expected number in Germany”

    I missed this. what did they have?

  • chronographics

    IFO business confidence survey
    climate 106.7 vs 105,7 expected
    current cond 108.2 vs 107.4 expected
    expectation going forward 105.2 vs 104.4 expected
    fair biy put on these number s

  • aussiebinlaughin

    No idea, but many expected Germany to have some decent figures compared to the rest of Europe. An exporting nation with a weak currency (quality products at a cheaper price) was always likely to post a little bounce in comparison to the rest of Europe's sick men. Look at Greece, what the hell does Greece produce? It effectively has zero chance (my opinion only of course) of not defaulting, along with the other PIGS.
    Ive been on holiday in Thailand for the last few weeks and my Lady Boy indicator is pointing heavily toward deflation in Europe. I been coming here with my family for years now and it used to be all Western Europeans and Australians that i met. Now its all Russians & Chinese. Sign of the times i guess, but there is only 1 tenth of the tourists that were here in 2008, the last time i was here. Even though the pound has lost about 30% of its value here, you can still pick up a bottle of whisky, pack of fags (with a free lady boy thrown in) for the price of a pack of organic carrots in the UK.

  • legobear

    Waiting for the US market to open. Europe is always lagging.

  • chronographics

    Lagging or Gagging? They need to grow some balls sometime :-)

  • legobear

    Germans with balls. You don't want to see that 😀

  • chronographics

    :-) you right there my friend :-)

  • chronographics

    EURO
    Well looking like we finished our wave 4 ( ABCXABC perhaps squiggles painful sometimes …) at 1.2727 so should be down from here, not a bad risk reward as we should see this go some way.

  • chronographics

    EURO
    15 min chart showing some divergence and osc crossing simple stuff really
    http://screencast.com/t/YmY2M2JlO

  • sloth_bear

    Thanks for your call!

  • chronographics

    OK so who listened?
    EURO hourly same thing nice divergence bit early as yet but if you got set on the shorter time frame you are now in the drivers seat. If this (purple) uptrend line goes it will get interesting :-)
    http://screencast.com/t/MTYzYTIyYT

  • chronographics

    Cub – cant remember if you play the currencies – given the times you watch the market I thought it would have been ideal for you?

  • chronographics

    Euro may attempt a little bounce here as 5 min bottoming but 15 min pointing down. IF the 5 min can only manage sideways to small bounce say 15 20 pips then the downside will open up.

  • chronographics

    Welcome mate – don't usually get time to post a lot of trade set ups and don't like to do it as we all need to do our own thing {also in case it doesn't work out :-) } But this one looked pretty good and tonight I have some time, Usually its Kids Cars And Girls okay maybe not so many Girls :-)

  • sloth_bear

    here is my bounce zone for EUR/USD:
    http://screencast.com/t/NmZjNzhjODk
    (Yellow line)
    I would also really like to see it breached soon!

  • chronographics

    Try this :-) make you happier?
    http://screencast.com/t/NDQ1NDU0M

  • sloth_bear

    I'm already very happy :-), now I'm even happier!
    I just tried to count the waves on this last move, just to sharpen my eyes on EW, here is the result:
    http://screencast.com/t/NjBkMDFmMDct

    Really a newbee in wave counting, I even skipped the corrective waves…

  • chronographics

    Hey looks pretty good, gets hard to count squiggles sometimes, you can use something like an RSI or Stoch to help, in particular you will usually see divergence between 3rd and 5th waves. If you not already doing so always go with the bigger time frames on EW that way if the squiggles ar hard to count you wil be less likely to get into trouble :-)

  • paros

    Mind you, a 4th wave that is correcting a relatively large 3d wave decline MAY last longer than you like

  • chronographics

    Well Sloth_Bear you should be very very very happy now :-)

  • sloth_bear

    More than that…
    My newbee count tells me to quit my AUD/JPY short and soon EUR/USD, but when I look at /ES, it seems to be only the beginning…

    Update: Looks like AUD/JPY will slide more

    Very very very happy as you said :-)

  • sloth_bear

    I wonder if it's not a W2… If so were in for an orgasmic day

  • chronographics

    yes here the difficulty in siting tight, bigger count says below 1.18 and on to parity. Soif you are going to take profit keep some of it inyour back pocket and sit on it. Wave counts have a habit of extending and changing. As this is part of a bigger “three” down the surprise will be on the downside and it will be constant and large…

  • sloth_bear

    Yeah, If I sit for too long on my hands, I shit on my hands…

  • michaelkgd

    I'm from Russia and I don't really think Germany is a 'pussy galore' :trollface:

  • michaelkgd

    I am your peer living in Russia. When I visited NYC in 2007 I thought 80% of 20+ and even many 30+ people in U.S. are freaking hipsters 😀

  • chronographics

    So long as you don't shit on your account thats acceptable ..

  • juju2

    Russel's has a picture perfect H&S on the daily.

  • amokta

    Peculiarly, .ftse is fallen a fair bit, even though ES is not that much down from yesterday (to be frank)

  • sloth_bear

    … As long as money worth more than toilet paper…

  • chronographics

    One other thing you may find useful in counting waves is that sometimes its hard to tell what is extending, in this case just look for a “9” wave move. This is a motive wave, it will help you keep on track :-)

  • http://thefxspeculator.blogspot.com Onorio

    It`s funny how we keep subdividing waves…

  • sloth_bear

    Thanks, I for sure need a lot more time before mastering EW

  • chronographics

    You are welcome – we all can keep learning :-)

  • Seahawk87

    Who left the barn door open? Hopefully Bob hasn't wandered too far off, and can give us his gasterointestinal take on the short term action.

  • Thesteveo

    Thanks Chrono….always enjoy your postings on FX….been reading them for a while…I'm a newb and really like comparing your ideas to mine!! Cheers!!

  • Brishort

    Extremely interesting! never though of modifying the atr on my P&F.

    I am familiar with the turtle story and the basis of their trading rules, and now remember the ATR was key in their system, but if I am not mistaken, they weren't using P&F.
    (those that read who aren't familiar may look them up on scribd.com under turtle and trading, plenty of quality documents on the subject. By the way, if I remember properly Livermore original work is on scribd as well.)

    That will now be my week-end testing project to tweak my charts! I am still trying to find the appropriate standard deviation on the BB on P&F to make it relevant. I am no SD resident specialist like RBW, but I am learning 😉

  • Bob the Horse

    I'm around but I am basically done for the month so not really saying too much. I would not chase the downside here – I could be wrong of course but that's just my view. My worst case scenario is just missing out on some short P&L but I captured a pretty decent move from 1123 to 1070 and am happy to wait for another opportunity to come along – they always do. What I would say is that volumes have been poor, both on the way up and the way down – even today, brokers are seeing remarkably little biz. What this means is that if pension funds chose to top up equity and reduce bond exposure into month-end, i.e.a simple rebalance after a massive performance differential, there could be a horror squeeze in the next few days. My primary concern is to avoid that – then look for the right moment to get the big short back on targeting 920.

  • Seahawk87

    It is interesting that a horse with a single stomach is able to intuit market movements better than a bull that has the use of 4 stomachs. Of course the bull has other duties to attend to — which may account for the distraction; whereas geldings are less occupied and more focused.

  • DudePlunger

    “1) Follow a written down, set in stone plan for managing the trade, that doesnt depend on how you feel each day. NOBODY ever got smarter once they got into a trade.”

    My plan was to take anywhere from 20-50pts on the trade, taking profits by Wednesday's market close. I also did not want to throw profit away if I was up 10pts or more in the trade, I wanted to secure profits this week and not worry about holding out for a big hit.

    We will discuss this on skype. You know what you're talking about.

  • Seahawk87

    Good point. I recall now that phenomena happened a couple times during the declines in the fall of '08, end of the month forced re-balancing by the pension funds due to the performance differential between bonds and stocks.

  • Bob the Horse

    I've looked back at the history of this and when you get a differential of this magnitude, on about 75% of those occasions, you get a partial reversal into month end which normally kicks off about 3 to 5 trading days before the end of the month. So on balance, not good odds being short here just in the very short-term.

  • Brishort

    Good day all,

    Today, my focus is exclusively how Mole key points react, namely the entry in the space bay of Curly to challenge all the young jedi chartists.

    As we are approaching a potential chart bounce points, my P&F have no edge for today, as they are just currently saying the down move is valid and a vix breakout occurred yesterday.
    (here is a slight tweak “in probation” chart of $vix @ ATR 14 on 60min, my previous one below was ATR 20. Beware that Stockcharts seems to have problems with my link and all settings. If you don,t see the “x” above the redline, relaod stockcharts and it should appear).

    http://stockcharts.com/def/servlet/SC.pnf?chart

    Good luck to all!

  • I_got_Prechterized

    keeping my shorts on but I'll probably cover around 1041-1042. If we break 1040, I'll start to buy. would love to short gold and silver but all the momos are hiding out there. the move in silver is the most bizarre.

  • BobbyLow

    Excellent.

    I was able to make the changes you suggested but with the free charts I could only get the daily and not 60 minute results. The Daily shows a Double Top Breakout so I think that's good for my Long Puts. :)

  • amokta

    ok, what going on?
    have we reached a( mltms) tradeable bottom yet?

  • tradingmom

    There was a massive “rebalancing” during the last week of October in '08. I'll never forget it. Sometimes those dates just get seared into your memory. They tend to have that bias attached to them forever (November 22 goes up big — usually the Monday of Thanksgiving week for example.) Anyway, I don't really remember any big action from last year, but in '08 in started around October 27 or 28th.

  • Bob the Horse

    SMALL DAY TRADE LONG AT 2566 ESTOXX, 1041.50 ESU0

  • ricebowl

    ^VIX is outside the upper bollinger. If we go below 1042, I'm selling my short positions.

  • ricebowl

    Sold. Will buy back in later in the day.

    Note: the pattern as of late is a drop that peaks around 10 AM followed by a melt up for the rest of the day.

  • sloth_bear

    Bye Dow 10k :-)

  • ricebowl

    QQQQ isn't confirming the downside — it's fallen nowhere near as much as SPX has today.

  • Bob the Horse

    S5HOME not going down – same as yday. Going to be hard for the mkt to fall with this type of price action in the dog sectors

  • ricebowl

    Something really odd is afoot. The market usually doesn't gap around like this — though it's not as bad as when the HFTs turned off on Black Thursday.

  • ricebowl

    Good play + excellent observations.

  • chronographics

    Also would have thought Euro would be taking a pounding – but not as yet…

  • ricebowl

    I haven't been watching EURUSD or the news lately, so I don't really know what's going on, but EURUSD is meaningless unless Europe is in trouble again.

  • BobbyLow

    Gee Wiz.

    Another surprise.

    July new home sales plunge to record low pace

    http://www.marketwatch.com/story/july-new-home-

  • Tooncez

    That _was_ bad, ATM Sept spy bid/ask spreads jumping to over .10 for a minute or two. I was speculating that NYSE was posting stale quotes… and I was getting ready to go into the bomb shelter…

  • ricebowl

    No kidding. I saw SPX hit 1041 and decided to get out. I almost caught the day's high on the Sept 45 QQQQ issue — hit the button with the bid at $215, sold at $214, day's high was $216. I think the bid was momentarily above even that as QQQQ had dropped another 5 cents or so, but my broker is lame, and I have no way to tell.

  • chronographics

    The (weak) USD is what been supporting the stock market given where the US Bonds are, when it strengthens it will pull the rug from under the equity market – the Euro is 57% weighting of the Dollar index so meaningless is probably a little rough..

  • ricebowl

    Well, I just know that I've seen stocks rally while the dollar rallies and I've seen them fall while the dollar rallies. My conclusion is that DX is another effect of the same cause rather than a cause in and of itself.

    If Europe were in trouble again, however, EURUSD would be the primary market for measuring sentiment toward Europe.

  • amokta

    sold my short oil etf (also sold short silver – small loss) – up overall
    holding index shorts for now – now when to sell!

    i think we go down sub 1020 – too much of a rocky ship to stay afloat in rough waters

  • Seahawk87

    A ST bounce into Sept “feels” right as a contrarian play. Everyone on CNBC is so dour, and even Cramer is talking about the weekly HS on the SP taking it to 820s. Throw in the re-balancing, potential Jackson hole news, potential for *any* non-catastrophic data point, and the opportunity for the returning traders to head fake us up before they distribute later in the month, trader intuition feels like the ST move is higher. I also wonder how much of the recent downward pressure was from funds raising cash to be able to get a chunk of the GM IPO. Anyone have the latest Investor Intelligence numbers?

  • chronographics

    RB I too have seen this first with Dollar/Mark and now the Euro you need to look at the bigger picture and not in isolation, Its the same with the Bonds sometimes the market rallies with higher bond prices and sometimes it falls with higher bond prices, you cant look at it in isolation either, These correlations change depending on what the focus is. What strikes me after 30 years of trading all over the world is that many US traders are myopic in their approach. Enjoy the rest of the day :-)

  • Bob the Horse

    The latest eco data has been so bad, the chances of Bernanke or Obama announcing some new housing market initiative is stupidly high. It will ultimately fail but not without killing any shorts first. This is why it is so hard to make money in a bear market.

  • Bob the Horse

    That reminds of a great song by a indie band called 'The Cud' – Bibi couldn't see.

  • ricebowl

    Point taken. I'll keep an open mind toward it.

    I'm fixing to buy back my position although we've not yet reached my target; but at least if I buy it back, I can go do other things and stop worrying about missing downside.

  • chronographics

    Lol :-)
    I remember working for a major US entity, I was responsible for EMEA, New York announced a new Global Head but he couldn't come and visit London until he got his passport as he had never been out of the country

  • chronographics

    You are so right the only Bear market I remember that was fun was '87 it was over fast – well except for Bob P his Bear market lasted a while :-)

  • BobbyLow

    Just sold a few SPY December 85 Puts against some of my Long December 105 Puts.

    Waiting to sell December 80's against the rest.

  • chronographics

    No worries was really just agreeing with you that something just didn't feel right :-)

  • chronographics

    Last chart of the night for me sloth_bear if you still around you'll enjoy this:
    http://screencast.com/t/ZTIxMzkxY

  • BobbyLow

    Maybe so Bob.

    But I must say that “Social Mood” over here is getting worse by the minute.

    Also I think a lot of people who used the $8,000 Tax Credit to buy a home might already be regretting it as home prices continue to fall.

    The bottom line is that no matter how much of a Tax Credit is used to bribe someone to buy a home, it will do no good if the prospective person buying the home doesn't have a job to pay the mortgage.

    Retail has left the stock market in droves. This is in stark contrast with keeping interest rates low so that businesses can survive but not hire new people and further driving social discontent.

    I wonder if any of the Baby Boomers that have any money left would rather have 0% Interest Paid on their savings or risk 20, 30, 40 or 50% in a stock market that has been Death Valley for 10 years?

  • sloth_bear

    Thank you!
    I re-shorted at the top of 2 using my habitual plan, nice to see it was such a great spot!

    Here is the blue channel I used (Sorry for the ultra messy chart):
    http://screencast.com/t/NjIzZjlhZ

    With of course a bit (a lot :-p) of luck, I made a killing today, thanks again for your help, have a good night

  • Bob the Horse

    I agree with you but ultimately people will be forced into the stockmarket, not because they are optimistic about the economy but because they are scared of being robbed by inflation. Whether they will be right to do so is another matter – we could be doing this for the next 30 years. Look on the bright side – traders get the chance to be long on the way up and short on the way down (or vice versa). Most punters have no idea how to trade and they are helpless.

  • Bob the Horse

    Anyway, I'm glad you held your line with your puts. Can't have been emotionally easy. Just promise me something – you'll cash them in at 920.

  • BobbyLow

    Another issue that hasn't been fully factored into the market yet is the breakdown in the Public Sector already in progress.

    Illinois Pension May Sell $3 Billion of Assets to Pay Benefits

    http://noir.bloomberg.com/apps/news?pid=newsarc

  • Tronacate

    Illinois Pension is dead in the water……like all pensions they engaged in risky behaviour to increase return.

  • Tronacate

    And underfunded corporate retirements too……..we're seeing the tip of the iceberg ponzi scheme

  • Tronacate

    Wolffewave point 5 just finished on NQ 5 min…….target 1750

  • BobbyLow

    Thanks Bob.

    It's taken a long time for me to get it through my thick head that most of the time it is best just to sit tight and weather the storm. (Although it seems like this weather pattern has been in play way too long) LOL

    Over the past few months I've watched you sit through a few storms with open positions and that has been a great example.

    In the mean time, yes it would be nice to see 920 and have the opportunity to make a decision at that point. :)

  • Tronacate
  • Eva S

    Looks like bears are dead for now…. :-)

  • Tronacate

    Maybe so….but still looks like another bearish wedge building……the pattern of choice

  • ricebowl

    Au contraire. Earlier we were outside the ^VIX bollinger bands and came very close on SPX. We needed a bounce for the selling to continue.

    By the way, someone dumped 4 million shares of QQQQ in 2 minutes around 11:08. Very interesting.

  • kenl32

    I think wave 1 is finally complete. I'm looking for a near 100% retrace of the wave to 660 on the RUT. That seems to have the clearest count. I think wave 2 will be fast and short. The news on Friday may help things along.

  • BobbyLow

    VIX just went Negative, ES above VWAP all is well on Wall Street.

    Sold some December 102 Puts on a Temporary Basis – might be a Day Trade or Longer. Mr. Market will let me know.

  • raised_by_wolves

    Too bad I slept in. There was an opportunity to take some profits at Mole's Curly level. Perfect hit.

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    OD, Puking? careful cub, do you know who died 40 years ago?

  • raised_by_wolves

    Hendrix.

    By the way, my main health concern is not getting enough sleep.

  • Tronacate

    Au contraire mon frere(sp)……..lol…..i forgot that one

  • http://www.mylifemytrade.com MyLifeMyTrade

    Looking for LOD EOD finish today.. This is a sucker rally. Those who bought today will likely be shaken out by EOD and be forced to buy at higher prices tomorrow when we likely gap up.

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    unless you're on speed all the time you WILL sleep the bare minimum (your brain shuts down wether you like it or not)

    as for mole's point… hamsters have bands that only play latter (not before 1020's)

  • gsavli

    that can easily be remedied – just go to bed 6 hours earlier than usual.

  • Bob the Horse

    you've lost me.

  • Bob the Horse

    I think you found his secret.

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    not realy, not the way he misses some hours …

    there were times i slept as little as him on no external help (just accute chartitis… hours and hours peering at charts)

    then you sleep the key moment you wanted to trade because you felt asleep

  • raised_by_wolves

    Yeah, currencies probably would be ideal for me. I don't know if my bank roll is high enough though. Question: If you enter a trade, say AUD/JPY at 78.81, it moves in your direction, and you set a stop loss at 77.94, then do you still have to worry about the leverage? It's not like a leveraged ETF that works against you when there is sideways movement, correct?

  • raised_by_wolves

    That would give me nine hours of sleep :-)

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    3 hours+ N naps…

  • raised_by_wolves

    Do you ever use Hamster bands on an intraday chart like this one?

    ($SPX/GLD)

    http://content.screencast.com/users/raised_by_w

  • raised_by_wolves

    I usually take 1 nap a day. Yesterday it was for 1.5 hours. But enough about my sleep schedule. I'm going to court.

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    only those I can do on google finance (104 on 2 min chart is a nice one)

    BTW ramp or crash hour just now

  • http://www.mylifemytrade.com MyLifeMyTrade

    I am saying that we sell off into close to finish at lows of the day. And likely gap up tomorrow (excuse may be some crap out of Europe or surprisingly positive claims data).

  • Long_John_Silver

    Thanks for scribd.com – never been there before. Looks like a lot of stuff though – perhaps you could suggest a doc or two as starting point. Full disclosure: have a good friend who was a turtle trader, so I got a book or two, but looking to learn more. thx ljs

  • Brishort

    Let me look it up tonight for you at home.
    Scribd doesn't make it past our firewall at work.

  • DudePlunger

    We had a hammer on the hourly /es yesterday, and another hammer today. I think it's obvious we are in the process of building a short term bottom.

  • Brishort

    Houston, I think we may have a problem.

    I am hearing chatter on some other site of a scenario that could count complete for a C wave up. Reasons, rational behind for bringing it up now, I don't know or care, but it seems the count works.

    The closest I have to show a chart is to reuse what Subevil did yesterday in a reply to me at one point and repost here:
    http://tinyurl.com/28ug98t

    Bottom line:

    I have no indicators that could forewarn of such a bounce, as they are currently trendfollowing and will support quite a retracement before turning bullish. I.e. my indicators don't catch bottoms, needs a while to indicate a turn.

    I so far did not believe in such scenario because of the current dollar expected run up and the outrageous amount of bulls on the bonds, which if you follow EWI, are part of the “all the same market down” prognostic are a nice fit for P3.

    HOWEVER,

    If EWI is wrong and for any reason there is a stronger push up on this market going up, the bulls in bonds would be deflated by allocating instead money to stocks.

    WHY BRING IT NOW UP?

    TA is only about objective scenarios. I have not done the count for the ABC in detail yet, but to start may occurences starting to discuss it is giving pause for thought. And I am giving further added credibility because of Mole few comments yesterday but very clear: bears are quickly squandering downside momo energy and Mole ain't impressed.

    Bottom line,

    As hamster is saying, this need to go hard now and hard otherwise there is a huge effort of EW recounting is needed. On top of it Curly did its perfect job and the bears are screwing around since this morning.

    It does not feel P3, but it's early in the game. If it is not P3, it is therefore exhaustion of selling power whereby every gap down is bought back.

    As an uber short bear, staying frosty means be ready to turn on dime if the market tells me so.

    I am currently worried about what the market is trying to tell me…

  • Long_John_Silver

    Thanks – this looks like a great resource – appreciate this & your other posts btw – ljs

  • Brishort

    Few typos in the message, editing right now, sorry for that, hoepfully the meaning was still there.

  • finansreven

    Well, call me crazy, but I'm buying now.

    The weekly range has been around 40-60 points on the SPX the last few weeks since last week in July.

    We had buyers coming in yesterday and reversing a free fall (admittedly not strong enough to turn the market around), then we had the same today. I think we might see buyers succeed in turning it around this time.

    10 point stop loss (LOD).

  • DudePlunger

    Not calling you crazy at all. In a post earlier, I mentioned 2 hourly hammers in the last 2 days. In the past, it's only taken 1 of those for a short term bottom.

  • http://iberianviews.blogspot.com/ catracho

    almost finished the “holiday”..quick look at DAX and we are at at the bottom of the channel..so “should” bounce here..BUT if we keep going down…THEN a long way to go before bottom…will try to post a chart later..

  • http://iberianviews.blogspot.com/ catracho
  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    we have some kind of top around NOW

  • DarthTrader

    Time to think about cutting out a Bond Bear Position to Ride for the long term on the reverse of this 30 year Bull market.

    Right now I am long a big swack of TBT Calls but ETF Ultra Decay taketh away what falling bonds will giveth . . . So I will switch to a Bullish Ultra Bond fund to buy long term puts on like the TMF. Then I will have ultra leverage and put leverage working for me as well as a long term down trend in bonds and ultra ETF decay. Still picking thru the Bond Bull Ultra Candidates for the best choice.

    How much fun would it be to short near the top then put on spreads against your Ultra Bond Put position as technicals dictate. Gradually growing your position as time goes by

    Bonds will top out sometime this year I would say. And it is entirely possible could top out this month as important cycles in this month and we are blowing off to the topside that is a big plum for the Big Boys to squeeze. I mean we are talking the end of a 30 year Bond Bull Market.

    Or perhaps Chris Carolans 10/10/10 date.

  • BobbyLow

    For the time being, I kind of did my own “Stick Save” by Shorting some more December Spy Puts against my Long Decembers and Long Junes. I'm at least temporarily limiting some of my Maximum Profit to the Downside but I'm also putting a decent chunk of money back into my account for perhaps a partial “do over”. :)

    They'll probably reverse this again but balance of power is in Bulls favor right now and VWAP is in the upper range right now.

    I guess this all doesn't have to make any sense. BWTFDIK?

  • Brishort

    Mole, I think you have charts that are good to catch bottoms. are any behaving in a way that could indicate such ongoing behavior further to curly this morning?

  • http://www.mylifemytrade.com MyLifeMyTrade

    I am still open to my earlier thesis of close near LOD.

    The other possibility is that the pullback from 50.50 level (gap fill AND a level that was protected yesterday on 30m closing basis) is nothing but suck-a-bear-trap. And we keep going up.. and close around 54 level (54 level is where volume was built up yesterday)

  • finansreven

    Where does the dumb money go when/if the bond bull market ends?

    Would love to see some alternative money flow numbers (as now I have a feeling that the dumb money has been poured into the bond market).

  • OldChicago

    Without any good reason to rally, bond bursting would be a technical one, unless Euro crashed overnight, taking Europe down. Europe markets aren't oversold as Japan or US.

    The daily chart don't really look like in wave 3, IMO.

  • bluprint

    Getting ahead of yourself imo. How long has Japan had <1%?

    This could take years to resolve still. When it unwinds, it will be quick though. Commodities and early-stage production industries/companies will be the next thing imo. Already seeing it with Potash.

  • Tooncez

    I'd put up my A/D-clone, but there's a hole in the TOS data from monday…

  • DarthTrader

    I am still seeing bullish divergences in a lot of charts ES, NQ, IWM, TBT, etc

    To be fair I've been seeing it for days now

    Here is the ES 120 min chart as an example http://www.screencast.com/users/Innovisual/fold

  • LilSpaniard

    ZL putting in mini neg divergence

  • DarthTrader

    Exactly Gov't would love to see Equities rally here . . . best way to get that is to sell off bonds.

    What is the best way to sell off bonds ? Simple buy up bonds for a week or two . . . the weak hands will follow you in on the trade as you load your bond market war wagon with Bonds to sell as you reverse the market reap what you have sown.

    Such a big juicy plum for the money center banks to SQUEEZE.

    I mean it is not like some kind of oversight body will limit their activities.

  • http://evilspeculator.com molecool

    Some are getting close – others are still leaving plenty of space of further downside. I know it's a tough call right here. The bears are worried about having their ball pulled away by Lucy once more. But fact is that we need to breach the support levels below and the bulls will tease it out as much as they can. We just rallied on very little participation on the Zero (which you can see today ;-)) and we also have price levels that should not be breached.

    For now I'm just watching this and try not to over think it. If we breach certain price levels then we may have to entertain other scenarios. We are not there yet and I don't see anything conclusive (i.e. fractals or momo charts) that would suggest a strong possibility of a reversal here.

  • finansreven

    Yep, makes me want to step out and wait. Closing my long (will also priority the Champions League match between Rosenborg and Copenhagen, it will require my full attention).

    Well, have been a very nice day.

  • Zero_Sum

    I believe the stock market to the PPT, is like a game of Big 2. You have use your best cards, and best combination of cards, in the final stretch to secure the victory. The victory I am talking about right now is the re-election period. The last and final push is coming, and it will be excruciatingly painful, and unfair for the bears, but remember we have the trump card, the Big 2.

    TL;DR – November-December small decline leads to avalanche by January 2011. Hang in there.

  • legobear

    I think that's a fair assessment. You can't have a market crash and an election at the same time. Well, you can, but it's not very realistic. Looking forward to reshorting new highs :)=

  • 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

    So, what happened in 2008 then?

  • legobear

    The republicans didn't see it coming and it killed them 😉 What a sorry bunch that's left in the GOP.

  • Brishort

    Thanks. And yes, it works, I see it. You got yourself a new subscriber!

  • chronographics

    OK no its not like etf – not that I trade them but I gather you have some kind of readjustment at the end of each day. In the currencies its more like futures from that point of view say you sell EUR and Buy USd at 1.2700 spot so value two working days as USD has lower interest rates than Euro you get charged a couple of pips so that might cost you 4 dollars right now. This is arrived at as a function of the where the currency is right now and the interest differential between the two and the length of time the deal is for. Unless there is a big interest differential its generally a small amount. Thats it. very liquid market. Got to run but if you like can let you know what brokerage I pay and what margin deposits to give you an idea :-)