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Tape Phase Transitions
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Tape Phase Transitions

by The MoleJanuary 12, 2015

No short term setup on the equities front but there’s plenty on our plate across the futures and of course the forex side, so it’s going to be a busy Monday. However the hourly E-Mini today is a great example of how the tape repeatedly transitions through different phases with dynamics (and thus odds) constantly shifting. This year’s first sell off started after a very tightly squeezed Bollinger (both the 25 and the 100 – I’m always using a 2.0 for std dev). It immediately trended down without a single close above the 25-hour SMA.

2015-01-12_spoos_thresholds

Thanks to the Zero we actually got in at 1990 but frankly speaking we were very lucky as technically there was very little to suggest a low was in place. However when looking at the situation it’s clear that a squeeze to the 100-hour SMA was almost guaranteed – the blue squares demonstrate how the corrective zone was growing constantly as price was falling away from the 100-hour (you could easily use a 50 or a 75 or a 150 – it’s just a personal lens I use).

The very first hurdle to was the 25-hour SMA and once it was overcome a run higher to the 100-hour had very good odds. That is the very reason why I often look for inflection points near the 25-hour (or again you could easily use a 21 or a 30 – whatever works for you). The area in between is rather easy pickings and once price touches the next major hurdle, the 100-hour SMA, you have the choice to either close out or convert it into a daily campaign by moving your stop near break/even in anticipation of continuation higher.

If the 100-hour is overcome the bulls usually have a pretty good chance to make it to the upper 100-hour BB, however that is most likely where we encounter new selling pressure, the strength of which will decide whether or not we just produce a little correction or we go back to retest the lows. And that is the situation we are in right now – we are in that no-man’s zone which delineates bullish territory from the big bad snarling bear. The 100-hour often makes for great retest dip-buys – there are never any guarantees and you should look for correlated measures (i.e. momentum, velocity, participation, volume, etc.) to pick an entry.

Of course it is exactly here where great entries can be found – to both the down and upside. I usually try to identify as much context as I can find (i.e. Net-Lines, moving averages, price patterns, support clusters, what have you…) and then decide where I want to be long and where I want to be short.

2015-01-12_GBPUSD_briefing

Now given my general approach it’s easy to see why I want to be long cable right now – it’s got very low odds to succeed down here BUT we are enjoying a very tightly squeezed BB pair plus the SMAs are starting to inverse; there’s a NLSL right below and that’s where I’ll place my stop.

2015-01-12_NG_briefing

Natgas is a bit of a lottery ticket – I always call it the widow-maker for a reason. We may see another bounce higher here and I’m currently long near those lows with a stop below 2.8.

Quite a bit more below the fold – please meet me in the lair:

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You have been briefed – now have fun but keep it frosty. See you guys later this afternoon.

Cheers,


About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at various social media waterholes below.
  • BobbyLow

    Mornin Folks and happy Monday,

    Oil still making new lows and I took profit on Friday. Oh well. Free Oil might not be out of the question after all. :)

    Currently only new position is Short AUD/USD

  • ridingwaves

    seems like the equity vix wants to catch up to oil vix

  • Dyellowflash

    Gotten some dax shorts a few hrs ago and had cleared them off at this US open mkt dip. Currently long 1 ES contract (work like a tracer) to see how its going.

  • Darkthirty

    on inflection point here…

  • Dyellowflash

    Seems like i had cleared and reverse a bit early. Siting fine on that long tracer, but missed about a 100 pts of downside. I shld have traded the chart instead of my suspicions of a pending long reversal.

  • Darkthirty

    That’s the bitch of a brawl or trading your subconscious is spot on, just slip into mode…….

  • ridingwaves

    this might be the obligatory little shakeout before earnings season kicks into gear….

  • Darkthirty

    Earnings? The uptick in GDP was due to obamacare, earnings should be interesting!

  • ridingwaves

    go back the last 4 years and look at the market during earning season….

  • Darkthirty

    I don’t drink the kool aid, but I try not to let my bias run my trading either. Scalping minute time frames is the only game I trust

  • ridingwaves

    your missing the point….good luck in your trading…

  • Dyellowflash

    mkt slipping down and up quite fast during the past few mths. I think the 5m ZL might not be able to keep up with scalping anymore. It might be useful if we had the 1min zero. Wonder if mole will put it up?

  • Darkthirty

    Sorry, just got off a 24 hr shift…..you anticipate upside long term?

  • Ronebadger

    TRIN and VIX remain strong…I remain short

  • http://evilspeculator.com molecool

    Tough one to read here – clearly it’s a major inflection point.

  • BobbyLow

    Quiet in here today. It could be because of extra sharks in the water beginning with GS calling for $40 Oil. Reminds me of when they called for $200 a few years back and it only made it to $140. But $40 is not too far away so who knows? Earnings season begins this afternoon with Alcoa so look out for what looks like ripples in the water.

    Added a short on GBP/JPY and still short AUD/USD.

  • http://evilspeculator.com molecool

    yeah, where’s everyone?

  • Ronebadger

    Present (but busy)…added to shorts…small positions

  • DarthTrader

    Quite the opposite here. Went long near days lows on Russell as an ABC was completed yielding a Gartley Buy even though it extended a bit further below my buy to channel line support. Got a nice pop in it but pulling back here on declining volume. Have to see how the price and volume action is going into the close.

  • Billabong

    Word is (no reliable source) they are negotiating at sea tanker storage contracts (just like the last sell-off). I guess there will be a lot of excess tanker space hanging around while the over supply is burned off.

  • SirDagonet

    Haven’t seen too many comments like this from those in a position to have sufficient insight and access to accurate information
    http://www.marketwatch.com/story/oil-above-100-never-again-says-saudi-prince-alwaleed-2015-01-12

  • Billabong

    GG … For my system, DIG is a good example of a failed buy signal (FBS). Where as, CL is a straight sell signal.

  • bullethead

    There’s enough contango (Brent) to support storing it in tankers now – so it may start finding a floor

  • momac

    closed /cc from the ID the other day, still long sb. sold half jnug, small long position in oil etf

  • ridingwaves

    no apology needed….just an observation that has saved me a lot…cheers

  • Billabong

    I don’t know about an earnings shakeout, but there are a lot indexed ETFs and equity positions rolling over.

  • captainboom

    Shoveling my driveway… 😛

  • Darkthirty

    Blast it!

  • http://evilspeculator.com molecool

    Strange – on the most crucial days it usually goes quiet in here… inflection point anyone?

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

    Advantage – bears.

  • Ronebadger

    “My name is Ronebadger, and I’m a Permabear.” I’m liking that the VIX has been 16+ all of 2015 (and hanging in there since Christmas).

  • ridingwaves

    Definitely a different vix vs. a year ago….I have it really being a gem to buy in March time frame….

  • ridingwaves

    not to sure….this smells like setup before earnings and the draghinator next week…but today definitely….

  • Darkthirty

    I want one of those!

  • Scott Phillips

    We *should* have gone up today, especially given the strength of the move off the lows. It is axiomatic that lower probability outcomes lead to larger moves.

    Today is a bad failure by bulls

  • BobbyLow

    It sure was. I put in a filter and re-backtested and based on it I should never have got out of DUG never mind take a hit on DIG. It looks like the DJUSEN is going to retest the 605 Low after all. CL is still a Sell. But with Oil not too far from the $40 mark, I am not going short again not at this level.

  • BobbyLow

    Would you buy a used car from this man? :)

  • DarthTrader

    He can’t afford oil over $100 anymore . . . . alternative energy sources from fracking to wind and solar will be drinking his milkshake. OPEC has to keep the price down so alternatives are not fiscally feasible or the price will be forced much much lower.

  • BobbyLow

    This could very well be the case and I’m pleased with what I see at the gas pump.

    However, what puzzles me is how in relative terms this “awakening” began on September 30th when oil closed at $91.32. Over the past 3 months oil has declined by 50%. So fracking, wind, solar and low demand has caused such massive decline in price over 3 months?

    I’m probably more cynical than most. (BTW, my cynicism has been earned) :). Something just doesn’t pass the smell test here. As far as Aleweed goes, I remember him saying that $100 was the correct price a while back. Sorry but I just can’t believe anything these people say whether they are from Saudi Arabia or from Goldman Sachs.

  • Billabong

    Watching SCO volatility, I also said no way. BTW “one trend pays for them all” could have been the slogan for ES on the upside and oil on the downside in 2014.

  • http://evilspeculator.com molecool

    ““The decision to not reduce production was prudent, smart and shrewd,” he said. “Because had Saudi Arabia cut its production by 1 or 2 million barrels, that 1 or 2 million would have been produced by others. Which means Saudi Arabia would have had two negatives, less oil produced, and lower prices. So, at least you got slammed and slapped on the face from one angle, which is the reduction of the price of oil, but not the reduction of production.”

    That must be the dumbest fucking reasoning I have come across. Seriously? It’s S.A. that’s caused this glut so this type of logic is completely cynical. The guy is connected enough and smart enough to know this. Guys – ignore this shit as it will do nothing for you but put you on the wrong track.

  • BobbyLow

    Correctomundo! Believe nothing but price.

    It’s too bad that it took me so many years after finding out that there was no Santa Claus that heads of state and heads of corporations lie. :)

  • BobbyLow

    That’s for sure and I’m shaking my head too. We probably wont see a run like this again in oil real soon. The only thing we can do is learn from this and act accordingly going forward.

    If and when price turns there will probably be a few FBS’s along the way before one takes. The only thing I feel reasonably certain about is that eventually one of these Buy Signals will take and it will run.

  • Scott Phillips

    Where there is a tip there’s a tap 😉

  • Skynard

    Stopped out of /CL and will wait for price action, still holding remaining positions.
    L /QG, /ZW
    S /DX, /ES

  • http://evilspeculator.com molecool

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