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That Time Of The Year Again
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That Time Of The Year Again

by The MoleMay 6, 2011

Things were going nice and smooth for a while and the bulls enjoyed a six month hard-on courtesy of free blue pills dropped from helicopters by Fed & Friends. But alas – it was not to last – and from one one day to another Mrs. Market turned from a promiscuous Dollar burning mistress into a raving razor blade slashing bitch.

Hey, don’t blame her – it’s not her fault. It’s just that time of the year again 😉

I’ve got to be honest with you though – it’s good to see a bit of volatility. Although an eternally rising market may be catnip for equity investors it’s a scourge for us stainless steel rats. Especially during times when everything moves up in unison – and in an unnatural pharmaceutically induced fashion. Of course some us may have gotten more than they asked for, so always be careful what you wish for 😉

Personally, I can’t complain – we banked a lot of coin and I even managed to piss off some ZH muppets in the process – all in a good week’s work. Time to look forward again – the setups right now are not as sweet as last Friday but these are the times to gather intelligence and to prepare for future assaults on hapless retail piggies. This is what we do best:
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Charts and commentary below for anyone donning a secret decoder ring. 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.
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For some reason very few people are talking about bonds right now – Chris Carolan may be the exception here. Now, you may remember this chart – last month I drew this diagonal on TLT and TBT expecting some kind of reversal. I also pointed out that if it did not happen we would see quite some acceleration upward on the 20-year – which is exactly what happened. Now, long term the inverse H&S (see the blue squares) appears to be in process and I am now expecting a little shake out – not unsimilar to what we just witnessed in equities.

This is why – we are now pushing outside the 100-day BB and whether or not we continue upward it’s time for a little reversal. This may not happen right away but I think it’ll happen later next week.

Silver dropped a little further today and then snapped back – as I expected that lower 25-day BB line would hold for now. What I’m seeing here is the potential for a little squeeze into the 40 region. If we get there I see the potential for a nice setup:

This is what I’m talking about – the net-lines buy level starting Monday is 42.325 – if we push toward 40 I would want to be short with a stop a few ticks above that level (and I would trigger those stops at the EOD, which you can do in TOS). The risk would be minimal as a close above that mark means we probably resume higher – if we fail we probably drop toward the 30 mark or much lower.

Similar situation in crude – just a lot higher up – but keep an eye on 111.22.

Yesterday night after the close I mentioned that we didn’t get our VIX buy signal but that this didn’t mean that we would not get it at all. Now, I don’t have a crystal ball but we are again scraping the upper BB line again – and if the spoos keep dropping as they are right as I’m typing this we may get that coveted close outside after all.

The spoos retraced almost half of the drop today and then fell back, which paints a very bearish candle. So it’s quite possible we see some continuation here and that the current support line will be taken out. I would love to see a drop to 1300, with VIX painting a buy signal. Now that would be a good spot to take on some long positions. I expect you symbol hunters to be ready for duty and to parachute out of B52s if we are lucky enough to find ourselves in that setup.

The easy money in the EUR/USD has been made – nice follow up drop today but it puts us too close to my preliminary target area of 1.42. The recent high of 1.49394 also happens to be the next buy level and I have a feeling we’ll have to wait a while until we see this again. My recommendation is to sit and wait – if we drop toward 1.4 then a long position may be warranted.

Cheers,

Mole

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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.
  • DarthTrader

    I'm about to go long some Silver

    I'm expecting another Sunday Ambush in Silver

    This week the Bears will be the victims . . . Drawing them in right now

    Kind of like the dual edge razor first edge lifts . . . the 2nd edge (Sunday Night ) Separates them from their money

    .

    Razors ' ' '

  • jigdaddy

    bears are wising up…taking it down without breaching BB

    http://screencast.com/t/uaAOpq

  • amokta

    You have been right on the money, so respect due.

    With your profits from shorting, i think you have the leeway to go long

    First green daily candle in silver – looks more doji than hammer
    ?

  • http://evilspeculator.com molecool

    I only told them for over a year now – about time.

  • http://evilspeculator.com molecool

    It's above it right now.

  • jigdaddy

    i know, i always watch out for that now when we get sell offs…great clue

    to either sell partials or cover and wait for re-entry if you must.

    its below now :-)

  • BobbyLow

    As I said earlier, I bought a few TLT June Calls this morning for a Swing Trade. This could dovetail nicely if we were to hit 1300 on the Spoos.

    OTOH, the EU could open the Spigot up for Greece again over the weekend and all will be well in the world as the Market Rallies on.

  • DarthTrader

    Also regarding Silver looking at the options open interest on the SLV, AGQ & ZSL ETF's the MAX PAIN in are wildly bullish for Silver.

  • BobbyLow

    As the Bots run the “market” up before the close this Friday I would like to extend my congratulations to Ben and Tim for their hard work in planning our economic recovery.

  • http://evilspeculator.com molecool

    No video wrap up today as I have the worst allergies and need to kick back.

  • http://evilspeculator.com molecool

    Yet again they closed it a few cents below the upper BB line – seems like you were right and the bears smartened up.

  • jigdaddy

    if you go to your doc, ask for that zymbal shit…you will feel like you smoked massive amounts of mary j

  • Joe_Jones

    I don't know if today marks the end of retest of the recent high, but the daily shooting star on SPX and VIX closing just inside the BB says a lot for next week.

  • gsavli

    Monday should be amusing. We had two consecutive reversal days, a big sell off in commodities and Euro. I am staying short, of course, smells like a gap down on Monday.

  • gsavli

    You know, another package of few (hundred) billions for Greece is not out of question: Germany is its biggest debt holder and is sweating a bit right now, trying to talk Greece into staying in the EMU (European Monetary Unity).

    Basically, what Greece is trying to do is to get out of EUROzone, adopt its own currency once again (drahma), devalvate it, declare default and show the middle finger to its debt holders.

    Devalvation is the only way to cut expenses in its public sector and national pension fund without major civil unrest. (I still remember death of 3 bank employees, when mob threw molotow cocktail into the bank last year).

  • http://evilspeculator.com molecool

    Better living through chemistry.

  • http://evilspeculator.com molecool

    That is one nasty candle that…

  • http://www.facebook.com/people/Aaron-J-Butler/560633708 Aaron J Butler

    I've been playing with the XIV (basically inverse VIX) for a while, and this week I have a new data point that's worth noting. As of today, the VIX is virtually unchanged for the year at ~18., while XIV is up about 30 percent. This reverse contagio stuff seems to be working pretty well so far. Don't think about the fact that the dealers have had this type of instrument at their disposal for decades, just enjoy it now, is my recommendation.

    Those who were smart enough to buy during the mid-march panic are now up about 50 percent. So if we have a big vix jump in the near future, be sure to nibble at some XIV on the ride up. You'll levitate when the VIX calms back down (as it inevitably does).

  • DarthTrader

    SLV max Pain is 41 Now at 34.50 . . . AGQ Max Pain is 300 now at 186 . . . ZSL Max Pain is down to 12 now at 23 with lots of options between them all. Big money sold a lot of those options they want Silver to rally and destroy that option premium. Normal for this market to retrace the sell off

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

    understood. you earned it. and stay away from the tap water.
    😉

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

    UUP volume finally backed off. whew.
    hey wait a minute, higher price!?
    MACD crossover.
    http://stockcharts.com/h-sc/ui

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

    ZH muppet.
    nice.

  • amokta

    Good insight. But surely they dont want to reward call holders long on silver?

    What time frame?

  • convictscott

    Very very very good post. Over the weekend I'll add my own thoughts on the same symbols :)

  • convictscott

    Absolutely agree. The setup is clear. Long on break of the high, stop at the low of the daily hammer candle painted today.

    High probability trade

  • http://evilspeculator.com molecool

    Thanks – enjoy the rest of your weekend, Scott.

  • convictscott

    I just read your action over at zerohedge….. OMFG its stunning to believe that Silver down 30% in a trading week, they are MORE bullish about it than ever. If we havent found a top in Silver that lasts for a while, I'll become a post-op transsexual 😉

    Its astonishing to believe that they have bought the lie that “the only silver that went down is paper” and that there is somehow something different between paper and physical silver.

    I dont think they understand that any person on earth can get physical silver at the paper price from either CME or LME. My own bank does it as a service and charges a spread for it, and stores it in their vaults.

    That being said, it *is* probably time to go long silver for a few days. That hammer candle is very very tempting.

  • DarthTrader

    Amotka go look at the open interest of SLV in puts and calls for May expiration. You should have done that once presented with my analysis to see for yourself. You can't really learn very much if it is all second hand. Look at the date yourself you will understand

  • http://twitter.com/Scrillhound Scrillhound

    I have not read comments at ZH for a looong time, and just did so…. What a waste of time… Everyone there is waiting for the end of the world/ P3, etc.

    I'll probably buy more physical this weekend, but I'm not some nutter that is throwing their life savings into it. A little here, a little there….

  • DarthTrader

    Thanks, Also if you look on the 120 min chart there is a “Sign of Strength” or accumulation with the highest volume candle since two Mondays ago when we had a down candle showing distribution or “Sign of Weakness”

  • Joe_Jones

    Quagmire: “Hey baby, why don’t you turn around and show me the lower east side”*manly woman turns around*Quagmire: “WHOA Transvestite!”Quagmire: “Wait a minute… pre-op or post-op”Transvestire: “Pre-op”
    Quagmire: “WHOA Transvestite!” Back off!

  • http://evilspeculator.com molecool

    As I said – muppets. But we need someone to be on the other side of our trades, right? They do fulfill an important public service.

  • Joe_Jones

    Kudlow calls for risk off trade. LOL..OL!
    Next week should be fun.

  • OldChicago

    All chart indicators are rocked bottom, not to say that SLV is outside of BB. The intra day action does feel like someone is holding the support. The volume today is also very high. Not sure if this is bullish or bearish.

    The cruelest thing here is for silver to retest high in a short order, say 1 week. Margin, Soro, Calos all be dammed.

  • convictscott

    My point exactly. The worst thing for both bulls AND bears is a very convincing retest of the highs, way beyond 61% retrace.

    Therefore thats the highest probability outcome

  • convictscott

    Nothing wrong with that :)

  • convictscott

    Didnt I just get through scolding everyone about that happy its going down attitude?

    Stay unbiased, stay neutral as to market direction.

    Commodities and silver took it in the ass triple hard this week, but equities are comparitively unaffected. Sure they are down a little, but the uptrend is not broken.

    What do you think happens to equities if oversold commodities suffer a retrace?

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

    whoa whoa whoa.
    here's an idea. take the silver weekly candle.
    and apply your already mentioned techniques.
    sell if it goes lower, long if it goes higher.
    very good chance everything will be an inside candle to this weekly candle.
    yes?

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

    I look forward to your post ops pics. har har.
    http://www.chinadaily.com.cn/l

  • OldChicago

    This I noticed yesterday where FFIV, NFLX, HPQ were green and Q's held. The other scenario would be for commodity to stay consolidated while equity slide (and catch “down”). But, the argument against this is that commodity & tech stocks have been consolidating/lagging in the last month or so before this week, like GDX, GOOG, AAPL etc. So, if these stocks are holding and turning up, oversold metal should follow soon enough.

    More earning for energy, industrial stocks have yet to report. If they rally on earning, index will not slide or slide hard. CF, FLR are two examples today.

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

    SPY closed around 134.
    big deal, it's a strike price. there's lots of strike prices
    oh yeah?
    you know the highs of Feb 18 & April 6?
    134…so what? 'Resistance becomes support' past highs are just getting tested.
    but do you know where 134 came from son?
    Hell no

    Plastics Pivot Points son.
    R1 of 2010, the whole year.
    http://i56.tinypic.com/2wqwcic

  • Hungry_Joe

    Silver has this terrific candle painted on the daily. Gold with an Inside bar. Now the problem is that I can still take a long position as the commodity markets open for a few hours on Saturday too (am in India). But is not everyone looking at that Hammer to go long. Even those people who shorted when it first reached 35 in March and just that the reference now has changed to 50, so 35 with retrace is a buy. But is not everyone (anyone) still holding their longs from 49/50 just waiting for a rise to dump their longs. Or should I wait for a break of the lows of the hammer (can happen) and go short?

    PS: DarthTrader, the earlier icon suited you better. This is kind of more like ZHish. :-)

  • raised_by_wolves

    Yeah, the 9th through the 13th could very well be an inside week.

  • amokta

    Thanks

  • DarthTrader

    True. I'm only going to have it for a while though leaving Lucy & Charlie for something else not sure yet

  • Joe_Jones

    I got ur .

  • Joe_Jones

    Like 4 D Avatar!

  • OllyVaradi

    Moley,

    I was researching appropriate “wedding dance” songs for me & Ninel this weekend and came across this. I don't think it'll work on the Hacienda (or in THE Hacienda 😉 ) but I don't know whether you've booked yet for the Evil Spec Christmas lash up. I think this lot offers great variety. The girl with the horn may have some difficulties getting through customs but the rest should be fine.

    If you don't want to go with the variety act we can get the second one. Looks like he'll come for a few pints and a pie.

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

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

    The first outfit are Suissies I think (Ultra – can you confirm), the pieman is a nailed on German.

  • Joe_Jones

    I am in stitches…

  • OllyVaradi

    Good.

    Moley, stick JJ down – he'll be coming too if we can get them.

  • Celtic33

    Louise Yamada calling for 80. She's good

    http://www.commodityonline.com

  • Zero % forever

    This statistics from Bespoke Group sounds interesting for the next wekk silver trade.
    With silver on pace for its fifth straight day of losses, many traders in the commodity will be happy to see this week come to an end. With a decline of 28.43% so far, silver is on pace for its second worst week in the commodity's history. For those looking for a silver lining (no pun intended) to this week's decline, we would note that following the nine other worst weeks (-15% or more), silver averaged a gain of 2.41% in the following week with positive returns seven out of nine times. It's a start, but in order to get back to where it was last Friday, silver needs to rally 40% from current levels.

  • gsavli

    Here we go.

    Talks about Greece leaving EMU never happened. :)

    Another “loan” in the works?

  • captainboom

    Olly, you've got WAAAAY too much time on your hands.

  • gsavli

    talk is cheap.

  • BobbyLow

    I've read the Article and couldn't find where Louise Yamada explained how Commodity Prices were going to rise that high without Wage Inflation. I've asked time and time again how we can have Run Away Inflation without Runaway Wages to go with it. If there is a way for this to happen, I'm willing to listen. However all I hear so far is how the dollar is going to continue its decline and Metals and Oil are going to go through the roof. But How and for how Long?

    I believe that Cost Push Inflation can only continue to rise as long as there is an amount of funds readily available to pay for these increases. And without “Real” Job Creation and an Over Supply of Labor, how do we get Accelerated Wage Inflation?

    So if the calls for $3,000 Gold, $80 Silver, and $200 Oil are possible who's going to pay for this stuff? Governments? Also with all the talk about replacing the Dollar as Reserve Currency, what do we replace it with? The Euro? The Yuan? The Ruble? Perhaps if the Greeks leave the Euro we could use the Drachma as the World's Reserve Currency. :)

  • convictscott

    Sun night globex is off and running. Very thin on the metals so far

  • OllyVaradi

    You've all got to check out the first one from 00:40 – 1:40. I think Mole could do a star turn on the Appenzeller Hackbrett
    provided he can get himself some white socks wi' black keks, a red waistcoat and an earring with a crystal ball on the end – an look as if he's completely pilled up in an Ebeneezer Goode kind of way.

    Say you'll do a Crimble bash Mole…….

  • DarthTrader

    BobbyLow in my view the only way they can get the RunAwayInflation is if Wages to Do NOT go along for the ride. Once wages join in the Fed can longer pump the QE money pump . . . Low Wage Inflation is their excuse for being able to do so now. Right now we are in a Deflationary Environment Bernanke thinks he can beat that out by pushing money out into the banksters hands that is why we have commodity inflation not because joe sixpack is loading up on Silver, Gold, Oil & soybeans. As long as Bernanke can keep pushing his economic experiment we will continue to have new waves of commodity inflation as time goes by.

    Silver bigger selling volume coming in . . . regardless of what happens this week in Silver. It's gonna be fascinating

  • gsavli

    was expecting gap down, instead, we get a gap up. :)

    that's how it rolls…

  • convictscott

    There is your first mistake. Expecting *anything* from price is an error

  • convictscott

    Agree about the wage inflation.

  • BobbyLow

    OK so maybe I'm being to simplistic about this but when Oil hit $140, it practically broke the back of the American Consumer (and that was before the fucking government actually knew we were in a recession.

    So what I'm saying is that Gasoline can be $20 Per gallon, but who besides the ruling elite is going to be able to fill their tanks and pay double and triple the cost of food prices – let alone buy the latest I-Pad without increased wages. Again I ask very simply, where does the inflated money come from to pay for the uber inflated prices then? I raised a Family through the Inflation of the 1970's and early 80's. Back then, costs were going up everyday and so were wages along with the Price of Gold. But the key back then was that wages were going up along with everything else. That's Inflation. I still say they can QE 3, QE 4 5,6, 7, 8, 9 or whatever. All this will do is to push the outer limits of the misery index and then go BOOM. It has too. In any event, I guess we'll see how this mess turns out.

  • http://profiles.google.com/acabrera768 andres cabrera

    Agreed

  • http://profiles.google.com/acabrera768 andres cabrera

    That is the best way to describe the economic environment. it really is a experiment but one that has been tweaked since 1940s then heavily moded 1960s-1970s example Nixon admin. Now here we are on with some out there talking about going back to step one. But yea it will be fascinating to say the least.