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Simplicity – The Art Of Complexity
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Simplicity – The Art Of Complexity

by The MoleNovember 7, 2010

Yes, I’m back – with a vengeance. Having barely looked at the tape for the last two weeks I return with a much better perspective of what’s important and what’s not. And what will be important to us going forward is an increased focus on simplicity – which is the art of defining complexity.

Remember when I told you that there would be no reversal ahead of the midterm elections? How did I know that? Quite simply the ‘path of least resistance’ was clearly to the upside, plus the charts quite obviously demonstrated that the slightest dip was immediately being bought.

Done.

See, most of us harbor an inherent conviction that more is better – meaning that the more information you look at the better you will be informed, and thus the better your decision making process will be. I bet that many of you spend several hours each day perusing financial news, differing market analysis, a collection of trading related blogs, trading chat rooms, you name it. Now multiply all those hours by 300 days (I assume you take a few days off each month) and you get to several weeks worth of collecting financial information which in the end proves to be absolutely and utterly useless.

Just think back – last month – can you remember all the opinion pieces you read on the Dollar, the Euro, Copper, equities, etc. – how many of that actually gave you an edge in the market? I bet you that most of them were either wrong and if they are right it was sheer coincidence, meaning that the same source probably was wrong in a majority of the cases before and will be so again in the future.

Look – I just spent two weeks away from the tape and when I bothered to take a peek nothing that had transpired surprised me the very least. So, as I am running a trading blog I am facing an inherent conflict. Many of you want me to post more and be more active – this way you feel like your subscription Dollar is truly ‘earned’. Well, I beg to differ: If I told you several weeks ago that we would not correct and that we would continue to either melt higher or at least hold current levels, wouldn’t that be worth something? Wouldn’t me telling you that in simple terms save you a lot of time and keep you from losing your shirt by trying to step in front of a speeding bus?

Oh wait – I DID!

That’s right – just look back – I was quite clear on the subject and rather insistent that there would be very little downside ahead of the midterm shellacking the Democrats were about to face. So, if you are upset about me leaving for a week or two – well, don’t! Because I did give you everything you needed to know. And if you listened to my musings your portfolio should be doing just fine today.

And that’s how I will keep it going forward. Frankly, I don’t care about Ben Bernanke, I don’t care about the Fed, I don’t care about POMO auctions (except that we don’t want to be short on those days), and I don’t care about the housing crisis, politics, or any rumors circling the blogosphere. All I are about are my charts and what I deem to be essential to planning my trades. Anything outside of that is nothing but mental masturbation.

So, what you have to ask yourself is this:

  • Why are you here in the first place? To win and bank coin or to chit chat?
  • Which sources/types of information are really useful to you?
  • When you run into a piece of information – is it really pertinent? Does it give you an edge?
  • Do you care to expose yourself to more information than you need to make an educated trading decision? If you do you are wasting your time.
  • Are you doing this to make money or for entertainment? If it’s the latter I suggest Vegas as a preferred venue.

I know these are very basic questions – but as we are all human beings we are very easily drawn into the ‘social aspects’ of participating in the financial markets. The drama, the losers, the winners, the controversies, the bad, the good, and the ugly. Fade all that out and what’s left are the dry and boring facts. A lot less entertaining than Fox News or MSNBC – but in essence fact combined with reason translates into knowledge and thus furthers your decision making process.

Simplicity is the art of complexity. If you empty your mind and remove everything non-essential you will find how simple trading can really be. Listen, it’s not about being wrong or right – I make good calls and I make bad calls – perhaps the ratio is 60/40 – which is better than most. But what matters is what we do when we’re wrong (i.e. cutting our losers) – and of course when we’re right (i.e. riding our winners).

What else do we need to know? Nothing!

So, let’s try something else. Let’s pretend we all just came back from Asia after a two week break. Look at your charts – and try to not anticipate – just absorb what you see. Fade out all the crap – do something else instead – learn a new language or pick up a hobby. Limit yourself to posting your favorite charts here – make sure that your mom can understand them – because if she can’t then they are useless.

Alright – I have a few things worth looking at ahead of Monday – so, let’s take a look:

The Dollar has been kicked in the groin with Ben’s iron plated Doc Martens. During my absence the DXY dropped through a three year support line, despite heavily oversold conditions. Which is something I pointed out weeks ago in case you remember – extreme conditions in (manipulated) currencies and commodities can prevail for extended time periods.

It bounced back on Friday and the question now looms whether or not this was fake breach will hold or a real one which would imply that the current bounce is a last kiss goodbye ahead of a major drop. In my mind the 74.95 mark (i.e. 100% of wave A) will be key in painting a floor here. If we drop below that then 74.16 must not give – if it does you can kiss the Dollar goodbye and you better start swapping your saving account for Renmimbis.

On the long side I think that we need to see a bottoming pattern first before we may see a push to the upside. Again, something I have talked about for weeks now. A single green candle to the upside only serves to feed the shorts and unless a level can be held for a week or more a floor is not in place. I am fairly sure the sellers will soon stream in again and as long as the longs are unable to make a stand it’ll just get uglier and uglier for ole’ bucky.

What has happened on the Dollar side has of course benefited commodities. Crude oil has enjoyed a nice upward channel for over a year now and unless the Dollar finds strength we may be heading toward triple digits again. Now, I do see a bit of a divergence here and we may see a little drop but if we do the 75 mark should provide quite a bit of support.

Sugar continues to burn the shorts – you may remember my post on that a few weeks back. The stochastic has now painted a bounce level around the 65% mark which should be a good buying opportunity – until of course it doesn’t. Calling tops/bottoms in sugar is near impossible but as long as the Dollar is unable to paint a floor I expect this situation to prevail.

Copper has and continues to call the shots – a very easy chart, don’t you think? And unless we see a clear divergence I think the bullish party in equities will continue. It’s all about the Dollar after all. As a side note – I think that Yelnick may be rightly concerned about the risk of margin compression: the inputs rise, but prices of end products remain about the same, squeezing margins. A scary outlook indeed.

Just look at the gold/silver ratio which, like the Dollar, has pushed below a three year support line. The difference here is that it didn’t bounce back and if we push below 51 we may go all the way to 48. I find it almost mind boggling that we dropped from 68 to 52 less than one quarter – that’s a 25% change!

A lower gold/silver ratio means that either gold is getting cheaper versus silver or that silver is gaining on gold (since you are getting less gold for the same amount of silver). A current ratio means that 52 ounces of silver buy you one ounce of gold. Or in other words – the lower the gold/silver ratio drops the more silver is catching up with gold, i.e. a gold/silver ratio of 1 would mean that silver is worth the same as gold.

Traditionally a high silver price reflects strengthening economic conditions but I think that the recent surge has more to do with speculation and a destruction of the Dollar than a boost in the U.S. economy. If you disagree please post your evidence in the comment section and I will consider it.

The chart that rules them all – they daily Zero. It did paint a little drop in mid October but that one was corrected fairly quickly. And it clearly shows that the momentum is fully with the bulls – all I see on the raw panel (on the bottom) are spikes to the upside. Only a clear bearish divergence would led me to believe a meaningful correction is looming – but thus far I just don’t see that. And if we do see some downside look out for an accompanying bearish signal – if there is none then it probably means that any dips should be bought.

Bottom Line:

And that’s all I have for now – as long as the Dollar dies equities will either thrive or hold, and so will commodities. And that’s really all you need to know. Yes, equities are probably due for a correction – but when it happens I don’t think we’ll see very much downside unless we see the Dollar pushing hard and unmistakeably to the upside at the same time. We are now fast approaching the seasonal Santa Rally time cycle and although miracles do happen the next best opportunity for the bears on my calendar is in early January.

Until then the path of least resistance continues to the upside. With that said – I wouldn’t want to be long here – although I know that this trend has the means to prevail I don’t see a clear edge on being long here. Best to stay aside and to wait for a juicy selling opportunity. That doesn’t mean however you can’t devote a small portion of your assets to selected long positions – I’d love see more long symbols in the comment section. Any takers?

Cheers,

Mole


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.
  • http://oahutrading.blogspot.com/ steveo77

    The games are incredible.

    Misinformation has always been a problem, but now the “numeratti” has more information sources easily aggregated online in order to fine tune the effectiveness of various “misinformation campaigns”.

    With the media primarily controlled by large conglomerates / financial companies, and the financial companies largely controlled by the gov (dependent on handouts, and lack of prosecution), well….the games get more intense. With the Economic Hit Men having turned their sights on the motherload….the United States, we are in for interesting times.

    Here are some of my favorite charts.

    http://oahutrading.blogspot.com/

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

    Boy boy boy – quiet in here – did everyone give up on me? 😉

  • nugie

    Thanks for the comments they are interesting. What I really want to know is what in the heck happened to the Zero chart on Friday as it went down and not a word from old mole about it. It would be appreciated if you could keep it up for a full month or at least answer an e-mail when it goes down so we know if it is our problem or yours.
    Thanks

  • yudhisthira

    Been absent tonight watching Avatar on HBO.
    Mole's commentary this Fall prepared me for the current market setup.

    For the new economy, “Want to Earn $10-12 an Hour? Be a ‘Foreclosure Department Supervisor’ “
    http://tinyurl.com/2elwben

  • jacksoo

    Hey Mole – -sorry I didn't comment on posts earlier. Been off line since late Friday – spent weekend at Moab ans state parks in Utah — the most spectacular place I have ever been. The Nat Parks down these just blow you away – – if you only visit one place before you die it hase to be these parks – -just breath taking.

  • ds2

    Of course not Mole. Everyone is just not expecting you to be updating yet. Plus the whole time change is messing w/ our realities. Thanks for the post and welcome home.

  • http://evilspeculator.com molecool

    Old Mole was traveling – on the upside it worked fine the rest of the time I was gone.

  • http://evilspeculator.com molecool

    That's great – hope you took pictures!

  • convictscott

    Relax mate – at 50 bux a month its unreasonable to expect him to not take holidays or employ staff in his absence.

    I'm pretty sure I get my 50 bux worth, every month.

  • http://evilspeculator.com molecool

    Actually I did have someone watch over it but some strange login cross-over occurred. Always expect the unexpected… as much as you try something invariably gets messed up the second you take a few days off – Murphy's Law.

  • Wave_Surfer

    Maybe we are following your advice to read less, write less, and bank more. :)

  • http://evilspeculator.com molecool

    Yeah – as if…

  • http://www.hervey-bay-holiday.com kea11

    Sentix Investor confidence soaring. http://goo.gl/0YU0q

  • jacksoo

    By the dozen mate but because it was an unplanned trip – just took off on

    Sat morning – -my camera battery ran out – -ended up buying 1/2 dozen

    'throw-aways' — ironic that I got chatting with a German guy 2000 ft above

    the Colorado – -he told me Monument and Bryce Canyon were even better – —

    I'll be off next week. Re Australia – if I can help let me know.

  • jacksoo

    Just read your commentary Mole – – spot-on. Over the last few weeks I've spent more and more time ploughing through information – -and you know what they say, search long enough you'll find what you want! Have to be veery careful not to over-complicate by way over information over-load I think.

  • 99er
  • Brishort

    Good day

    Today is the last POMO day of the previous regular schedule published.

    The three clues I am still watching for a top:

    i) $$ action. Looks ripe of a retest of the recent lows on EW squiggle but current premiss is that any previous low should hold.

    ii) I am expecting the raping of the VIX to continue on this POMO day, as it has occurred on every single PMO day. But tomorrow is another story. Not knowing how to factor-in the new play money of Benny and the gang, I am open to any intelligence on the subject.

    iii) To me we are in the 5th of something on the SPX. I am therefore… yes… looking for any clue on a top. (Please don't comment on trading a top, which is not what I am saying here. I am doing top picking on technical indicators, not trading.)

    Happy trading to all!

  • Schwerepunkt

    Beaucoup indecision at the present. I see some churn here in the 1215-1225 range. Problem is, since September, the indecision and churn was only the digestion process and then the market started stuffing its face again and we repeatedly moved higher. However, My 720-tick ES chart has a CCI crossover (in the yellow box) to the downside, which I find significant.

    http://www.screencast.com/users/Schwerepunkt/folders/Jing/media/34251441-88b2-4904-8536-35708f83f08b

  • Brishort

    Maybe I should add on the $VIX: the raping can continue up to 17.5 without touching it and still remain in a P&F double bottom configuration. A tick below 17.5 will be another story however.

    http://stockcharts.com/def/servlet/SC.pnf?c=$VIX,PLTBDANRBOPA!E20,2.618!B13DF1!3!!!2!20][J210493508,Y]&listNum=8

    So there you have it.

    Current trading game plan:

    1) Suspect POMO will still work today.

    2) Look at VIX NOT touching below 17.5

    3) Look in parallel for the $$ not making new lows and painting some sort of higher low

  • Brishort

    One last thing:

    SPX 61.8% retracement from 1576.09 top of October 2007

    to the bottom of March 2009 @ 666.79

    is: 1228.74

    Furthermore, everybody can say that this is a “seasonally” strong period, point to the matter is that at major tops such as in 2007, it wasn't.

  • http://chartsandthat.blogspot.com/ ultra
  • BobbyLow

    Man it's quiet here today. I understand it though. I don't know what there is to say that hasn't already been said.

    However, as I'm watching Silver go parabolic, and as a coulda, woulda, shoulda, I wish I had me some of that.

    I'm not complaining though as I'm still net Long S&P via Short SH, Long QQQQ via Short PSQ, and Long XLE. I'm still short TLT and all 4 positions have protection so I can sleep at night.

    E-Mini's have been in a tight range since the Open and are now above VWAP so what else is new?

  • EvilTrader
  • jacksoo

    every site is quiet BL – -given everyone is talking about the new bull mkt its all pretty subdued. I have to admit I don't get how they can be talking this thing up when commods are stressing costs, public still struggling – oh, I KNOW, KEEP REDUCING EXPECTATIONS UNTIL WE GET BEATS!!!!!!

  • jacksoo

    here we go – another example ” McDonald’s Corp., the world’s largest restaurant chain, said comparable-store sales climbed 6.5 percent last month from a year earlier, as it lured more U.S. customers with items such as frappes and a Monopoly promotion.” YOU DON'T THINK MAYBE PEOPLE ARE EATING MORE JUNK FOOD BECAUSE ITS DIRT CHEAP WAY TO FEED A FAMILY?

  • Bob the Horse

    The reason everything is so quite is because the Fed are openly stating they are manipulating the market. Bears have to exit. Sensible bulls similarly.

  • jacksoo

    you might be right BTH – -perhaps they killed the mkt after many attempts – – -how r u standing now – -?

  • http://www.mylifemytrade.com MyLifeMyTrade

    COMPQ chart says it needs to gap down nicely tomorrow.

    RAX reports tonight. COMPQ chart tells me RAX earnings will be sold very hard. We need to wait till EOD for confirmation.

  • Bob the Horse

    Well, I am a bit more neutral now. Am actually small long but that is not really accurate as I am basically short financials against various longs. So overall, I expect to trade as though small short. But it did not play out as I expected so I neutralised the position.

  • jacksoo

    for sure- – trying to capture what i learnt/what went wrong Sept onward and thinking short was way to go. I was clearly missing the message.

  • BobbyLow

    I agree Jacksoo. It seems like the Fed and the Market who now seem to be one and the same want to have it both ways. This should not end well at all. However, for me, it was either give up trying to predict when this bullshit rally ends or completely decimate my trading account.

    Also watching AAPL bounce around it's all time high at $320. If we go sideways from here on the Indices for a bit and burn off some of the OB it could be another launching point. But WDIK? I don't know shit anymore so I'll try to stick with the tape and take it one day at a time. :)

  • jacksoo

    yeah – you're right of course, not a mkt to think about just go long with stops.

  • Bob the Horse

    Well it won't end well. It is akin to the Fed trying to pass a law saying everyone should be rich. Waste of time. But they can do a lot of damage in the meantime

  • http://evilspeculator.com molecool

    Very nice way of putting it, mate…

  • 99er
  • Brishort

    Comments not needed. Leon Tuey most recent bullish newsletter extract…as giddy as it gets:

    “No question about it. This is one powerful bull market! Short-term corrections notwithstanding, this bull market has some time to go in terms of time and distance. From its March, 2009 low to last week's close, the S&P 500 Index has gained nearly 84%. Despite the spectacular gains already achieved, the best is yet to come. Hence, those who are still sitting on mountains of cash should deploy cash and partake in the party which is just getting rolling. Short-term corrections are not to be feared, but should be viewed as a buying opportunity. Cash is trash.”

  • Schwerepunkt

    12-pt range on ES since 2pm LAST THURSDAY! Sheesh. Nyquil market.

  • http://evilspeculator.com molecool

    What happened – everyone flew to Asia today? 😉

  • http://www.mylifemytrade.com MyLifeMyTrade

    Sodastream went IPO – this is really getting out of hand… They raised $100 MM.. Another vonage in the making. This sucker will be a penny stock in 2 years IMO.

  • Brishort

    I have to say that if everything is centrally planned now and that this is no longer a free market, what gives to try and comment on it. I am surprised to see the low level of comments compared to last week, but the market is just not happening. This is whipsaw crazyness of going nowhere in a thight range.

    No trend, no comments I guess. Even the zero is troubling by its flat nature. Who will be left to trade in 6 months, I don't know…even currencies did nothing today. And this is supposed to be a great bull market? With absolutely no participation? C'mon….

  • convictscott

    Good morning :) To me it seems obvious we will now have dip buying bulls, so the easiest way to pick a top (short term or long term, now or in months time) is to wait for a massive down day on increased volume, then see if dip buying pressure cannot push it up to new highs. That would be the *only* thing which would convince me that a top was in place.

    You are right, the price action, viewed as a totality, has the character of a mania

  • http://www.mylifemytrade.com MyLifeMyTrade

    IMO sign of a top is a lower low on hourly or 30m chart. That dip too will be bought. However, EOD on that day should be shortable IMO.

    For a bigger top that leads to a decline lasting several weeks to couple of months, you are right.. we need to look for what I call a separation gap down.

  • http://evilspeculator.com molecool

    I feel your pain and the way it's going I don't know if there's a future for financial blogging. Guess I'll have to do some soul searching and see how it goes early next year.

  • gsavli

    stupid market had all + one reason to sell off today. except for being a POMO day, of course. which indicator won? yes, the POMO day indicator.

  • Brishort

    Well, there is a future is automated trading. I am up to my knees in testing Tradency to understand such set-up and, to further enchance, I have joined with a programmer friend to develop my technical knowledge into robot trading. Does not need to be fancy or complex, but there is a clear market there. Properly optimized ichimoku, MA & SARs KAGI & RENKO on various timeframes can do in a simple manner wonders, without the need to scalp. It can even prosper in flat markets. Maybe that is the future, at least I have decided that it is mine and where I want to invest.

    My trading losses of September have actually been the best thing that happened to me, since I have nearly re-invented fully my market approach while being nearly position flat since then, except for a few round-trips.

    This is how I am myself adapting. This bitch of a market may take me down for a while since I need time to re-adapt, but it won't take me out! Make no mistakes, I am clearly adapting and getting ready for trending markets, non trending markets, bull or bear or even centrally planned markets :-)

  • ds2

    So here's the next thing to get your head around – If the dollar stays above the resistance line in Mole's chart, can it and the markets go up together in this environment? Thoughts?

  • http://www.mylifemytrade.com MyLifeMyTrade

    Expecting gap down which should be bought more aggressively than today and lead to new highs tomorrow. I expect nasdaq to lag tomorrow

  • convictscott

    Without a doubt yes. If the dollar tanks from here, the odds are high that stocks will go up in a substantial move. Whether that has the character of a wave 3 with broad participation, or a wave 5 blow off… time will tell.

    If the dollar holds its trendline, it opens up a number of different possibilities for equities, but the big question is whether equities can continue rising without dollar devaluation assistance. I dont think anybody knows that at this point. Certainly, the price action in equities has been undeniably, unequivocally bullish. The failure to pull back in extremely overbought conditions is a positive for equities which will not have escaped sideline bulls.

  • DudePlunger

    Statistically, how often do back to back gaps happen?

  • DudePlunger

    Sounds like an RTV sell on the daily with the filter of a powerful trend day lower :D.

  • http://evilspeculator.com molecool

    Everyone is expecting an immediate ramp in the Dollar. Maybe – but maybe it'll just zigzag around over the next two months until oversold conditions have been burned off a bit.

    What I do know is that retail traders are pretty much gone – just look at the comment section here (and other places) – it's dead. Whoever runs this tape has an agenda and it does not include a ramping Dollar or lower equities. So, we have to continue trading what we see – not what we want to see.

    Quite frankly – I don't care about 'final justice' – I just care about banking coin. This country is screwed one way or the other. Let's at least stay on the right side of the tape – waiting for Godot is not a trading strategy.

  • http://evilspeculator.com molecool

    Statistics have not mattered much in the past few months 😉

  • http://www.mylifemytrade.com MyLifeMyTrade

    I am very weak when it comes to statistics. All I know is mean and median – that's all. Please don't ask me any statistics related questions.

  • DudePlunger

    Statistically, thats when they should start mattering again :D.

  • http://www.mylifemytrade.com MyLifeMyTrade

    Bottom fell out of Euro and to some extent ES also – whats going on?

  • red_clay

    Mole,

    Really liked your post / market overview and I also believe strongly in the “less is more” approach. Larry Walker, who won batting titles with Colorado emerged from serious slumps early in his career based on advice from a batting coach in the minors who told him to clear his mind and “See the ball – Hit the Ball.”

    On another note, has the next POMO schedule been published yet?

  • convictscott

    Back to back gaps up… as in one continuation and one fail? Or breakaway gap with a further gap up?

    To me its important to see what the gap represents. A gap up is caused by MOO (market on open) orders, or a ramp in the globex session futures, or some news event outside of hours creating extreme emotion which can be faded. What it means is that a number of people who were planning to buy do so at the same time, temporarily and artificially driving the price up. This in part explains the historical tendency of gaps to fill (gaps up to 40% of the previous days range have approx 80% chance of filling). Also, gaps on charts have a weird, undeniable, but hard to explain tendency to act as magnets, attracting and then repelling price from great distance.

    Once the gap fill is out of the way the market can then either resume its march upwards, or the gapping action *may* have exhausted buying pressure, causing a situation where all the bulls sitting on the sidelines may have been panicked into buying, exhausting buying pressure, and leaving an opportunity for bears to wrest control.

  • convictscott

    Mole, I couldnt agree more. Trading for the long term fall dealt me a savage blow. Im fucking done with that. To me, the market is now acting in a way I can understand, explain and trade, even if I dont like it one little bit.

    I couldnt make any money on the tape last month.

    This month I'm ready to bank some serious coin.

  • convictscott

    Great to hear :-) My last serious drawdown caused a method rethink which revolutionised my trading results. Losses make me hungry, wins make me complacent.

  • convictscott

    :) I'm indeed looking for an rtv sell, but a convincing one, not a “technically it fits the rules” Its bad practice to modify setups, but the evidence here is we have a heap of failed short setups, and a heap of working long setups. Until that changes, shorts are off the table for me. I'll miss the first working short trade to avoid the risk.

  • chronographics

    Well it may be a strategy but just not a tactic for making money on a regular basis.
    Hopefully Seoul was good for your soul, Mole.
    I don't see that anything has changed regarding the market well as far as FX goes, sure there are less players than years ago n speed of execution is quicker, but you still got to pick the direction and your levels. I try not to understand why it does what it does from a fundamental viewpoint it just hurts my head.

  • http://evilspeculator.com molecool

    Seoul was very good for my soul, so much so that I question living in the United States. Which may be a curse, because learning Korean ain't no joke…

  • Bob the Horse

    1216.50 – not exactly a crash! But that is how we are now conditioned. Even a 3 point drop creates a 'what's happening' moment – did Bernanke sign this off? Or did he say it could fall 10 points? It would be easier if they just posted target levels.

    The Euro is beginning (tread cautiously here) to reflect the structural weakness again. Irish 10yr is now 7.86%, Portugal 6.78%, Greece 11.41%. Spain is moving out as well – now at 4.40%. Spain is not a crisis yet but it needs watching as it is not too big to fail, it is too big to save. The recent chatter from Germany is that private bondholders are going to have to take a hit on any restructuring. What a strange world it is that that can be considered a controversial statement.

    The thing is – I am not convinced that the S&P will go down very much if you get a sovereign default. European markets will for sure but the reality is when you get different monetary policy regimes, markets can diverge a lot. The US is in a reflation mode whether you like it or not. Europe is not.

    Watch the SX7E Index – that is the only thing that can take markets down. It may go down on it's own but without that cracking, the S&P is not going to fall. It's that simple.

  • Bob the Horse

    I saw a TV program where people took some white wine, ran it through a sodastream and put it in a taste test vs. various champagnes. No one spotted the difference.

  • chronographics

    Well i struggle with English or Kiwi and my German is grammatically not too flash. But I have to admire anyone who gives some of the asian languages a go, they are very difficult and require a huge amount of practice – of course those of my friends who have learnt well have all had asian girlfriends… maybe some food for thought for you Mole :-)

  • chronographics

    hmm were they regular bubbles drinkers would be my question. Maybe Heli Ben did the research on that :-)

  • http://evilspeculator.com molecool

    It is an intriguing thought :-)

  • http://wealthadviseruk.blogspot.com/ Gary_UK

    Don't panic, the boys have rectified that small glitch.

  • http://thefxspeculator.blogspot.com Onorio

    Like to title of this post im gonna be simple…

    USDJPY has broke bellow the triangle base that has been forming some days, also broke bellow the 4H kumo.

    I went short at the kumo breakout arround 80.80, looking for 79.75 all time low

  • Anonymous

    But you didn’t get what you always got!

    How about “If you always do what you’ve always done, you might get screwed when the market context changes”?

  • Eva S

    What makes you think there will be a gap down on the open?

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

    here's a chart I posted a while ago…could be we bounce at the previous low…
    http://www.screencast.com/t/ZDRjYzY5ZTMt

    here's current http://www.screencast.com/t/dDhMZ3KH

  • 99er
  • jacksoo
  • gsavli

    what's going on here. no comments? everyone just watching? anyone going long here at this point?

  • Brishort

    Good day,

    I do not usually post news, but this one is worthy. Everybody seems to discount Chinese rating agencies, but the country remains a significant investor in US treasuries….

    “Chinese rating agency Dagong Global Credit downgrades US credit rating due to QE program- Chinese press

    – Cut long term US sovereign rating one notch to A+ from AA, with a negative outlook.

    – “The serious defects in the U.S. economy will lead to long-term recession and

    fundamentally lower the national solvency. The credit crisis is far from over

    in the United States and the U.S. economy will be in a long-term recession.”

    Weaker dollar will hurt US ability to attract dollar capital reflow. “In

    essence, the U.S. government's move to devalue the dollar indicates its

    solvency is on the brink of collapse”

    RECALL: Dagong cut US Sovereign Rating from AAA in July 2010.

  • 99er
  • http://iberianviews.blogspot.com/ catracho

    not a lot to say!

    watching…

    no…..

  • 99er

    Nice!

  • BobbyLow

    Good morning folks.

    This run kind of reminds me of the Dot Com Run of 2000 – 2001. You didn't have to know anything back then to make money. As a relative nubie, it was easy to bank all kinds of coin. All I had to do was buy Tech and (“BAM”!) it was instant success.

    Another thing back then was that I didn't have to look very far to find people who I could plug into mentally that would reinforce my positions. I was a Tech Bull and nothing was going to stop me.

    Well as history shows, that Bubble got blown to hell and I looked for and received enough positive reinforcement to return almost 1/2 of my considerable tech gains back to Mr. Market. Unfortunately for me back then and throughout the years following was that I didn't realize was that all I was doing was only searching for things that would reaffirm my position while disregarding everything that was out there disputing my position.

    A few months ago, I remember when Mole gave me my first wake up call after a day of my bitching and complaining about how the market was all wrong. He kind of slapped me upside the head verbally and after seething for a couple of hours, I had to admit to myself that he was right and I actually thanked him for the verbal slap.

    And then Convict Scott came along and delved into the psychological aspect of trading and I realized that throughout the years almost every conceivable psychological aspect of trading I was doing wrong. There is now no doubt whatsoever that I was on my way to trading account bankruptcy.

    I don't know how this will all turn out in the end. But by eliminating influential bias and establishing a set of my own rules which help to eliminate emotional decisions, I do feel more confident in my trading regardless of how irrational the market might appear.

    I suppose out of desperation I had to realize that “If you always do what you’ve always done, you’ll always get what you’ve always got.” (unattributed) :)

  • BobbyLow

    I'm currently Short TLT and it has been making new 3 Month Lows Today. So something is happening in this area.

  • AlohaBear

    If looking for a good RailRoad CNI just got upgraded by UBS inexpensive compred to the rest great strengths soled outlook..

  • 99er
  • Brishort

    Hey 99er

    This must be the first time I reply to you.

    Thanks for being so regular at posting your charts. I always look at them!

    Nice one here indeed.

    Just got short with a tight stop as well on es.

    What the hell… Cobra had an interesting piece on # of days without a 2.5% retracement last night as well.

    Good luck in your trading!

    Brishort

  • ds2

    Next schedule comes out at 2pm on 11/10
    Everyone should bookmark this.

    http://www.newyorkfed.org/markets/tot_operation_schedule.html

  • Hungry_Joe

    Silver up around 5.8% while Gold up 1%. I wonder what havoc it plays with RBW's charts.

  • BobbyLow

    TLT currently riding 96 Handle last ridden in June.

  • ds2

    TLT just broke bellow the 200

  • BobbyLow

    Yes it's been a good short so far.

  • skynard

    Financials rolling over watching XLF, let's see if the 50 ema is lost on the 30 min (15.26)

  • BobbyLow

    Looks like someone put a Kill Shot into Silver and Gold.

  • Wave_Surfer

    After Russell has spent 3 days outside the daily BB, has broken decisively back inside the BB. It would only need to drop another percent or so to be able to get close to kissing the mid line by tomorrow. It might be a bit much to ask Russell to do that today, since it would need to drop 4% from today's highs.

    Note to RBW: It does look like the spike outside of the BB ended up acting more like the VIX rule after all. Still having an index spend 2 days sitting Completely outside of the BB is highly unusual.

  • Fearless

    Was it a good decision to hold on to my DD short? Time will tell.

    You probably all remember that I shorted DD at $47.92 on Thursday, only to get screwed over because my broker's web system crashed. I had to call them to grab emergency call options at premium. Friday's action indicated to me that DD's break above its long term resistance trendline was not validated. I held my protected short.

    Fast forward to today, DD is slowly trading below its long term resistance line, with no positive divergence in sight on the daily time frame. I think I may be okay.

  • http://chartsandthat.blogspot.com/ ultra

    GLD – possible more downside here – let's see what bounce develops

    http://bit.ly/c72ZiJ

  • EvilTrader

    I have to say im celebrating a little today, but will this dip be bought ?

    thats the question.

  • http://chartsandthat.blogspot.com/ ultra

    Silver just retraced a perfect 61.8% of the last 32 hours' move in a single hour.

  • http://chartsandthat.blogspot.com/ ultra

    USDJPY is looking more and more like a reversal, no?

    http://stockcharts.com/h-sc/ui?s=FXY:UUP&p=D&b=5&g=0&id=p01035364402&a=213659615

  • red_clay

    Aside from currencies, seeing bona fide exhaustion reversals in major cyclical stocks – reminiscent of late April. Look, I have been going with flow on long side for over a month, but this appears to be a sea change.

  • BobbyLow

    Fearless, I'm glad to see you have protective calls against that short position. This way you are protected against a parabolic move upward and that's good.

    BTW, I didn't realize this until after I had already done a few of these but there is an actual term for what we are doing and that is when you are Short Stock and Long ATM Calls it is called a Synthetic Long Put. When you are Long Stock and Long ATM Puts it is called a Synthetic Long Call.

    What I like about these is that there is unlimited upside while limiting downside therefore allowing me to sleep well at night. Of course the cost of these Options can cut into potential profits but the options can also turn around and work for you if you are stopped out of the initial trade especially if you are stopped out early.

    Anyhow, good luck with your trade.

  • red_clay

    Thanks, really appreciated.

  • amokta

    Pity i went long silver (small position) – i wonder if this parabolic move has more upside (if silver hit $50) in the 1980s, then surely it could go higher??

  • convictscott

    A weird thing happened last night my time. I got a call from an old friend with money who has never traded before. He wanted to talk to me about silver, excited as hell about it, wanted to know the best way to buy it, silver stocks or silver futures, or physical…

    If thats not a contrary indicator, I dont know what is 😉

  • EvilTrader

    LoL.

    When janitors and taxi-drivers talk about stock market, u bet its time to getout.

  • ds2

    Anyone trade nat gas? UNG etc looked to have bottomed.

  • http://chartsandthat.blogspot.com/ ultra

    Still looking at USDJPY… this is a bit rough and ready, but I found it interesting so thought I'd share…

    http://bit.ly/bjHDlE

  • http://evilspeculator.com molecool

    The original quote goes with shoeshine boys, but yes!

  • 99er
  • amokta

    This was mentiioned elsewhere too, that it had been one commodity that had yet to go upward. However, there is something about UNG that it does not accurately correlate with what its supposed to be tracking?

  • Eva S

    A similar thing happened to me Friday. I recommended NG (gold miner) to a friend in August when it traded below $7. I also bought it myself. I sold it about a week ago. That friend asked me Fri if she can still buy it now. She said she didn't buy it in August. So she wants to buy it after it went up over 100% in 2 months. When I saw today's volume I bought puts on NG and some other miners.

  • Eva S

    Are you back from your fabulous vacation or are you posting from the beach?

  • convictscott

    RBW and I did some work on the combined Open Interest across all the Silver futures contracts added together. As at last week it was still rising, indicating a strong possibility that as of last week, the move probably has more to go.

    Whether or not it stalls here in the short term, as Silver makes the end of its run open interest should decline overall, indicating that long term bulls are cashing in their positions and not rolling them over as a new month futures contract comes available.

    Another way to put this is the age old concept of *distribution*, at the end of a run the smart money gives their positions to the stupid money. IMO technical analysis is of limited use in a mania, because its an unusual set of factors that are driving the parabolic rise. Nobody in their right mind would short silver right now, so its a case of strength begets strength. Parabolic moves are by definition unsustainable, because the temptation to take profits is so great, and at the slightest weakness everyone runs for the exits.

    In technical terms, I see it as a 3rd consecutive close outside the bollinger band, prime for a little mean reversion back inside caused by greedy bulls taking profits.

    Personally if I had a lot of profit in the move I wouldnt be shaken out by this.. if there wasnt much profit in it yet Id probably jump out now, and be prepared to get long again on break of a high of any future hammer candle.

    If it was a long term position my stop would be at 23930 on SIZ0

    Amokta, what do your RULES tell you to do ?

  • ds2

    The next set of POMOs will be announced tomorrow and then we can resume the ramp.

  • convictscott

    I have a buy signal on the weekly charts on break of the weekly high. The pattern on my work is a retest variation buy.

    NG is a heartbreaker, I've been stopped out many times trying to pick a bottom, which never seems to come.

  • convictscott

    I like the way you think :)

  • http://chartsandthat.blogspot.com/ ultra

    Bullish divergence zero 5 min…

  • ds2

    I hear the gas report comes out tomorrow which should factor into the price.

  • Eva S

    This was a no-brainer. Many of the miners gapped up in the overbought area on huge volume. They were begging to be shorted. :-)

  • Schwerepunkt

    False signal? We've dropped quite a bit more since you posted this.

  • 99er
  • http://chartsandthat.blogspot.com/ ultra

    Yeah was about to say – not any more!

  • red_clay

    Even silver is acting mortal here

  • http://chartsandthat.blogspot.com/ ultra
  • Eva S

    LOL!

  • http://chartsandthat.blogspot.com/ ultra

    Is that all down to your and Scott's mates??

  • amokta

    Thanks Convictt. I have no rules on this one to be honest. My rule was to wait for a pull back,but i bought an opening scale-in a bit early.

  • Eva S

    Silver and miners were nuts the past few days, so they deserved a day like today.

    But the overall market doesn't look so bad. It will be interesting to see what happens tomorrow. This may be a bigger pullback.

  • Seahawk87

    The 2 week trip to Korea, working on some “tech” project, taking time off from the blog, posting about dreading to return to the U.S. and specifically L.A., talk about learning Korean, and now an “unexplained” missile launch off the coast of L.A. Too many co-incidents, if you ask me.

    If only the US DOD had the satellites turned on when the missile was launched, I am sure a close up view of the side of the missile would have had E.V.I.L. imprinted on it. Ok, you are onto something big. Mole Nation? Testing the defenses around the evil lair? Us loyal rats are dying to know what is going on.

  • Fearless

    BobbyLow, I knew there must have been a term for what we were doing. Glad you found them. Yeah, when I want to buy puts, I actually short the stock and buy ATM calls; whereas when I want to buy calls, I go long stocks and buy ATM puts. I turn calls into puts and puts into calls.

    The choice is mine: if I want to hold onto my short I sell the ATM calls for profit to effectively raise my short price. Or I could get stopped out at the validated resistance break and cover my short at back test, then ride the calls to the upside. I have done this for over a year. Last October, I shorted AXP at $35.50 and never covered. Look at the stock price in April 2010. Had I not done the synthetic long puts, I would have lost so much that it's not even funny. Of course that drop in the summer never made it to my short sale price, but I still covered at $37.50 to book a loss of $2 per share but an enormous profit of $11.5 per share (from $49 to $37.5) this summer after equalizing the rise with calls that I kept rolling forward.

    At this moment, I think we're headed for a short but fast correction. I will re-evaluate then. I may or may not buy into Tech stocks for one last ride Y2K style.

  • amokta

    Last day in Cyprus, hotel has free lobby wifi & free internet in room

    Nice Island, probably best to rent a car to see all the places – all within 100km

    Pity the bottom is falling out of the market, as soon as i am becoming confident about being long!

  • red_clay

    Wild! On that note, have you been watching AGQ – it defines parabolic.

    Overall, some big buying with volume on dip EOD, but still has look of at least short-term peak day. Took 1st short side scalp today in quite a while – bullish sentiment also over the top here for what it's worth.

  • convictscott

    Mate, its useful to use stuff like this as an opportunity for learning. Win or lose, this trade is now officially an error for you. In fact, probably the worst outcome right now is for you to make money on it, just ask all the traders who learnt shit habits in the dot com bubble.

    When you enter an unplanned trade, not part of your ruleset, your motives are almost by definition suspect. If it were me, I would get out now, win lose or draw, and wait for an opportunity to reenter that fits some predefined ruleset of yours.

    I would also caution that the scale in approach should only be used as scale in if its working, it should never be used to scale into a losing position.

  • Eva S

    Sounds great! I'm jealous!!

    I'm not sure about the bottom falling out…. This may just be a small pullback. We need a pullback at some point!

  • 99er
  • Eva S

    I think this is *it* for AGQ and the miners for a while. These were momentum plays and once you reverse like we did today, the momentum is broken. This is the laws of physics and not only the stock market!

  • red_clay

    Agree, although may not go straight down and may challenge highs again first. By the way, after all of the carnage to the shorts, how many shorts do you think are left to cushion the fall?

  • Eva S

    That's why these stocks can drop pretty fast. I'm starting to go short. After a correction, silver and miners should be very attractive again.

  • convictscott

    Amotka, NG has been going down for several years. There are therefore accumulated short positions which will have to be unwound causing a parabolic rise at some point. Bottom picking is difficult, and NG is the hardest bottom pick of all

  • http://evilspeculator.com molecool

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  • http://evilspeculator.com molecool

    Parabolic is the wrong term – exponential. Unless of course you show me a chart that eventually turns backward and goes back in time 😉

  • http://www.mylifemytrade.com MyLifeMyTrade

    yesterday when silver was 27 and gold was 1398, I posted on Gary Savage's blog to wait till sub-1315 to buy. I was made fun of…. everyone laughed at me and what not… They even posted a video of dancing dog saying “mlmt is an attention seeking pooch”.

    It was good to poke some fun at people there. If you are gonna trade gold and/or silver, read the comment section on his blog – it will give you a good idea of whats going on.

    Today, at EOD they are a little shaken, but believe that this is just a normal correction. Some bought at EOD.. I dont know of a single soul there who sold their position today – not at the top, not even as we started correcting. So, I know that we will not bounce here.. We have more to go on the downside before we bounce.

  • Eva S

    What? (saying in Don Draper style)

    I think the problem is that you give all these wild predictions, usually without explanation, and most of them do not materialize. There was no indication yesterday that silver or gold will start a correction today.

    For today's market, you predicted a gap down at the open with a higher close. What actually happened was the opposite.