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The Four Horsemen
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The Four Horsemen

by The MoleAugust 6, 2010

As expected the last two days have been a flatline snooze fest in anticipation of tomorrow’s non-farm payroll numbers. As if the news ever mattered – but heck, let’s leave the financial p0rn to the drama queens. Here at Evil Speculator we neither engage in anticipation nor mental masturbation – instead we focus on proven charts which provide us with a clear edge in reading the market’s temperature.

Tonight you are scheduled for a visit by the Evil Lair’s Four Horsemen:

Let’s see what those scoundrels have in store for us:

The White Horse – not particularly evil but rather a representation of righteous bears on a course toward self destruction. This chart tells me that we are already in the late phase of the current swing up. Which is accompanied by rising prices but a falling NYMO:BPNYA ratio.

The Red Horse – representing the incessant war between bullish and bearish legions – the former greatly outnumbering the latter. Which is why we have to be better trained and a lot smarter – think Sparta and 300. This is Spartaaaaaa!!!!

Anyway, the NYMO:CPCE ratio (think medium term momentum divided by put/call ratio) is back to where we like it the most – meaning it’s overbought to the hilt. Does however not guarantee a drop right here – it’s often delayed – same old, same old. However, the shot out MACD gives me hope that we may actually turn and fall hard after we finish the obligatory circus clown parade leading us into 1160.

The Black Horse – representing famine. Thus far copper (traditionally an important representation of the health of the economy) is busting higher just like most commodities recently. Russia just announced that it will stop exporting wheat due to record drought conditions (and raging fires everwhere), which will probably create a lot of volatility in those futures pits. May be short term inflationary and push commodities higher – and stocks with it as the Dollar continues to be stomped on. Although – we are currently at 6% Dollar bulls, not sure how much lower we can go there. But it’s been a brutal summer for ole’ bucky and may continue for another week or two. Currencies and futures like to extend – remember how long it took for the Dollar to find a floor late last year.

The Pale Horse is the forth and final horseman – representing death. As in the death of Mole’s chart reading abilities. I can’t believe I have been so blind since I started looking at this chart. Fortunately tonight the scales fell off my eyes and I saw the light. No, I didn’t see the Holy Mary (I’m probably last on her list) but I finally saw what should have been staring me in the face. And you guys too – shame on you!

So, the big deal here is that the SPX:VIX ratio obviously is leading the trend. As long as it’s below the SPX the trend continues down. When it’s above the trend is up – that simple. Usually reversals end when both touch – now that is very interesting – wouldn’t you agree? Short/medium term this chart doesn’t have too much value but for long term trend traders this may just be what the doctor ordered.

I need to figure out how to create a MACD of an SPX MA and an SPX:VIX ratio MA and then paint that with a histogram. Reason being is that it seems to me that extremes in the distances appear to rise the odds of reversals. Any ideas on how to do that? I could probably hack it up in TOS or NinjaTrader but it would be nice to be able to do that in Stockcharts.

Of course the not so good news is that it’s above the SPX right now – and until we see a touch there I would venture to propose that we continue to the upside. The daily Zero also seems to agree right now, so despite tomorrow’s anticipated volatility explosion I still expect at least an attempt of a final run higher. Maybe once we see the blue and gold line converge it may be time to get re-positioned for some downside. Until then we continue to wait out the summer of pain.

Stay frosty!

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.
  • doublethink

    Chart: VIX
    Morning, hon. Coffee? Hey, was that you stepping out on the town with Paris last night?
    I wish! Unfortunately that's only mental masturbation.
    Oh sweetie, there's bound to be a reversal soon.

  • DarthTrader

    WE may have to wait until after Oct 8th to reach the top for 2nd half of the year

    Obama, Geithner, et al will be pushing stimulus into the market design get an immediate Bump

    For the Mid Term Election

  • http://evilspeculator.com molecool

    It never ends, does it…

  • convictscott

    Thats a nice chart 🙂 IMO being long vix at this point or in a few days is a trade so tempting and juicy that it makes my long term trades in equities a joke.

    Going to do some research on vix options now 🙂

  • sloth_bear

    Hi Mole,
    Thanks for the update,
    Very nice as always, you are one of those who makes me love my “job”, you put a lot of life in it.

    I just woke up from a short night, a cup of coffee in one hand and typing with the other, so take what I will say with a grain of salt:
    For your fourth horse, it sounds logical that when VIX is high, you will divide SPX by a high number so it will fall quickly, the opposite when it's low, so the real purpose of this chart is: when VIX is high it's bearish, when it's low, it's bullish, that's not something completely new…
    Also with the ratio shown, you would have missed the 5th wave of P1 or get caught long from jan-feb to mars 2009, and would have been faked out long on jun 2010 and short in jul 2010.
    It is still a good indicator to keep us in a trend, but I would not rely on this tool to spot reversals.

    Thanks.
    I finished my coffee, gonna do some horse riding!

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

    Woo. Nice observation on the SPX:VIX. Would suggest that some accompanying divergence would be good as well, which will probably amount to much the same thing.

  • fisheggs

    Inflation Vs Deflation – Good Interview with Mr Hendry.
    http://www.youtube.com/watch?v=cQjD2sw_eg4&feat

  • doublethink

    Chart: NQ
    Refill? OMG…look who just pulled up in her white Bentley!
    Sorry I'm late; traffic was horrible on Rodeo Drive and those fucking papparazzi! So did you have a good time last night?
    Well, I played with my crayons You know, the usual mental masturbation. But I may have stumbled on something useful: the Teepee Pattern.
    http://www.screencast.com/t/NDIwZDEw
    Should we make a video?

  • doublethink

    Thanks!

  • Bob the Horse

    Payrolls in 5 mins – should spice things up a bit

  • tradingmom

    Check out Bill Luby's Vix and More. There's been a bunch written recently (maybe there, maybe not) about high “retail” interest in Aug and Sept Vix calls and the general trend for “retail” to be wrong. I suspect that Vix calls are somethere where you would need an absolute explosion in volatility in order for it to pay off. Any reasons why you don't like VXX?

  • fuw

    It definitely did. Looks good so far.

  • SW6

    Anybody have real time ES. I have a rotten time lag.

  • Bob the Horse

    back of the net

  • randomtrader

    here is free real time http://www.eltee.de/futures.php

  • DarthTrader

    ES down 10.00 was down 12 + current 113.50

    Who is your broker?

  • SW6

    Thanks

  • fuw
  • fuw

    I just hope that there is some follow-through. At least under 1110 would be a good start.

  • Bob the Horse

    Dollar is getting killed. If this move is going to have some meat on it, I would look for the $ to reverse engines and start to rally, then we should get acceleration to the downside on equities.

  • SW6

    I don't have a computer platform. I wanted to wait awhile before calling.

  • SW6

    Great! Thanks

  • fuw

    I was thinking the same thing….
    This cannot go on if the bear case is going to work out.

  • DarthTrader

    Here is my Astrological rationale for this rally to extend into Oct . . .

    The chart ends in Late June so you can imagine the last months rally on it. That does detract from the clear point made in this chart.

    http://www.screencast.com/users/Innovisual/fold

  • Bob the Horse

    It needs to transition into a global growth panic and not just a US is weak wobble. German Bunds are now at 2.53% on the 10yr so there is every chance of that. We might need to wait for next week when QE2 is NOT announced.

  • Bob the Horse

    What about Cardinal Ejaculation?

  • Bob the Horse

    I have added some short GBP and short EUR positions alongside my short equities in my pa account. Fund is still very short equities and doing very nicely today thank you.

  • OldChicago

    gold is up, instead of dollars.High beta is not giving back as much as SPY. That's where the animal (spirits) resides.

    Higher Euro should hurt German's export. DAX and FTSE had quite a run, if not reaching a near term top.

    Further drop in premarket will hurt the bulls the climb back up. The headlines from major newsites are all printing bloody murder. Further stimulus is possible but will have more hurdle than the first one as the first one apparently didn't work. Congress is not in session, I thought. They extended benefit as a form of stimulus. I wouldn't know how they can pass additional stimulus.

  • Bob the Horse

    And let us not forget – katzo is bullish.

  • DarthTrader

    Cardinal Climax? Nah. Just breathing hard it appears. Until something truly earth shattering occurs . . .

    Looking at that chart it looks like we are setting up another Double Top just like 2007 set to peak after Oct 8th 2010
    Especially when I consider Where we are now and the Embattled White House with a Few maneuvers being discussed Like Forgiving massive amounts of Freddie Fannie Mortgages in some fashion. They could get this market up on Fumes with nothing but Wet Pasta for support.

    Of course all of this could be falling apart today but I will be watching this scenario as time goes by. If we make it thru August with ES over 1080 I will be leaning very heavily on this sceanrio

  • Tooncez

    I weave to swerve.
    One MACD of an SPX MA and an SPX:VIX ratio MA and then painted that with a histogram:
    http://screencast.com/t/ZDFkYWRj

  • bshah

    someone had hit the wrong button and so they realized it and now changing the course, but since it's a big market vessle, it takes a bit of time to turn it around… only 4 points.. give them few minutes, it will be in right direction..

  • Thespookyone

    I posted the cash target for this drop of 1115 last night here. We hit it. We go to 1152 cash from here-nothing has changed. The internal push North is done, but the momentum high will follow. It's like driving your car down the road at 70 mph-you take your foot off the gas, but still drift forward pretty fast for a while (cash 1152).

  • derekste

    mole… re: your 8/4 post… I, too, find Paris Hilton extremely attractive… must be something in the German bloodline

  • bshah

    hey.. how @ for those who missed the target, let's revisit 1100 and then take off in stealth plane…

  • Bob the Horse

    Prefer the George V myself.

  • bshah

    as i was saying y'day, wtf, unemployment rate is still 9.5, everything is priced in….. so what if the non-farm # is down more… who the fuck cares… they are all loosers (including my wife's hospital nurses, staff etc), they don't deserve to be employed.. don't earn much anyways… to contribute to the giant pockets of bastards… so fundamentals are still pointing to ISS ( space station )

  • Bob the Horse

    Relax – the mkt will go down when it is ready. Just be thankful you are being given a chance to get positioned.

  • amokta

    Why the fall today? (been out of office)

  • http://evilspeculator.com molecool

    Yeah – we like skinny blondes – it's in the blood.

  • sloth_bear

    EUR/USD took a rocket to Uranus…

  • http://evilspeculator.com molecool

    Ouch! Remind me not to piss you off – hehehe…

  • bshah

    bob… we have agreed that this mkt has been artificially manipulated and maintained at certain level not to create havoc in general public.. But come on, when the real life doesn't speak to the green effect they are portraying, that hurts even more coz it widens the gap between rich & poor… The bigger the gap, the bigger the social unrest…
    e.g. lot of complaints on theft these days in a decent area where i live… why ?

  • http://evilspeculator.com molecool

    Beautiful – I like the way you colored it. Sorry, never saw it until now, otherwise I would have given you credit.

  • doublethink

    Chart: NQ
    So that's a “Teepee Top”? Are you mad?
    Yeah, I guess. Kind of like your reefer madness in France.
    http://www.screencast.com/t/MjljMzYx
    Yeah, I still prefer California Gold.

  • chronographics

    Ah those calls have come in handy, protecting my planet 🙂 Sold some more up here with another short term option I took out at 1.3180 for a week. Lets see if we can make a Top here…

  • http://evilspeculator.com molecool

    Mostly agree, my friend – but if you know the rules of trend trading you know that the last phase of a trend does not matter that much. This however seems to be a complementary tool to gauge the progression of a trend, plus I think there's more meat in it by adding that oscillator I proposed.

  • http://evilspeculator.com molecool

    That's where I feel it…

  • Bob the Horse

    you are totally right which is why it ultimately collapse and we end up in a totalitarian environment but our job is to navigate the rigged game, not to complain about the rules. If you see the manager of the casino reaching under the roulette table, you put your money on zero.

  • BobbyLow

    Gotta love those head fakes – almost filling the Gap and Whamo!

  • sloth_bear

    Here is the flight plan, just came back, shorted some @ 1.3325, let's see if we can blast through these asteroids…
    http://screencast.com/t/YTU3NzdmM

  • EvilTrader

    what a ride.

    Well, odds are we topped for the short term;

  • Bob the Horse

    think Eur may have topped as I had a stop in on 1/3rd of my short position and it was taken out – amazing how often that makes the high. still fully short GBP and equities though. Added a small short in Crude just because . .

  • sloth_bear

    Can't wait to see this oscillator in action!

  • Wave_Surfer

    Hm…. is Soylent green trying to LOOK like it might be blue, just so it can yank the football out right before we kick it and laugh at us?

  • Bob the Horse

    my mother said if you can't say something nice, say nothing at all – but that is no fun

  • mrBozo

    I used to prefer Cali-fornia,

    But now it's like something out of National Geographic.

    http://www.screencast.com/users/VernontheGerman

  • sloth_bear

    Ouch! 😉
    Note that we did not (yet?) took out the 04/2009 low:
    http://screencast.com/t/Mjk5NjA4NGY
    I don't know if it's of extreme importance…

    Here is a copy of the ST flight plan I just posted to Chrono:
    http://screencast.com/t/YTU3NzdmM

  • BobbyLow

    Well it took me all the way to about 12 Points Down on the SPX Cash before I took most of the rest of my Long Hedges off. I only ended up with a small net loss on these hedges because my Net Short Put Profit helped offset my Long Call Loss on SPY.

    So now I'm very short and will add more at confirmation below 1088.

  • Bob the Horse

    You've been sleeping on the back seat of the bus while it's been parked overnight in the depot. You're hungry, tired and desperate for the toilet but the driver has turned up and is starting his route. To take the analogy to a ridiculous degree.

  • finansreven

    Got stopped out of my long, but not ready throw in the long towel yet. Bought SPX at 1108.5. The silly buggers that wants to secure the election are not done with the bears, me think.

  • sloth_bear

    Lol! I could click on the “like” button, but you would be in danger if I do so…

  • amokta

    Dont want to be negative, but dont you think calling for 1088 is a bit premature, given the Bear-beating we have had continously (for the record im short, and in your camp!)

  • ricebowl

    I have a minimum target of 1093 that is highly likely to be hit. I am loading up shorts on every pop.

    On SPX daily, I can't find an example over the past few months where SPX drops through the 20-SMA without reaching the lower bollinger band. That band is currently at 1093, but it's a moving target, and the slope is negative.

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

    where are the Europeans when you are long and need em??? Euro moving up

  • BobbyLow

    I'm not calling for 1088. That is where Mole had confirmation of further downside.

  • Wave_Surfer

    I am guessing that 1088 is the number BobblyLow was using because that is when Mole said that Blue would be confirmed, so the idea is to wait until Blue is actually confirmed before adding more short.

  • OldChicago

    Both FTSE & DAX are down with SPX. Higher Euro isn't necessary good for Germany. If Germany falter, credit crisis might surface. IMO. But, that's not a tell in the near term.

  • SW6

    Bob, you are totally encouraging a huge whoop-ass Ninja attack, just so you know! 🙂

  • sloth_bear
  • doublethink

    See what being broke will do?

  • Moleasses

    wee-wee-weeeee as we have entered P3(now in w3ofw3ofw1 target 1095 then w4 of w3 retrace to 1106 then finish w5 of w3 at 1088-93 region we can then retrace to1111 region before entering w5ofw1 and end at 1075 area.with this level compleating minor w1 w2minor retrace to 1106-11 area again and then down hard !IMO)BUT I must have more bullish pundits to tell me we are going to new highs for my confidence to add to my short view.please speak up:)

  • doublethink

    Rectangle Top…if flying by wire.
    http://thepatternsite.com/recttops.html

  • EvilTrader

    statistically-wise , employment days with bad surprises (like today), gaps down and rise into EOD. Lets watch.

  • Champ1A
  • Champ1A

    Typo, that is PUG; though it doesn't make any difference

  • equity_momo

    My virus checker is not letting me open that link fyi.

  • bluprint

    Google Safe Browsing about that site:

    http://safebrowsing.clients.google.com/safebrow

  • zenob

    Firefox warned of malware when I tried going to that link that Champ1A posted.

  • http://tradingthecow.blogspot.com/ Steoli

    Do u have another link?

  • Champ1A

    Use Internet Explorer, you will not be able to open it in Firefox or Chrome.

  • EvilTrader

    my mcafee just blocked a trojan horse from thatsite.

  • Thespookyone

    Add as many shorts as you like. You are frontrunning, imho.

  • Thespookyone

    That A-Wipe couldn't count his way out of a paper bag-as I posted on that thread previously. If I were here, I'd be listening to Moles fine advise-and filtering out all the noise.

  • gibbsfe

    If that's true then I think it might be time I switch to Firefox or Chrome.

  • http://tradingthecow.blogspot.com/ Steoli

    I'm short from 1123… i will look to close @ 1095. According to my Market Profile, the 1095 was the biggest area of rotation below the current value Area (1110-1125).

  • Bob the Horse

    Right off home, still short, would go flat at just below 1100 if reached tonight then look to come back Monday and sell it out again.

  • Tronacate

    Hay buddy…….kickin' around?

  • amokta

    Time to go long dong?

  • Tronacate

    Bob…..are you really a horse?…….if so……. I'm impressed

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

    ok, bob's and girls, sorry but i was chatting with a friend

    point 1) i know it may be involuntary, but if others point to a virus/trojan on your link YOU DELETE IT

    point 2) have fun, LOD stil ahead IMHO

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

    don't be jealous Tron, you're still BIG IN JAPAN

  • Tronacate

    Damn straight Ham…….cheers

  • Bob the Horse

    I'm not even called Bob.

  • BobbyLow

    Actually he is the son of Mr. Ed.

    ” A horse is a horse, of course, of course, / And no one can talk to a horse of course / That is, of course, unless the horse is the famous Mister Ed. …”

    http://tv4u.com/mr_ed/images/mr_ed_promo.jpg

  • Tronacate

    I suspected that……..the truth comes out…….I'm changing my nick to Wiiillllllbbburrrr

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

    “in the blood?”

    she also gave you a STD?

  • gsavli

    not necessarily.

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

    anything you say BOB

    p.s. the BOB harassement is courtesy of the hamster on behalf of master Mole who is feeling a bit jealous of your likes ( a bit jealous of your likes… do you appreciate the beauty of this joke?)

  • BobbyLow

    OK, I know I bitch a lot about ultra low volume but it looks like somebody came back in from the Hamptons today.

    Yesterday's entire SPY Volume was 140,364,400.

    As of 1:11 PM Today SPY Volume is at 143,822,000.

    Hmmmmmmm?

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

    ok, but leave something for tron to brag about or we're in a world of pain

  • gsavli

    you're right 🙂

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

    ok, as i mentioned i see LOD ahead, but it might just be a drop to 1104 before the retracement (?) takes over

    for those following the spx:vix we went to sma13, breaking it would bring the bulls one hell of a collonoscopy… guess that will have to wait for monday

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

    then give the hamster a like 😉

    (want to check how the boss will deal with that)

  • Tronacate

    Fuck all you assholes……:)

  • Tronacate

    Possible Wolffewave on the 5min NQ

  • Tronacate

    Wish I was a hamster…..then Paris could tickle my furry belly with her forehead……just a thought

  • Tronacate

    I'd give SSH a like……..but I hate to lie like a politician…..lol

  • DarthTrader

    OK Bears

    Miss Lucy Market has a beautiful set up for you.

    Just run as fast and as hard as you can and give it all you got, Ok?

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

    not my fury little one you don't!

    go back to your cavities

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

    she enjoys the fur… and the huge balls

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

    then just lie like a lawyer

  • Tronacate

    Tronacate, ESQ………likes all of SSH posts….

  • Tronacate
  • http://evilspeculator.com molecool

    Word!

  • http://evilspeculator.com molecool

    point 1) say what? what virus or trojan?

  • http://evilspeculator.com molecool

    Wrong – THIS TIME it's a ban.

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

    well, if you want a virus, IE is the way to go 😉

  • Tronacate

    Maybe this deal with MARS moving closest to the earth is going to cause some major upheaval……..mars=war stuff….true?

  • 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

    NOT that you deserve it! 😉

  • Wave_Surfer

    So, you think we are still most likely green and green is gonna yank the football right before we reach it, huh?

  • http://embarqmail.com stoner516

    Like the SPX:VIX chart. Thanks, Mole