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The Ugly Truth
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The Ugly Truth

by The MoleOctober 23, 2009

The ugly truth is that Mole might have fallen for a nice head fake which retraced exactly to the 78.6% fib line:

If we breach today’s highs we will make new highs – if we drop through yesterday’s lows we are most likely looking at more downside going forward.

Here’s the zoomed in view:

Of course don’t expect to see this resolve today – the resolution will occur via a gap overnight or over the weekend, so that retail traders have no chance to get in or out where necessary.

Yes, this tape looks like it’s topping but we have been fooled – how many times now? You come back on Monday and suddenly the ‘nature’ of the tape completely changes as if a new roster of traders has taken over with a completely different game plan.

If you were still short from yesterday’s lows chances are you sold out during the spike up – unless of course you were stubborn as hell – as I was in the past. Of course that’s when the tape kept running – this time I didn’t want to take this chance and the tape dropped. I thought of that possibility last afternoon but was not ready to take on that type of risk again – and I’m pretty sure the entire game was primed against that prior experience. Nothing like conditioning players that something will happen at a particular stage and then to do the exact opposite. This is one big poker game at this point – and the only difference is that the big cats can see my cards and I am flying blind. What I have is my wave count but at the current stage the odds are completely open. A year or so ago I would have stayed short and added positions today. But I have seen a drop like today’s recover too often to take any more risks like that.

So, the only ugly alternative now is to wait for this trend to officially fail – which means 1070 and then 1040 need to be taken out. VIX is going to be higher then and premium won’t be as cheap but it sure beats this losing game.

Public Service Announcement:

Effective today I will not post a Program Trading Update anymore – I will however continue to post the Zero chart when I find the time. This is mainly due to unjustified accusations by one unhappy Geronimo subscriber who suggested that both me and Eric were lying – something which in my mind is simply inexcusable as we both have been bending over backwards to be as fair and transparent as possible.

I will also reduce my participation on this blog as this outlash today has shocked and disappointed me deeply. Quite frankly I also do not believe that I have much to contribute these days – and I’m sure that most of you are sick and tired of hearing me bitch about this erratic gyrations – this is not very productive. I also wonder if it makes sense to continue catering geronimo to retail traders as some of you obviously are unfit to accept the occasional losses – if this is what we get after one or two down days then I don’t want to know what will happen after a bad week or month. Eric and I are considering to scale out of the current subscription model and to solely work with funds and CTAs.

Enjoy your weekend.

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.
  • Woolly Llama

    Has Godot arrived at the exact moment you find yourself capitulating on the LT ideas and EW counts you've been after the last 3 months?

  • gannsecret

    Good post , right on taking out the 1074 low now gives us a series of lower highs and lower lows. below 1074—- 1058

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

    http://screencast.com/t/xZKbxhY6

    While watching paint dry, cast your vote for your favorite blog, see results above (so far), and cast vote below. So far Slope is winning, with a pretty much 3 way tie for second.

    http://oahutrading.blogspot.com/

  • http://www.facebook.com/screasy v8muscle

    I'm stopping my longs out at 1072 $spx

  • molecool

    I am thinking about that as well – frankly, at this point I do not know what to think anymore…

  • http://www.evilspeculator.com berkshire

    Nice post mate. Damn… do we all need a psychology degree too?

    Skål!

  • http://www.evilspeculator.com berkshire

    Perhaps, but I don't think my belt is long enough…

    Skål!

  • TheMacroEconomist

    Bailed on the IWM Nov. 60 puts about 5 mins ago at 1.73, when IWM was in the high 60.20's.

    Notice that IWM just dropped to 60.28 again and the MMs were only bidding 1.71 for them. After 3PM now, so as we head to the close, the MMs start to take an “advance” on a weekend's worth of Theta decay.

    So I'm not gonna be married to those puts (haha), if I need to re-short for the weekend I'll go with TWM maybe…

  • john_matrix

    well said mole, lost some money on amzn today should have got out with a profit, u win some, u lose some…..

  • Carl V

    The diamond reversal pattern on the QQQQ seems to resolve, slowly, to the good side -down- but nothing sure yet. The only fact, at the moment and in 5 and 15 minutes, is that prices are consolidating at the lows, not at the highs, and as a bear I am prudently optimistic (and loaded with bearish ETFs…)

  • upld2

    Yeah, head fake city is right. The banksters have eliminated a significant part of their competition, via Lehman, B Stearns, etc and can now manipulate markets with far greater efficiency.

    Based on how they have played the March rally we can fully expect a completely unexpected cliff dive in the overnight session without offering any chance for any bears to participate.

    I think the only way to get in is to take a chance and be in when the top appears close at hand. Like right now!

  • ColonelKurtz

    Who wants to stick it to a credit card company? Check out the H& S of Visa… Target is somewhere around 72…If someone has a better analysis by all means educate me soon. It is Friday and cold beer is waiting.

    http://www.screencast.com/users/ColonelKurtz/fo

  • http://www.evilspeculator.com berkshire

    They want me to stick it to them, so they can get some of there money before I decide not to pay…

    Skål!

  • http://www.evilspeculator.com berkshire

    GOOD EYE… GORGEOUS daily candle…

    Skål!

  • ColonelKurtz

    It is all funny money from the tax payers anyway.. Go ahead and spend you some…

  • flyboy08

    Berk….thoughts on MA? I'm hesitant form COF's earnings?

  • Woolly Llama

    Earnings on Tuesday, too much of a gamble

  • http://www.evilspeculator.com berkshire

    Looks REAL weak to me… (Yes, I know it is up while the market is down). I am cautious, but I have 2 short trade signals on it…

    MACD rolling over…

    Skål!

  • mmTesla

    My thoughts on the market today
    http://www.youtube.com/watch?v=7oAJwyxG9qI

  • upld2

    We should consider that this month's cycle low is still very difficult to manipulate and that liquidity, that liquidity is being withdrawn from the system, that we are at the intersection of the primary bear trendline, that the fundamentals support a full fledged depression rather than any form of recovery, and that the inverse correlation between the markets and the dollar has weakened significantly.

    The banksters are not after our chmp change but after the bulltard trillions they have trapped on the long side. The bulltards are the primary target of these scumbag bankers and they are as ripe as can be for the slaughter.

  • http://www.evilspeculator.com berkshire

    I agree about earnings. But I have a strong love of engulfing candles that take out a weeks worth of trading…

    Skål!

  • http://www.hotoptionbabe.com annamall

    I just added a 115/110 put spread on AMZN

  • malusDiaz

    Max the credit card, short their stock, pay them back!

    on one of those nice 0% cards!

  • DesertEagle

    Dear Marketmaker fucks,

    Can we shed another 2% in the next 30 mins? Kthnx

  • http://www.evilspeculator.com berkshire

    Smart girl… It should be in for a few days of consolidation…

    Skål!

  • http://www.evilspeculator.com berkshire

    Yes, but it will be from your account, and not the market… Your welcome in advance 😛

    Skål!

  • malusDiaz

    Head and Shoulders on 133K:

    Target 1070

    http://farm3.static.flickr.com/2479/4037352803_

  • http://www.evilspeculator.com berkshire

    Some day you are gonna have to teach me how to trade spreads like you baby….

    Skål!

  • bshah

    guys,
    how @ the biach COF… Any one taking that one…?

  • ColonelKurtz

    COF chart after the earnings report… She is giving it up and banging the wedge….

    http://www.screencast.com/users/ColonelKurtz/fo

  • http://www.evilspeculator.com berkshire

    I'd short it base on the candle. But be long based on the fucked up market.

    Skål!

  • gregn
  • Woolly Llama

    hope they don't fill that gap 😉

  • fa_q

    If they can get it under 1073 we could flush into the close. if not then 77 is probably on the table

  • Woolly Llama

    Top Earnings Reporters next week: VZ, APOL, VLO, V, WYNN, COP, FSLR, CME, XOM, PG

  • BigHouse(Aka Mr Vix)

    First index to break its trend line….

    http://screencast.com/t/gE8gEUdUj

  • http://www.hotoptionbabe.com annamall

    Why not???

  • http://www.hotoptionbabe.com annamall

    More than happy to my friend :)

  • http://www.hotoptionbabe.com annamall

    GMTA :)

  • insite

    i hope they DO fill that gap; running a 105/100 put spread.

    anna – why did you chose the 115/110? i honestly don't have much of a reason for having chosen the 105/100 other than it was cheaper when i picked it up this morning.

  • http://www.hotoptionbabe.com annamall

    ahhhh hi Sleeping Bearster :)

  • http://www.hotoptionbabe.com annamall

    It was a good risk to reward and this thing will sell once the consolidation is over. Anytime you have a new high with the volume like this done is very bearish :)

  • insite

    i'm agreeing w/ the concept of a put spread here. just curious as to why you chose those particular strike prices.

  • http://www.hotoptionbabe.com annamall

    $VIX IS PIMPING our options wheeeeeeeeeeeeeeeeeeeeeeee

  • DesertEagle

    Make it rain

  • vardoger

    Watch out for the potential bullish wedge / ED that we've been painting since 11:20 est on SPX.

  • http://www.hotoptionbabe.com annamall

    and also the probability by Nov OPX is better than a 105/100

  • Woolly Llama

    Sorry, i've only got credit spreads on the brain

  • insite

    thx; that makes sense

  • http://www.hotoptionbabe.com annamall

    anytime insite :)

  • http://www.hotoptionbabe.com annamall

    ahhhhhh :)

  • http://www.hotoptionbabe.com annamall

    looks like the MM's shaking out the weak hands to me….

  • gregn

    A p/c of 2.5 is too expensive to pay out in this scenario.

  • PRSGuitars

    v8muscle (steve) just alerted me that $DJT broke its trendline from March:

    http://screencast.com/t/vxrMMgJuHOf5

    (steve's chart)

  • BigHouse(Aka Mr Vix)

    I posted the chart below

  • funkypenguin

    Anyone watching ZeroHedge's tweets about Amazon – ROFL

  • http://www.facebook.com/screasy v8muscle

    can't wait for the selloff!!!

  • Cypherd

    Anyone else noticing the firmness in bond land (TNX)? Interesting given the sell off. Market near LoD while TBT is near its highs.

  • vardoger

    I'd like to see it break the trendline drawn off of the pins FWIW.

  • http://dreadwinaard.livejournal.com dreadwin

    Sold my DRV position, +4.7%. Like I predicted, IYR touched 42.

  • PRSGuitars

    I'd like to see the market at 700 and VIX @ 65. Can you help me out?

    (just kidding — i'll have another $DJT chart @ the close)

  • vardoger

    You don't need my help for that, just some more patience.

  • http://www.hotoptionbabe.com annamall

    then the bulls/bears duking it out.

  • gregn

    I was agreeing with you, I was suggesting that they wanted to lower the p/c before the potential gap down on Monday.

  • EDC

    SPX is forming a diamond top?
    Reversal from main trend ahead?

    No chart just look at Mole's perfect chart up top.
    I can't see the vix but it may be similiar along with the dxy

    Just a thought

  • http://www.hotoptionbabe.com annamall

    ahhhh GMTA 😉

  • Tronacate

    LQD looking interesting the last 20 min

  • http://trading-to-win.blogspot.com/ DavidDT

    beauty

  • dollar

    Took profits on TZA

  • http://trading-to-win.blogspot.com/ DavidDT

    looking at open/close – this is one pretty engulfing – good weekend all

  • vision_invisible

    ya

    picked up some amazon april puts seemed cheap to me

  • tradejane

    Congrats, Dreadwin. :) Everything went according to plan here too. Great day!

  • http://www.hotoptionbabe.com annamall

    You too David! See you Monday

  • http://www.hotoptionbabe.com annamall

    Closed all Spy 110 puts due to theta burn over the weekend. time to start doing Decembers (yike december already!)

  • gregn

    If we gap down Monday are you going to add dec puts at open or are you going to wait for a bunch up to reload?

  • http://www.facebook.com/screasy v8muscle

    Mole,

    Dont beat yourself up too much. We've been with you the whole way. Everyone's been getting raped left and right so of course people will be mad. Dont take it too personally or you'll never get out alive

  • gregn

    a bounce* ;D

  • PRSGuitars

    Sold SPY 103's against the 110s i'd held from a few days back (from the first trip to 1100 — jeez) … just trying to wait until 1064.

    My /es read says 1072-1073 in sympathy to today's selloff sometime on Sunday, then 1082 at least (pivot) to relieve oversold-ness before dropping more in monday's session. going to try to catch a long hedge sunday night for that and will then just let myself get stopped out as we pop towards 1080-1085.

    Still rocking a rather large Mole put position amalgam of Dec 100s and Mar 80,87,90, and 97 puts (long story). Breakeven imminently @ SPY 105.5, so, not really that upset with myself for how it's been managed.

    Should've been ballsy enough to take some shorts last night and hang onto them. Steve (v8) and I were talking about short 1094 and 1094.5, stop 1095.5 and 1096 (a trade that worked twice for me but I covered too early both times near vwap 1093ish)… taking even a single NQ short up there would've been gold. Meh.

    Will look to continue trading both lots of ES until there's an IT entry available for me… curses, market, for not letting me hang on for the whole damn ride!

  • CandleStickEmUpper

    This was a nice trading week. Im maintaning short positions going into next week. Have a good weekend everyone. This community is awesome. Mole, excellent charting as always. Laterz

  • itsgold

    Still holding puts. I think I'm either going to loose it all by June / March. Even so, I'm still holding on.

    My own subscription service still forecasts a sudden correction in the next 6 months. Each day, I get more doubts that it will happen.

  • http://dreadwinaard.livejournal.com dreadwin

    Next week should be interesting. If we keep following the same fractal, we should go down, then go sideways (or up), then down again, followed by a rocket up to new highs.

  • molecool

    Don't you love it when they pop a question like that and then leave you hanging? LOL

  • tfinavia

    Not wasting much time, we go past 1125 SPX next week.

  • gregn

    My prediction for early next week: http://screencast.com/t/ppn91jIf1X

  • http://www.hotoptionbabe.com annamall

    wait to see the tape on monday..:)

  • amokta

    ok, when will dec10 spx 700 puts show a profit, or will they expire worthless?
    When does time decay start becoming an issue?
    goodluck all, next week will be a week to remember

  • AS2009

    Sorry guys – did not post much today … horrible day for me – down 6% on my portfolio :(

    Berk when you have a chance, could you take a look at MOS … bought at the top … avgd down in today – down on this (seems to be becoming as usual) … anyway – I think this filled the gap and should bounce …

    I saw a flag on this … now not so sure … this was also a triangle breakout in the start of the week … and as usual I bought the breakout @ 54 … my avg on Nov 55 calls is 1.87 after averaging in today …

  • http://www.evilspeculator.com berkshire

    Sounds a little like an inverted Beanie…

    Skål!

  • http://www.evilspeculator.com berkshire

    Ouch baby. 6% in one day is no good…

    MOS actually doesn't look bad. As you said, gap fill, and bounced from the lower channel (flag) resistance. Both are good signs. CF looked real ugly today, but has earnings on Tues. POT and IPI still look pretty bullish though. STRONG overhead resistance via a TL drawn from the 5/19 close to the 9/18 close (7+ touches). I'd keep a tight stop and a close eye, but think that you are still likely to escape unscathed.

    Skål!

  • http://www.evilspeculator.com berkshire

    No options on this one, but I like a short stock trade on CHUX… Nice H/S top. Nice break-down.

    Skål!

  • PRSGuitars

    Ok, to anyone still around after such a wicked week, I have a present for you. It's called the 133 game, where you find targets that are 133 extensions of things and then get weirded out when you realize how perfectly they work on something like the $DJT.

    Not like I'm trading the transports, just charting them . . . but seriously, this is the most wicked thing I've seen in my charting coincidence career.

    http://screencast.com/t/Ctcacx0zxRYI

  • Rd99Hse1

    Probably only doubting because you're already holding short, and hence biased – and now uncomfortable. Good luck though, I'm short into the weekend and hoping I won't get hosed o Monday! I think that Monday's the day we go down into the lower end of the range, but above 1040. We shall see. Enjoy.

  • jtbirk

    8.5% in my ES account today. I feel your pain.

  • hank30

    I see new highs for next week, and then we may get a decent break.

  • http://dreadwinaard.livejournal.com dreadwin

    I think that pattern is very trade-able. My only concern is that it is “too obvious”.

  • http://dreadwinaard.livejournal.com dreadwin

    Did you get in UYG? Still holding?

    I'm thinking that if IYR does not break the 50 MA on Mon. or Tues., it's going to rocket up and test September's high. It was amazingly strong today, given the weakness everywhere else.

  • http://www.evilspeculator.com berkshire

    I think your 133% works really well for waves 1,2,4, and 5. Obviously it loses during wave 3s, but that should tell you something too.

    Love your cluttered-ass charts.

    Skål!

  • gregn

    Berk, we are at critical support in X. Do you think it gaps down Monday?

  • mmTesla

    What is your ES trading strategy?

  • TheMacroEconomist

    Well, they couldn't put that annoying tape out of its misery fast enough today! IWM closed at 60.06 and that really was where it was trading going into 4PM. Within 3 seconds after, those shares were going AH at 61.16. And within 7 minutes after, in the 61.30s, where it had been trading 45 minutes before (it has since dropped back a bit).

    So if I did hang onto those IWM puts, or grab the UltraShort TWM into the close, I'd already be at a loss. And the weekend hasn't even started yet!!!

    Not sure what Mole meant about an outlash today as I was tied up at day job. (Doubly tied up too as I had to cover another guy unexpectedly in the afternoon.) So not able to follow many comments. I'm hoping he's not taking this week's TAPE personally. It's been a headache for everyone I think! But, the tape will always be there again on Monday.

  • flyboy08

    You called a ramp up into the EOD today too. Why are you calling up next week? DO you have a chart? BTW…Kamal see's the same.

  • funkypenguin

    AGU screwed the pooch for everyone in this sector by announcing earnings would be horrible.

    Agg company earnings have sucked, I would be careful of anything in this sector – of course WTF do earnings mean in this wacky market. POT has buyout rumors which is the only thing that drove it higher

  • http://www.evilspeculator.com berkshire

    Agreed, but CF did not have buy-out rumors. And AGU could have been doing the whole “guide lower before earnings so you can beat them bull-shit.”

    Skål!

  • ds2

    I got a cue about a bump at the close today too. Shorters selling off before the close & weekend. Made sense to me. I made a little off it.

  • http://www.evilspeculator.com berkshire

    No, actually, I think we see some bounce back into Tuesday's earnings. Steel as a sector is MIGHTY weak. If it does drop before earnings, be cautious of the gap fill just below 40 (39.63). If we rally, I (personally) will add to my shorts. If we drop, I won't add or sell before earnings.

    Skål!

  • gregn

    I say we continue to drop till mid-end of week. This is my reasoning. Feedback is appreciated. I just started experimenting with this indication so it has not been proven yet.

    http://screencast.com/t/k2xtUeHghe

  • 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„¸

  • funkypenguin

    Yup – hey wait a minute are you accusing a company of %$#^ with their guidance and manipulating earnings – never happens, I say never

    As I said, WTF do earnings have to with anything in this market. Make that WTF do any technicals or fundamentals have anything to do with the market right now (of course a few hard core trend followers I know have made a mint over the last few years – pretty much the only people I know who have been really happy with their trading performance the other time. These types crawl out of the woodwork every time we get some good trending markets).

  • http://www.evilspeculator.com berkshire

    Yeah seriously. We are in the “detached from reality” rally. Which does mean the end is nigh, but herds of people can stay disillusioned for a LONG time.

    Yeah, what kind of company would try to do something like that. Seriously… We already have analysts missing by as much as 40%. The WORST period of analyst performance EVER. Like I keep saying, WTF does it take to get one of those jobs.

    Skål!

  • TheMacroEconomist

    That's sort of my take too based on seasonality. Historical odds favor strength later next week into the first few days of November. (But the past 2 months exhibited Mole's famous “fractal pattern” of weakness extending into the first trading day or two of the new month.)

    Speaking of historical quant odds: Monday tends to be the weakest day of the week. But this one coming up could be especially so. It's also the 5th trading day before the end of the month, which has historically been the single worst day for equities. Cumulative return of -55% for the day on the Dow over the 107-year period from 1901 thru 2008.

    Take it for what it's worth. It doesn't mean that Monday will necessarily close down. It could be some mutual funds get busy window dressing (many funds' fiscal years end on 31 October) and Monday closes up 2%. But those are the odds.

  • TheMacroEconomist

    Question Amotka: do you mean the SPX Dec. 18, 2010 LEAPS ticker SPLXA? 2500 of those large contracts traded today probably to serve as hedges for 2 money managers' portfolios.

    Or do you mean the SPX Dec. 19, 2009 option ticker SPZXT? SPZXT is a lottery ticket, plain and simple.

  • jtbirk

    He was mainly talking about one (or some) Geronimo subs giving him grief. There was a glitch or two today in the signals and unfortunately this person(s) really raked him and Eric over the coals. I like what you said at the end: Monday is another day. I had a rough week but I will be suited up and ready for battle again Monday.

  • TheMacroEconomist

    The last 2 of those were Mole's so-called “fractal pattern” that I alluded to below for Aug/Sep and Sep/Oct.

  • jtbirk

    Today was my second week trading Geronimo. Roughly in the red by around 10-11 points BUT I missed two winners in week one (potential 5 points) and made a real stupid mistake today for a big loser. Had it not been for those missteps I'd be down only a few hundred bucks including commissions.

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

    if this thing plays out as I expect it should bottom on BPSPX around 65 probably by the end of november, have you seen that chart?

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

    so has i mentioned to anna, it will go to either 30 or 50 in 3 months… either buy OTM pairs of puts and calls (that's it, don't like the concept of selling naked options)

  • AS2009

    Hey Berk – yes 6% hurts when you are a newbie with TA .. trading a long while – lost a ton of cash… then heard about TA and have been learning for the last 8 months…. Have a small account 5K compared with a lot of traders here, but figure out I would grow it from there … start small… and the fear of the big losses from the past keep me cautious.

    My analysis is usually right, however what kills me is the entries / exits ….

    For MOS – I entered on the break of the LT trendline & previous high on the 21st… when it seemed that we were going to breakout from the previous close above, then bought … the candle closed down and obviously next 2 days are history …. not sure what else I could have done to do this right … my stops were just below the gap …. any thoughts ?

  • mmTesla

    Ouch! It has good stats over time. Is this your second week trading futures or just geronimo?

  • mmTesla

    Try Bigalow's stop method but give it an additional .05 cents and use end of day stops, with an additional hard stop as well that is higher up, works pretty good because generally the daily whipsaw action doesn't blow you out of the position.

  • tradejane

    No, I sold the rest of SRS @ 9.73 when UYG filled its gap, per trading plan. Not exactly the price I was hoping for but still, +.31 is nothing for me to sneeze at.

    I did not buy any UYG though, because I think I have a good chance of getting it cheaper on Monday.

    (You might ask, well why didn't you keep your SRS then? That's because I don't like keeping those overnight for longer than a day unless I'm really, really SURE I know what I'm doing. :)

  • jtbirk

    Just Geronimo. I've traded futures for about a year.

  • jtbirk

    Just Geronimo. I've traded futures for about a year.