Discretionary Trading
Now Reading
The Quiet Before The Storm
53

The Quiet Before The Storm

by The MoleOctober 5, 2016

In my recent momo update I was quite adamant about the increasing odds of a major market correction. Since then we’ve seen a further increase in spasmodic intra-day gyrations across the board, fueled by a mix of low participation bot trading, heightened emotions and a constant stream of contradicting market rumors (e.g. Deutsche Bank). The trading lair has been in defcon 3 mode for a while now which clearly affects our daily trading activities.

2016-10-05_spoos

After over a dozen failures to reconquer the ES 2180 mark (Dec contract) technical resistance near that cluster is growing (see the NLBLs) and I expect every push higher to meet increasing resistance. Thus, I have now dusted off my bearish hat and am willing to consider short entries. Which of course doesn’t give me license to willy nilly jump into short positions. Instead my plan is to start selling the rips, as long as they meet selling pressure near technical resistance levels. On the daily that means 2165 plus minus a handle or so.

2016-10-05_spoos_lt

Our LT road map is increasingly coming into focus. Here 2180 is what separates the bulls from an almost obligatory happy X-Mas rally. Which obviously still cannot be ruled out just yet. As a matter of fact the longs are still officially running the tape and if 2180 is taken out I will be happy to buy every single retest that follows. But until then I will leave it up to the swing traders to play the bounces. We have held our own over the past few weeks but the activity in the comment section clearly reflects the current sentiment, which is one of exhaustion and confusion galore.

Fall Equity Roadmap
  • The bulls are still in charge. Let’s not kid ourselves – just look at that monthly panel. A major spike higher cannot be ruled out but I would deem it a final exhaustion spike. Either way I expect us to trade significantly lower by spring of 2017.
  • A push above 2180 hands the ball back to the longs and will most likely produce a rally into X-Mas.
  • Between 2165 and 2180 (our weekly hurdle) I may consider long entries but will need to consult participation (see our invaluable Zero indicator – you should sign up).
  • Until 2165 is taken out I will consider short entries near that level.
  • 2006 is the bearish point of recognition. If it is breached the bears have a real chance to become the Grinch Who Stole Christmas.
  • 2074 is where the bears take over – odds for continuation lower will increase exponentially with every 10 ES handles lower.
  • Basically we currently are trading within a 100 ES handle information vacuum.
  • If you have been reducing your trading activities it is time to start paying attention assuming of course you are comfortable playing the short side.

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.
  • OJuice

    Concise as always Mole.

    The series of lower highs is looking oninous.

  • http://evilspeculator.com Sir Mole III

    It’s not very pronounced yet but what really irks me the most is the intra-day volatility and a series of bullish failures to breach 2180. EVEN IF we push higher from here it shows that the long have been significantly weakened and it puts the LT trend in question.

  • topedge

    thanks for your insights. I had to google ‘defcon 3 mode’ :)

  • ZigZag

    do you mean 2106 in the above post?

  • randomuser6789

    For those of us who grew up watching War Games this made perfect sense.
    https://www.youtube.com/watch?v=HsSH9ibLzlc

  • OJuice

    I’ve been looking at it pretty closely. For me the gaps that haven’t been completely filled really support the weakened Bulls perspective. There is obviously still a lot of complacency and high expectations for central banks so I don’t think a sell off would be crushing on the long term scale. But it could leave a pretty good gash. I don’t know what’s driving this all out defense at the 2140-2150 SPX range, but, it looks to me like ultimately it will fail. And the fact that high yield keeps creeping up has me a bit worried that we have created a void below.

  • http://pugsma.wordpress.com/denalis-turning-points/ denali92

    The election – though still a month away – may mean little occurs between now and 8-Nov. The Fed can do nothing…. maybe the ECB on 20-Oct…. but rarely do the BIG boys make moves until after the obligatory rally in to the election…

    There have been 3 years (out of 10) since 1976 that saw significant moves pre election:
    -1980 (4 day 6% fall, then a 10% 17 day rally followed by an 8% 15 day fall, etc…)
    -2000 (7 % 26 day fall, 3% 1 day rally, 11 % 20 day fall, 10% 19 day rally, etc…)
    -and 2008 (35% 38 day fall, 4 day 24% rally, 14 day 19% fall, 7 day 19% rally, etc…).

    Otherwise, most years saw a lot of moves in the 2 to 3% range from late September to the election – though the median pullback from the early mid October top to the late October pullback low was 4.5%.

    I do think there will be some GREAT moves when the time comes…. The only question for me is whether the time is fairly soon or whether one needs to conserve one’s energy and focus until later this month….

    From my perspective, any break of this 2100 – 2180 range on the ESZ6 will most likely be faded after a day or two until the election is done and dusted….

    Still all of your time and efforts on your posts is much appreciated. It always gives me something to consider. THANKS!

    -D

  • http://evilspeculator.com Sir Mole III

    Actually no – I meant 2006.

  • http://evilspeculator.com Sir Mole III
  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    High Yield may be the key.
    Risk ON in my lens, via a dumping of the TLT (ratio).

    http://stockcharts.com/h-sc/ui?s=HYG%3ATLT&p=D&yr=2&mn=0&dy=0&id=p05606753594

  • Ladywandering

    bottom right panel of the zero is pretty funky

  • ZigZag

    Thx, wasn’t sure because it came between 2165 and 2074, but makes sense now.

  • OJuice

    That’s the issue Gerb. “Risk on” when Mole is no longer looking for long entries. That’s a dangerous playing field.

  • kudra

    GDX was looking decent until 10 AM when that robust ISM figure hit. dam. Miners look to be in a downtrend now. I got gauged trying to catch the falling knife yesterday.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    that’s why I show up here daily.
    Salut!!

  • kudra

    still in. let’s see if $23 holds.

  • Mark Shinnick

    More or less, the downside objective for now has been reached. However, the story here goes well beyond bullishness for the metal. Probably better risk/rewards elsewhere such as equities.

  • kudra

    I’m short equities via TZA at 26.92. hard out there for a pimp.

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    agreed on the downside objective. (mostly)
    The massive move in 2016 was around 140 trading days.
    Half of that is 70.

    Wallah, price is currently near the band, defined by Oct 2015 high.

    http://stockcharts.com/h-sc/ui?s=GDX&p=D&yr=1&mn=3&dy=0&id=p14157736330
    -GG

  • Mark Shinnick

    Facinating…I imagine a bunch of shorts are gunning for the remaining gap. That might seem the correct technical thing, and may well get there, but for only the moment impresses me as greed or too late shorts hoping to get some last action…and that doesn’t always work. This is psyche stuff only for super-short term scalp justification.

  • Mark Shinnick

    What your doing there is riding it down a long-slow climb phenomena of equities. It eats away at your resolve and then most persons end up bailing and missing the move they hoped for. Try not to usually fight living below a fast MA, just exit and reposition at a later time.

  • Mark Shinnick

    Ok, long miners, but here’s an important point. There are gold gaps actually extending for about another 100%+ of this move to the downside. Just saying…

  • http://evilspeculator.com Sir Mole III
  • http://evilspeculator.com Sir Mole III

    BTW, if you’re not a sub consider supporting the blog 😉

  • http://evilspeculator.com Sir Mole III

    funky how? sometimes all you need to do is to reload after a few seconds.

  • http://evilspeculator.com Sir Mole III

    We are sooooo old… :-(

  • OJuice

    Taking a look at the Deutsche Bank daily chart it looks like there was a decent spike in volume starting September 26. I don’t know how reliable the NYSE version of DB is, but, I’d have to say that looks like capitulation and a tradeable bottom. I’d post a chart but I’m out of pocket today.

  • Mark Shinnick

    Flat

  • BKXtoZERO

    what if you just are a really cheap piece of garbage? (a blood leech)

  • BKXtoZERO

    my stop was hit on half TVIX position (again)

  • http://gerb-reloaded.blogspot.com/ Gold_Gerb

    forget DB, go for the Bank index.
    😉

    BKX! print print print! {paper goood, metals baaad}

    http://stockcharts.com/h-sc/ui?s=%24BKX&p=D&yr=0&mn=6&dy=0&id=p92612699137

  • Mark Shinnick

    It might be that skin in the game helps to take it’s goals more seriously.

  • Mark Shinnick

    Wow, 2166 is really important.

  • http://evilspeculator.com Sir Mole III

    What contract?

  • Mark Shinnick

    SPY

  • Mark Shinnick

    All the gain gone from my Trump account, just went slight neg. Does the US still have a silent majority?

  • BKXtoZERO

    I was kidding you Mole. I am in truth, just plain up to my neck with the other stuff of life. Right now a CT scan is something I am putting off.

  • randomuser6789

    Yes, but growing up in the ’80s was golden. It was one of the the best music and movie eras in my opinion.

  • http://evilspeculator.com Sir Mole III

    You’re trading the election?

  • http://evilspeculator.com Sir Mole III

    Jeezz – a CT scan? Why would you put that off??

  • BKXtoZERO

    it would be my 6th one by now…. final tweaking, need MORE filler, would like to see where but Obama care has meant I pay more. 3 years in a row of surgeries with a 2K deductible is a big hit for me after all of this house crap too. I am really not even “trading” per se…… I just like hanging here although by the old Scott iron fist of law, I am still not a “trader”.

  • http://evilspeculator.com Sir Mole III

    The more time you spend in hospitals the sicker you get. If it’s my turn I think I’ll just bite the bullet. I don’t trust doctors at all – the entire medical care industry is corrupt and bent on keeping you sick (and spending money).

  • http://evilspeculator.com Sir Mole III

    Silent majority – LOL – did you ever see the movie ‘The Tailor of Panama’?

  • Mark Shinnick

    Yeah, back when I thought I had some edge last month. After that debate a 60% gain simply evaporated over the days since then. Without a sense of edge there is no reason to stick around. I”ll check out the movie.

  • Mark Shinnick

    It depends….there are at least some good people in the field even though its become corrupted. I think the better people who could started concierge cash-based services some time ago. For what ends up killing most of us, we can individually do a hell of a lot of prevention.

  • Mark Shinnick

    Does the scan data get direct-loaded into your modeling software?

  • Mark Shinnick

    Interesting point. Seems like 80’s has taken over from the stations formerly playing 50’s/60’s.

  • BKXtoZERO

    no, I would have to do all that again, although I am now part of the study at Stanford and they would model the results. That is hard work.

  • BKXtoZERO

    ENT doctors sure fucked up, some are still debating but most realize that they have been wrong for years. Most are coming around to understand the nose has more neural connections and it is not some thing you just hack off, that there is a design intent to aerodynamics, a correct amount of pressure and velocity and that it is all meaningful. My website pounding the shit out of them has helped.

  • Mark Shinnick

    Are there many self-adapting micro adjustments normally being actively made depending on pressure, temp or velocity sensing?

  • Mark Shinnick

    Yeah…definitely been a shot across the bow over rates. The rate scene has encouraged derivatives like at no other time in history. The systemic vulnerability is like never before. So much robustness has been sucked out…these really are amazing times to have this seat watching.

  • Mark Shinnick

    Maybe one of the most significant films of all time.

  • http://evilspeculator.com Sir Mole III