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Under The Hood
88

Under The Hood

by The MoleJuly 22, 2012

It’s been a few weeks since my last momo update and that means it’s time to kick the tires, wiggle the shocks, and to take a good peek under this market’s hood.

However always make sure you use an experienced technician with access to the proper type of tools. And read the manual before you ask her any embarrassing questions.

Despite Friday’s little red candle party it seems that market makers remain rather positive about the prospects of the current uptrend. At least judging by the VXV:VIX ratio, which stubbornly was locked in position last Friday. Recall that this is a medium to long term chart as the VXV is looking three months out – thus it mostly reflects what’s going to be happening over the next few weeks or months, not the next few days.

Another long term momo chart that’s pointing up is the NYA50 vs. NYA200 ratio. In case you’re a noob – we are comparing the number of NYSE stocks above their 50-day SMA vs. the ones above their 200-day SMA. In essence we are measuring the quality of the current advance – and again on a medium to long term basis. I consider this a long term chart as 200-day SMA and even 50-day SMA changes obviously take their merry time.

The short to medium term picture however is looking less rosy – please step into my air conditioned lair:
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More charts and cynical commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero or Geronimo subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.
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JNK vs. TLT – a high yield bond ETF vs. one that is tied to 20-year treasury bonds. Junk vs. quality. And it seems credit traders are a lot less enthusiastic about the short term here. We do sometimes see a little divergence that suddenly unravels and turns into nothing. But if this thing keeps dropping next week then I would be extremely cautious about the short term picture on the equities side here.

Another chart well worth keeping an eye on is the NYSE advancing vs. declining volume and yet again I see a developing divergence I have an increasingly hard time ignoring. Obviously it sometimes plots some quick spikes but the current pattern is increasingly pointing down, not up. Of course this one has in the past triggered way ahead of corrections, so we can’t rely on it out of context.

And potentially offering up a bit more on the context side is its hot cousin – the NYSE advancing vs. declining issues ratio. I call that a solid divergence and one that either gets cleared out soon or it has the potentially to drag equities into an ugly August.

Bottom Line: We just made a U-turn at the first volume hole on our road map. The next two trading sessions will either resolve the red flags I am seeing on the momentum side or a price will have to be paid (or should I say stingy bidders will have to be paid). Long term we seem to be okay – thus far at least. Personally I would prefer to see divergences on both the long and short term side paired with a relentless short squeeze. The odds for this to happen during the low vol summer months are usually rather slim.

The equities side would be of more interest to me had we touched that P&F target of 1390 on the SPX. Until either that happens or we see a meaningful correction to the downside I don’t intend to throw much of my capital at playing equities. Instead I plan to stick with solid setups on the commodities and FX side.

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Cheers,


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.
  • wvobiker

    Not that it matters, I think Valencia and the Canaries are bust.

  • Fibz

    Starting to think momo stocks and spx are sitting just above a line of future resistance here.

  • StrikeFirst

    Keeping a close eye on JRCC.  

  • StrikeFirst

    The Sep 12 options chain shows a volume of 1390 vs. an open interest of 117 at the 1.5 call strike.

    (On JRCC)

    Those have to be buyers, right?

    Who would short a $2 stock?

    Someone please correct me if I’m wrong.

  • StrikeFirst

    How do I get under Megan Fox’s hood?

  • StrikeFirst

    I got it.

    I’ll tell her I’m a stainless steel rat!

    Am I a lady’s man or what?

  • Fibz

    I dunno about JRCC, but Sprint is a sub $5 stock I could see as a short. Bet that company goes bankrupt this year or next. Much of the campus at their headquarters is already being leased to other companies.

  • Darth_Gerb

    T’s.
    I’m a big fan.
    expecting sanity around 12,700.
    http://s17.postimage.org/iu3tdrovx/temp1.png

  • Joe_Jones

    I won’t mind fixing that bumper

  • StrikeFirst

    I have a radiator hose that would fix all her problems.

    😉

  • MrMargin

    ES opened below the 100d. The 25 better holds now or we visit 1330 and possibly lower.

  • Darth_Gerb

    she has a hammer that will fix yours.
    now knock it off, before I do.
    😉
    http://farm3.staticflickr.com/2572/3821776586_261ee09b77_o.jpg

  • http://profile.yahoo.com/ZSFIZYIMIRUV3BUXT77JQOHQII greg4

    Nice Mole, anytime you can get a post in with a picture of Megan Fox is worth reading.

  • almez

    inside day broken on gold. Would go short if we get below 1570

  • http://evilspeculator.com molecool

    Well, I hope you liked the charts as well.

  • sachsich

    There were charts attached??

  • wvobiker

    Selling EURUSD in addition to the other stuff (ES, AUDJPY, AUDUSD, EURJPY). Ready to cover the others of course but EURUSD seems to be waiting to happen.  

  • DarthTrader

    /ES rallying so bottom may already be in as is often the case before US market opens . . .  but if not then the 1335 area is lower channel line support which also happens to set up yet another ABC targeting the 1390 area.  I have 3  ABC’s targeting the 1390 area . . .

  • Skynard

    Trying long /ES 1342.5

  • http://profile.yahoo.com/X3UHQ24EPYQVH62MCJVJM4KIJI peter

    Took the ID on /CL.  /HG head fake breakout from Thur/Fri failing impressively.

  • http://profile.yahoo.com/X3UHQ24EPYQVH62MCJVJM4KIJI peter

     Waiting to see if it reaches NLSL then will play a bounce.  Ugly prices on EUR.USD

  • http://evilspeculator.com molecool

    I just sent an updated Net-Lines chart to all the subs – please check your email.

  • Skynard

    Think she’ll run now, no data coming this morning. Adding to remainder of my longs.

  • Schwerepunkt

    Spain banning short selling on all stocks. The guy behind the curtain is getting worried. Maybe Mole should go to Madrid and slap some sense into him.

  • http://evilspeculator.com molecool

    It never works – there probably will be a spike higher which will be taken out a few days later.

  • stovis

    Can volume holes act as support as well as resistance?

  • Darth_Gerb
  • Schwerepunkt

    Exactly, hence the need to slap him around. Might as well piss in the wind.

  • Schwerepunkt

    Thanks for the article. History does rhyme. 

  • Schwerepunkt

    AMC, I saw that some OandA accounts were hacked. I hope yours was not one of them!

  • AMCabrera

    Hacked? Is that the term they use now for stop hunts? lol. No it was not.

  • AMCabrera
  • Fearless

    On a touch of 1.367% on the 10-year yields, I’d short the US bonds unhedged. The TLT:TIP ratio is also getting ready to signal BTBFD soon (could even be today).

  • AMCabrera

    http://www.youtube.com/watch?v=r1k0gfNXGJs
    this is what they probably play when they are playing with your accounts.

  • AMCabrera

    BTBFD?

  • Skynard

    All that with a -1? In weekly calls front month:)

  • captainboom

    I’m going to bet BTBFD = Buy The Big Fucking Dip

  • http://profile.yahoo.com/7EP357CI7UQWY7LCRF4KXIZJXA Mama Papa

    Could you explain this indicator, please?
    Looks like a C&H formation, could push even higher form here and correlated with the market that would be another 2-3 days of simialr sellof, so unless I miss something, I am confused.
    Thanks.

  • http://profile.yahoo.com/7EP357CI7UQWY7LCRF4KXIZJXA Mama Papa

    Extra –  on a long term chart TLT/TIP there is triple resistance at 1.08 and it looks like we break trough today…

  • http://profile.yahoo.com/7EP357CI7UQWY7LCRF4KXIZJXA Mama Papa

    see some highly correlated resistance for TLT/TIP with support for 6/4, 6/25, 7/12 and today. If SPX breaks support, and it looks like, TLTTIP should rip higher…. 

  • http://profile.yahoo.com/7EP357CI7UQWY7LCRF4KXIZJXA Mama Papa

    The breakout in TLT/TIP is on high volume too!

  • Schwerepunkt

    I suspect TDA in the offing. 

  • BobbyLow

    There is a long way to go before the close today and I wont make a decision on what to do with my remaining long oil position until after 3PM.   It’s a good thing that I took +1R Profit out the other day and didn’t re-add on Friday.  However, what was my remaining +2R Profit has pretty much turned to shit as of this moment.  

    I’ve accepted this as part of what can and often does happen while holding on to a Swing Trade for a few days.    

    In the mean time, I’ll let others discuss Greece, Spain and the eventual demise of the Euro – AGAIN!

    Whateva. . .     :) 

  • MrMargin

    Data says no. And this starts looking more like gap & camp to me. Probably a couple of hours of consolidation before a stab lower to the 50d at 1332.

  • Schwerepunkt

    yeah, I’m looking at ~1328 ES as some kind of support. $TICK finally moved north a bit, but price has not gone up much. That says to me this market is weak, even at this price level.

  • Darth_Gerb

    <10 min to go, and amateur hour is over.
    I fear a great snap back….. (in da hood)
    http://cl.jroo.me/z3/3/A/m/d/a.aaa-Largest-Rubber-Band-Ball.jpg

  • Joe_Jones

    it seems so

  • Joe_Jones

    TICK numbers are rather weak today

  • StrikeFirst

    Well, I’ve been short since Friday, so I’m feeling pretty evil right now.

    Taking partial profits, and then shutting my computer down.

    Is it just me, or are down days not as exciting as they used to be?

  • bdoone

    What data do you use?  I see SMA’s on TICK <0 for 1st 45 minsand also 40/45 closes <0 on 1 min TICK chart (89%)…that being sais it is mentaly difficult selling this already down 1.7-2%

  • Skynard

    Fill the gap baby:)

  • Joe_Jones

    I think you are tired of the whipsaw like anybody else. It’s wise to take profit after such a big move, take a break from the computer and think twice before re-entering the market. Emotions have been usually killing my profits, so I try to learn keeping my head cool and stick to reliable indicators such as the zero. BTW, I’m sitting pretty green today too. 😉

  • Darth_Gerb

    sound like Troncate.

  • AMCabrera

    http://content.screencast.com/users/AMCabrera/folders/Jing/media/4b2e14e6-e4d7-4848-b329-51c3c86474b2/2012-07-23_1105.png
    pretty gangster so far uh DG. Ive been popped at 1.2070 but I have another one waiting at 1.2130 again.  the short taken in the AUD/USD Thursday helped. which I no longer hold. 

  • Darth_Gerb

    EUR/USD?
    looking at it now…I’d rather pet a rattlesnake.

  • Joe_Jones

    LOL! 😀

  • ronebadger

    Anyone mention VIX today?  It bounced off top BB…interesting…

  • Darth_Gerb

    serious!

    I got raped in SPY when a bowl pattern with jabs trapped me in calls.  it was the third jab (high). and I was a bagholder of calls.held me underwater just enough days to take me out.

    http://s15.postimage.org/kztzdtzaj/temp1.png 

  • MrMargin

    I was actually looking at Mole’s TDA mail and it said ~69% < 0. You're right about the SMAs, but smoothing can distort the results. Scott did a post on this some time ago: http://evilspeculator.com/?p=24719 I don't like chasing the market either, but I'd be willing to go short. We broke the upward pointing wedge the ES had been trading in for the last couple of weeks, we have broken the NLSL and we broke the 25d and 100d SMA. If the 50d doesn't hold and we make a lower low below 1320, this whole move from the beginning of June would start looking like a failed retest of the March high.

  • AMCabrera

    Nah. By de jure I think it has to reach 1.2300-1.2400 by eow.

  • AmazingLarry

    When you rats say “short bonds” you mean to bet yields are going up, right? In other words, short /ZB.

  • Joe_Jones

    Sorry to hear it Gerb. 

  • captainboom

    I like how you’re thinking Skinny.  Been long /ES since the end of the blue light specials this morning.

  • Darth_Gerb

    builds character
    onward and upward!
    😉

  • Skynard

    Like a robot:)

  • Darth_Gerb

    is de jure opposite of deer stand falling?
    he he.

  • Joe_Jones

    Jeez, every time I reload this page I get naughty thoughts. :-p

  • AMCabrera

    Haha. Hey I don’t make the laws

  • http://evilspeculator.com molecool

    How’s everyone?

  • Joe_Jones

    Feeling like a million bucks

  • http://evilspeculator.com molecool

    Well we are above that daily NLSL – let’s see if she holds until the close.

  • AMCabrera

    doing well kaiser. 

  • Darth_Gerb

    not bad.
    fading emotion, trading my setups.

  • ronebadger

    present, sitting on hands with some longs from Friday (dopey me, I doubled up this morning) watching closely

    VIX, anyone get the feeling the VIX snapped WAY to far this morning…not really a feeling, kinda like a fact (so far)

  • Joe_Jones

    FYI: We are currently retesting the SPX 60 min acceleration line

  • Skynard

    VWAP holding, seems the liking of a squeeze!

  • MrMargin

    Bored, waiting for the market to tip its hat. However, I noticed that ZL was staying in a tight range mostly between 1 and -1 for the last week or two before this downmove. We saw the same thing in spring for an even longer period before the top. I’m thinking that a low ZL range like that could be a warning of an imminent selloff. Did you ever try to use it like that, put an ATR indicator on ZL or something to look for contracting range?

  • BobbyLow

    I am totally serene while keeping one eye on the nutcracker.   :)

  • Joe_Jones

    I am reloading some shorts right here.

  • Fibz

    Monthly chart on AUD/JPY is interesting. 3 years and it still can’t break above the 200.

  • Joe_Jones

    Looks scary

  • http://profile.yahoo.com/X3UHQ24EPYQVH62MCJVJM4KIJI peter

     No kidding

  • Joe_Jones

    and horny….
    :-)

  • http://profile.yahoo.com/X3UHQ24EPYQVH62MCJVJM4KIJI peter

     Had some fun with the /CL inside day. Covered right around the NLSL and am long again with a stop just below.  Also flipped EUR.USD and /ES so having a nice day.  You have helped me out a lot. Might just close up and go to the beach.

  • Tronacate

    Current positions……s soybeans…..l gold……l  es……s DX……..s ZB

  • Darth_Gerb

    file under: never trust amateur hour
    [/ES] 
    http://s11.postimage.org/ad5g9ptzl/temp2.png 

  • http://evilspeculator.com molecool

    ¤ø„¸¸„ø¤º°¨¤ø„¸¸„ø¤º°¨ 
    ¨°º¤  S H A K E   N ¤º°¨ 
    ¸„ø¤º° B A K E !“°º¤ø„¸
    ¸„ø¤º°¨¤ø„¸¸„ø¤º°º¤ø„¸

  • http://evilspeculator.com molecool

    Alright, keep it in your pants big boy.