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Welcome To The Wood Chipper (Again)
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Welcome To The Wood Chipper (Again)

by The MoleAugust 18, 2014

I’m happy to report that I’m on the path to recovery but it’s been one rough weekend down here at the lair. The week prior I injured my lower back and just when I was getting better I came down with a nasty cold that kept its grips on me until Sunday. Not feeling 100% by any measure but the reflection in my mirror is starting to resemble a human being again – well, sort of (in the right light and special effects).

Now back to business – this is the situation in the nutshell: The bears dropped the ball near an important medium term inflection point (i.e. 1900) and the ensuing punishment has been swift and brutal. We’ve recovered almost all lost territory and are now back where none of us really want to be – in the dreaded wood chipper zone which spans between 1955 and 1980. Twenty five handles of pain and I don’t expect this to be a fun week. Chances are there will be profit taking up here and fortunately we may be joining the fun:

If you’re a sub you should still be long since 3917.25, which at this point has banked us around 2.6R. My stop has been advanced to the 2R mark at 3985.25 and so should yours. Nothing much else to report on the equities side. I don’t see any entry opportunities worth taking about right now and given where we are picking a direction here is tantamount to a coin flip.

However if you want to grab a few lottery ticket shorts then this is pretty good territory. Perhaps pick a collection of 194 to 193 Spider puts and then link your stop to ES 1580. That is where the bears should lose all hope (again). The bearish case isn’t completely dead but it’s looking pretty bloody due to massive stab wounds. Expect it to expire if the ES finally manages to hop above 1980. I don’t have a directional bias here – let’s see what the tape does. If we start looking weak I may myself grab some of those lottery tickets – for a limited time (i.e. in this chop zone for a day or two) the risk/reward here is pretty good actually.

For the subs I have some very interesting EUR/USD perspectives – you don’t want to miss this!

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You have been briefed – now have fun but keep it frosty. See you guys later this afternoon.

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.
  • ridingwaves

    well, it looks like they did decimate late to party VIX players

  • Billabong

    You’ve had a rough couple of weeks. Are you doing any natural anti-inflammatory fruits and vegs? How is your meditation for stress relief going?

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

    4 days ago – EDIT: SPX overhead challenge 1975. maybe a retest to the median 1941 to shake out the weak hands.
    http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=0&mn=3&dy=0&id=p44485720891&a=316518399

    -GG the Oracle

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

    ROC nudging positive.
    class refer to sections March & May for previous wood-chipping history.
    [SPX]
    http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=1&mn=0&dy=0&id=p63686698242

  • BobbyLow

    Looks like the Equity markets are having Bear Butt for breakfast and lunch again. I have no dog in this fight and I’m just a passing observer. 🙂

    I’ll probably flip to the short gold before the EOD that I should have done on Friday.

    Another topic is that Bias Kills. On the last thread I said that I didn’t decide to get back into trading Oil until August 7th and that it had already gone down to 97.63 by that time. I decided back then that I would wait for a Long opportunity (aka a Bullish Bias). Well here it is now down to 93.79 at last print. That’s a $4.00 opportunity cost down the drain.

    It is what it is.

  • BobbyLow

    Hey GG where the fuck is everybody? 🙂

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

    I don’t Know. I showered and brushed.

    hey, what do you think of WTIC? pretty snappy eh?
    http://stockcharts.com/h-sc/ui?s=$WTIC&p=D&yr=0&mn=6&dy=0&id=p27560307967

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

    GLD is about 10 cents off the plumb line, IMHO.
    it’s been dead for about 2 months.

    http://stockcharts.com/h-sc/ui?s=GLD&p=D&yr=0&mn=9&dy=0&id=p27791976669

  • Billabong

    Mighty quiet considering ES is up 16 points …

  • http://evilspeculator.com molecool

    Just hit the gym for the first time and was doing pretty well. I think I may be hitting the nudie bar later today for some much needed meditation.

  • BobbyLow

    Yeah but that chart ends on Friday and it’s a good thing I didn’t go long on wishful thinking. Here’s a picture with today’s action on it.

    http://screencast.com/t/POxqVwuM

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

    lesson learned. never go long while under the MA’s?

  • BobbyLow

    Well I just flipped over to GLL (2XShort) few minutes ago. Even though I’m trading off of the Daily /GC on this one, I expect to receive a number of small losses before I hit a Vein.

  • SS_JJ

    Throwing some bear p0rn and wave waking for those interested. It is a slow day after all.
    The top 100 h BB is my target for the retracement, after that the sky is the limit.
    I don’t have much confidence in the bear case as Nasdaq is making new highs.
    I suppose some mental m. won’t hurt though.

  • SS_JJ

    hehehe, “they” are fu_king up with Ras_Putin piggy bank.

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

    funny. but don’t get Scott all worked up about ‘they’.

    time for coffee!

  • BobbyLow

    Sometimes this is the case but not all the time. There are other factors involved. 🙂

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

    oh come on….don’t start acting like Ivan.
    😉

  • BobbyLow

    Better watch out for too much Bear Porn because I read somewhere that the ultimate effect can cause blindness. 🙂

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

    NAZ new highs?….oh crap.
    well, never say never. it has crossed that upper line before.

    http://stockcharts.com/h-sc/ui?s=QQQ&p=D&yr=0&mn=6&dy=0&id=p17240513229

  • BobbyLow

    LOL

  • SS_JJ

    There is not much support below. 100 w bottom BB is at 85.5 and P&F has a target of 84.00.

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

    that would explain why no one see’s Mole’s charts!!

    http://aqu52.files.wordpress.com/2014/08/94297.gif?w=305&h=305

  • SS_JJ

    or an uneven forearm build-up 😉

  • BobbyLow

    Yep. It wont be the first time this thing has traded in the 80’s. However, I’m still going to wait for a long signal. If and or when that long signal fails then I’ll go short.

    At this moment, the selling appears to be very strong so it might be awhile.

  • BobbyLow

    Or you might want to watch it only until you need glasses. 🙂

  • SS_JJ

    yup. Not the time to play knifes catch.

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

    hey, make sure those bar chairs are Ergo friendly.
    😉

  • Billabong

    TBT set-up … long @ $56.34

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

    I was just typing that setup….too funny…

  • Billabong

    VALE … strong set-up, long 13.71, SL 13.28

  • Billabong

    I’m just visiting , not staying…. lol

  • ridingwaves

    the 60 minute shows capitulation candle backed by volume on Friday…GS call a couple weeks ago for higher rates led a lot of sheep into slaughter as it kept dropping…they got what they wanted and are now ready to turn it…

  • http://evilspeculator.com molecool

    Boy, this is boring…

  • captainboom

    … time to go fishing.
    – J. Livermore

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

    Our systems must be closely aligned… 🙂

  • Billabong

    🙂

  • Billabong

    You’ve already finished with the bar? Oh, that’s right, Spain starts night life around 10 pm … only another couple of hours to go…

  • Billabong

    I’m going to burn the midnight oil this week (and will be close to burnout) and take the next two weeks off to charge the batteries.

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

    an update on the Silver rat.
    Range or Trend? as Scott would remind. [RANGE]

    looking at the February and June counter swings.
    I wouldn’t be a buyer until sub 18.50
    even getting price correct, is no win, months can go by with little change in altitude.

    http://s1.postimg.org/c1hqi0a33/silver_rat.png

    -GG

  • Billabong

    Are you looking for a double bottom?

  • SS_JJ

    http://stockcharts.com/h-sc/ui?s=HL&p=D&b=5&g=0&id=p48388689820
    I am somewhat happy to hold HL long today. Miners benefit from lower operating costs when oil goes down, so even though the price of the metal is not too shiny, the miner is faring rather well.

  • BobbyLow

    That would be good if you can. This stuff can be very addictive.

    Speaking of which, I’m down to only two active addictions – The Markets and Coffee. These two seem support each other. 🙂

  • http://evilspeculator.com molecool

    That symbol would be popular here in Spain.

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

    I’ve got mixed signals. the miners BP is pointing up, but the spot commods are neutral to negative

    http://stockcharts.com/h-sc/ui?s=$BPGDM&p=D&yr=2&mn=0&dy=0&id=p99193909996

    so I watch, and wait.

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

    I’m looking for a new low, capitulation.
    possibly a loooong whisker tail.

  • SS_JJ

    Watch and wait is a good approach.

  • Billabong

    I agree with your mixed signals. Even within the miners have mixed signals; HL going up, NEM a sell, SLW beginning to turn up … sage GG advice watch and wait.

  • Billabong

    It falls in-line with patience, discipline, and consistency (PDC).

  • Billabong

    Hopefully it’s a money voucher and not a lunch voucher … 😉

  • Billabong

    🙂 … aren’t we all.

  • newbfxtrader

    Would be nice.

  • newbfxtrader

    Dang it bears. Nice way to blow my setups 🙂

  • Billabong

    Here is the Jesse Livermore book; “How to Trade in Stocks”. It’s an easy read of less than 90 small pages. You will find his trading style was different because he was dealing with a different environment. What isn’t different was his discussion about human psychology, how trading everyday is hazardous, and the role of sitting back /waiting.

    Worth a read

    http://os24.org/files/a-z/speculation/Jesse_Livermore-How_To_Trade_In_Stocks_(1940_original)-EN.pdf

  • Billabong

    It’s almost time for some trading refresher training like left / right brain integration, how to maintain a bias free zone, meditation options for the naturally uptight individual, risk management, the role of intuition, remembering to buy strength and sell weakness, and needing the confidence to stick to a RBT plan even when things are going bad … among many other subjects.

  • SS_JJ

    Thanks B.

  • http://www.ProfitFromPatterns.com/ Ivan K

    Whilst most people focus on the depth of a drawdown … in terms of Dollars, R or percentages … there is another aspect of a drawdown that can be far more devastating … and that is the length of a drawdown … or how long to achieve new Equity Highs.

    The chart below shows an intraday RBT that has been running now for about 47 days … active and focused one market approach … fulfilling the goals of the student … and within his capabilities to apply.

    As this is a RBT that the student spent the best part of a year putting together and tearing apart … ie it was his creation … as a result he had the conviction and confidence to endure the last drawdown … very mild in terms of depth … yet potentially devastating in terms of length … about 100 campaigns of being under water, so to speak … well, actually not under water as the RBT was well up at that stage … it was just a drawdown … to deal with.

    In a perverse sense, the fact that drawdowns are a normal part of life / risk taking … is a great plus … especially in helping to answer an obvious question that eventually all traders have to address.

    Chart below.

  • Billabong

    About 100 campaigns in a drawdown. That is hard to go through. When you work so hard to move forward, and with the inevitable 6 or 8 campaign drawdowns in a row, it’s tough on the psyche. Two steps forward, three steps back, 5 steps forward…. Bad enough if your holding tight to your RBT let alone throwing in mistakes on top of it. Did this individual continue on after training?

    I have to check out … I’ll touch base in the morning.

  • http://www.ProfitFromPatterns.com/ Ivan K

    ‘That is hard to go through’ … it is simply what it is … the degree of ‘hard’ is proportional to the degree of ‘attachment to the outcome’ … every person is different in their make-up … hence what is hard for some … is merely an exercise in self-control for another person.

  • Scott Phillips

    Virtually all surviving long running systems will go through 100 trade drawdowns at some point.

  • Scott Phillips

    If you even have to think about it its a range not a trend. Though the short term trend is down but objectively the preceeding upmove was more violent and fluid than the recent downmove which has an element of choppiness about it.

    Think you are right in this instance 🙂

  • http://www.ProfitFromPatterns.com/ Ivan K

    Thank you for the honourable ? mention.

  • phylum

    … “maintain a bias free zone” …. logically, how can you take a trade if don’t have some sort of bias (IP’s excluded)? Isn’t the bus going somewhere?

  • phylum

    Intuition is relative to time frame & risk tolerance imho

  • phylum

    my right & left brain have issues, that’s why we have fingers & toes (saves using a calculator) … see intuition

  • phylum

    no reason to be uptight … the sun “will” rise again tomorrow

  • phylum

    if you have a RBT … aka checklist …. just remember to keep your fluids up

  • phylum

    Confidence … I heard a story today about a guy who decided to be a coal miner. During his work experience, underground, there was a gas explosion and he & his co-worker were literally buried alive. They ran out of air and passed out. They were both eventually dug out and revived. Afterwards, though, only one was able to go back, the other was so traumatised he went elsewhere. Sound familiar?

  • Scott Phillips

    This is quite common in trading. Having experienced blowing up an account, the beginning trader can psychologically scar himself with thoughts that he will never be good enough, born to lose etc.

    Myself, I was trading for big money when I wasn’t yet competent. Didn’t end well, and took some time to get over

  • Scott Phillips

    This is an interesting question, and one which I have changed my opinion on. I used to preach from the church of Ivan… ie have no bias at all. This is an emotionally easier way to trade.

    These days I try and be biased in favor of buying strength and selling weakness, in favor of trend continuation rather than trend reversal.

  • Scott Phillips

    For wave wanking this is actually pretty good. I see Tim Knight was despondent today, would be hilarious if it plays out

  • phylum

    Most likely applicable to “life” in general …. what was that “Lake W….” effect?

  • phylum

    Maybe there’s a filter in there, somewhere?

  • http://www.ProfitFromPatterns.com/ Ivan K

    ‘Logic’ is based on an ‘experiential construct’ … and hence challenging to arrive at a definitive perspective … that is an absolute.

    After all where is the ‘logic’ in engaging in a field / any field … where the vast majority do not achieve their perceived goals?

  • phylum

    If there are no absolutes, then it is only the quantum of time, quantity & quality. That is where, eventually, the “numbers” stack up for better or for worse.

  • phylum

    Looking at this scenario objectively ….. do you know of a business that does not suffer a “draw down” at some stage. I really don’t see why trading is any different to any other business …. mmmmm that’s why we, in business, have overdrafts … so maybe you’re business needs to back itself …. nada difference in my book.

  • http://www.ProfitFromPatterns.com/ Ivan K

    There certainly are … ‘absolutes’ … and some of them are less challenging to arrive at … especially when it pertains to ‘Life’.

    It is in the world of risk-taking where they are less well defined … or definable … yet they do certainly exist.

  • http://www.ProfitFromPatterns.com/ Ivan K

    It is a rare business where the nexus between decision-making and action and ‘vindication’ thereof are so ‘instant’.

  • http://www.ProfitFromPatterns.com/ Ivan K

    It is a rare business where the nexus between decision-making and action and ‘vindication’ thereof are so ‘instant’.

    EDIT: One commonality between business in general and the world of trading is being under-capitalised … emotionally, knowledge-wise or financially.

  • phylum

    agreed, the risk exists …. in trading however one can define the risk … in many other endeavours (industries) however the “risk” may very well be undefinable

  • phylum

    In context …. then a “trading” business is like any other business, it is a business.

  • http://www.ProfitFromPatterns.com/ Ivan K

    In trading the ‘risk’ goes way beyond a single campaign … for example … what is the risk of another ‘flash crash’ … what is the risk of the goalposts being changed mid-game … what is the risk of a de / re-valuation of a currency … what is the risk of a market going into a series of limit moves … etc. All these are real, yet hard to quantify, associated risks.

  • http://evilspeculator.com molecool

    Time is not a constant – it varies with gravity and velocity – look under time dilation. Also there are theories that time constants vary throughout the universe. And according to one Portuguese astrophysicist time used to move about 60% faster in the early stages of the universe. So the concept of time as a universal constant is most likely wrong 😉

  • phylum

    k, getting a new watch:)

  • http://www.ProfitFromPatterns.com/ Ivan K

    Spot on.

  • strider

    Your edit comment reminds me of the ‘defect trap’. If someone is raised in a situation where they are overly criticized, they think of themselves as being defective. If this isn’t dealt with, then they place themselves in situations throughout life that confirms the defectiveness. I believe the markets have many players that are dealing with this.

  • http://www.ProfitFromPatterns.com/ Ivan K

    Not just in the markets !

  • BobbyLow

    You guys are making my head hurt on this “time dilation” stuff. LOL

    Roughly speaking of time dilation,
    I made a comment on ES around 4 PM my time yesterday just before my
    electric power went out. It was a major outage and power did not come
    back on until 12:30 AM this morning. After power came back on, I wanted
    to check my charts regarding open positions before I went to bed but
    my internet was still out. TG for my phone app as I was able to monitor
    and adjust a couple of stops based on Pips. But all and all, I
    couldn’t get over how badly I missed the internet and the ability to
    look at my charts. As it turned out, there was only one position that
    should have been closed last night according to its chart and I missed
    the correct stopping price by only 8 Pips.

    So not having a clear lens of my positions was a form of time dilation as a portion of
    my control was taken away from me. The market did stop because I did not
    have internet.

    Oh shit, I’m still half asleep and I need to go back to bed. 🙂

  • http://evilspeculator.com molecool

    Actually the market didn’t stop – you were cut off from the phone/Internet and because of that your mind was traveling at much slower speed. And according to time dilation time in Chicago and NYC was passing so quickly in relation to you that you didn’t perceive any movement at all.

  • BobbyLow

    This reminds me of conversations held back during my pot smoking days. 🙂

  • Billabong

    I think we all go through this if the journey is long enough. I had enough of those couple of big 5 and 6 figure winners a year where you then spend the rest of the year pissing it away in bad “trades”. It became a situation where I needed to strip all that I knew away and build from the ground up. A step by step approach; remove the bias, small trades, start a campaign, identify and reduce mistakes, accept drawdowns, etc,. One of the guests mentioned he couldn’t start over because it would take too much time. That says it all…

  • Billabong

    Aren’t you on EST? What are you doing up so early … you need your beauty rest.

  • Billabong

    “what is the risk of the goalposts being changed mid-game” … USG 18 Sep 08

  • Billabong

    That’s why we can make money on it … the bots can’t be programmed for human intuition yet.

  • Billabong

    Everyone lives their beliefs and their own reality.

  • http://www.ProfitFromPatterns.com/ Ivan K

    Ever-present … margins can get varied … leverage can be changed … and more !

    EDIT: Account minimums can and have been increased etc.

  • http://www.ProfitFromPatterns.com/ Ivan K

    Perhaps only kids (pre-school and TV) truly do that ?

  • BobbyLow

    Yes I’m on EST. Going to try to get a little more sleep now. 🙂

  • http://evilspeculator.com molecool

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