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Welcome To The Wood Chipper
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Welcome To The Wood Chipper

by The MoleJanuary 23, 2017

The bad news is that we’re getting ever more extended on the equity side. The worse news is that sideways conditions may prevail far into February. Barring a major event that somehow throws indices across the board into a tailspin the bears do not seem to be able to muster up sufficient mojo to exploit what clearly is a market that has run out of buyers.

2017-01-23_spoos

Just looking at that hourly panel is giving me a headache and makes me wonder if I wasn’t better off sipping a glass of Michelada at some beach in Puerto Vallarta.

2017-01-23_SPX

The current formation actually is strangely reminiscent of the one we painted back last summer. Whether it resolves the same way remains to be seen but it goes to show that inability to breach an important inflection point (this time being 20,000 on the Dow) usually comes with a price.

2017-01-23_crude_woodchipper

Crude isn’t going nowhere fast and if it can’t convince buyers soon then we probably seeing it near 45 in a week or two. Which I personally wouldn’t mind by the way as a great entry opportunity.

2017-01-23_crude

I may have to increase the dosage of my meds as I’m seeing a repeating formation in crude as well. And once again it seems to be pointing downward. Coincidence? Probably but worth watching…

2017-01-23_USD

The Dollar incidentally is at a pretty significant inflection point. The 100 mark previously served as resistance and if it doesn’t provide support here then we’ll probably see it drop to 99 or lower.

Now let’s look at our momo charts – please grab your secret decoder ring and meet me in the lair:

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2017-01-23_NYMO_SPX

You may remember our bearish inflection point on the NYMO:SPX. We’re still sitting on it and usually we see movement after a second touch. I don’t want to be hasty though so let’s see if it keeps dropping lower. After we love divergences 😉

2017-01-23_NYA50_NYA200

One of the reasons why I am still hesitant to make a bearish call is that NYSE market breadth is still above our 1.0 trigger point. Which is why we may have to endure a few more weeks of this trading hell. Puerto Vallarta is starting to sound better by the minute!

2017-01-23_VIX_volatility

That’s volatility on the VIX (yes, you heard right) as expressed by the rate of change (ROC). You may recall the recent touch of the lower threshold. Those traditionally are followed by a meaningful correction which we have not yet seen. So this adds to the increasing downside risk but unfortunately on its own does not give us license to start going short.

2017-01-23_VXV_VIX

Finally VIX:VXV – usually a lagging indicator at least the way I’m plotting it here via the SMA(5). Well, we’re getting there – first we had a new high and now there’s the divergence suggesting that we should at least see one first swing lower.

Bottom Line

In my mind the smart play is to wait for that first scare to the downside which is usually followed by a reaction to the upside. As long as that one doesn’t breach major highs (doubtful given the lack of buying interest lately) that would be the place to stage a short position or two. Which may actually come in the form of buying options. I would be tempted to grab some now while the VIX is still gyrating around the 12 mark but theta burn is a bitch as they say. I rather give up a VIX handle or two but then see my campaign resolve while my clothes are still in fashion.

So let’s be patient folks – it’s a virtue for one and always remember that no trader has ever gone broke waiting for a solid entry opportunity.


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

    After Fridays bounce in oil I bumped my stop to just under 53 with the assumption that follow through was necessary this week to get things rolling.

  • http://evilspeculator.com Sir Mole III

    It better go soon…

  • StockTalker

    Party on Garth:)

  • OJuice

    Yep. Still an outside chance I think for the long side, but, too much risk of the floor falling out as you pointed out. Have to wait and see what develops this week.

  • http://evilspeculator.com Sir Mole III

    Well, it really doesn’t matter at this point, does it? You placed your trade and as such your stop should be where you exit, not before. We don’t change campaigns unless extraordinary events force our hands.

  • OJuice

    I’m out of the trade. Stopped out last night. Looking at another trade at this point. Wait and see on any good entries is what I was referring to.

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

    while my clothes are still in fashion

    Luv it.

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

    If I see a good entry I’ll let you know – right now it’s too messy in there…

  • ridingwaves

    In PV Cafe de Olla is a must for the palate….get there early…

    taking out bio/healthcare today..

  • ridingwaves

    I picked up VNRAP last week as long term hold with this cabinet now in place…dd required…

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

    is she hot?
    😉

    damn, I’m hungry for Empanadas now.
    :-(

  • http://evilspeculator.com Sir Mole III

    Hey, how are you doing the magnified panel on the right?

  • StockTalker

    Bulls slipping………

  • ridingwaves

    she is a little down in the dumps, cheap date though!

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

    Chart Attributes -> Zoom Thumbnail

  • StockTalker

    Mole signals on today:)

  • Mark Shinnick

    Yes. So…I’m slipping into some short miners pretty soon.

  • Tomcat

    I am not sure if any of you guys follow Raoul Pal, but he made an interesting argument (pretty consistent with Mole’s chart view) about how specs and producers are positioned in OIL.
    and how producers are the shortest they have ever been and specs as u can expect, based on the price are looong. He suggests we are heading to $30 again which is contrary to the midterm belief I have held that we should $60 in 2017.

  • Yoda

    Seriously? Miners look super boolish to me now.

  • Mark Shinnick

    Yes..they do, and may really be so this time.

  • ridingwaves

    the window for move lower is getting pretty narrow, a push thru 50 is going to be fought teeth and nail….with considerable support at 49..
    He might not be factoring in Chinese oil fields looked to have peaked with production output now trending lower

    that being said, I’ve seen an 80 yr old with a 26 yr old hot wife….anything goes in this corpocracy…

  • StockTalker

    VWAP nada

  • BobbyLow

    Afternoon Folks,

    I’ve been out all day and got back in time to check the close of my 9:30 Candles at 12:45 PM ET and was pleased to see my 3 open positions – Short Oil, Long Bonds and Short Russell hanging in there so far today (especially the Long Bond).

    The Markets appear to remain in slice and dice mode so I’m using patience with fairly wide stops. Let’s see how we close.

  • StockTalker

    Re-shorting /CLH @ 53.00

  • Tomcat

    I think your eyes are playing games, our FLOTUS is 46 even though she looks like 26 :)
    The argument from Rao is that specs are already looong so who would be left to buy, but from a technical perspective your levels should act as resistance/support even though short term… I am still debating whether I should initiate a position…

  • strider

    I believe that wood chipper is tried and true Buscemi model.

  • Tomcat

    My TSLA short is getting close to my stop. Very frustrating.

    As usual, should have “listened” to GG.

  • http://evilspeculator.com Sir Mole III

    Shouldn’t be.

  • http://evilspeculator.com Sir Mole III

    Going nowhere fast.

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

    Ya, bulls need to hold this line.

  • Edd

    Congrats on Pats

  • http://greenlander1.blogspot.com/ Greenlander

    When the indexes are chopping, I stay out now and try and find things/ sectors moving. It isn’t worth it for such small range and high chance of being stopped out. Longs looking good except the GLD short. Re-added NTNX which looks ready to break out.

  • StockTalker

    2060 again? Must be important.

  • ridingwaves

    woodchipper, woodchipper
    daytraders, big dippers
    stuffing money down
    like a Fargo clipper

    Woodchipper, woodchipper
    more ups and downs
    then that cool cat flipper….

    I guess I’m bored, a rainbow just appeared though and it looks like it ends near Kevin’s noodle house….time for pho….

    cheers and good luck in your trades..

  • BobbyLow

    Thanks Edd. I’ll be carrying a “warm and fuzzy” feeling until the day of the SB and then I’ll become worried about Matt Ryan and the powerhouse offense of the Atlanta Falcons.

    I have a feeling that most Non-Patriot Fans will be rooting for Atlanta and that’s OK. But if Roger Goodell awards Tom Brady another SB Trophy on February 5, 2017 another item would be checked off of my “Bucket List”. :)

  • StockTalker

    Come on down….The price is right

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

    Nothing like the school of hard knocks. What doesn’t kill you makes you stronger.

    https://uploads.disquscdn.com/images/f2bf363fe69fbdbccc301461fc3901d85b3a809347093fcca7bbf38b33c68427.png

  • http://greenlander1.blogspot.com/ Greenlander
  • http://greenlander1.blogspot.com/ Greenlander
  • http://greenlander1.blogspot.com/ Greenlander
  • BobbyLow

    Up, Down, All Around
    Hope and Fuckery Abound
    This is the Game We Choose
    It is Ours to Win or Lose

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

    git that motivation:

    https://vimeo.com/83785218

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

    We haven’t seen much of these VIX/SKEW readings over the last 15 years or so. Don’t ask me what it means for the short term though.
    https://uploads.disquscdn.com/images/e9fb10651f209ca759ef265a5a3cf05a554281b52ee0975396ea46c71d537e46.png

  • Edd

    First time ever I`ll be rooting for NE in SB. I have to respect all B and B have accomplished and at this point would like to see them put a cap on what has been an amazing ride. You never know if they will get the chance again. Even the greatest QB`s all seem to fade quickly at the end of otherwise stellar careers. Brady is entering into that time where maybe he has a few more years or maybe not. Had to give my son 14 points for him to take steelers in our little wager. After watching them against KC I was counting my money from the opening kick off! Go pats!! Without a horse in the race, I`m just hoping for a good game. As a fan I hate watching the blowouts, unless it`s my team delivering it!

  • ridingwaves

    so at ipo it shot up to 123, I wonder if an RBT can be created off fading IPO’s..even facebook went $10 below IPO in first cple weeks after ignition or was it later…

  • http://evilspeculator.com Sir Mole III
  • http://greenlander1.blogspot.com/ Greenlander

    Yeh I def think so given the majority I’ve seen go down. Shorting after a big daily candle or two would be what I would do if I were to take a stab.