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Back to the charts…
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Back to the charts…

by MoleNovember 4, 2008

We got a nice election rally today.  $INDU rose up 305 points, right into diagonal resistance, and just cracking into my target range.  What is even more exciting than that is the divergent momentum on which we are rallying (had to edit that for my English teacher (holla!)).  What momentum indicators are those?  Well, you should know my “standard” MACD is divergent (both histogram and 2-lines), ATR is horribly divergent (this could be due to the boring action we have been having, but can also be used to support waning strength), as well as a few others I won’t mention.

$INDU 60d/60m

$INDU 60d/60m

We are also poking the upper bollinger band, and with this amount of divergence, another close inside (assuming we get back outside) would be a quality entry.  I will touch on that most likely sometime this week.

There are similar conditions in the $NDX… Outside 2.0BB, divergent MACD, divergent ATR, approaching resistance, and barely into target range.  As it stands to me, the $NDX is painting the most clear wave pattern, and that is a simple flat.  As you can see from there chart, the lines hardly need moving.   I do expect a push higher, likely to 1400, and we will take it (most likely down) from there.  Should the $NDX manage to scrape above 1430-1450, it will be very hard for me not to resist shorting (buying puts) some high fliers.

I want to put in a little blurb about the $VIX, but I do not have a chart prepared.  I have gone back to all data and gauged the weekly (using closes) range of the $VIX in the 2000 Bear market.  The UPPER boundary of that range is right around the 46 level (i.e. we are are retesting resistance from the topside before it becomes support).  The most notable thing by far that happened today was with the $VIX however.  We pushed outside of the 2.0 BB, but failed to close with that level.  What does this mean?  This is the precursor to my standard sell signal (which is immensely more accurate than the buy signals).  Should we get a close outside the 2.0, I will be the first to let you know.  But, sell signal or not, the $VIX confirms that the emotions of the herd have swung very quickly from the most extreme fear we have seen in decades (if not ever), to levels now considered “under the norm.”  Though the $VIX has been cut in half in less than 10 days, so it is quite remarkable that the BBs have allowed mid-40s to be considered sub-normal.  As I said, no chart now, but should we get the sell signal, I will be extremely happy to post my standard $VIX chart.

Okay…Nobody call me crazy.  I am seriously going out on a limb here so you guys can see how my brain works.  I am going to post a “chart” below, and you guys let me know if you can follow my logic, or if I am completely bonkers.  Think about this from a fractal perspective, knowing that markets move in similar “patterns” of different “size” with slight variance in time or “shape.”  That said, put you beer goggles on and gaze in wonder (Note: Beer goggles are NOT required).  If anyone can tell me what ticker and what days I am looking at, I will be modestly impressed (I would like to think I have made it a little tricky).

Chart Comparison (Beer goggles optional)

Chart Comparison (Beer goggles optional)

So what is it?  Can you see the similarity, or are you all currently fleeing from the blog because you think I am a complete nut (if you flee now, you will miss some good trade ideas)?

And now to assure you that I am not REALLY crazy, check out CCJ.  Fits the same bill I have been laying out all through this post… divergent (MACD, ATR, Volume), outside BB, at resistance, and is also rallying in a nice channel.  A push up towards 20, and I will be buying up puts.  If we don’t make it that high, I will be forced to trade the break-out move.

CCJ - Bounce or Break!

CCJ - Bounce or Break!

One last gem for the road is CHK.  Nice ascending triangle in a downtrend (i.e. bearish wedge).  Stiff resistance around 24, and highly divergent on MACD, ATR and volume (are we starting to see a pattern?).  Again, two buying ranges here, one is the aforementioned resistance at 24, the other would be a break of the rising resistance line which should pass through 21  (and higher) tomorrow.  Two targets on this guy too.  A secondary resistance cutting through the 17.50 range, and the previous low of 12, which would represent a 50% decline from an entry at 24… Any takers?

CHK - 60d/60m - Rising Wedge

CHK - 60d/60m - Rising Wedge

Given all the ideas we have thrown out there today, y’all should have plenty of homework to do.

Skål!


About The Author
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.

  • neutrino

    Glad to see I'm not alone in doubting this rally. I'm not ready to enter yet. The charts tell me DOW 9800-10,400 is probable first. Last week I bit into this BS rally until about 2 PM today. Pulled the chute on almost all my longs(afam, celg, thor, pets), listening to that inner voice from Polterguiste whispering “get out !” I'm still holding a few recent oil dividend plays (BPT, PWE) which are really dollar shorts/commodity longs.

    About a week ago I started a blog with an emphasis on TA. I hope it's not impolite to post it here, if so my apollogies. However, it's http://www.speculativemeasures.com and I welcome all critiques. I do regret that posts thus far have been bullish, but up till now that's what my charts have called for.

    I'm more of a trend trader (1-3 months +) than a swing trader so this counter trend rally just makes me sick inside. I can't trade it and still sleep at night so I'm out. My gut tells me that the next phase of the bear market is ever closer. I can't help but think the American standard of living has peaked.

    Many thanks to Mole et al.

  • Growler

    My neighbor was over tonight to watch the elections. She proceeded to tell me mortgage rates were revised four times (4x) today. I used to be in the mortgage debt business and a day that carries 4 revisions is incredibly hairy. That being said, rates dropped over 1.125%.
    This is concerning given that rates don't move this fast unless some tumultuous event occurs.

    So today was a big day for flight to “quality”.

  • http://z-stock.blogspot.com/ zstock

    spwra should be crushed…

    11/04/08 07:40pm
    [SPWRA] SunPower Corporation Guides Q4 $0.58-$0.65 v $0.75
    That's a 17% miss

  • https://www.evilspeculator.com berkshire

    I don't know where Barry is getting these quotes, but every single one has been fantastic…

    “The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money.” —Alexis de Tocqueville

    (I don't think we have figured that out yet) 😛

    Skål!

  • Dimitry

    Check out MTD for short- scales for every industry. Lots meat on this bone.

  • BigHouse(Aka Mr Vix)

    The election is over.Time to focus on new stuff. Keep your eye on the tape.

  • Ukla the Mokk

    Here are my ideas and some notes on why I like them. All I want to reiterate is a little rule that happens to be critical…and one I didn't do a good job of following today: DO NOT enter a trade on anticipation of what you think the underlying will do; enter a trade after an unquestionable confirmation of a tangible trigger (e.g. up candle followed by a doji at resistance, followed by a down candle that extends past the low of the doji and at least half-way into the aforementioned up candle…enter at that candle's close or the next candle's open. THAT is a trigger. Follow it!).

    APC – http://screencast.com/t/f34eAWbQ
    BA – http://screencast.com/t/pctaXu6Uz
    UAUA – http://screencast.com/t/8waGLDCW

  • malusDiaz

    what if you could project stock data in 3 dimensions,

    you have X = price ranges (top to bottom), y = time, then Z = volume, you could see patterns in 3 space.

  • molecool

    I like it – a LOT! Just like the 3D map over finviz.com – but with barcharts instead.

  • molecool

    Good info – and this time it's timely! 😉

  • molecool

    Poltergeist? Love it – possessed traders fit right in here…

  • http://z-stock.blogspot.com/ zstock

    Don't go to any other blogs except this one__There's a political blood bath going on out there in the comments sections
    I got my right arm cut off__and my foot got nail gunned_help!!!

  • http://www.myspace.com/181419967 JZT_CHIL

    Can you give more “clues” to that “chart” question? 😉

  • http://z-stock.blogspot.com/ zstock

    Ukla
    I like the %K ocsillator on your UAUA chart —
    Wish I could post the UAUA chart at my site.

  • http://www.myspace.com/181419967 JZT_CHIL

    Maybe you deserved it? (^_^) Don't attack, just state your point & give supporting evidence.

  • Paleface

    All Hungarian political parties already discovered it in the last 30 years:(

  • http://www.blog.donnaklinenow.com dkpa

    Just wondering… since the election is over, what will happen to the PPT?

  • https://www.evilspeculator.com berkshire

    The real question is only if you can see the similarities, or if you think I am all wet. If we get a few more responses, I will be sure to clue everyone in on what it is. If noone validates my efforts however, I will not elaborate on it.

    Skål!

  • https://www.evilspeculator.com berkshire

    Jeeeez, hard to argue with your first line. 😉

    Skål!

  • minion of the ppt

    They will continue to serve the country and thereby their own interests. Expect no change.

  • Paleface

    To me the left chart shows a downward slope after the spike, the right is udecided yet, maybee a following breakdown, or a megapfone.

  • https://www.evilspeculator.com berkshire

    There is a very steep drop on the right chart immediately after the sharp rally. After the drop, there is some consolidation before a final drop. As I said, if you could expand the time taken on the right chart to match the left, would you see similarities, or am I too far out there.

    Skål!

  • Duuuuuude

    The best thing to do at this point is to give our new president a big show of support, regardless of your affiliation. I voted for McCain, but you must move on and hope for the best. The bickering helps nobody. There will be good things happen. It is not all bad!

  • bts

    The two charts remind me of the way breadth indicators act during a countertrend move. I assume that's not what they are, but the left one feels like a breadth indicator behind the right one's bull trap.

  • https://www.evilspeculator.com berkshire

    Hope y'all folks hopped on FSLR yesterday. Below 160 and we should be heading easily lower. However until we exit said chop zone in the $NDX or $INDU, I would not jump to conclusions.

    However…Great way to start the day!

    Skål!

  • gagelle

    Thanks Berk.

  • http://www.myspace.com/181419967 JZT_CHIL

    Same here. Thank you!

  • Ukla the Mokk

    Too expensive for my blood. The profits would be phenomenal, but the losses would be devastating. Some day though. 🙂 I have my own ideas for today that I posted earlier and they look pretty sweet without overexposing myself.

  • molecool

    I just grabbed PBR and RIMM looks ripe for the plucking.

  • molecool

    1+ for good money management.

  • Gumbo YaYa

    Nice. Got on it!

  • Gumbo YaYa

    DRYS – Short at apex of sym triangle?

  • https://www.evilspeculator.com berkshire

    Okay folks. For MY entries, BIDU and MA have given the signal. I am waiting on a little bounce up to grab them (Rather I would LIKE to wait for a bounce up). GOOG is close, and CF has given the signal also. Thought to watch.

    Skål!

  • https://www.evilspeculator.com berkshire

    I don't see your triangle, but I like DRYS as a short @ 25 or on a break of rising diagonal resistance.

    Skål!

  • Gumbo YaYa

    Mole, what are you using to determine your entry signal on RIMM?

  • Gumbo YaYa

    Triangle is 10/6 with the break down on 10/22.

    If you don't see the triangle, why $25 as your entry?

  • C.C. Rider

    Berk,

    My guess is Nasdaq circa 2001 to 2002on the left, and Dow at present. Although you could substitute many others including recent $WTIC, homebuilders or banks.

    BTW, BKX closed yesterday right under the 10 yr monthly Fib at $61.97. It's all down from here.

    http://www.screencast.com/users/texana44/folder

  • https://www.evilspeculator.com berkshire

    Okay…previous triangle…Got it now. Under the gap around 22.5 would be a nice entry IMO.

    Skål!

  • molecool

    CLEAN CUPS

  • C.C. Rider

    Here's one for YOU Berk and others. What is this comparison? Clue, noth the same time frame, but the same time of the year.

    #1

    http://www.screencast.com/users/texana44/folder

    #2

    http://www.screencast.com/users/texana44/folder

  • https://www.evilspeculator.com berkshire

    Not sure of the charts, but I damn sure see the fractal comparison of the impulse waves.

    Thanks.

    Skål!

  • Ukla the Mokk

    +1 to Gumbo…I'm curious what you used for entry criteria during amateur (half) hour. I'm not disagreeing that they look like really good potential setups in the making though.

  • https://www.evilspeculator.com berkshire

    Your close, very close. I didn't go back that far though. Thanks for playing and thanks for you addition above. I will reveal my answer later on.

    Skål!

  • Ukla the Mokk

    I'm already short DRYS (with a put) from yesterday. But I'm still in the red…needs to drop more.

  • moneyfarm

    I will take a stab at your chart comparison. I'm not sure what your scaling and time frame are, but the left chart looks like it might be the $DJI Sept-Dec 1929. The right chart may be the $DJI Sept 2008-present? My beer googles may require more adjustment, but it is still early.
    Cheers

  • benji12

    mkt to end in the green by 12noon pst. mkt holding up VERY strong. Off the lows and trickling up.

  • Gumbo YaYa

    BIDU didn't offer us the gap up I was hoping, so it is too far away for me if I put an exit above yesterday's high. Would that be too wide for an exit?

  • Ukla the Mokk

    Wow…CF looks nice! I may just grab a put on that one if it retraces a little. I'm currently watching BA and APC. Was watching UAUA, but it just doesn't want to break down the way it “should” so I'm skeptical.

  • benji12

    fslr to be in the green by close. Guarenteed. All everyone talks about on tv is how solar gonna benefit the most from obama. already off its lows. I've got puts but may be getting out very soon

  • gagelle

    Went long on CHK.

  • http://z-stock.blogspot.com/ zstock

    JZT, all I said was –The news say it's a landslide victory__
    MY Deep OTM FSLR puts from yesterday up 40% YAY,

  • https://www.evilspeculator.com berkshire

    You were smart apparently!!

    Skål!

  • http://www.myspace.com/181419967 JZT_CHIL

    Duude, just wanna let ya know I also voted for McCain.
    Support-for-new-president honeymoon time only lasts about a year in general.
    As “show of support” to our nation I have loved ones serving in the military – 2 in the Air Force just got back from Germany recently.
    It looks like you have good insight into trading commodities because of your background.
    Like “Roger Neshen” at Fast Money (^_^)

  • JZT_CHIL

    Duude, just wanna let ya know I also voted for McCain.
    Support-for-new-president honeymoon time only lasts about a year in general.
    As “show of support” to our nation I have loved ones serving in the military – 2 in the Air Force just got back from Germany recently.
    It looks like you have good insight into trading commodities because of your background.
    Like “Roger Neshen” at Fast Money (^_^)