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Bull Hunting Season!
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Bull Hunting Season!

by The MoleFebruary 22, 2009

I think it was Karl Denninger who said:

You can dress up a pig and call it daisy but in the end it’s still a pig.

If I think back and reflect on the past year the one salient sentiment that stands out is a complete and utter disregard for reality. Trillions of tax payer dollars have been pumped into obviously insolvent banks, GSEs, and other financial entities – and this is what we got in return:

Just take a step back and marvel at this chart for a minute or so, and then reflect on the fact that during each and every small retracement the financial ‘experts’ on CNBC, Barrons, MSN, etc. claimed that the bottom was in and that now was a good time to shop for bargains. As the old saying goes: Analysts – you really don’t need them in bull markets – and you definitely don’t want them in bear markets.

Hillary Clinton just returned from an Asia beg-a-thon as overseas money is increasingly pulling out of GSE paper, which they now want to be guaranteed (FYI – GSE’s are government supported but not guaranteed). Of course we cannot do that without blowing up the treasury market as this would send yields into the sky – the opposite of what Uncle Ben wants to have happen. Yes, the law of of unintended consequence – it never fails to strike, especially when the levers of our economy are being played like a medieval pipe organ during Sunday mass:

Last week’s tape was ugly for the mouth breathers – breadth was clearly negative every single day and it seems that the 2009 Bull Hunting Season started in mid February. If you didn’t bag your 2000 pound bull just yet, no worries – the bears are just getting started and there’s plenty of downside left to enjoy. BTW, in case you guys ever wondered what Tim and I do during our weekends – here’s a recent snapshot:

Okay, let’s get serious – we’ve got tons of charts to look at, but I promise you that you’ll like what you’ll see.

On Friday I mentioned that the DJI had breached its November 21 low of 7449.38- and that pretty much was the death knell for the pesky triangle scenario. Good riddance, you shan’t be missed! BTW, for now just make a mental note of that 7,197.49 line I marked on the chart – we will get back to that one a few charts down.

Although it is still a theoretical possibility for the SPX, at this point probabilities clearly favor our intermediate (5) scenario. I am now projecting two possible paths going forward. Either the little rally on Friday was it for the expected consolidation and we continue our trajectory downwards or we retrace up to 780 or maybe towards the 800 zone before we drop into the abyss. There are some interesting fib cross-overs which I have taken the liberty to highlight for you rats.

Orange: We are half way in Minuette (iii) of Minute {iii} of Minor 3 of Intermediate (5). The path from here is straight down and it should be violent, especially if we take out the November 741.02 low, which in this scenario would probably happen later this week.

Blue: We are in Minuette (a) of Minute {ii} of Minor 3 of Intermediate (5). We consolidate, maybe very quickly as bottom feeders (and the PPT perhaps) step in again to bang up the tape one last time. After we touch 780 – 800 bearish sentiment should should catch up with them just like gravity hitting a burned out Titan booster module at 60,000 feet. Seriously now – if this turns out to be the count my target zone highlighted above would be extremely conservative.

For obvious reasons I would prefer the blue scenario as I am looking for an opportunity to reload – besides we’ve seen five down days in a row now and a little bounce would re-energize our downside potential. Remember, the market rarely continues in one direction for an extended period of time.

Remember that 7,197.49 mark I mentioned above? Well, it just so happens to be the very bottom of the 2002 cycle a wave. The 2007 ‘bull market’ peak was nothing else but the end of this Supercycle’s b wave. We are now in the beginning stage of the c wave, and if you think you’ve seen the worst you’ve got another thing coming. This bear market is just coming out of hibernation as we are now only completing Primary {1} of Cycle wave c – we’ve got 4 more waves to go.

But in the immediate future – what do you think will happen once we breach and eventually close below that 7,197.49 low? Your imagination is as good as mine but I can promise you that it won’t be pleasant for the bulls. Unless of course you enjoy wearing battery charger clamps on your testicles – to each his/her own. How’s that as a visual for you? 😉

As you know I recently started to count the wiggles on Mr. VIX as well. Again, I must point out that any conclusions are still premature but it seems that my current count strongly supports the Intermediate (5) scenario in equities. Based on the above we are now pushing into Intermediate (3) and the target zone here would be 75 -80. So, better enjoy your ‘cheap’ options while they last – volatility should challenge those prior peaks in a fairly short order.

I am the first one to admit that I didn’t expect to see 1000 before we would see 650 in Gold but here we are. Bullish sentiment among Gold traders is now well established in the 90 percentile – and no matter what the count is at this point (and I will follow up on this next week) it’s time for a retracement, just like in March 2008. I’ll be loading up on GLD puts and maybe some ZG contracts when I see signs of a rollover (e.g. stochastic divergence, lack of volume, etc.). Remember that commodities often trace out an extended fifth wave (while equities like to put in extended thirds), so I think we need to give Gold a bit more time – but not much.

While I’m typing this the Yen is doing exactly what I told you guys it would do – slingshot back from the lower border of its 2.0 Bollinger band. That can’t be good for equities tomorrow – I actually hoped they’d keep a lid on it for another day or two – I really want that damn counter rally!! &@%*#*

That’s all I got for tonight – I could go on with various measures, correlations, etc. – but it’s becoming quite clear where we’re heading, which is down. One word of encouragement: If we rally it’ll probably be very violent and you’ll see some long candles as a lot of pent up upside momentum has accumulated – Keirsten mentioned something on Friday about the quiet accumulation of calls by institutional traders. I personally will not let any counter rallies discourage me from grabbing index puts left and right while they’re on sale. Frankly, at this stage I will continue to load up even if we push past the 800 mark and maybe towards 820/830. The DJI is at a new low and so are the Dow Transports (DJT), the Dow Jones Composite (COMP), and last but not least the S&P 100 (OEX). These are bearish Dow Theory confirmation signals and the probability for a counter rally at this stage has been greatly diminished.

UPDATE: I meant to post this earlier and just remembered:

Cheers!

Mole


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 the usual social media waterholes.
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  • BalaB

    Ok. That bull riding picture is funny.
    LOL

  • Marco

    What time frame for puts you have in mind?

    Not familiar with option trading at all, learning and very scared right now, actually in shit myself friday.

  • http://www.slopeofhope.com Tim Knight

    I look pretty cool riding that bull! Sure beats the clown suit I used to wear.

    As for 650 on the S&P: thunderous applause and agreement.

    Genius is never understood in its own time.

  • molecool

    Seriously, these guys must have balls of steel – maybe they would make great traders 🙂

  • Keirsten

    Hey Mole- wasn't me who mentioned call activity on Friday, I was sitting here in absolute amazement at the lack of volume on the block trades. If that was a dead cat bounce, RIP Kitty. I think someone mentioned some call activity on BAC and some possible interesting volume on BAC preferreds. Who's buying that toilet paper? Karen Finerman or Ben Bernanke? It appears to me, as I've told you privately, I think they've totally screwed up the liquidity from the Feb. 12th stunt and are running out of bullets at these levels. As I watched the mouth pieces over the weekend I sense the big money orders are lying well below where we landed Friday, and all eyes are now watching 600-650.

    Now… obviously a lot of shorts covered on Friday- there's some volume – (what didn't get covered on Thursday the 12th,) some flipped long for a potential rally, but in all honesty, and particularly after No-bama mentioned the T word over the weekend and directed it at businesses, I think he may have just put the nail in the coffin. IS HE COMPLETELY INSANE? (sorry, I'm a bit blown away.) I just heard a stat that said- in order to pay off what they've already spent they'd have to raise the taxes on the wealthy to 95% of income, and that doesn't factor in the deficit! HAS THIS GOVERNMENT GONE INSANE?

    Here's a simple chart from Yahoo that truly shows how pathetic it was on Friday- even a plain 'ol vanilla chart like this can speak volumes. TTFN Comrades and G/L to us all this week.

    http://finance.yahoo.com/q/bc?s=^GSPC&t=1d&l=on…

    P.S. Mole- you have completely outdone yourself tonight. We are not worthy.

  • MACT

    Mole,

    I posted this another MB but a new thread was started hence nobody will prob even see it…but I know you're into this type of garbage that I spout…:).

    Since most feel we are due for a short corrective rally and this is mostly a bearish board, thought I'd post a big picture topic….I know most come here for charts and Atilla/Sol's advice so sorry…:)….I post this because sometimes while trading you lose sight of the big picture and I thought about this because someone posted the link to the Zeitgeist movie earlier, which I have watched many times in the past….it is sad to realize that our govt is handing out trillions in pork and bailouts to undeserving people while there are 10000 children dying of starvation everyday.

    In a nutshell, I think our way of life will change dramatically and be forever changed…Im not talking about the empty malls, lost jobs, slow growth, etc.

    Im thinking more big picture such as capitalism as we know it being replaced by a more socialist and fascist(corporate run society/govt) govt…in other words, a totalitarian govt..this process has already been happening for many decades but “they” have been so clever we didnt even realize it.

    Think about it, wanna know why our govt wont allow the free mkt to replace the greedy and immoral co's who made bad bets and lost…it has nothing to do with systemic failure…..they come up with these bailouts because they want to maintain their relevence…they want control by determining who they will transfer “our” wealth too…thats all a bailout is…its like pouring water into one end of a pool by taking buckets of water from the other end except the recipient happens to be the greedy banksters.

    The analogies to Rome are amazing…in Rome, they gave the mob cheap food and wine(our low interest rates, homes for everyone,fast food, obesity), entertainment such as gladiator sports(Amercan Idol, football, UFC), thirst for power(Iraq, Afghanistan, Vietnam)…they did all these things to keep the mob entertained, feeling confident and complacent while they(congress) raped and pillaged the entire financial system while everyone was asleep and drunk….they keep us drunk with greed, ignorance, complacency…they keep us dependent on them for food, shelter and jobs…wonder why the only sector growing right now is the govt?

    Even our education system promotes the status quo and doesnt challenge us to evolve…why is home schooling so polular now…didnt Einstein say the only thing keeping him from learning was education?…I think they keep us just smart enough to run the machines but not smart to challenge the status quo(George Carlin said this)

    We pretend we are a true democracy but we are essentially a 2 party system being used a facade for the one party system that we truly have…the media owned mostly by the elites and banks control who has access to the peoples eyes and ears….it is they who control who will run for president and who will win also…it should be no surprise that Obama got more money from the banks then any other president in history(so Ive read)…but if you like to get passionate about the evils of Bush, McCain or Obama, then I think you need to look into who really runs society because no single president is at fault for most things as its the system itself….this is not a republican or democrat thing at all….its much bigger than that.

    Our civil liberties have been consistsently been taken away from us for a very long time now with our consent by default/absense..there is no law that says we must pay income taxes on wages earned yet we do it…the constitution says only the govt is allowed to coin currency yet we let the private bankers the Fed Reserve do this without a fight….pretty soon or right to bear arms will prob be taken away from us…the second amendment wasnt about hunting for food, it was to keep our govt in line.

    The reason I bring all of this up is this…we are reaching a crossroad where societal beliefs and political systems are going to be overturned and altered..the timing is right for it…there are cycles and patterns for everything…hence TA works whether your talking about Elliott Waves or Gann cycles….in the east, they think everything runs in a circular pattern…in the west such as the US we think very linearly…but to truly understand the dynamic nature of things whether your talking about politics, financial mkts or life itself, you need to see things in a more dynamic way…ie- a corkscrew pattern moving as a wave perhaps??.

    I believe within the next 2-5 yrs we will have uprisings and protests as the “people” truly wake up for the first time in 200 yrs…a severe crisis situation typically creates radical changes such as this…one day people will have revelations regarding religion, politics, energy and society in general and they will be surprised and shocked…things are never as they appear…the truth will emerge one day.

  • http://www.disasterporn.blogspot.com Edwardo

    Karl Denninger? That was a joke right? Mr. Denninger didn't come up with it, and the phrase is “you can put lipstick on a pig, but it's still a pig.” Now go polish a turd.

  • maple

    Thank you, Mole. I appreciate the wavy gravy – especially stuff like 3 of 3 of 5 and WHERE.

    WHERE I can give to anyone to look at, take from it what they will.

    Last week's chatter of BAC preferred long and short the common has flipped to long the common. Devout risk-takers they surely are.

    Holding SPG short from 53.13.

  • Loren1711

    Repost from last thread, everyone said the links werent working but I checked on 3 different computers. The content is NOT imbedded in the link pages. They are documents, not pictures. They must be opened with notepad and excel respectively.

    Alright ladies and gentle men, I'm looking for a little bit of input here. I know fuzzy was doing something similar a few days past, so hopefully you will see this.

    Anyway, I have been tinkering with a trading system using a combination of MACD crossovers supplemented with MA crossovers. I have attained the best results with a 9,8,17 MACD on a 60Min chart and a 6,9 MA crossover. For some reason, profit is noticably greater when trading the IWM, rather than the QQQQ SPY or DIA.

    The rules of the system are as follows:
    http://www.screencast.com/t/0D3S2OpTw

    And here is the manual back testing, with as much hourly data as I have access to:
    http://www.screencast.com/t/nG14bbaZ

    In the back testing, I used the worse possible entries. Longs were opened at the highs of candles, while shorts were opened at the lows. In live trading, one would expect to get better entries, and probably not have as many positions firm stopped. Even with this, the returns were pretty impressive. I still need to run back through and make sure I didnt make any mistakes.

    This is the first actual systematic trading plan I have devised and worked with, so I would like to hear input from those of you that have done this before. Where do I take it from here? I would like to back test it more,but even like eSignal only offers 6 months of hourly data. I did probably 50 of the excel spreadsheets above with different MAs, MACDs, stops etc. and this is the one that came out the best, but again thats only testing it over 3 months…

    If someone really wants to lend a hand, (maybe fuzzy? since I know you were doing the MA crossover thing) I would be thrilled to talk on your messenger of choice, or skype. Input posted here is greatly appreciated here however.

    Mole, I assume you were talking about Google Chat? Talking to a couple people via email has led me to look into Ninja Trader, so now I am looking at a data feed. Basically looking for the most hourly data possible for the least price. I'm sure I'll have some questions going forward, but if you were indeed talking about google chat, or any messenger for that matter, please give me a time at which I can contact you that is the least burdensome. I prolly only need like 10-15 mins. Thanks man.

  • molecool

    And I responded to you – why are you posting it again?

  • de3600

    asian markets getting smacked see how this plays out the next few hours

  • TomOfTheNorth

    From The Financial Times –

    Citi presses officials to take 40% stake
    By Francesco Guerrera in New York and Krishna Guha in Washington

    Published: February 23 2009 00:40 | Last updated: February 23 2009 00:40

    Citigroup is pressing the US government to agree on a new capital injection that would increase the authorities’ stake in the troubled bank to about 40 per cent but stop short of an outright nationalisation.

    The talks come after Citi’s shares slumped last week as investors feared it would be nationalised. Citi insiders said they expected a decision on the company’s future in the coming weeks but warned that it would have to come earlier if its shares fell again in the next few days.

  • katzo7

    Excellent post Mole. Kept on scrolling and the charts kept on coming. Your fingers must be tired from drawing all of those charts. Makes excellent sense to me but maybe we should kept it on the down low so the mouth breathers don't catch on. Mum's the word, after all we need them to run this up a bit more for some sweet meat.
    What was really an eye opener is your second DJIA chart. Shoulda shorted in 07 and pulled a Rip van Winkle. Although the ol' American Rip was of Dutch decent, he was from the German side of Dutchland. LOL

  • Anton

    These guys are agree with you about VIX:
    https://www.optionmonster.com/news/article.jsp?…

  • TraderJorge

    You may want to take a look at the GC futures (gold, Nymex) – they have much better liquidity that ZG.

    Best trading,

  • maple

    Nikkei has re-taken the lead from Dow in the limbo contest.

  • Loren1711

    Other opinions/clarifying the link issue. But regardless, my apologies. I'll hit you up on google chat after I read the lengthy NinjaTrader tutorial and look into feeds.

  • katzo7

    http://apnews.excite.com/article/20090223/D96GV
    Still want to get that job at the SEC. God, I would love to aspire to sloth and mediocrity.Something to make old mom proud of.

    SP futes up 3.

  • GoCougs

    Loren…are you trading IWM options using this system or index ETF's? I entered it into my TOS and will watch it for a few days…seems viable when looking back a few months.

  • http://centrifugaldeforest.blogspot.com/ Centrifugal_Deforest

    TK and Mole + entourage this time…
    http://blogs.reuters.com/oddly-enough/files/200

  • fuzzygreysocks

    Howdy Loren,

    For both links I got something like this: http://i101.photobucket.com/albums/m47/fuzzygre
    Try that Jing thing again and lettuce kick around whatchu came up with.

    For instance, today I figured out this thanks to a similar conversation with another: http://tinyurl.com/d5e52l
    Two heads are better than one! http://www.imdb.com/title/tt0067245/

  • http://greedangerignorance.blogspot.com DJ

    closed /nq at 1185, 11 pt profit

  • Fujisan

    OK, here are my analysis of SPY, IBM, GOOG, POT, and MOS that I am planning to put calendar and butterfly positions on sometimes next week. I will watch for a couple of days to see if these stocks are still trading in the same channel before I actually put them on. I will close and/or adjust my positions if it breaks out of the current channel.

    My strategies are not targeted to pick the exact highs and lows. Rather, I am targeting my shorts right around the settlement price for March OPX expiration in order to take the most money out of my position. If we play it well, we can make as much as 100% return on a monthly basis without risking much. This has been working dearly for me.

    These positions have positive theta and vega so if the trade goes against you, you could still get out of the position with a little bit of profit (if the market started selling off, that would inflate the position due to high volatility and you could get out of the position without losing much). With positive theta, I could just sit on my positions as long as the stocks are trading in the range.

    SPY March Expiration Target 68~70

    http://www.screencast.com/users/Fuji-san/folder

    IBM Mar OPX Target 95

    http://www.screencast.com/users/Fuji-san/folder

    GOOG Mar OPX Target 350

    http://www.screencast.com/users/Fuji-san/folder

    POT Mar OPX Target 90

    http://www.screencast.com/users/Fuji-san/folder

    MOS Mar OPX Target 45

    http://www.screencast.com/users/Fuji-san/folder

  • Loren1711

    In the screenshot you posted, just beneath the orange bar it says “Unable to embed this content type. Download this media.” Click download this media. The first is a .txt, the second is a .xls.

    I've been way behind on comments lately, with school and stuff, so I have no idea what you have found in terms of trading crossovers of any sort. I'll obviously know more once I can backtest some stuff in Ninja, but just briefly what I have found:

    There seems to be no way to trade any sort of crossover without a firm stop and trail stop in place at all times. It also seems that profits can be greatly increased by implementing a profit target threshold where half of one's position is dumped. The other half is trailed out. I tried this breaking it into thirds but it wasn't as effective.

    A MA pair in addition to the MACD seem to supplement each other well. That leaves the question of what pair and what MACD values to use.

    I'll probably neglect almost everything else to focus on NinjaTrader this week and then I can test different scenarios a hell of a lot more effiencently. I look forward to hearing your thoughts. And I'll browse through that thread right now.

    Thanks fuzzy

  • JohnyWalker

    Love the post , love the humour . Simply thank you.

  • Loren1711

    Honestly, at this point in my trading I'm simply not comfortable with options, but thats not to say that its not viable. I did run trials on the QQQQ, SPY, DIA, and their respective futures, and for some reason, the profit margins simply weren't as great with the IWM. The same goes for the 2x ETFs.

    Again, thats not to say that one couldn't time a futures, or options, entry based in an ETF crossover, its just something I haven't put a lot of effort into.

    Atleast to start, I will trade the ETFs simply because its pretty non-capital intensive to dump half positions. For example, if I wanted this ability trading futures, I would need two contracts, which, atleast for now, is not something I am comfortable with. Clearly this could be done with options, but I simply dont have enough experience with them.

  • etechpartner

    Thank you Mole.
    Curious… the slingshot of the Yen,,, how much credence should we give it considering the ES is rising strongly at almost the same time. Do you suppose there is still some amount of disconnect between these indicators and what the market ends up doing. (Similar to what you had described last week I think)

  • anotherone

    Thanks, Mole. That's some of the most detailed analysis I've ever seen anyone put out with regards to the market. I know it took a significant amount of time. Us rats are going to be raking in the dough. I hope to make enough to be able to help family and friends through the next 10 years or so.

  • fuzzygreysocks

    SWEEEEEET JEEZUS!!!
    41 trades and 25% after three months!!

    Hell.
    There are easier ways to earn 25% : http://i101.photobucket.com/albums/m47/fuzzygre
    That's for a single day.
    An afternoon, really.

    You cleared for options?
    We're right at or near a fairly decent bottom.
    Actually, five bucks says we gotta fair little pop coming (if you didn't position FRI you could chase it with tight stops) and then we drop.
    I'm already loaded for the pop : http://tinyurl.com/ddv7az
    And I'd shoot for MAR $70 puts next, whatever your ETF flavor: SPY, cubes, or IWM/TWM.

  • yazzer

    watch it tomorrow during the 'real' hours…also, one day or a few hours does not make a trend…

  • Anonymous

    that’s the deal ano….we might make 7 figures or whatever but what good does that do if we have runaway inflation (after the deflation) that makes the future dollar worth a tenth of a cent against today’s dollar or worse?

  • LoneRanger

    Mole – How about shorting Silver instead of Gold. Same chart but you might get some better downside as Silver has outpaced Gold during the recent runup? Looking through the charts long USO and TLT might be in the short term cards. Thoughts??

  • etechpartner

    Maybe it wasnt a good example. My point is that Mole mentioned a certain amount of disconnect between some of the indicators like the Yen and the behavior of the market in a few posts before. Maybe you saw them,

  • anotherone

    I'm looking to buy gold when it's price comes down, before the inflation has too much time to eat away the value of my account.

  • yazzer

    yeah – maybe borrow as much $$$ as we can get, buy gold, land, etc. and pay the mortgage/notes back at future dollars worth a fraction of the current $$$

  • Loren1711

    Lol wow, I was impressed by the 25% return in a quarter. Assuming thats sustainable, thats 100% a year. Add this to the fact that the worst possible entries were taken, and whippy tape has been common place, who knows.

    Any thoughts as to using the MACD on the derivative rather than on the underlying? Just looking at these charts I see the awesome trades you highlighted, but some not so nice ones based purely on crossover trades. As to the MACD crunch, thats essentially where the trailing stop comes in. Makes the entire process pretty systematic.

    What can I say, this whole things one giant learning process. I cant figure out how to do a damn thing in Ninja, but I'm still pretty stoked.

    I am cleared for options, but at this point am not too comfortable with them. Didnt grab any index positions for Monday, but I'm sitting pretty delta positive as of about late Friday morning just with individual equities.

  • asetrader

    Hell of a deal on IBB March $60's…Or am I crazy?

    http://www.screencast.com/t/ZrtrQSTM

  • yazzer

    PUTs, I assume?

  • TomOfTheNorth

    Interesting graphic – two versions – one w/CPI & 1 w/shadowstats CPI – note the differnece in current position relative to mean

    An aspect of this is the implication that we eventually revert to the mean trend

    Seemingly overlooked is the possibility that the trend could ever change

    http://dshort.com/charts/SP-Composite-regressio

  • Fujisan

    Loren,

    I tried both links and they still won't work. Can you upload again?

  • BOOTS

    MOLE, in EW, the B wave of a Bear market can go 20% higher than the Bull market top?
    Intuitively that doesn't seem logical

  • Loren1711

    Are you clicking on the download link? Like I said its not embedded. This shows it pretty clearly:

    http://www.screencast.com/t/HSjf4SEjXE

    If its still not working, I'll just email em.

  • Fujisan

    Yeah, I clicked download link and nothing happend. Oh, well…

  • anotherone

    SPX Futures are at 780

  • GoCougs

    I don't trust this damn rally! Went short the /NQ at 1178…considering closing

  • El Gato

    drum roll please………………………….” and the oscar for best actor goes to”

    BEN BERNANKE in The Three Blind Mice!

    Ben: ” I'd first like to thank the Federal Reserve for printing so much money. We just couldn't keep the bubbles bubbling without their unwavering support for the last ten yeas. Hank , your deep understanding of derivatives machination allowed us to build incredible amounts of compression into a system that allowed liquidity to dry up and volatility to explode. Last , but not least , I would like to thank my predecessor Elmer for bringing rates to historically low levels that allowed the housing bubble to grow to it's enormous size. May our bubblettes blossom into bubbles. God bless .”

  • fuzzygreysocks

    I use the MACDs on the underlying to time the trades on the derivatives/options.
    And you're right, not all MACD crossovers are gonna end up good. That's where the stop loss orders come into place.
    Normally I don't do the five minute charts; just on days I have to babysit the computer like by daytrader brethren, here.
    Normally I can check movements a couple times a day, maybe every few hours, so I plan my positions accordingly.

    What's your Monday & Tuesday look like, timewise?
    You gonna be school bound most of the trading day or will you have a nice big chunk of time at some point?

    And I don't know nuh'n 'bout Ninja.

    Cleared for options! Great.
    Lettuce scope out what's available for IWM…
    Orient myself to my environment (like a good little soldier) : http://tinyurl.com/cdamw3
    Lettuce see what the competition is doing : http://tinyurl.com/b9urfx
    WOW! That's a lot less volume. Surprising.
    Well, at least we know to stick with IWM options! Better B/A spreads.
    IWM's at $41 and change, bouncing off a mild SloStoch & Willie (SS&W) bottom fifty cents lower where the MACD happened to also cross : http://tinyurl.com/ddkedj
    We know the general conditions in the market are fairly well oversold, yet acknowledge that it can run under the 10/20 EMA – irrationally!!! (Fuh-reeek!) http://i101.photobucket.com/albums/m47/fuzzygre
    Mole's gunning for a possible retrace to the 23% Fib line which seems pretty near-fetched to me and correlates to a IWM $43.
    https://evilspeculator.com/wp-content/uploads/20
    IWM MAR $43 calls are IWMCQs : http://tinyurl.com/bvcsaw
    Here we see that if the underlying did make a nice run for $43 that these buck-twentynine (probably buck fifty on any gap-up open) may have a fair stab at $2.50
    $250 / $150 = 66% gain. Probably less than a couple of days.

    Just watch 'em.
    Don't buy 'em – yet.
    Watch 'em as hourly's, 15min & 5min charts – time permitting.
    Watch for the crossovers.
    Watch for the candle ranges within those ticks.
    Figure out where you would put your stops under the trending baselines.
    Watch for the MACD crush to ditch 'em ASAP.

    Have a plan.
    Work the plan.
    But be flexible.

    Battles are often won before the first arrow is drawn or shot fired.
    This is how we make sausage.

    And don't ever forget our generous host's mantra : “Don't invest more than you can lose.”
    Stop losses be d@mned.

  • fuzzygreysocks

    That is some mighty sexy mouse-writing there, Loren.

    LOL!

    😉

    (“Yeh”, I'm bustin' your ovaries. Psht!)

  • Fujisan

    Are you set for this avatar for now?

  • Rhett

    The people , playing macro and thinking of shorting gold….consider shorting bonds (after this equity crash) for…..the usual reasons , which you can fill in yourself.

    -Rhett

  • TomOfTheNorth

    If my account balance were to lose 'weight', so would my avatar. Fortunately, it's been growing lately. Hopefully I'll be looking for an even larger avatar before long lol

  • Loren1711

    Wow fuzzy, awesome advice.

    The only access I will have to the market intraday this week is via a remote desktoped iPhone. Its about as close to being connected without carrying a laptop around. So because of that, thats kindof why the MACD and the Zero indicator were attractive to me, they are simple and really easy to trade from a phone. If the setup I currently have actually returns 25% quarterly, to me, thats one hell of a return. Obviously I would start with 100 shares, and move up as I get more comfortable, but for doing nothing more than dicking around on a phone during the day thats pretty cool. Theoretically I could turn a very small account into a very large account by the time I'm done with college.

    On my long positions, they are good to go. Entries were triggered friday morning (I think one was in the afternoon) and then they are all sitting on GTC OCO firm and trail stops. Assuming this goes the right way, I'll prolly dump most of them to bring me back delta negative as we approach 800.

    Not that I'm going to, but say I was going to attempt to establish an IWM position as you outlined above. Depending on how we open… If we are below Friday's highs (most likely) toss in an order for 40.90 (firday's open) If for some reason we open above them, I'd toss in an order for fridays highs. The first would have a stop just below Fridays lows, and the second would have a stop just below friday's close.

    The attraction I see in the option strategy you outlined is that it is very capital un-intensive. Given the fact that I would have traded a 100 lot on the IWM in this hypothetical trade, the profit would have been almost identical. The difference is that you only committed $129 where as I would have committed just over 4 grand. At first I was going to try to defend the use of ETFs on the basis that if I am only taking one position, the rest of the account is going to be in cash anyway. Aside from the nonexistent interest I earn on my account balance, whats the difference between the two, but I'm telling myself to reconsider.

    I sent out some emails in hopes of getting an answer to the data feed question and then I should be good to go. TradeStation looks really nice, as it has 16 years of intraday data, but I'd rather not have to commit 5-10grand to open an account simply for the data. Somewhere I saw that eSignal only has 6 months of intraday data, which is barely better than prophet, but when other sources have 16 years I find that hard to believe.

  • molecool

    You are looking at a distorted chart – adjust for inflation and the 2000 peak was never breached. Even if you not – it's possible.

  • Fujisan

    Hummmm, someone bigger than Sumo wrestler…. How about King Kong??

  • http://greedangerignorance.blogspot.com DJ

    Thanks Mole. U R the the best. No other blog can match what u post here every night.

  • wowmorecrap

    So now we are talking about taking our preferred shares in Citibank (which we should never have owned) and turning them into common stock and potentially increasing our exposure to 40% of Citibank. We are getting so fucked its unbelievable. You can bet pricks like Robert Rubin the former Treasury Secretary and former heavyweight who just left Citibank to protect his reputation was involved in this. Fuckers. We are getting so screwed do we not see it! Our great grandchildren will be paying for what these pricks are doing. This is going to get alot worse, a lot worse. Anger stage, we haven't even scratched the depth of anger that this country is going to witness.

    It makes me want to take all of my profits and buy a few pages in the NYT and out all the pricks who have benefited along with their home addresses. Fuckers, they are lucky I'm a pacifist.

  • http://outsidethe-cardboard-box.tumblr.com/ TomOfTheNorth

    I would hope to see both of our P&Ls warrant an avatar of such growth this week! Perhaps I’ll go w/Godzilla in keeping w/ a Japanese theme.

  • rhae

    CITICORP news…. Us taxpayers gonna get to own up to 40% of C?…. Hmmm, In the short term it could cause a little flurry…. But can you say Delution with a capital D. Shit that is about as bad as a reverse split… Oh I see give the big money players a chance to bailout leaving the taxpayers as the bagholders, again… I could go on but I won't…. just unbelieveable what kind of games they play… Sad to say the little guy has no clue… imo

  • wowmorecrap

    So now we are talking about taking our preferred shares in Citibank (which we should never have owned) and turning them into common stock and potentially increasing our exposure to 40% of Citibank. We are so fucked its unbelievable. You can bet pricks like Robert Rubin the former Treasury Secretary and former heavyweight who just left Citibank to protect his reputation was involved in this. Fuckers. We are getting so screwed do we not see it! Not just us our grandchildren and great grandchildren will be paying because of these pricks. This is going to get alot worse – a lot worse. Anger stage – we haven't even scratched the depth of anger that this country is going to witness.

    Yeah sorry I will stop ranting about this stuff – its so hard to see it and not be outraged. It makes me want to take all of my profits and buy a few pages in the NYT and out all the pricks who have benefited along with their home addresses. They are lucky I'm a pacifist.

  • etechpartner

    Keirsten – appreciate the comment and the Yahoo chart. Thanks. For some reason I am not able to reply directly but I hope you see the comment anyways.

  • etechpartner

    Ah now the reply works…. For a while it didnt, Until I restarted the browser…. Anyways – thank you Keirsten. That chart speaks volumes. I suspect with the news on Citi we may still get more of a bounce which is fine as an opp to reload.

  • Vic

    Mole, check out this chart of gold: http://screencast.com/t/v8Ox5Fma

  • rhae

    Just replied to anotherone on C…………. Geez, just amazing

  • rhae

    I am never sure about responding to a chart addressed to someone else, but I think an open forum here.

    A very nice chart, I am a little mixed about the target, The wolf wave at Fib Ext 1 or Fib Ext 1.27 Butterfly?
    I guess we will find out soon…

  • http://groups.google.com/group/monitoringthemadness/ johneeboy3

    Yet another excellent post, Mole. Sorry I can't be around more often. I miss hangin' with all the other fine rats…

    The best I can offer you is my recent post on xtrends, but our shakras are pretty much in alignment about what the tape will print over the next few days/weeks:
    http://xtrends.blogspot.com/2009/02/what-i-thin

    Let's get this plunge over with.

  • Insect Overlord

    Have you read “Trade Chart Patterns Like the Pros” by Suri Dudella? If you haven't, you should. Your chart is over my head technically speaking. Not that it isn't a fine chart, but you clearly are on another level…as is Dudella. I never go anywhere without his book. I cannot help but think two things about gold:
    1. it is overbought
    2. never underestimate the bullishness of gold
    I'm currently awaiting a good confirmation to enter a long position. But I'm trying to be very picky and disciplined on my entries.

  • molecool

    And a fine count it is – I hope the 920 scenario is out of the picture for now. I don't think I have the mental fortitude to make it through that one – LOL 🙂

  • Chop it up

    Long Gold @ 988.20 for quick hit with a nice tight stops.
    http://screencast.com/t/TYsAEdyC

  • Fujisan

    It's a butterfly chart pattern, Insect. You should read “trade what you see” by Larry Pesavento.

  • GMunni

    E of EW Theory said that the run up to 1929 was a B wave and that was just a titch more than 20% if you look.

  • GMunni

    Beware copyright infringement.

  • GMunni

    Ben working his organ. http://tinyurl.com/c6fsyu

  • Insect Overlord

    I'll have to check that out. I've read about the butterfly and gartley
    patterns and such.

  • Insect Overlord

    Nice play…I'm looking to go long on gold myself (for a quick hit like you) before I short it again.

  • Vic

    Thank you, but I am not nearly Suri's level… at all.
    Suri's book is on my “to buy” list as well as B. Shannon's book (from
    AlphaTrends). Suri also has trading systems for TradeStation based on the
    Pesavento patterns. I have some code I scalped from the TS site but I have
    not used it yet as I don't understand the way EasyLanguage deals with arrays
    and I can't use an indicator if I'm not sure about how it works.
    I bought “trade what you see, not what you think” from Larry Pesavento a
    while back, and TA has never been the same for me since.

    You're 100% right about gold: you have to respect it. I've only traded gold
    once, last year from 840 or so to 999 via GLD. Never again and frankly I
    admire Mole and any other individual that has the balls to trade gold,
    silver and oil. I do keep a chart of gold updated for technical analysis
    sake.

  • GMunni

    I agree Keisten. Just my cursory review of those who covered and/or went long is surprising given the lack luster tape. Seems as though 4 of c of B is underway.

    BTW, not sure if you seen what levels the taxes went to in the Great Depression but on the margin your 95% figure is probably not far fetched. It wasn't the market crash that caused the length of the Great Depression it was everything that the government did trying to avoid the inevitable. Of course this time round they've realized the only solution is to spend even more to save the system. Have I mentioned the phrase “Greater Depression” lately here?

  • Keirsten

    etech- not sure where this is going to show up on the board here, but wanted to tell you you're welcome. Sometimes just a simple look at price/time/volume is all that's needed. 😉

  • Vic

    No worries, Rhae. I appreciate the feedback.
    I was thinking anywhere between 1068 and 1088. 1068 would be 127% of AB and
    1088 127 of XA. If I was trading it, I would probably go short (half pos.)
    at 1068 and add at 1088 and place a very tight stop. I don't trade gold -it
    is one of those things… I don't touch the banks, gold or oil.
    Another interesting fib coincidence: if you retrace from where gold close at
    1011 50% from C and extend it another 100% you'll end up with a 3-drive up
    pattern (a wolf wave) that completes close to the 127% level of XA. Check
    it out:

    http://screencast.com/t/5ZoN6pMw -that price reversal zone keeps getting
    wider and wider.

  • Vic
  • standard_and_poor

    My evil guess for monday SPX activity, hell or heaven?:
    http://www.screencast.com/t/tM0ULMcxx
    click for the gift of art:
    http://www.youtube.com/watch?v=cJ9L_S7si3I

  • standard_and_poor

    Go with Budicon, it's bigger and filled with sumo or rock muisc.

  • standard_and_poor

    +1 for warm thoughts dude and best of luck.

  • Vic

    No worries, Rhae. I appreciate the feedback.
    I was thinking anywhere between 1068 and 1088. 1068 would be 127% of AB and
    1088 127 of XA. If I was trading it, I would probably go short (half pos.)
    at 1068 and add at 1088 and place a very tight stop. I don't trade gold -it
    is one of those things… I don't touch the banks, gold or oil.
    Another interesting fib coincidence: if you retrace from where gold close at
    1011 50% from C and extend it another 100% you'll end up with a 3-drive up
    pattern (a wolf wave) that completes close to the 127% level of XA. Check
    it out:

    http://screencast.com/t/5ZoN6pMw -that price reversal zone keeps getting
    wider and wider.

  • standard_and_poor

    +1 Fujisan.

  • standard_and_poor

    Me likes bearish news..

  • TomOfTheNorth

    Herr mole –

    Thought I would offer this in the spirit of cultural exchange. Adapted from that wonderful German opera Der Ring des Nibelungen :

    http://www.youtube.com/watch?v=EJAXJWm8G4A

    Enjoy!

  • jacksoo

    Hi S&P ; hope your weekend was good? Not sure I get your statement today – are you saying to top out around 798 or expecting it to fill gap around 820 ish? I was looking to place some orders for ES ~804, 820 – still holding some FAS from Friday so will set off with tight trailing stop this morning.

  • jacksoo

    shoot – looked like a dog to me…..back to basics 😉

  • standard_and_poor

    Hey Jacksoo, I suggested closing out 10-15% of puts into friday morning weakness. So now will buy them back basis 820 SPX, if it happens. I suggested 798 as possible top for monday,
    we'll see. Smart move going long Jacksoo!

  • Fishrman

    Great post! I have traded single options positions and a few bull spreads/put spreads but have never traded butterflies though. Do you scale into these positions? Also, I am trying to learn more about trading these positions. I have read books about them but have never seen them used in practice (which I have found is the best way to learn). Any chance you could post the strikes/months you use after you enter? I don't intend to copy you, just to watch and learn. I would like to be able put on these type of positions in the future, however. Thanks!

  • jacksoo

    Thx – pretty much a scalping move – expected a knee jerk, and weekend news seems to be the norm – fully expect the buy on rumour, sell on news game to play out again though.

  • Rui

    Hello Mole,

    You score 1st place in my daily investment blog review alongside Minyanville (Todd Harrison specially).
    I really appreciate the humor alongside the analysis, some of these images like the organ or the rodeo really get into the mind's eye and make good company throughout the day.

    Of course you know us rats like all your vocabulary, I certainly take as a complement stainless stell rats (SSR).

    If you ever come to Portugal and need some holiday tips just tell me.

    Take care,

    Rui

  • http://greedangerignorance.blogspot.com DJ

    shorted /nq at 1196

  • katzo7

    Glad to see you are back into the serious side S&P. Save the joking around for me. LOL

  • katzo7

    Ohhh, anyone who can put up with the rigorous passage to American citizenship can stomach a slight bounce. Have any kids, Mole? If you witnessed 2 childbirths like I did–honest, it was harder for me than her–one can put up with much.

  • katzo7

    Nice chart. Could a=EW5 down, B=EW1, C=EW2. Stochs are set high which means it will back of a bit but it doesn't have to come down much to reset the stochs to lows. It what I am suggesting comes true, we are in for an extended EW3 up run.

  • katzo7

    Chart looks great but puts are thinly traded. Huge discrepancy in the Mar. 70s (2.45) and the Mar. 65 (.95)?

  • David

    Mole: It seems I remember you posting that you like to use (14,3,3) Stoch. on a 120 minute chart of the four major indexes. I use (5,3,3) Stoch. and RSI(2) on daily and 120 min. charts and it seems to work fairly well for multi-day trends.

  • Victor Berry

    This is much better than Santelli's sophmoric rant (or is it sophmoronic):

    http://www.dailykos.com/story/2009/2/19/05524/5

  • Royal With Cheese

    Wabbit season !

  • katzo7

    Obviously Elmer is not good at charting. Those were not rabbit tracks on the ground he was following.

  • alphahorn

    Boy that brings back memories! Good monday morning all, let's replicate last week!!! off to a good start already!!

  • alphahorn

    things are pretty rick in the premarket

  • Mikey

    Took notice of your view on Friday Alpha and jumped in long AH. Looking to get out first hour this morning. Thx!

  • alphahorn

    i'm thinking the same thing, might have a couple of in and outs this morning, and maybe turn to short by close, could be interesting. Friday after hours was awesome shopping for bargains, felt that one big time

  • katzo7

    Mikey, I did the same. Got good prices.

  • katzo7

    Actually, what I'd like to see is not real gap up but a slower climb. Then we get out and go short.

  • alphahorn

    Steve Leisman's as arrogant as he is stupid, I wish Santelli would punch him in the face

  • yazzer

    LOL – now that would be good reality TV! Jerry, Jerry, Jerry! LOL…

  • Mikey

    Good call. Yeah Katzo, will give me more time to prepare for my shorts:)

  • http://trading-to-win.com/ DavidDT
  • http://www.srsfinance.com SRSFinance

    You guys are either very smart or very brave. Aren't you worried about the month end markup here? I too think this thing is going down, but I'm betting a decent short squeeze could be in the works first.

  • alphahorn

    katzo you still holding DXO right

  • katzo7

    That is exactly what we are playing. We are either smart or very brave or very short term.

  • alphahorn

    just depends on how violent this move is, once my spx targets are hit, i'm going to start shifting to the short side, but going long friday pm seems to have been the right trade at the time. i just don't see this as a prolonged bounce, unless we trade down beginning this pm into tomorrow then rally from there.

  • katzo7

    We are all long here, very short term.

  • T. Waffle

    You've got a really big ass Mole.

  • TomOfTheNorth

    Joint statement on banks – worth reading if only to reassure oneself that it's more of the same:

    http://www.bloomberg.com/apps/news?pid=20601068

  • http://www.srsfinance.com SRSFinance

    Sorry if I was confused. It sounded to me as if you were looking to sell the bounce early today. My analysis is showing that we may see a bounce that lasts longer than the first hour. I've been known to be wrong from time to time so I'm not disagreeing with you if that's your intention.

  • katzo7

    No, thanks for your advise. We appreciate it.

  • katzo7

    Alpha, Mikey, SRS FIn. et al,
    What concerns me is the lack of “horsepower” on Friday's move up (Alpha's comment). I am looking as my indicators and they all look good, are pointing up, but this market is famous for teaching lessons about following indicators too much.
    Any thoughts on a prolonged rally vs. a day only rally?

  • http://www.srsfinance.com SRSFinance

    It's tough to guess, I'm playing that by ear here. I have a bit of a personal axiom that tells me don't go short into the end of the month. It's been wrong on rare occasions but more often than not it's saved me from whipsaws.

    What I'm looking for is for the CPC to swing back down and for the short term stochastics to move back out of their oversold range. I just don't see the risk:reward being very good on the short side until this oversold condition gets a chance to work itself off either through time or price.

    We may indeed be on the verge of another wipeout like we saw late sept but since those types of sell offs are rare and since oversold bounces are not I'm stepping aside and may trade the long side on a couple of stocks that are ranging rather than declining here.

  • MaxPainMan

    dumped my FAS @ 5.56 this morning.
    perfect fear/greed balance there….

  • http://www.srsfinance.com SRSFinance

    Yeah, I saw that too. Friday was not capitulation in any shape or form. That won't stop the MMs from what IBC refers to as “fuckery” though, and that's my concern with the short side early this week. Like Mole, I'm crossing my fingers for the blue scenario as that offers the best risk:reward for shorts here I think.

  • katzo7

    Yeah, why?

  • katzo7

    Now I am beginning to think this may only be a gap fill. My projections on the up side are very muted.

  • http://greedangerignorance.blogspot.com DJ

    closed /nq short at 1174, 22 pt profit

  • TomOfTheNorth

    Dead cat bouncing!

  • alphahorn

    i sold a small bit of my FAS but am sitting tight, i think this might be a bit of profit taking from those who went long on friday and are enjoying nice runs, if it doesn't reverse and move up soon i might take profits and run

  • Mikey

    I went with the profit I had and sold. Didnt seem to be moving much so stuck with my plan.

  • katzo7

    Yeah, I see 778 as a sticky point.

  • jigdaddy

    new day high on XLF…

  • T. Waffle

    Out of FAS @ $5.40

  • Vic

    Hey, Katzo,
    I was expecting a run up to a 50-62% retracement of the last leg down of the s&p. Is this what you mean by “extended ew3 up run”? Do you have a chart you could share at your convenience?

  • Skates

    It keeps going up! My FAS is loving it!

  • molecool

    Needs to be big as it needs to maintain two huge brass balls.

  • T. Waffle

    heheheh +1

  • molecool

    NEW POST!

  • standard_and_poor

    Oh yeh? What does the Ponga indicator say this morning?

  • Fujisan

    Thanks for your comments. I will revise my target price after today's market activities and will post the updated charts together with the strike price.

    If you have never traded butterflies, I would start with calendar spreads first as they have less legs and easy to make adjustments (i.e., if for some reasons it goes out of the range, you could add double, or triple calendars to adjust the positions). I would start with a small position until you feel comfortable about the price movements.

    My main positions are calendar spreads and I would use butterflies to hedge my positions as these spreads are very cheap.

  • Fishrman

    Thanks for the reply! I look forward to seeing your strikes/updated charts!

  • standard_and_poor

    Oh yeh? What does the Ponga indicator say this morning?

  • Fujisan

    Thanks for your comments. I will revise my target price after today's market activities and will post the updated charts together with the strike price.

    If you have never traded butterflies, I would start with calendar spreads first as they have less legs and easy to make adjustments (i.e., if for some reasons it goes out of the range, you could add double, or triple calendars to adjust the positions). I would start with a small position until you feel comfortable about the price movements.

    My main positions are calendar spreads and I would use butterflies to hedge my positions as these spreads are very cheap.

  • Fishrman

    Thanks for the reply! I look forward to seeing your strikes/updated charts!