Now Reading
Bullish Bearish
104

Bullish Bearish

by The MoleNovember 1, 2016

It is the first trading session in November and that means it’s time for another momo update. What I’m seeing across the board reaffirms the current low participation holding pattern which I proposed in my last update. Various attempts to break even modest support zones have failed and in the process consumed almost all short term bearish momentum over the course of the past few weeks. Although I am still holding short positions from near ES 2150 my perspective now has shifted toward short term bullish and long term bearish. Let me tell you why.

2016-11-01_vix_vxo

Let’s talk about the more immediate future first and then we’ll talk more long term. Here’s the VIX:VXO ratio – the latter is often called the ‘old VIX’ a it focuses on strikes near at the money while the new VIX is composed a more balanced cross section of 30-day strikes.

The purpose here is to produce a delta in pricing which would suggest that front strike risk are either over or under priced in comparison with strikes further out the option chain. As you can see on the chart – quick spikes up usually are purveyors of reversals – a few weeks later. And that’s something we expected to occur at least a month ago. But as I already pointed out in my mid-October momo update – price ain’t budging. And as most of the bearish potential has been burned off I am unsure as to how realistic the probability of any significant downside is at this point. Especially with one more week to go until the election.

2016-11-01_nya50_nya200

Now here we’re measuring breadth via the NYA50 versus the NYA200. Market breadth basically indicates whether or not stock indices are propped up by strong leaders while the remaining symbols are under performing. And that seems to have been the case as of late – I have not see such a pronounced divergence since 2012 when eventually price broke to the downside into a pretty subtle correction all things being equal.

So now we are more or less in bullish territory if you want to believe that rising diagonal I painted on the chart above. Sure there is more downside potential and this ratio could easily drop to 0.3 or lower. But given where we are right now (i.e. < 0.5) price should have budged quite a while ago. So short term paint me skeptical.

However the long term picture couldn’t be any more bearish. There’s a ton of fascinating material below, so if you’re not a sub then this is a great opportunity to make the leap:

evil_separator

It's not too late - learn how to consistently bank coin without news, drama, and all the misinformation. If you are interested in becoming a subscriber then don't waste time and sign up here. The Zero indicator service also offers access to all Gold posts, so you actually get double the bang for your buck.

Please login or subscribe here to see the remainder of this post.


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.
Enjoyed this post? Consider a small donation to keep those evil deeds coming!

BTC: 1MwMJifeBU3YziDoLLu8S54Vg4cbnJxvpL
BCH: qqxflhnr0jcfj4nejw75klmpcsfsp68exukcr0a29e
ETH: 0x9D0824b9553346df7EFB6B76DBAd1E2763bE6Ef1
LTC: LUuoD6sDWgbqSgnpo5hceYPnTD9MAvxi6c

  • CandleStickEmUpper

    Thanks Mole for the excellent analysis.

    FYI, NG got hammered this morning

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

    But given where we are right now (i.e. < 0.5) price should have budged quite a while ago

    ..Amen.
    [BPSPX]
    http://stockcharts.com/h-sc/ui?s=%24BPSPX&p=D&yr=1&mn=0&dy=0&id=p02328067944

  • Yoda

    Great momo update. Greed and Fear Index is already deep in the Fear zone. Not ready to draw any conclusions at this stage though.
    http://money.cnn.com/data/fear-and-greed/
    Besides there are more juicy plays out there for the time being. Go barbarous relic, Go!

  • ridingwaves

    I just picked up some….

    I second your opinion on analysis

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

    ..the toe hold, held.
    it’s a long way back across the weekly vacuous drop IMHO.

    http://stockcharts.com/h-sc/ui?s=GLD&p=W&yr=2&mn=0&dy=0&id=p34631279564

  • https://evilspeculator.com Sir Mole III

    I’m thinking of taking a few days off. Unfortunately the weather outside of Valencia sucks everywhere in the vicinity. Damn it!!

  • ridingwaves

    Vix seems unsettled and not playing the pre-election playbook

  • Yoda

    Good idea. This churn has been exhausting.

  • OJuice

    Dang high yeild getting clobbered again today. Yesterday it looked like ES was going to be able to shake the risk off trade. But if it keeps going like this, we might see a range break. I’ve been stopped out of my long.

  • https://evilspeculator.com Sir Mole III

    I just don’t know where to go. Weather is nice here in VLC right now – warmest temperatures in Spain 🙂

  • https://evilspeculator.com Sir Mole III

    Supposed to cool off next week. Maybe that’s a better time to get away.

    https://uploads.disquscdn.com/images/263a865af6db6c6600319dfabe686d87da58753f357d39bbcc7eda9c3453997a.png

  • ridingwaves

    your kind of on vacation already….maybe a drive south to a nice little cottage by the sea…

  • kim

    i’ve hedge my shorts…this seems to go north again

  • kim

    go to nowhere 🙂

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

    I’m not clear what you mean by this…

  • Mark Shinnick

    Yes, the analysis looks good. That p/c ratio is at a good place while Mc Summ is hanging below zero, I’ve been semi-boatload puts.

  • Mark Shinnick

    jdst entering my buy zone. Will be buying below 24

  • Yoda
  • kim

    hunting 2108spx? 🙂

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

    what’s that saying Mole? take the money
    😉
    CVX, exit 106.33

    http://stockcharts.com/h-sc/ui?s=CVX&p=W&yr=4&mn=0&dy=0&id=p41522214306
    -GG

  • ridingwaves

    that gap on daily spx candle 6/28-29 bugs me…

  • Mark Shinnick

    Buyside not a good idea today.

  • kim

    fantastic 🙂

  • kim

    yep, i’m full short at the moment

  • ridingwaves

    they could use Raid or Black Flag

  • Mark Shinnick

    That Apl-June base looks good. What was that idea that emergency intervention gets excited by around 15% correction?

  • kim

    you mean to kill the bears? not every time, they will switch to bear mode from time to time, for some quick money.

  • Mark Shinnick

    Got to 23…waiting on that buy…

  • kim

    maybe you can kill a bear with that one also 🙂

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

    time to pull out the rollercoaster monks yet?

    I’d be excited, but it’s Month Begin. Shenanigans happen. Mostly.

    SPX 110
    http://stockcharts.com/h-sc/ui?s=%24SPX&p=D&yr=1&mn=0&dy=0&id=p85871875910

  • Mark Shinnick

    The overall context here of the recent trend’s acceleration is fairly significant, so that’s what I’m mostly keeping in mind.

  • kim

    4h candle spx has nice closing promising more downtime

  • OJuice

    There is a little more work to do on the sell side before it’s a done deal. Patterns on all the major indexes are at support. Also looking at high yield it looks like a fairly mechanical sell off. More like a risk unwind prior to the election rather than a risk off completely.

  • kim

    everyone is waiting for elections with pants down?

  • Mark Shinnick

    That news won’t be worth knowing by then.

  • ridingwaves

    as u mentioned before they will not let that break out area be so easily defeated….watch the dollar, no rate raise will give it some downward movement…..should be bullish if so..

  • OJuice

    Exactly. Clinton and Trump are two heads on the same beast. The only thing that changes post election is what type of stories the media focuses on. Everything else probably status quo.

  • kim

    i know that you guys now that 🙂

  • kim
  • https://evilspeculator.com Sir Mole III

    How’s my crew today? Hanging in there? 😉

  • https://evilspeculator.com Sir Mole III
  • Mark Shinnick

    I don’t see this, at least because non of Trump’s message is pro-Wall Street / pro-Establishment. My belief is that a Trump win will greatly unsettle the status quo and equities will discount that.

  • https://evilspeculator.com Sir Mole III

    Is it too late to rename today’s post then?

  • Mark Shinnick

    Quite a interesting day.

  • https://evilspeculator.com Sir Mole III

    Maybe today’s move is in anticipation of the recent poll numbers…

  • https://evilspeculator.com Sir Mole III

    Not short I take it then?

  • https://evilspeculator.com Sir Mole III

    Fuck yeah.

  • https://evilspeculator.com Sir Mole III

    Dude was strung out on drugs big time…

  • https://evilspeculator.com Sir Mole III

    Cheaper to just head to Norway then.

  • kudra

    you were spot on yesterday – long gold, short equities.

  • https://evilspeculator.com Sir Mole III

    Not a bad idea.

  • https://evilspeculator.com Sir Mole III

    That’s my job – take a machete to the noise and extract profitable setups for the crew. Whether they take it or not 😉

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

    Hope this grind down continues. Will set up a great multi month rally

  • https://evilspeculator.com Sir Mole III

    Anyone long that EURO? If you’re not a sub you missed out (again):

    https://uploads.disquscdn.com/images/466e49f45f1a21c934ee97c3e6b8ccc43c53f09a64c026914826fc4a8c15ccb2.png

  • OJuice

    Definitely seems like one of the drivers. From the snowballs chance in hell perspective to could he rally take the White House.

  • kudra

    I re-entered short IWM yesterday but got rid of it too quickly this morn thinking we’d see more ping pong action.

  • OJuice

    Does that zero pattern tell you anything with reading into?

  • https://evilspeculator.com Sir Mole III

    Yes. Don’t fucking touch it if you’re short.

  • https://evilspeculator.com Sir Mole III

    Sorry about that – I hope my ST bullish post wasn’t responsible. I did mention that I was still holding short at the top of the post. I usually ride out my campaigns once I place them.

  • kudra

    No, not at all. You’re awesome.

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

    anybody balls-to-the-wall short without rules, be advised.

    BPSPX found support around this area in the Summer.
    EDIT: …Aaand Xmas last year. That’s my 2 grams.

    http://stockcharts.com/h-sc/ui?s=%24BPSPX&p=W&yr=2&mn=0&dy=0&id=p25553354469
    -GG

  • CandleStickEmUpper

    I got in yesterday morning. Thank you for that analysis on yesterday’s post. However my /NG losing position is evening out my gains.

  • Mark Shinnick

    Not short short !

  • Mark Shinnick

    You are right-on to point this out.

  • https://evilspeculator.com Sir Mole III

    Good stuff. Thanks.

  • ridingwaves

    Orange County-Long Beach Calif. punk was pretty intense in late 70’s and 80’s, probably helped metal get footprint…

  • https://evilspeculator.com Sir Mole III

    I guess this is a good opportunity to post a little teaser:

    http://evilspeculator.financhill.com/

    You guys thought I got lazy there during the summer? Many exciting things are happening at the lair 😉

  • ridingwaves

    they are close enough to go down and fill that gap….easy part of move is over….now it gets hard. lots of support at 2100…

  • Yoda

    niiiice!

  • Yoda

    short DX by being long junior miners. Same directional results essentially but with a bigger bang!

  • Tomcat

    That was the bottom…BDTF

  • Yoda

    banking coins

  • kudra

    sweet! You are an industrious fellow.

  • https://evilspeculator.com Sir Mole III

    The snap back is in process. Doesn’t mean it’s a low though – we are living in volatile times.

  • https://evilspeculator.com Sir Mole III

    If you’re a short term trader then maybe. If you’re looking to hold medium term then we may not be done yet.

  • https://evilspeculator.com Sir Mole III

    Got to keep you guys entertained…

  • https://evilspeculator.com Sir Mole III

    Yoda approves – we are good to go.

  • https://evilspeculator.com Sir Mole III
  • https://evilspeculator.com Sir Mole III

    Let’s see if the signal remains below the zero mark now. If it does we probably get another leg lower. If not then we may revisit VWAP again.

  • Tomcat

    Love the simplistic design

  • Yoda

    we gonna start a new trend: Netflix and Financhill ;-P

  • Yoda

    loud and clear

  • Mark Shinnick

    Yeah…this situation is loaded with unexpected surprize so don’t become myopic.

  • ridingwaves

    the dollar might be the big tell for the next move, crude might have touched its support….need to tread lightly here…

  • Mark Shinnick

    I think we have a situation where the more normal shorter cues can get overwhelmed by some more macro stuff going on here….may be one of those times…

  • https://evilspeculator.com Sir Mole III

    That was exactly my thinking but I’m not too hot on making predictions. When in doubt I let my positions run as they are.

  • https://evilspeculator.com Sir Mole III

    NFLX? How’s that? Sorry not getting the joke I guess…

  • Billabong

    $45 on the daily?

  • Ladywandering

    Are you leaving that up for a day at least? I’m on my phone and it sure looks interesting!

  • Billabong

    US election interference? Today was the first break to the downside for YM since Sep. It has been stuck between 18000 – 18250 for literally 6 solid weeks.

  • randomuser6789

    Apparently, I drew the same support line as you.

  • ridingwaves

    Dollar move down would seem to support all things commodities…and up market….it would seem a $ move down before december rate hike would be very helpful unless they want earnings to really be shellacked by strong dollar….I like crude here, still a lot of folks thinking it should be at $30…which helps bullishness, it might be last chance to buy into it at these levels for quite some time…

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

    ok, close up your books.

    look at that tail.
    I love the em80. Doesn’t always work, but when it does, PerfectO!

    http://stockcharts.com/h-sc/ui?s=%24SPX&p=D&yr=0&mn=3&dy=0&id=p12427151290
    -GG

  • Billabong

    I’m currently short with a small position from early Oct. While looking at $45 for support, $42.5 hasn’t been ruled out. Any reversal to the upside and I’ll move to the sidelines. The $ weakness is a good point. There was a general call for $36 on the last down move and it settled around $40 before reversing. This time may not see it go that low.

  • https://evilspeculator.com Sir Mole III

    Yuppers – VWAP touch it is.

  • Ladywandering

    ok checked it out looks cool

  • ridingwaves

    the dollar is going to deliver for some directional trades, just figuring out which direction is key, your odds are just as good though the 200 and 360 sma’s will be acting as support for the bulls now…

  • bluprint

    “netflix and chill” is a euphemism among youth that means hang out and have sex, more or less.

    “how about some netflix and chill?”

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

    I don’t like to paste here links to external sites, but I almost died LOL reading this one:
    http://ibankcoin.com/zeropointnow/2016/10/28/donald-j-spirit-of-harambe-trump-time

  • https://evilspeculator.com Sir Mole III