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Chop, Chop, Chop…
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Chop, Chop, Chop…

by MoleDecember 29, 2008

Yawn… Another day at the markets, and again, not much has changed…  As Mole pointed out in the last part of the update, open @ 869 ; close @ 869… If you made dough in between, then great.  If not, staying in bed would have been the wiser choice.  Alas, we are back at work, and it is actually getting pretty exciting…

One thing is certain though, stock have not been moving higher, at least not for the past week or so.  This doesn’t mean that we are “going lower,” just that we aren’t “going higher” (i.e. stagnation and/or loss of momentum).  I have said this about the markets 3 times in the decline (now being the third), and let me illustrate the others…  What is interesting is the time of year when these actions happened.  The big boys were gone at all 3 times when this chop happened (which is a great illustration of who REALLY moves the markets).

This stagnation of uptrend, combined with all the indicators we have been mentioning paints a solid picture of a strong bearish case.  My primary count at the moment follows this strong flow of evidence, and is calling the recent action the topping touches of a rally phase (wave II) of the ending diagonal.  I believe that we should be heading lower from here on out, but will give the institutions a chance to get back in the game before I am really sure.  The alternate count remains the dreadful chop of the triangle.  I can’t wait to get rid of that option, but right now, we are not in the position to do that.  Thus, we wait…

$NDX…

With that said, I will cut it short tonight while Mole and I amass a grand evil assault for just after the new year.  Yes, I know it is a short post, but until the market gives me something to talk about, I will patiently await my turn to speak…

Be sure to relax in the final 52 hours of 2008!!

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.

  • molecool

    And to support your argument about the 'boys away tape' – remember the chop and fake rally during the long Thanksgiving weekend? The MMs are basically pushing the market where they want it to be. The fact that we reversed today one single point away from the NDX's December12 low makes that point nicely.

  • de3600

    I love this site /I already took my puts june 30s fslr nice Head and shoulders right shoulder taking a year and a day to form thou

  • BigHouse(Aka Mr Vix)

    Looks like s&p are up overnight. That can soon change by Tuesdays econ numbers.

  • VirginiaJim

    Lots of things coming together. ISEE initial call/put had a 162 reading last week which was one of the 4 highest since October 2007. Today it hit 206, the third highest since the ISEE started 4 years ago. The two higher readings preceded the May-August 2006 mini crash. Readings in the 160s this last year (only a few) preceded major bear waves. And CPC saw some very low readings last week. I'd say these items corroborate the bear case going into the New Year.

    Great site. Thanks for all the work and especially developing and sharing it.

    Jim

  • molecool

    Yes, the CPC was already very low last week – it's very hard to deny the bearish case. Of course it's possible that the institutions will launch a last and painful bear squeeze on Jan 5th. This is the only reason I'm not knee deep in puts/shorts right now.

  • http://zstock7.com/ zstock

    Mole, GOOG, turned out GOOG H&S at 291 was the buy signal and not the short sell signal–H&S also mean support. My charts show sort of a short sell signal at 305, anyway, nice !!! spotting that H&S in the first place.

  • VirginiaJim

    I fully agree. I'm flat at the moment hoping for a Santa Claus Squeeze. I can't think of anything good that might serve as a convenient excuse, but I'd welcome opportunity to sell. Jim

  • Eric_in_SFL
  • old_lefty

    This is a little long and a little of subject, but kind of related to the chop we are going through. Look at those charts, weren't there times when being out was the best thing to do. No financial nor emotional losses if you sit out, get rested and are sharp when the markets move. These are from the guy who runs Big Trends and sometimes is on the Wed TOS chats.

    Here are some lessons learned from trading that you can implement to take yourself to higher levels of prosperity in the year ahead:

    1) Trading is a mirror of other elements of my life. If I am behaving in an undisciplined way outside of trading, my trading shows undisciplined behavior like not following stops. If I feel depressed about something in my personal life, my trading observations will not pick up as many opportunities as I cannot see the possibilities that I see when I am in a positive frame of mind. Use a journal to diagram issues in your trading that can allow you to not only be a more effective trader but also experience personal growth.

    2) Treat every trade as both a potential loser and a potential winner. Know how to tell the difference when you're in it.

    3) Think positively. Have confidence in yourself. If you don't feel good about what you're doing, change it immediately.

    4) Never make a trade on a market that just completed a major move if the only reason for making the trade is that you just saw a major move and missed it. (Warning-Those most susceptible to this are the ones who did expect the move but made the trade earlier.)

    5) Winning traders and losing traders experience the trading environment differently. It makes them feel different and as a result their actions consistently vary. In psychological terms, they interpret the market differently because they have a separate belief system in the way that they see themselves relative to the stock market. Change your belief system from the reactionary emotional beliefs of most losing traders to a more proactive unemotional approach.

    6) Know when not to trade. This skill is just as important as knowing when to pull the trigger. Part of being a great trader is being a keen observer of what a stock is telling you. By committing to observe objectively, you give yourself permission not to trade until the conditions are right.

    7) Don't trade for excitement or entertainment. Avoid the highs that come from quick profits or the lows that can appear after losses. If you have a sound system, it does not matter whether any particular trade makes a profit or a loss. What matters is that the probabilities over time are in your favor. You must remember that no system is perfect, and prepare for losses along the way. You should measure yourself on whether you followed your rules and executed your system, for both winning and losing trades. The process of trading is much easier when you focus on execution of a system rather than on whether each individual trade was right or not, because you take your ego out of the process. This makes you more rational and less emotional, which leads to better investment performance.

    8) It is critically important to protect your psychological capital by not overtrading or playing for excitement instead of profits. This can cause you to be emotionally “drawn down”, and then sit out, usually as a move just begins that could have been a big opportunity. Yet you miss the new big trend because you were financially and emotionally exhausted by overtrading in a tough market. As a result, you can't see through the negative emotions because you feel beat up by the markets. Managing your internal psychological state of mind is equally important as managing your financial position.

    9) Be careful not to overreact to intraday news. It seems to me like every year, there are more whipsaws where the opening occurred in one direction but was then reversed with a close in the opposite direction. I like to do my preparation for each day's trading in advance after the previous day's close, so I know what the market structure looks like heading into the next day's trading. This allows me to move from a reactionary state to a more proactive posture. This helps position your mindset to capitalize on news-driven intraday volatility.

    10) Accept total responsibility for the results of your trading. Remember that losers always look for somebody else to blame. Winners look to themselves particularly if they have to take a loss on some trades, as is inevitable for all traders and all systems. When you accept total responsibility, you commit that in any market environment you will find the way to win.

    I wish you a very happy and prosperous New Year, filled with many Big Trends!

    Have a great week!
    Price Headley, CFA, CMT – President & Chief Analyst

  • Insect Overlord

    berk, thanks for another awesome analysis…this one may have been short, but it was SWEET! mole commented on the big boys pushing this market where they want it to be, reversing at NDX support almost exactly…sometimes it amazes me how UNrandom the market is.
    I'm still anti-theta, but cautiously bearish. I'm short BPO right now and am looking closely at PLD and DRE…
    http://screencast.com/t/3WyKkj6l
    http://screencast.com/t/HbdWdUFuU

  • ZigZag

    Dear Mrs. Market,

    Please go higher so I can add to my shorts..

    Sincerely,
    ZigZag

    http://tinyurl.com/822l9m

  • BigHouse(Aka Mr Vix)

    I hope the market moves up for Tuesday Wed and Friday. I want to short at higher levels. Not here.

    http://screencast.com/t/ddSqBJNS

  • BigHouse(Aka Mr Vix)

    It will if you start doing this

    http://screencast.com/t/RVKDfvmAr

  • LGSinCO

    Thanks for the wisdom. All the best to you in '09.

  • ZigZag

    🙂

  • BigHouse(Aka Mr Vix)

    Mole.. i think we missed this move

    http://screencast.com/t/dUVhj4iJ

  • de3600

    way off topic but if any of you cook try this when you have time http://www.unc.edu/~hallman/cookbook/brandy-ale

  • ZigZag

    Insect, XAU is still in the pattern…Time for a little revenge on AEM maybe. XAU needs to close above $126.50 for me to cover..

    http://tinyurl.com/97298t

  • BigHouse(Aka Mr Vix)

    lol wow .Going forward this site will talk about the markets and cooking. I am going to buy everyone this book for the New Year.

    http://www.simonsays.com/content/book.cfm?tab=1

    🙂 Heads up Mole Paula Deen is going to be guest speaker.

    Just busting balls de3600 . PS S&P spiking higher now 877.50

  • Insect Overlord

    lol

  • b_rad

    koo-koo for cocoa puffs, nice +1

  • Insect Overlord

    AEM has a nice pattern too…unlike last time, I will wait for confirmation. The more aggressive confirmation would be breaking today's low. The less aggressive would be if the next candlestick broke below the close of the doji the day prior.

    http://screencast.com/t/KqZOGUclX

    I don't want AEM to become my Moby Dick, so I'll enter if it has a nice pattern. Otherwise, it can go fuck itself. 🙂

  • BigHouse(Aka Mr Vix)

    On a serious note please click below. We hear so many people on CNBC talk about the The Great Depression.What do they know. Below are real people in their late 80's and middle 90's who are still alive to tell about it.

    http://www.washingtontimes.com/news/2008/dec/29

  • Insect Overlord

    Here are my ideas for whatever the market may do:
    Puts:
    AEM – (see below)
    CELG – http://screencast.com/t/kMPPRO9fqoh
    CEPH – http://screencast.com/t/Q98TURlp
    LLL – http://screencast.com/t/HMgfsirw07
    PCLN – http://screencast.com/t/qF9zd4aFK
    Calls:
    OIH, RIG, USO, X (no charts…figure it out for yourselves)

  • Insect Overlord

    Or go fork itself. 🙂

  • ZigZag

    Sounds like a plan…If this count is correct, the C should be ending here soon. If not, it definitely can go fuck itself. 🙂

    http://tinyurl.com/97udbq

  • molecool

    Excellent advice – spot on – in particular the last one.

  • molecool

    You and me both brother…

  • BigSteve

    Here's a link to a Senor Coconut video that really expresses my relationship with the market lately.

    http://tinyurl.com/8gjtdb

  • standard_and_poor

    Hey Mole and Berk I hear you guys have hired a new Spelling and Grammar Constable for the
    New Year?

  • Mastachopchop

    U.S. Retail Sales Fell 1.8 Percent Last Week, Trade Group Says

    http://www.bloomberg.com/apps/news?pid=20601087

  • https://www.evilspeculator.com berkshire

    “You can't always get what you want..”

    Skål!

  • b_rad

    really? crap, i didn't get my application in on time!

  • DZZ

    Gold setup looking good,

  • BigHouse(Aka Mr Vix)

    aahhh a nice rally . Lets see if we go up 100 in the dow.

  • BigHouse(Aka Mr Vix)

    I'm i doing something wrong? Please read below.

    http://www.nypost.com/seven/12302008/news/regio

  • molecool

    We are all doing something wrong by letting this shit continue to happen. Enough said….

  • geckoman
  • molecool

    We also set up a 'bad grammar dungeon' where we whip offenders into submission.

  • BigHouse(Aka Mr Vix)

    Market losing its gains on Consumer Confidence # that came out great.

  • BigHouse(Aka Mr Vix)

    I guess i should go there now.

  • DZZ

    Support is now resistance.

    ZERO:
    9:58 Blue line down – do nothing
    10:02 Red line down – ETA – do nothing – trigger finger ready
    10:04 no line or yellow short – indecision doing nothing till 09

  • Trader Jose

    Gracias, Lefty. Great advice that I will refer to often.

    Prospero Año Nuevo.

    TJ

  • de3600

    Said it time and time again WE THE PEOPLE

  • de3600

    DEAD DEAD DEAD

  • BigHouse(Aka Mr Vix)

    XLF leadin gthe charge up

  • BigHouse(Aka Mr Vix)

    I am long xlf from yesterday. Anyone guess where it would be a good place to sell this?

  • JWBlack

    I'd take some profits now. SPX at the highest % frequency for go short — 877.30.

  • BigHouse(Aka Mr Vix)

    Yea i saw that.

  • molecool

    CLEAN CUPS!

  • molecool

    Yeah, but it's methodical how the MMs always ride the market up in anticipation of bad news.

  • molecool

    I agree there – look at the Zero – signal is completely flat. We might overshoot yeah – but this rally is running on vapors.

  • Bartholomy

    GMAC received 6 billion from treasuries.
    Xmas worst sales in 40 years, 2% decline.
    Thousands of stores will close in 2009, International Council of Shopping Centers advanced 73000 as a number.
    The real question is regarding $USD direction, witch dominate market and commodities reaction.
    I still expect crude to go back over 60$ in 2009. I will try another attempt to get long in crude for july.

  • geckoman

    Tony Cherniawski's morning comment I'll summarize the important points and provide chart.

    Feels the SPX took out its Trading cycle low (December 22nd) by a mere .02. The NDX did a little better than that, exceeding its Trading Cycle low by 11.16 points. The DJIA achieved its goal by 8.2 points. Believes that the trend in this cycle is decidedly more bearish, starting today.

    We are entering the final phase of this cycle in which the markets make a statement of their true intent. A chance that the rally may continue for a while in the morning. However, the larger picture is that we have about a month of down days ahead of us.

    Refer to chart – Feels there is a lot of “white space” in this chart. In addition, the DJIA really achieved liftoff after the decline in 1994. Perhaps this is where the DJIA may go in this final decline. It certainly would make a statement, wouldn’t it? It appears that there is a descending trendline from the 2000-2002 decline and 4-year cycle support at 3500.

    Looks at Fibs and concludes. The .50 retracement is at 7099. The .618 retracement is at 5424. The .786 retracement is at 3038 and the .886 retracement is at 1610.

    Chart:
    http://www.screencast.com/users/geckoman/folder

    Please visit Tony at http://www.thepracticalinvestor.com for more information.

  • Mastachopchop

    U.S. Retail Sales Fell 1.8 Percent Last Week, Trade Group Says

    http://www.bloomberg.com/apps/news?pid=20601087

  • https://www.evilspeculator.com berkshire

    “You can't always get what you want..”

    Skål!

  • Woolly Llama

    really? crap, i didn't get my application in on time!

  • Michael Ricelli

    Got my finger loaded for a qqqq dec 29 call at open. Think we go up for an hour or so. Think traders will early out. Big lunch. Martunis. A couple of lap dances. Drive home for long weekend. DAX and Japs did same. Just a hunchski. No fundies. no techs. Just an early out up continued from yesterday afternnoon. Good luck.

  • DZZ

    Gold setup looking good,

  • BigHouse(Aka Mr Vix)

    aahhh a nice rally . Lets see if we go up 100 in the dow.

  • BigHouse(Aka Mr Vix)

    I'm i doing something wrong? Please read below.

    http://www.nypost.com/seven/12302008/news/regio

  • https://evilspeculator.com molecool

    We are all doing something wrong by letting this shit continue to happen. Enough said….

  • geckoman
  • https://evilspeculator.com molecool

    We also set up a 'bad grammar dungeon' where we whip offenders into submission.

  • BigHouse(Aka Mr Vix)

    Market losing its gains on Consumer Confidence # that came out great.

  • BigHouse(Aka Mr Vix)

    I guess i should go there now.

  • DZZ

    Support is now resistance.

    ZERO:
    9:58 Blue line down – do nothing
    10:02 Red line down – ETA – do nothing – trigger finger ready
    10:04 no line or yellow short – indecision doing nothing till 09

  • Trader Jose

    Gracias, Lefty. Great advice that I will refer to often.

    Prospero Año Nuevo.

    TJ

  • de3600

    Said it time and time again WE THE PEOPLE

  • de3600

    DEAD DEAD DEAD

  • BigHouse(Aka Mr Vix)

    XLF leading the charge up

  • BigHouse(Aka Mr Vix)

    I am long xlf from yesterday. Anyone guess where it would be a good place to sell this?

  • JWBlack

    I'd take some profits now. SPX at the highest % frequency for go short — 877.30.

  • BigHouse(Aka Mr Vix)

    Yea i saw that.

  • https://evilspeculator.com molecool

    CLEAN CUPS!

  • https://evilspeculator.com molecool

    Yeah, but it's methodical how the MMs always ride the market up in anticipation of bad news.

  • https://evilspeculator.com molecool

    I agree there – look at the Zero – signal is completely flat. We might overshoot yeah – but this rally is running on vapors.

  • Bartholomy

    GMAC received 6 billion from treasuries.
    Xmas worst sales in 40 years, 2% decline.
    Thousands of stores will close in 2009, International Council of Shopping Centers advanced 73000 as a number.
    The real question is regarding $USD direction, witch dominate market and commodities reaction.
    I still expect crude to go back over 60$ in 2009. I will try another attempt to get long in crude for july.

  • geckoman

    Tony Cherniawski's morning comment I'll summarize the important points and provide chart.

    Feels the SPX took out its Trading cycle low (December 22nd) by a mere .02. The NDX did a little better than that, exceeding its Trading Cycle low by 11.16 points. The DJIA achieved its goal by 8.2 points. Believes that the trend in this cycle is decidedly more bearish, starting today.

    We are entering the final phase of this cycle in which the markets make a statement of their true intent. A chance that the rally may continue for a while in the morning. However, the larger picture is that we have about a month of down days ahead of us.

    Refer to chart – Feels there is a lot of “white space” in this chart. In addition, the DJIA really achieved liftoff after the decline in 1994. Perhaps this is where the DJIA may go in this final decline. It certainly would make a statement, wouldn’t it? It appears that there is a descending trendline from the 2000-2002 decline and 4-year cycle support at 3500.

    Looks at Fibs and concludes. The .50 retracement is at 7099. The .618 retracement is at 5424. The .786 retracement is at 3038 and the .886 retracement is at 1610.

    Chart:
    http://www.screencast.com/users/geckoman/folder

    Please visit Tony at http://www.thepracticalinvestor.com for more information.