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by The MoleApril 13, 2009

UPDATE 10:00am EDT: Happy Monday rats! I hope you enjoyed your three day weekend because this is OPEX week and boy, is it going to get ugly!!

So, why am I disappointed? You might remember that I loaded up on some XLF and other puts on Friday in what I thought were ridiculously overbought conditions. And what do I get? 1% down? Hey, at least I have enough cash to buy stamps today. I dropped those suckers for very humble profits as Goldman Sucks is announcing profits tonight and there’s a rumour going around Wall Street about record earnings. Yeah, big surprise – let’s not forget: as a favorite primary dealer those cats hold a free license to fleeze the public purse – business as usual – they should be so proud.

I still expect some downside [at some point] as we are heavily overbought – but nobody seems to care and the bears remain in hibernation, thus the risk for upside surprises remains high. Also, if it’s Goldman and its OTC delta hedging cronies running close to 40% of the tape then I remain extremely hesitant to jump in on either front:

  • The long side unless we see a large and desperately needed consolidation that gets us closer to the 810 line. Although anything is possible right now this is not where you go long – I’m not going to be a hero here.
  • The short side completely right now since the trend to the upside hasn’t even suffered as much as a dent since March 6th. Of course it’ll all come tumbling down pretty soon but we don’t exactly know when – might be today, tomorrow, or another 30 points further up. It’ll probably be when we least expect it as obvious resistance zones are seemingly being ignored. I might change my mind if they push the tape to 881 but even then I would be hesitant to hold anything overnight. After all it’s OPEX week and the tape is thin – Fujisan’s delta neutral spreads might be good medicine.

I think it has now become very apparent that trading against the current up trend is an exercise in futility – case in point: as I’m writing this we are pushing back up. We have to remain patient and wait for an opportunity to play the current trend, which remains to be the upside. We have been talking about ‘overbought conditions’ for weeks now – not days – weeks – but there is no letup in buying pressure. Is it due to market manipulation and program trading? Yeah, but who cares – we’re going up either way and I rather be rich than righteous.

Here’s was my channel du jour as I was starting to type this.

Here it is now – see, I’m not completely useless! πŸ˜‰

A breach of the lower line will probably push us into the blue scenario. So far it’s holding though, so be vigilant – we might just go apeshit here and push into green.

Gold is being a pisser again – I think it didn’t get my memo about the trend being down now. I’ve drawn a line in green at 900 where I see some resistance that I would rather not see breached. We touched it this morning but thus far have remained below. The wave count in our favorite precious metal is wonky enough – if we breach 900 by more than a few points I might cash out my puts, which incidentally have suffered quite a hit since Friday. But the trick in trading Gold is not to get scared out of your position, so I’m going to watch this for a little longer.

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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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