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Event Horizon
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Event Horizon

by The MoleJune 10, 2019

The S&P 500’s 2900 mark now beckons as the E-Mini futures already scraped the ES 2898 mark overnight. Fair value (PREM) is only 50 cents right now due to the looming roll over, which means this would roughly represent the SPX trading at 2897.50. As I already outlined last week, a breach above SPX 2900 almost guarantees continuation to the upside. That said, after five consecutive sessions higher an obligatory shake out session would not be uncharacteristic.

From a pure price action perspective we are looking at a low volatility rally higher that was launched by a snapback off the 100-week SMA. Compare the time and effort it took to descend from ES 2880 to the spike low at ES 2728.75 with how long it took to reverse back into ES 2880.

Not counting the actual spike low I count 11 candles on the way down versus 5 candles on the way up (including today). Also look at the shape and nature of the candles, which are shorter and more volatile on the way down and quite a bit more directional on the way up with nary any wicks on them.

So on the surface that all seems fairly bullish, doesn’t it?

Yes and no. If I saw this type of price action in the midst of a medium term bullish cycle then I’d be buying every dip like a mad monkey. However the dirty little secret of bear market reversals is that they often come strong and hard and, just like last week’s advance, are devoid of downside days.

Implied volatility by definition represents the perception of market risk based on the collective pricing of options. As you may recall from previous posts I deem the VIX 15 to VIX 20 rang as ‘bulls are on notice’ territory. Anything above 20 is clearly bearish.

Since the beginning of 2018 we have seen a slow but steady rise in the 100-week SMA which started at around 12.5 and now has ascended to 14.3. The realized volatility of implied volatility (RV of IV) has oscillated through extremes and I already pointed out last week that the current cycle of market pessimism still looks incomplete.

Although I’m always very cautious to interpret the VIX like a regular price chart it seems to me that the 15 mark has now become an effective baseline for bearish take downs.

Bottom Line:

The bears are limping but they aren’t out of the game just yet. Although the juicy double top formation on the weekly panel has lost some of is luster it cannot yet be counted out. However a breach above SPX 2900 pretty much seals the fate of the medium term bearish scenario.

Which statistically would be rather interesting as the most bearish week of the year by far, historically speaking, begins next Monday. The bulls would be well advised to drive the ball beyond the line of scrimmage (i.e. SPX 2900) with time to spare.

I am thrilled to see a major reversal in soybeans after a massive blast higher in late May. As it is a thinly traded market we are however well advised to wait for a convincing floor pattern before considering any long positions.

The reversal in corn looks like regular profit taking to me. After a push to its 100-week SMA off its lower 100-week BB in merely three sessions participants are trying to find out what to do next.

Our crude campaign is still looking good but it has not yet advanced far enough to justify advancing our ISL.

Almost an identical perspective on the USD/JPY. Similar formation on the daily panel as well. Very interesting!

Apparently I was a bit too hasty with my DX entry and got stopped out with a vengeance. The current formation looks pretty juicy actually but since I’m already long the USD/JPY I’ll give it a miss.

And finally much to my chagrin my long entry on the EUR/USD has been triggered. I really loath being long this thing but a breach of four spike highs puts this one on the road to more upside.

If you are new to the blog then you may be unaware that I’m an expat living in Spain, thus a low EUR exchange rate will always put a big smile on my face. Conversely trading EUR pairs always requires me to ignore my own emotions, which effectively renders it a control gauge of my self-control and emotional discipline.

As my buddy Scott put it so aptly the other day:ย The gold standard of trading is to hold your opinions lightly, and like a scientist, constantly try and disprove them.


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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  • HD

    Just because the VIX worked 5 years ago doesn’t make it a good market indicator today. Characteristics of this market are very different. IMO if the VIX >30 you can imply a low is coming within days as it’s always wrong.
    https://uploads.disquscdn.com/images/878712e79bf3a9dcf7c6cd37c401724c263f782505ba53cb4ac3a18d55cf5fe4.png

  • HD

    I was wrong at 2800 and still willing to try 2900. I’m a seller.

  • Dyellowflash

    I am in. Doesn’t matter if I am against the trend. I am a ST trader. ST signal in my method is a short at Dow 26160s.

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

    ..all I know is one hour equals 27 years.
    certainly feels like it.

    https://secure.i.telegraph.co.uk/multimedia/archive/03212/Black_Hole_3212469b.jpg

  • HD

    RTN finally broke out. Sorry it took so long.

  • evilasevildoes

    great stuff Mole

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

    Great post Mole. “From a pure price action perspective we are looking at a low volatility rally higher that was launched by a snapback off the 100-week SMA. ”

    Funny, we were talking about this possibilty a few days ago and here it is. How long it lasts is anybody’s guess. In the meantime, after looking back at my previous trades of the new micro equity futures, I found that I’ve left a lot on the table closing my trades way too early. So that’s going to change. I actually went long /MYM last night after the initial spike retraced. (I could have waited a little longer for my entry) but with a wide stop, I was pleased to see my position was still alive this morning. Trade management is crucial and extra crucial with futures.

    BTW, for the Capital Challenged and or Courage Challenged, I’ve been switching back and forth between /MES at $5.00 per point per contract and /MYM at $.50 per point per contract. I’m currently trading 2 Contracts of /MYM so that’s only $1.00 per point. In this case a 100 Points is worth $100. Just like everything else we trade you can still lose but they seem to be decent things to trade in relative terms. I would like to be able to trade the full /YM and /ES again and plan to do so someday. But in the meantime, I feel good getting back into the futures game with the much lower risk Micros.

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

    his comedy’s not bad either.
    ๐Ÿ˜‰

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

    for those into poetry & Hans Zimmer..

    https://www.youtube.com/watch?v=gSkIwwdT79E

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

    XLF,
    I’m no fan, but there’s a range target if I’ve ever seen ONE.

    https://uploads.disquscdn.com/images/947ed6722e9750b4d134d6c012645c761e8b443f11358f738b94259247605ce9.png

  • mSquare

    SQQQ – Buying some in low $37s for a quickie as I think reversal on QQQs at today’s highs of $184.25 or a bit higher $184.5-ish

  • HD

    fees the same as ES?

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

    HD…not to be a contrarian, but…..
    R of S&P500 vs VIX for the last 11 months is -0.81. The 2 issues plotted over a long period of time are near mirror images, but that relationship breaks down more and more as the time frame gets shorter, and over 1 day they may move together. Yahoo Finance doesn’t normalize the values so the plot isn’t helpful, but tradingview.com (free), and perhaps others, makes the longer term R crystal clear, but that might not be helpful for what you need.
    I agree that if the VIX >20 or so, things get….interesting. 11 month Average=16.5, SD=4.3 AVG +1 SD=20.73 In those 11 months, VIX >20 44 days.

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

    are you a chemist? or a walking MATLAB?
    https://lumiere-a.akamaihd.net/v1/images/C-3PO-See-Threepio_68fe125c.jpeg?region=0%2C1%2C1408%2C792&width=960
    edit: you and Mark will have some great conversations.

  • https://evilspeculator.com Sir Mole III

    Hey buddy – regarding taking profits: It’s crucial that you employ specific campaign management rules that allow you to take advantage of an extended run in a low volatility rally situation.

    Now there’s one problem with that. The only way to employ the proper rules is to know for sure what type of tape you’re dealing with. But you didn’t and there was no way that you could have switched your rules on a dime. The character of the advance is different than that of the recent rally. YES you could have guessed that but again this would imply the assumption that we are in a bear market rally.

    So essentially you did the right thing and the only mistake I think you may be guilty of is that you seem to pick your targets on a purely discretionary basis – assuming I understood your comment properly.

  • BobbyLow

    I’m not sure. Right now I’m with TOS and their future fees are twice as much as IB. TOS is saying that they have to rework their Futures fees. In the meantime, I downloaded a trial platform from IB and really do not like it partly because I’m used to the TOS plaform and really like it and partly because I find IB’s platform clunky in comparison. I want to make sure that I’m going to have a steady diet of futures and then TOS will either have to lower their fees or I’ll consider running both TOS and IB at the same time.

  • https://evilspeculator.com Sir Mole III

    I also applaud you for limiting your risk by trading the micros. How’s liquidity treating you on those?

  • https://evilspeculator.com Sir Mole III

    It should have said ‘seals the fate of the medium term bearish scenario’. Just corrected it.

  • mSquare

    Yes, I see QQQs higher – as in the $186.07 highs of 1month it made mid-May but not likely right away and not today. That is this quickie trade premise.

    I rarely hold these 3x ETFs overnight but just being tempted to add to it and hold it till $186.07 stop (perhaps the $2000 round number resistance & potential reversal on $SPX too)

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

    Thanks Mole,

    Liquidity is fine especially on the MES with prices identical. MYM has less liquidity and at night there can be a 1 or 2 point differential with YM but that’s only .50 Cents per point so that’s not too bad. During regular hours MYM is as tight as YM so there has been no problem there. Fortunately, these micro futures have been a hit right away and don’t have the same liquidity/spread problems that the micros in grains do.

    I understand what you mean about picking targets and I don’t use targets at all. I’m back to using ATR Trailing Stops and add points to them. The ATRTS takes volatility into consideration and after back testing, I think I have a pretty good idea of where to place my stops so we’ll see what happens. ๐Ÿ™‚

  • HD

    Hi Scott. I donโ€™t think thatโ€™s contrarian. Looking back, yes, the VIX will always catch up to what the SPX price has done. Most talk about the VIX in the context of a leading indicator. In the context of Moleโ€™s post Iโ€™m not sure looking back over the last 2 years gives clues to future price action in SPX or not. Has IV been higher? Yes. Did the VIX forecast that? No.

  • BobbyLow

    I loved the “Spock” comparison.

    โ€œLive long and prosper.โ€ ๐Ÿ™‚

  • HD

    At 1/10 the size itโ€™d be nice if fees were 1/10 as well. ๐Ÿ™‚

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

    It’s only Logical.
    ๐Ÿ˜‰
    https://www.youtube.com/watch?v=Xa6c3OTr6yA

  • HD

    You could also go back and study the 2016 hit. Did VIX 30 2/11 give any clues SPX would head into the lowest volatility in over 10 years?

  • Scott_CA

    That I had the data was coincidental, simple stats only. Barely know what MATLAB is, never used it.
    Today (1 PM EDT) the VIX & SPX on the 1 m chart are near mirror images. Need to go look at VIX derivation, but it’s based on futures, so it should be a leading indicator. But by how much, how far ahead, apparently not far enough to be particularly useful.

    DISCLAIMER: THE INFORMATION PROVIDED IS NOT A SUBSTITUTE FOR A CRYSTAL BALL.

  • HD
  • Cyd

    USO stalling at 8 ema so taking 3/4 off long and break even stop on remaining.USO may go sideways in a consolidation No trade FRC.Going in on small long MEOH on a bottom fish above 42.60 proposed over weekend.44 is resistance so monitoring and will evaluate
    Cyd

  • Cyd

    SLV has pulled back to exactly 13.71 target Actual low 13.72
    Cyd

  • Cyd

    Mole Chieftan Comparing the 11 days down and 5 days up is excellent.The time ratio very important Good one
    Cyd

  • https://evilspeculator.com Sir Mole III

    I have my moments ๐Ÿ˜‰

  • zzezzezz

    What a weird chart….

    http://schrts.co/DRseKhZx

  • Mark Shinnick

    2 Generations of hardcore conditioning.

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

    they never saw it coming. yeah right.

    but I suspected 2017 was just a pump, to eventually buffer the eventual dump.
    the crash won’t be that bad, for the common man.
    ๐Ÿ˜‰

  • zzezzezz

    Short position built up so far averages @ /ES 2890
    I’ll add more short at 2920 and 2940

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

    carnival game. You can see why my pessimism of Silver Bully is validated!

  • Mark Shinnick

    I’m too variable in my quantum dependency of whether or not the information is actually recorded.

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

    Lock in 10!

  • BKXtoZERO

    Good…. Because I missed it. Can’t leave without me.

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

    I worked myself like a rented mule. Spent most of weekend under my old comet ending 1am. New gas tank.new gas line. All new brake lines. New U joints. Differential oil change. Every dirty job underneath all at once. Not much left for trading today.

  • Cyd

    EXAS 1.272 extension is 110.00 1.414 extension is 113 Approachng targets bollinger band % — % above 21 ema and CCI 200 Additional https://uploads.disquscdn.com/images/058cf459709772052b0c665606270bc866433fe4352824d5f95ddb3af702197e.png https://uploads.disquscdn.com/images/248ea1e767db4df9171707193b3ae247a5f27355a975c980cd01524aec3c5759.png chart indicates top of all bollinger bands and overbought all full stochasticsi with a negative divergence on the 5,3.2 EXAS is a stock we trade

    Cyd

  • zzezzezz

    pictures? ๐Ÿ™‚

  • zzezzezz
  • BKXtoZERO
  • BKXtoZERO
  • zzezzezz

    nice job!

  • HD

    SPX back at June TL

  • Cyd

    EXAS 1.272 extension is 110 1.414 extension is 113 I posted the wrong chart so deleted and starting again Approaching bollinger band % — % above 21 ema and close to CCI 200 where a pullback with pattern recognition is important The full stochastics are all overbought and at top of all upper bollinger bands EXAS is a stock we trade https://uploads.disquscdn.com/images/248ea1e767db4df9171707193b3ae247a5f27355a975c980cd01524aec3c5759.png

    Cyd

  • BKXtoZERO

    Just saw last line from Scott: “As my buddy Scott put it so aptly the other day: The gold standard of trading is to hold your opinions lightly, and like a scientist, constantly try and disprove them.” Nice.

  • Cyd

    SPX HOD is 2904.77 and Level 2 @ 2905.43 Could be a pullback Lunch almost over
    Cyd

  • Mark Shinnick
  • Cyd

    Scott_CA posting below is a friend of yours ?. If so welcoming him aboard
    Cyd

  • BKXtoZERO

    Drill Saergant trader friend of Moles.

  • Cyd

    Mr GG SLV Do not be such a pessimist. Nice bounce off 13.71(13.72 LOD) and closes above 21 ema 13.79 would be a big benefit No pessimism allowed on PM ‘s Cyd https://uploads.disquscdn.com/images/3660c67a1fcbf26fcf293a72ed99668ce2adce398903af246b33a332e8638af1.png

  • Mark Shinnick

    Too cool, I love working on the older cars from a time regular people could still understand them.

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

    MACD Histogram barely above zero
    it’s not dead…yet.

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

    define, older.
    ๐Ÿ˜‰

    http://classicvehicleslist.com/pics/bigpics/1926-ford-model-t-truck-one-ton-1.jpg

    There’s a reason the Model ‘A’ is better than the Model ‘T’.
    LOL.
    edit: and good luck retarding the ignition by hand!

  • zzezzezz
  • Cyd

    I’ve seen a lot of good me die because the did not believe in a silver rally
    Cyd

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

    Mole called a top at $50. listen to MOle.
    =P

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

    ..how could I forget the buttered cat?

    https://evilspeculator.com/anti-gravity-equities/

    “Silver โ€“ long term chart. Quite an eye opener when you realize what this chart really means. I mean almost every chart we look at each day is a ratio between a financial instrument and the Dollar. Does silver really buy you a lot more than it did back in 2000? Maybe by a reasonable margin โ€“ but NOT eight times as much, thatโ€™s for sure.

  • Cyd

    SPX just went below Level 2 @ 2890.39
    Cyd

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

    wake me at 2826 Level 1.

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

    Just got back from Dr’s Appt. I flipped over to short just before I left at 26133 with a wide stop. Nice to see it alive and heading in the right direction. Can’t say the same thing about oil. I’m still holding long via OILU. It’s still alive but not doing good today.

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

    wait…

    you have teeth?
    ;-D

  • BobbyLow

    Yep and they’re my orginal ones too.

  • mSquare

    SQQQ – Out near close at a small profit. Tomorrow is another day

  • https://evilspeculator.com Sir Mole III

    Boy – looking at that old post makes me melancholic. So many faces that have come and gone…

  • BobbyLow

    I just counted about 12 faces that are MIA. I wonder what happened to “Raised by Woves”? He was a cool dude. I also read some of my own comments and I was definitely still in bitch mode back then. LOL

  • Scott_CA

    Cyd….No, I’m a different Scott, new to this whole thing but willing to share what little info I have.

  • Cyd

    You are watching K Mr.GG. We love it .On par with weekend post

    Cyd

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

    of course. I don’t have the link, but extremeely close to the median I had posted. now, whether it’s a full reverse, or just noise – remains to be seen.

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

    He either got that girl pregnant and did the father routine.
    Or his microdosing of LSD got the best of him, and he went down the opiod route.

  • evilasevildoes

    think it will do you well

  • evilasevildoes

    what are yalls thoughts on USD CHF?

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

    look left, back to last summer.
    nowhere’s ville range.

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • Ivan Hrusovsky
  • Ivan Hrusovsky
  • evilasevildoes

    4 hours

  • Cyd

    EXAS trapped like a rat. A bearish close below today’s low 108.30 spells curtains
    Cyd https://uploads.disquscdn.com/images/6f8eb1566b93ce2edc513e1a253ed4999dd8388913dbb238e8495755662a9896.png

  • Cyd

    EXAS financially in the red and will be applying to FEMA for disaster relief
    Cyd

  • BKXtoZERO

    Trapped like a rat at 110? if you match the area prior to the channel and ad it on top, that would be…….????? 180? never say never

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

    Let’s keep it real. 120?

    https://stockcharts.com/h-sc/ui?s=EXAS&p=D&yr=1&mn=6&dy=0&id=p72395888438

    edit: RSI 68/69 is a real tricky spot, IMHO.

  • Cyd

    BKX and GG glad you are here Something very important Give an up vote Both of you are moderators so you can delete all

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

    not tonight Honey. I’m gg the spectator. (gold_gerb)

    During the day at work, I’m GG the MODerator.

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

    ..but if you had those pics…
    LOL

  • Cyd

    gg This guy now posting Scott CA is Julie’s tormentor and harraser I know it is He has been kicked off before by Mole about 2 weeks after Julie started posting here He has reappeared
    Cyd

  • BKXtoZERO

    Natural Gas alert…. No chart but looking interesting to me.

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

    I believe you. It’s something you should take up directly with Mole tomorrow. via email.

  • Cyd

    OK gg go ahead and delete all

    Cyd

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

    all what?

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

    this thread?
    Hey BK?…can you delete this thread?

  • http://gerb-reloaded.blogspot.com gold_gerb
  • Cyd

    Special Thanks BKX for the alert on NG
    Cyd

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

    silly thought, that spike was what 4.20?
    50% is 2.10?

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

    FYI – I’m not a big fan of it right now.

    Natural gas is consumed primarily in the pulp and paper, metals, chemicals, petroleum refining, stone, clay and glass, plastic, and food processing industries. These businesses account for over 84 percent of all industrial natural gas use.

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

    $Silver
    support at $14.50 & 14.25 in my lens.

    if they break. epic fall down to 13 range, IMHO. think fresh LOW.
    this would coincide with an equities blow-off?
    https://uploads.disquscdn.com/images/c8e7717ed1436b637f3d8ea747b062957f2ffb006e9e4339b5925077e62f95ad.png

  • Cyd

    gg SLV 13.71 target and bounce today 13.72 Go with the calvary on a reversal candle tomorrow. Looks like a back test of the fan line and support your magnificent chart
    Cyd

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

    nah. like I said, 15.50 or higher.
    I’ve already got’sum underwater. ๐Ÿ˜‰

  • Cyd

    But that chart is a thing of beauty No rest for us wicked when we hit the jackpot tomorrow on the pullback.This will better than hitting Big Bertha in Reno. That’s a story with Jewels . She put a dollar in Big Bertha at Harrah’s in Reno and hit 12,000. Quite a few years ago
    Cyd

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

    13.71 to 20 is around a 45% gain.
    not bad. not bad at all.

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

    I believe the envelope is correct. you could say I’ve had plenty of years to study it.

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

    dumb luck? yet again?! stop it!

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

    The envelope is an SMA, so give it a break.
    I’m sure the EMA has a much sexier fit.

  • Cyd
  • http://gerb-reloaded.blogspot.com gold_gerb

    we shall see.

    but you know, SMA isn’t that bad. look at the SPX.
    he he he.
    https://uploads.disquscdn.com/images/8ea72376b028f5d2111cbecd23def872f146456001f19b653f911c04a352c027.png

  • Cyd

    Sma plug in 40 – 80 and 160 on a daily chart

    Cyd

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

    yeah. that’s where I started.about 3 years ago.

  • Cyd
  • http://gerb-reloaded.blogspot.com gold_gerb

    it’s backwards.

  • http://gerb-reloaded.blogspot.com gold_gerb
  • Cyd

    Me too See you tomorrow
    Cyd

  • BKXtoZERO

    fundamentally “they” buy starting around now and are stocked up heading into autumn all ready for winter while most regular folks would think that it would be higher during the winter

  • BKXtoZERO

    probably rally when they get it

  • Darkthirty

    And anhydrous ammonia