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Evil is as Evil does…
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Evil is as Evil does…

by MoleNovember 13, 2008

Gotta respect the evil at play in the markets today.  I walked home with mud in my face, but I am able to trade another day.  It was rough.  I was talking to Mole this morning and mentioned that after the first rally, triggered by the break of the prior $NDX low, there was not enough institutional buying around that level the second time around.  Something just wasn’t right.  They were crafty.  They took a lot of us by surprise, letting 1149 go with ease the second time around, and even letting $INDU 8K break without much struggle.  However, a measly 35 points below 8K, with bears licking their chops and adding puts on the break downs, the black boxes kick in.  And damn did they kick in.  THERE was my institutional buying.  It was quite the kick in the crotch.  However, though I am evil, I can admit defeat when I am out traded.  Today, the black boxes won.  They caught me like a deer in the headlights, but I learned, and we will battle yet again…

As I write, I am chatting with Mole, and I will show you something I noticed that is SCREWED up.


**DISCLAIMER**  This is not an attack on any one particular charting service, as you can see there is a discrepancy between all of them.  Rather, it is a VALUABLE warning to traders to make sure you have a back up feed.  Personally, I have 4 available to me at any time (though I USUALLY only use 2), and I have had bad data on EVERY SINGLE service I have had since I started trading. **DISCLAIMER**

But the point is… it pays to have multiple feeds.  You don’t need to pay 3K for them, but a back-up is ALWAYS a good idea.  I wish I was at my standard work set-up so I could confirm it with yet another (2), but the tendency says… We rose on expanding(ish) volume (though prophet’s MACD was rising as if volume was expanding).

So as you might imagine, today’s tape put quite the kink in my analysis.  The volume was big and the breadth was QUITE bullish.  The ratio needs to be taken as an inverse for bullish action (i.e. (1/0.11) = 90% upside).


So, today’s action was much like the move in late October. In fact, the $TRIN visited levels (on the 5day moving average) equivalent to 10/31.  I expect the 5day $TRIN to break the Nov 3rd low, but odds strongly favor a top once the 5day gets into (or near) the 0.80 – 0.90 range.

It was scary for the bears, but (in retrospect), it looks quite playable.  We are most likely in a flat for wave 4, looking for 1343, 1432, and 1487.  Any push past 1488 in $NDX would negate the flat and suggest we are rallying in a larger wave [2], wave [4], or heaven forbid, Beanies infamous wave [5], $INDU 36K…

Seriously though, we should consider this until 1488 is breached, as that would be our maximum.  That said, we know that we have at LEAST 100 points ($NDX, another 500 in $INDU ($DJI)), and I will pick up some ITM index ETF calls until we get near the top.  The maximum target in $INDU ($DJI) is 10459.44, that would have wave 4 overlapping wave 1 and that would have us looking higher.  Again though, don’t let me get ahead of myself.  We would still need to breach 9500 and 10K before we can think about that, and we are likely in wave [3] of [C], meaning we would expect a strong push tomorrow, followed by some sideways chop for a few days (expiry week), followed by a pop.  Then we get our drop!

The other option at this point, we be a wave [5] ending diagonal.  If that were the case, we would be looking at the majority of that wave being done at this point, and targeting around 1050 in the $NDX.  The reason that I find this unlikely is the nearly complete reversal of yesterday’s decline, not only in price (bullish engulfing) but also in breadth.  IF this wave [4] of [5] of an ending diagonal (just about to make a BIG move up after a final drop, non-Elliotticians), the breadth and volume would indicate a VERY LARGE move up, as that is some serious expanding volume.

Finally, while there remains a third option on the table, which would be Gumbo’s triple bottom break out.  This in Elliott, terms would be equivalent to intermediate wave (3) being complete, and this is the very beginning stages on intermediate wave (4).  From a TA standpoint, we would need to see a break of 1000 in the $SPX.  However, non-Elliotticians, a break on 1000 on declining volume, and weakening breadth (we will keep you posted on that), would be a GREAT fake-out move, as a maximum target for the wave [4] flat would be 1080, the mid-point of a confirmed triple bottom break-out.  Something to chew on.

With that, I am changing short term indicator to up until we are within our first target range.  The medium term will be up-down, indicating that we might get to start our descent withing the next 5 days.  The long term remains down, as we have yet to breach levels anywhere close to forcing us to change this, and we still believe we will see lower lows on the year.

Just to note also, I believe today (but possibly tomorrow) was a full moon.  I am sure Moony could shed some additional light on that…  Something to think about, for those of you that DON’T believe in “Hocus Pocus!!”

Hope that shed some light on the day’s action.  Lesson of the day… Don’t mess with institutions.  They will kick yo’ ass (on the selling side too).

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.

  • de3600

    Great post see you short SRS and long the rut ((((((((((________________()———

  • stopsarein

    Great Post , thanks so much for sharing your knowledge and time.

  • de3600

    wow heres another long cme looks like thats gonna start the run up to for the top of maybe another double top//// I see this on apple rimm its all over the place.I wonder if this is gearing up for the big drop rim 25-30 apple 55- 60 fslr 20 google 199 boy would i be a bulltard at that point

  • Growler

    Am I the only one who see's a phalice in the first chart?

  • angus_mc

    Berk thank you for your insightful analysis

    On a positive note for us bears, when 800 is breached and we make distance below, that cluster 800-1100 will be formidable resistance for many months

  • https://www.evilspeculator.com berkshire

    NO DOUBT!!

    Skål!

  • https://www.evilspeculator.com berkshire

    Yes, I would expect us to bang our head on it for many months in a wave [4]. Unless of course we are looking up in primary wave [2] rather than intermediate wave [4]. We will know more about that once we see new lows…

    Skål!

  • C.C. Rider

    On second thought, these charts are not that bullish. Could be another surprise in the offing. A break of INDU 9000 would seal the rally for me.

    http://stockcharts.com/scripts/php/candleglance

  • pgrychah

    Looks fishy. we still made lower lows in EEM. FXI even in rally mode could not break to upside to 28. We go stopped at mother of all treandlines. Move was too impulsive.
    I understand that it violated retracement levels, but it's easier for me to believe that we are in wave 3(5), then to believe into bear trap. Bears closed their funds next to trendline.
    Anyway. I bought FXP (because it retraced whole move!) and DUG (XOM is very sick). I'll hedge it if wrong with FXI and DIG.
    Wouldn't be surprised at all to see sell off tomorrow.
    http://social.stocktock.com/photo/2348194:Photo

  • Ukla the Mokk

    Berk, I had the same volume discrepancy toward the end of the day but didn't notice it until after I entered my put on SPY (because of “low” volume).
    I'm set up for tomorrow after despite a large but manageable setback today.
    APC – http://screencast.com/t/Zg3wlZ2gP (my only put play for Friday)
    CLF – http://screencast.com/t/DJoOwBwm8gO
    DRYS – http://screencast.com/t/7hdMjvWdFm
    RIMM – http://screencast.com/t/5B8ovggn
    WFR – http://screencast.com/t/revsWuDLrXU
    I think next week will have a bullish bias, being expiration week (among other reasons).

  • Post Turtle

    Okay, so I'm new to all of this. Wet behind the ears. Reading like 8 books at a time trying to catch up… But today I noticed some strange things.

    DIG would move and then SSO, UWM, QLD would move accordingly. I don't have the tools you guys use so I jump from Yahoo to Finviz to my lame brokerage account to Excel and try to read the comments on this blog and SOH all at the same time. SOMEONE on one of the blogs noticed the link with oil. About that time I noticed that the indexes would move first and then the heat maps would change color. Maybe it's just a time delay. Maybe I'm nuts.

    Everyone has been talking about the PPT. I love conspiracy theories. So why does everyone assume that the PPT has to actually commit funds to move the prices and volumes. Geez, IF they exist, wouldn't they have a direct link to the software controlling these markets? Why spend real money? Maybe your feeds were fine – they just hadn't synched to the PPT's link.

    Just trying to muddy the water… Thanks for all that you and Mole do!

  • Gumbo YaYa

    APC looks like a breakout to the upside with great volume to me. Caution on puts. I would personally buy calls on a pullback to $38-ish.

  • Gumbo YaYa

    After testing the lows for the 3rd time & held strong + awesome volume + other intramarket indicators we saw today + the 14/1 breadth today tells me the low is in while we rally to DOW 10,100-10,300 range (of course not in a straight line).

  • Gumbo YaYa

    Berk, I am glad you pointed out that volume discrepancy…I was noticing the same thing, and thought I was missing something. WTF is right! How can it be so off. I love Prophet charts but they are becoming somewhat unreliable at the worst possible times….when you need them the most.

  • suchen

    Great post Berk/Mole…thanks for sharing your knowledge. I noticed that my platform also had some discrepancies…thank GOD for backup platforms!!!

  • Post Turtle

    Hah! I guess you see what you are thinking about… I see a reclining nude female form – but that's just me. ;- P

  • segaa

    Sorry Berk, but I would be cautious talking about volume discrepancies – different feeds give you different volume readings, probably the most accurate ones will be from the exchange where the instrument of your interest listed (sometimes quoting and trading data could go through different feeds though). Direct exchange feeds are way too expensive… 🙁

  • C.C. Rider

    Hope for da bears. Excerpt from McHugh
    =========================================
    One item of interest is that wave 5 down has not fallen below wave 3 down in the Industrials
    or Trannies, but has in the S&P 500, the NASDAQ Composite, NDX, and RUT. That divergence can
    happen when a huge new trend change is imminent. Wave 5’s can truncate, and intermarket divergences are signs of major trend changes. Certainly the start of the second phase of the Bear Market, a multi-month rally, wave b-up, is a huge trend change, and is close at hand.
    As mentioned, the S&P 500 hit a new low for the Bear Market and for 2008 intraday Thursday,
    November 13th. See the chart at the top of page 9. That argues that wave 5 down could have ended
    Thursday. However, we do not see a clean five wave decline from November 4th’s wave 4 top. Thursday’s dramatic intraday rebound seems to have occurred after a three wave decline from November 4th. That would argue that wave 5 down is not over, that it may be starting a five wave Declining Bullish Wedge, which would consist of five waves of three subwaves each. That would explain why the decline from November 4th is three waves. The rebound Thursday, which Wednesday’s 30 minute and 15 minute Full Stochastics correctly suggested was likely Thursday, has invaded the territory of the first wave down from November 4th, so that tells us the rally Thursday in the S&P 500 cannot be a wave {4} up within a five wave decline for wave 5 down. It must be something else. If in fact a Declining Bullish Wedge has started for wave 5 down, it suggests wave 5 down could drop low enough to challenge the October 2002 low.

    The 30 minute and 15 minute Full Stochastics Thursday suggest prices could decline Friday,
    which could be the middle wave {b} of the second of five subwaves for this Declining Bullish Wedge.
    We have a scheduled phi mate turn date coming next week on November 20th +/- a few days. It
    is possible the Declining Bullish Wedge could complete around then, meaning that would be the kickoff to a multi-month wave b-up, 20 to 30 percent rally in stocks. We also show the more immediate Bullish scenario that suggests wave b-up started Tuesday October 28th.

    http://www.screencast.com/users/texana44/folder

  • Ukla the Mokk

    Yeah, I can totally see that.  One day's candlestick will confirm which way to play it.  Whatever happens, I'm being cautious.  Thanks for the comment bro…you have skills!

  • toad37

    Great post Berk, thank you! Gotta get some rest for tomorrow! So much to learn, so little time!

  • molecool

    That's all nice and good but all the top TA traders I know of live and die by the volume indicator. The point Berk is trying to make is that some of us might take trades assuming different market dynamics. In the end, some discrepancies are permissible, but what he's showing above are running contrary to each other.

  • molecool

    Which one is the one having problems?

  • Ukla the Mokk

    +1…agreed. Unfortunate because they're awesome.

  • old_lefty

    The bearish wedge would be the ending diagonal that Berk threw out tonight.

  • molecool

    I don't think it's Prophet chart directly – my guess would be it's their data provider. I don't know who that is, perhaps Tim can shed some light on that.

    Again, Tim – we love Prophet charts but it is becoming apparent that there seems to be a data problem that is being noticed by many people. We are nice about it but would very much like to see it fixed. Unless of course the two competing ones Berk showed are wrong – that is another possibility. It's really hard for us guys to figure this out.

  • Ukla the Mokk

    Even if we pull back tomorrow, I agree. Plus like I said, next week being expiration week there tends to be a bullish bias. I think we're going up for a spell.

  • molecool

    The PPT uses the futures mostly as well as selected equities. Whenever I see large moves in only a selected few leading equities I get suspicious. But yes, watch the futures – they are easy to 'bang into the close'.

  • old_lefty

    eSignal matches Option Express, Scottrade matches OE for volume, but their candles are really whacky, big tails. Fidelty matches TOS.

  • pgrychah

    Good point. But I think it's 2 5 (3). That's why it looks like we violated retracement levels, but we didn't. I see tomorrow morning rise to 935 as a maximum (but I don't expect it).
    See this figure too. (Kenny's charts).
    http://stockcharts.com/c-sc/sc?s=$SPX&p=30&yr=0

  • http://www.mytrade.com/akiles Vic

    I'm on a different platform (TS) and everytime there is a “bottom” (I kid you not) my data feed fails and my platform crashes.
    Today it crahsed 3 times as I was rushing to place 1 order. I lost the data feed several times and I was flying blind for a good portion of the day.

    I use NinjaTrader and OpenTick for my backup feed but the ninja is a ram hog, so I never turn it on -so much for my backup!

  • http://www.myspace.com/181419967 JZT_CHIL

    Thanks for taking the time, Berk & Mole… wow, more colorful charts this time. Although the discrepancies are a pain.
    Lotsa missing/skipped candles on my prophet day/minute chart today…

    We have 6 weeks left in 2008!

  • moneyfarm

    Berk & Mole – thank you for your all of your work here! What are your thoughts on? GLD looks to be setting up for a short here or ideally in a push up to 72.60 range.
    Cheers
    http://screencast.com/t/LUbXb3rURP7

  • pgrychah

    Line graph has different picture. Do Elliott wave chartists use line graph for count?
    http://social.stocktock.com/photo/photo/show?id

  • Ukla the Mokk

    How do you guys get backup feeds? You talking multiple platforms? I just use prophet and TOS charts on thinkorswim.

  • https://www.evilspeculator.com berkshire

    LOL…that's great. I was going to ask you to check Esignal and Tradestation for me. Thanks for offering that up…

  • suchen

    my TOS/prophet charts…

  • T.B. Aurelius

    Shorts put in before the close are having an orgasm now……
    Stupid one day wonders….
    So many retail got trapped on the long side now….probably…
    There is no other way to trade this market…
    As soon as gain is clicked in toss in trail stops…
    You could get big wins, but focus on singles…
    I luckily escaped yesterday's blood bath by being absent during the surge…
    And mean while, trails did all the work for me…
    Happy trading!

  • de3600

    you got balls if your short anything right now

  • de3600

    long rut short srs see how it goes

  • b_rad

    perhaps a headless mermaid, but that's as far as i can take it.

  • T.B. Aurelius

    I have Two Balls~(T.B.) 😉

  • Ukla the Mokk

    Bought a put on SPY about 3:05 EST. So naturally this is the kind of thing I like to see today…

    http://screencast.com/t/boxZmXGL

  • bender_b_rodriguez

    i had my first account with TD…but they sucked so i got a TOS account…i still have both and can cross-check numbers. i guess google isnt too bad for near real-time prices but i have noticed their volumes are off sometimes…

    bender

  • Gumbo YaYa

    Wow, they are quick to call it before the market even opens. They must be wizards. Watch us close up today. HAHAHAHAH.

  • Gumbo YaYa

    ES looks like a lot like a bull flag shaping up so far…we'll see how it plays out.

  • BigHouse(Aka Mr Vix)

    Another day in paradise

  • deh

    RE: WTF. The volume errors you are seeing from all three data feeds are caused because all three sources are using 32 bit unsigned arithmetic for their volume numbers. 2**32 is approximately 4.295 billion. So when the up or down volume exceeds this number, it appears to start over. You can correct the bad data by adding 4.295 billion to the number that you see. Also, using corrected volume numbers for yesterday, I came up with 89.3% upside volume. Definitely close to 90%, but no cigar.

  • Erikd

    all i have is guts 🙂

  • TroyMcClureRIP

    Point up from a fellow Matt Groening Fan……

  • Ukla the Mokk

    Well, obviously my SPY put is in the green, but as much as I need to learn to let positions ride so I don't cut profits short and/or extend losses, I don't think I'll allow this one to move past breakeven considering my loss yesterday.

    http://screencast.com/t/rRUaYhaqD

  • gagelle

    People are defaulting on credit card debt in droves. No job, no payments. I just had my limits lowered on my AXP credit cards and I have a perfect credit rating. My theory about yesterday: institutions were creating a rally to get their clients out. I may go to cash, but there's no way I'm going long in a serious way.

  • T.B. Aurelius

    Hey!
    You hurt my feelings..
    I am not posting calls anymore…
    Meanie babie….

  • BigHouse(Aka Mr Vix)

    I went long uyg afterhours yesterday and early this morning. F it i'm bullish for the next 100 points in the spx. I'm not going to fight it. Pump this bitch up.2themoon

  • BigHouse(Aka Mr Vix)

    i guess its just Erikd and i who are long this puppy

  • dzz

    2 steel balls!

  • TroyMcClureRIP

    I am waiting for a couple of cycles on the 1 minute sto to try and get a feel…….

  • b_rad

    Don't feel lonely, I'm in UWM, SSO, URE

  • Gumbo YaYa

    You wrote the article 'Flash in the Pan?' If not, my comment was directed towards the media. Are you sure you posted under the right person? I certainly don't want to scare you off. 😉

  • dzz

    New trading strategy:
    Using steel rat balls, wait for PPT/MM 5% or 6% move on all 3 indexes, then go ALL IN at the reversal.
    Cash is a position.

    Looking for a new entry long DZZ position. Thoughts?

  • Growler

    For you short term traders, goog is making a descending triangle

  • Ukla the Mokk

    SPY just filled the gap almost to the penny and APPEARS to be reversing. For how long, who knows. But I almost reached my breakeven on my put, which is set a tad above yesterday's close.

    http://screencast.com/t/iD6PDdeHFtU

  • T.B. Aurelius

    Uups.
    Sorry you cutie pie~~~;-))))))
    Completely misdirected comment!

  • gagelle

    I can't sell my shorts. I'm going to ride out the rally, if there is one. My take is that we're still in a bear market. Sharp rallies are charactistic of secular bear markets. If anyone was fortunate enough to get out yesterday without too much damage, I can see going long for a short time. It's too late for me. I'll just be taking big losses.

  • T.B. Aurelius

    For the record…
    Not that kind of “Jumping into the fire” balls…
    “It's all in the charts” balls….;-))))))

  • C.C. Rider

    Nothing irregular here, nah.

    http://content.screencast.com/users/texana44/fo

  • Ukla the Mokk

    lol. what charting program is that?

  • BigHouse(Aka Mr Vix)

    No word from mole. Must be napping.

  • C.C. Rider

    Chart your way to Profits! Unknown origin.

  • http://www.myspace.com/181419967 JZT_CHIL

    Well, it's been a boring one so far… can't blame him! (^_^)

  • gagelle

    He deserves the nap.

  • T.B. Aurelius

    Upward retracement is probably not over yet…I reckon…
    DIA is likely turn back up around 85 or so…
    But AAPL looks like it is going all the way down just above low before it turns up…
    This projection is based on an assumption that down trend is still in tact.
    If trend has changed, all bets are off…
    Mole is letting out a sigh of relief …..and packing away his diapers….;-))))))

  • de3600

    Jumped oy of my postions i think i be back in long at 12 small profit

  • Ukla the Mokk

    boring for you maybe. 🙂

    http://screencast.com/t/2psQ7vO7

  • T.B. Aurelius

    Oh!
    And AMZN has a habit of being “Johnny come lately”…
    It might be that majority of buyers are newb groupies……

  • Growler

    Nice.

  • http://www.myspace.com/181419967 JZT_CHIL

    Yes, I guess only for me, lol… Congratulations on your exciting day! 🙂

  • BigHouse(Aka Mr Vix)

    Looks like mole and berk have abandon us . Sure is quiet today.

  • molecool

    CLEAN CUPS you damn leeches!

  • lazydogbkk

    Shaking out all the weak longs i reckon. mptrader is looking for 88 to 87.40 on the spy on the pullback but is also expecting a powerful reversal from around those levels that will propel the spy to the 98 level

  • http://www.myspace.com/181419967 JZT_CHIL

    Is it a six-pack? 🙂 …j/k

  • DARKTHIRTY

    Clean cups means dump puts?

  • bearish_on_bull

    it means new post, TK copywrighted the older term

  • Erikd

    sold out at the close yesterday and i am just now legging back long

  • T.B. Aurelius

    Yelling at others after peeing in thy pants???
    What manners???
    ;-))))))))))))))))))))))))

  • dzz

    4%

  • SteveInChicago (spsnomad)

    I just see an inkblot 🙁

  • SteveInChicago (spsnomad)

    I just see an inkblot 🙁