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Inching Forward
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Inching Forward

by The MoleFebruary 19, 2019

Equity index futures managed to hold the line without much drama over the long weekend, and all things being equal this would be a good omen for the remainder of this week. Unfortunately the bulls are now facing a bit of headwind for week #8 statistically speaking.

With a Sharpe ratio of -0.10 week #8 is the 8th least bearish of the year. Coincidence? I think yes! Now in comparison with June, August, or mid December that’s not a big deal. BUT the issue isn’t the historical average, it’s the distribution.

Because SKEW is actually strongly negative. In case you aren’t aware (or conveniently forgot) a negative SKEW favors the BULLISH side. Let me explain:

A bell shaped curve on a graph is symmetrical and has no skew. The peak of the graph is in the centre and the tails either side of the peak are a mirror image of each other. The mean, median and mode are all in the same position on the graph (right through the centre of the peak).

Now when a graph is said to be skewed, this refers to the tail and not the peak of the graph. In a left skewed graph (also known as a negative skew) the mean is to the left of the median. Where as in a right skewed graph (also known as positive skew) the mean is to the right of the median, as can be seen above.

Okay, you’re skeptical. Let me prove it to you. I just whipped up a quick example in python over at codingground which you can play with if you want. Here are three series and their respective skew, mean, and median:

[-10 3 5 8 -33 2 7 3 -8 8]
SKEW: -1.981825409776941
Mean: -1.5
Median: 3.0

[-20 3 5 8 -50 2 7 3 -12 8]
SKEW: -1.9978652008087856
Mean: -4.6
Median: 3.0

[ 0 3 5 8 0 2 7 3 0 40]
SKEW: 2.842169512571042
Mean: 6.8
Median: 3.0

See how 3 is the median on all three (as it has three greater values on its right and three smaller values on its left) while the mean keeps shifting significantly due to some of the extreme negative numbers being decreased and then increased.

So what this means in practice for week # 8 is that it’s usually positive but when it goes negative it really does so heavily. Which is a risk factor near inflection points, in one of which admittedly we still are.

Now as my campaign has come close to 2R MFE I’m shifting my trail to about 0.8R (playing it safely). The current formation favors the bulls and I most definitely enjoy the low volatility ride higher. However, another retest of the 100-day SMA is still a real possibility and would shake out a boat load of weak hands.

Meanwhile gold is on a roll now and my stop was now advanced to break/even. Frankly I didn’t expect that, especially since I managed to eek out a bit of coin with the opposing USD/JPY campaign. Sometimes you just get lucky I guess.

The long term panel is starting to look very juicy and I could see continuation higher here until about GC 1396.

Okay, time to spoil my intrepid subs – please meet me in the lair:

[am4show have=’p1;p13;p9;p12;p5;p10;p20;p29;p32′ guest_error=’login’]

Copper has painted a little island top and even better – it’s happening near a medium term resistance line as shown above on the daily panel. No guarantee for success but I’m taking a short position here with a stop > 2.8635.

Where did you get that number from, Mole?

I’m glad you asked! From the monthly panel in fact as that marks a monthly NLBL. A push above that would most likely trigger a new market cycle for copper -> from bearish back to bullish.

I also grabbed a long position in the EUR/USD just when the getting was good – I hope you catch a similar entry. 1.3 is usually the turn threshold as drop below that for more than a few days may shift the medium to long term dynamics.

Here’s the long term panel again for more context. We do have falling support, which of course slightly favors the bears. But over the past year or so 1.3 has been the Maginot line for the Euro bulls. So given the short term formation and the long term dynamics I think that’s a promising entry.

[/am4show]


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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  • zzezzezz

    Full moon today: Super Snow Moon @ 10:53 a.m. EST
    https://www.space.com/super-snow-moon-february-2019.html

  • https://evilspeculator.com Sir Mole III

    It seems that the site has been crawling lately and my suspicion is that my host shifted me to a busy node. After wasting quite a bit of time with support I gave up and told my own sys admin to take a look tomorrow. In the interim I appreciate your collective patience. Thanks 😉

  • london dhal

    fwiw I didn’t notice any problems

  • BobbyLow

    Mine is running fine as well.

  • BobbyLow

    Morning folks.

    Market keeps chugging along and FBOW, I replenished my long Oil Position this AM.

  • Jason13

    Bonds keep chugging up too. I’m actually shorting oil but it’s a contrarian trade. Don’t like all the inverse H&S hoopla.

  • Jason13

    Vix rising on oil as well

  • Mark Shinnick

    Yeah…noticed nothing weird recently.

  • https://evilspeculator.com Sir Mole III

    Strange – maybe it’s on my end then. I don’t have issues with other sites though, so it’s strange.

  • BKXtoZERO

    It has worked for me… on phone too. No issues

  • Jason13

    Soybeans is getting close to a buy zone..

  • BKXtoZERO

    VIX diverging from MKT rt now

  • Mark Shinnick

    Yeah…looking close to that time.

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

    it’s a dangerous spot, IMHO.
    (it could go either way, battle line drawn)
    [INDU]
    https://uploads.disquscdn.com/images/c375f12084c53aeb2d8f738dc4032dbfca19ab52d635f942f9a305ae6ded2166.png

  • BKXtoZERO
  • Mark Shinnick

    Yes…its where things can go hot real qwik.

  • Sp00nman

    Gold (and metals) with big moves today. I don’t trade on fundamentals but with everyone running deficits and printing money, makes me wonder if that’s not part of the reason for the moves. We’re coming into an area of long term resistance.~1350-1370. https://uploads.disquscdn.com/images/109c881af486a979380c257490523db006afeacb6be1719d8252f80675e5cbae.png

  • ElToroLoco

    Good Place to get out of Gold 1344 and wait …

  • ElToroLoco

    ES has to breath here 2783 …. and wait ….

  • Julie 35 – 25 – 36

    SPX The noose is getting tighter esp with TLT up
    JULIE

  • BKXtoZERO

    Putting on the VIX….TVIX 32.12…Also small from Friday

  • Mark Shinnick

    There are times…..when none of the tools are quite precise enough…..but are still adequate.

  • ridingwaves

    GBTC up 15% broke thru resistance, bitcoin could run to 5-6k fast

  • Jason13

    Now its just about a China trade talk tweet…”going great”- bump in futures…wash, lather, rinse and repeat.

  • mSquare

    How much down (say in $SPX) if we suddenly get a headline saying talks break up with nothing decided and tweets saying bigger tariffs on for March 1?

  • BobbyLow

    That’s for sure. You mentioned Soybeans earlier. The on again off again China talks is the main reason I stopped trading them. I got caught with a wicked Sunday night gap awhile back due to a China blip and got whacked at the open about 10 Points above my hard stop. That was it for me with Soybeans at least until this thing is settled one way or another. Too much luck involved right now.

  • Jason13

    Great question…

  • Jason13

    Yeah, its one I’ll need to be extra watchful of but from a technical point of view, I like how its setting up…

  • BKXtoZERO

    You boys have your union cards?
    https://youtu.be/bXdAeg-syY4

  • Mark Shinnick

    Holy cow…friggin short signals….who feels comfortable?

  • BKXtoZERO

    I am holding a few Rs…… always looking to pound intra day too

  • Jason13

    I just don’t like the fact Zero is not participating in this little drop

  • Mark Shinnick

    The tools all seem go into a no man’s land at just the right times.
    How else to freeze-out passengers from the bus?

  • http://gerb-reloaded.blogspot.com Gold_Gerb
  • https://evilspeculator.com Sir Mole III

    I have a favorite new band!! 🙂

    https://www.youtube.com/watch?v=vAtCHPayTU8

    If you’re into punk/metal – check them out online!

  • https://evilspeculator.com Sir Mole III

    It’s interesting, isn’t it? Profit taking? Tough to say – let’s see what happens tomorrow at the open.

  • Yoda

    Check out this tweet:

    https://twitter.com/PeterLBrandt/status/1096513068576788480

    Makes my head dizzy

  • https://evilspeculator.com Sir Mole III

    T’was pretty quiet here today. Everyone on vacation still?

  • BKXtoZERO

    Nothing fun happening Sir.

  • BKXtoZERO

    I am old….. my power meter sensitivity range is overwhelmed.

  • https://evilspeculator.com Sir Mole III

    I dunno – the market has been going up for weeks now – what’s not to like?

  • https://evilspeculator.com Sir Mole III

    Shuffle along grandpa!

  • Darkthirty

    Zero down, fundamentals mean nothing in equites. Gold is moving fundamentally though, IMHO