Discretionary Trading
Now Reading
Monday Melt Up
70

Monday Melt Up

by The MoleFebruary 2, 2010

The dip buyers showed up today and enjoyed their ‘toe dipping’ day. I guess the expectation was that a traditional ‘Monday Melt Up’ was probably their best opportunity for getting some long exposure. On Friday I already had pointed out a developing long term divergence to Zero subscribers (yes, the subs get it first, freeloaders! ;-)) and thus it was nice to see the tape retrace a bit today.

Last week before I left to San Francisco I proposed two main clusters for a bounce:

And where did we bounce?

At 1077 but we dropped further on Friday to a 1072 low. Close enough. Yes, yes – I know – unfortunately I don’t respond well to praise.

But I know the thought that’s rattling around in your little rodent brains right now. Are conditions ripe for a prolonged bounce?

Maybe – my A/D ratio chart points towards that very possibility. I’ve taken the liberty to point out a few bounce patterns after prolonged drops in the SPX. The spike today seems like a good indication that something is in the works. I however don’t think we’re going to retrace much more than 61.8% – if you look underneath the hood of what’s driving this market it’s quite clear that the bulltards have been overstaying their welcome by several months. And to prove it to you rats here is a novel and extremely complex market indicator I have been working on in my evil lair:

I call it ‘vol-ume’ and it’s way too complex to explain it to mere mortal rodents like you. However, if you rub all available synapses together you can see how vol-ume spiked up considerably on the way down and then reduced back down to a whimper on the way up today. That can mean two things – either it’s truly some gentle toe dipping by the bulltards or it’s just the quiet before a bear squeeze shit storm.

It’ll all come down to tomorrow – if we bust higher and can maintain a strong A/D ratio (i.e. breadth) then we might actually make it to the 50% mark, and maybe even higher. But if this thing trickles up like this I think the bears are just going to wait it out and then pick a good moment to stomp on this meek attempt to extent the bull’s hope vapor rally.

Right now as I type this the index futures are not looking so great – but let’s see who shows up tomorrow and if that channel I drew on the SPX chart can be breached. If so, I think an obligatory bounce is in the works, which is why I held on to my Feb calls today.

Long term, well… let’s say put it this way:

Cheers,

Mole

P.S.: gmak – please tack your post on to mine so that someone actually gets to see this – thanks!


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.
Enjoyed this post? Consider a small donation to keep those evil deeds coming!

BTC: 1MwMJifeBU3YziDoLLu8S54Vg4cbnJxvpL
BCH: qqxflhnr0jcfj4nejw75klmpcsfsp68exukcr0a29e
ETH: 0x9D0824b9553346df7EFB6B76DBAd1E2763bE6Ef1
LTC: LUuoD6sDWgbqSgnpo5hceYPnTD9MAvxi6c

  • http://trading-to-win.blogspot.com/ DavidDT

    frst
    now I need to learn to read…

  • yudhisthira

    Euro catching half a cold this evening.

  • bananaben

    Thank you for the much awaited soylent update. The bulltards are treading in dangerous waters now. Hope you saw the article on ZH about how CRE alone would “wipe out” the banking system. I recall Dimon the other day saying that commerical real estate is a trainwreck but that it's already happened. Move on folks nothing to see here.

    http://www.youtube.com/watch?v=rSjK2Oqrgic

  • https://evilspeculator.com molecool

    ben – do you remember my mortgage reset chart with the proposed SPX wave count on top? CRE indeed – it's going to get ugly – strap yourselves in, rats – it's going to be a hell of a ride 😉

  • BigHouse(Aka Mr Vix)

    Thanks for the charts Mole. This next wave up will tell the story..If this is wave {ii} in P3 then will will see wave {iii} in the next week or so …Bears will be happy. watch the volume….

  • TheGreedyFearfulFool

    Thanks for the post, Mole. Always love to read your thoughts.

  • bananaben

    Believe me – I'm strapping in with all I got this time. Time to position for the big moves. I should be fully committed by 1105-08. I'm lowering my bailout point to 1116 now. VIX is coming back down nicely. It could be another 2-3 weeks though before anything happens so we have to keep dancing until then. Soon it will be time for you to shepard your rats through the gates of hell. I can't wait!!!!!

  • K.I.M.

    nice post as always, let's not forget eurusd http://www.flickr.com/photos/42905134@N08/43239… , hope wolf won't see this, there's no red candle as promised

  • rosocecasita

    After reading the *Request for Comment* from the Treasury, (Zero Hedge: http://tinyurl.com/yhlfypy)

    I'll be cashing out my 401k now… I'll pass on buying full priced Treasuries.

    I want to thank you again for inspiring learning & taking action. Without the resources you made available I would have never known I wasn't getting off my ass.

  • https://evilspeculator.com molecool

    Are you new here? Never saw you before.

  • http://chartsandthat.blogspot.com/ ultra

    Ah… Lt. Drebin always makes me LOL.

    I am looking (like EWI) at the synchronicity with which everything has reversed – particularly the dollar pairs – check out the mahoosive triangle in Cable that I posted yesterday – that is not going to roll over by Friday. I suspect this may turn into another white knuckle ride for any unhedged bears.

  • tradejane

    Agreed. All the usual DAX suspects have gone vertical (Infineon has made a new 52-week high) and I'm close to getting an intermediate buy signal on the index, for the first time since the 11th of December.

  • bobthehorse

    1091 on ESH0 is my short-term resistance level. Above 1095 opens the way up to test 1120. Am still 35% long, will trim that a bit more at 1091. Would go outright short at 1120.

  • bobthehorse

    Update – am now back to 25% long which given I have a few defensive stocks is pretty flat, i.e. wouldn't expect to lose much if mkt fell. If we can break through this resistance, would look to turn it around and find an area to get a bit longer to play for a move to 1120

  • springheel_jack

    A couple of thought-provoking charts.

    Firstly the bearish chart from HSBC on the weekly where 2009's rising channel has failed at the upper trendline of the declining channel from 2007. In failing there a H&S pattern has formed indicating that HSBC may fall to 47 after a probable retest of the failed channel lower trendline at 57.

    http://www.screencast.com/users/springheel_jack

    Secondly the very bullish weekly chart from Berkshire Hathaway which has just broken back into the rising channel from 2000 and successfully retested the lower trendline. 13 & 34 EMA lines look likely to cross soon and more upside looks extremely likely with next resistance at 119 and then nothing until multiple points of resistance in the 130s.:

    http://www.screencast.com/users/springheel_jack

  • bobthehorse

    Just went to 20% long, from 25%

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    feeling bearish?

  • lululemo

    I have been following OBB and Anna for few weeks now. I have a paid subscription with ITMS (http://www.inthemoneystocks.com) and most of Anna's trades/stock picks and her market opinion are actually from ITMS. The irony is they charge only $50/month for trade ideas and daily videos teaching how to trade. She is going to charge $100/month for those copied trades/stock picks with no credit given to the originators of the trade ideas. Also, her daily commentary is an executive summary of the nightly videos with some of her thoughts thrown in.

  • http://oahutrading.blogspot.com/ steveo77

    Wow that sucks to hear that…

  • http://oahutrading.blogspot.com/ steveo77

    Berkshire…bear flag with a blow off top? Trying to maintain a sense of bearish decorum here. But seriously

  • gmak

    I seem unable to tack my post on. so I will put a link back to here.

    https://evilspeculator.com/?p=14438#disqus_thread

    NEW POST

  • Pingback: Living Inside a Broken Clock: Tuesday, Feb. 2, 2010 | the evil speculator - one nefarious trade at a time()

  • bobthehorse

    No, still think bias is to the upside but can't pretend recent price action has been good. Think if we can go through 1095, there will another be another few percent to play for and there will be a dip to buy. If not, might get another free-flowing move to the downside which now we have some ammo to buy.

    My base case here is for a bit of theta-burning range trading. We were too early to buy the dip last month, but have been given a good start to the month now so not going to throw it away

  • http://trading-to-win.blogspot.com/ DavidDT

    OK, MOle's post goes to shitter with only 20 comments
    Mr. G – you are in trouble 🙂

  • http://trading-to-win.blogspot.com/ DavidDT

    IF that is true

  • http://oahutrading.blogspot.com/ steveo77

    Are you still up, or up early….

  • http://trading-to-win.blogspot.com/ DavidDT

    yeah, slept for 4 hours only – getting old 🙂

  • bobthehorse

    Expect standard Mole moan and threat to pack it in shortly.

  • springheel_jack

    I hope so steveo. That would fit a lot better with everything else we are
    seeing. I won't be going long BRK.A. I won't be shorting it either though.
    🙂

  • http://oahutrading.blogspot.com/ steveo77

    from a non-avatar….OK

  • http://oahutrading.blogspot.com/ steveo77

    http://screencast.com/t/ZjU4ZDY5NjY

    HBC will be on my watch list

  • springheel_jack

    Yes, that looks like a beauty. 🙂

  • Gerbil_gold

    vol-ume, hmmm can't find it on my technical indicators list.
    is that a new french indicator? something like vwap?
    ;-D

  • springheel_jack

    I've been having a careful look at the SPX on the 15min and 60min charts for direction and I'm still not altogether convinced that we'll break resistance at SPX (cash) 1092.

    As you can see from the 15min chart, SPX has been repeatedly making H&S and IHS patterns inside a broadening descending wedge, and those patterns have been indicating to the other side of the wedge:

    http://www.screencast.com/users/springheel_jack

    The IHS is also a little doubtful because if you look closely, it may instead be a smaller IHS with the neckline at 1084. If so, we can expect a failure at 1092 as that would be very standard for an in-channel pattern.

    If we break 1092 though then I have found a potential new channel on the 60min that, if we reached the top trendline today, should be reached at slightly under 1103-4. That would fit well with the potential larger IHS target at 1104:

    http://www.screencast.com/users/springheel_jack

  • momac

    I'm glad you posted Mole. My resolve was weakening and it needed some confirmation so I could stand my ground. 🙂 Thanks for the update

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    Serious accusations, care to support them THOROUGLY before I delete your post and ban your ass? (the delete would be standard procedure for unsubstanciated accusations towards a fellow trader, prove or recant, the ban part is because you smell of double identitiy and that's a no-no around here)

    Give you till market opens ok?

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    I just took an adicional hour and a half nap 😉

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    BOB! Don't be a bitch 😉

  • lululemo

    http://www.inthemoneystocks.com/

    If you are a paid member, you will be able to access their stock picks in pro trader watch list and hot charts & alerts.

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    The OBB part is true so I'm giving some time for the person to deliver the goods or recant or be banned… I once commented here that Gmak was telepaticaly influencing someone's morning post, so I'm letting this one ride for a while…

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    I just knew V-OL-UME, but I'm still trying to figure out P-Rice

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    Agree, a rise is far from certain

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    I am not a paid subscriber to any site, I will take screenshots from both sites (and I'll take your word for the dates until someone can corroborate them)

    And consider yourself lucky, using a probable second identity (just using it to “spread the word”) would probably get you banned by me in no time…

    But I'm waiting to see if it was a bona fide warning

  • amokta

    What is liquidity, and does it involve Heineken? Apparently there is less Heineken going into the stockmarket, which might favour further market correction (if the lack of Heineken persists)
    By the way, i sold my spx puts while they still had some of profit in them – which usually means an immediate market fall!
    I am fast formulating the opinion that I should trade without trying to 'catch' P3 (had i done so, i would have banked more profit here and there)

  • http://dreadwinaard.livejournal.com/profile dreadwin

    The IHS seems to have played out, although it hasn't reached my target yet. I think we will hit it today.

  • springheel_jack

    Not done yet IMO. The IHS & provisional channel both indicate 1103/4. I
    think we'll get there.

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    ok, time running out, let's do it this way… I'll delete the post but won't ban you right away, IF you do your homework and present EVIDENCE, you can post it later and I'll undelete this thread. FAIR ENOUGH?

  • https://evilspeculator.com molecool

    Yeah – forgot to promote you to an editor. Don't worry about it.

  • https://evilspeculator.com molecool

    Are you trying to get your ass banned?

  • https://evilspeculator.com molecool

    Iron Hamster's wrath.

  • http://www.optionsblackboard.com/ OBB

    Wow, two people that both use technical analysis opened the same trade! Amazing! You're an idiot, perhaps threatened by a new service that is launching. Whoever you are, you are nothing. Quit wasting my time.
    If anything, this looks like shameless promotion of the ITM service…

  • rosocecasita

    Daily EMA 23 Crossed MA 59 Down. Very Bearish indeed: http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=0&

    MACD 23,39,13 lead is about to go negative (daily)

    RSI is retouching 50.
    ATR is ticked up to about 14.5

    a Move of 30+ points or more downwards is eminent.

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    Boss, I warned him…

    p.s. The hamster wrath took place and the post is tidy again, I left the Lulugate afair for a while because I wanted to test a theory… someone we know has telepatic powers…. I once saw a cover of Gmak's broken clock elsewhere

  • http://channelsandpatterns.blogspot.com/ springheel_jack

    I hope so steveo. That would fit a lot better with everything else we are
    seeing. I won't be going long BRK.A. I won't be shorting it either though.
    🙂

  • http://oahutrading.blogspot.com/ steveo77

    http://screencast.com/t/ZjU4ZDY5NjY

    HBC will be on my watch list

  • http://channelsandpatterns.blogspot.com/ springheel_jack

    Yes, that looks like a beauty. 🙂

  • Gold_Gerb

    vol-ume, hmmm can't find it on my technical indicators list.
    is that a new french indicator? something like vwap?
    ;-D

  • http://channelsandpatterns.blogspot.com/ springheel_jack

    I've been having a careful look at the SPX on the 15min and 60min charts for direction and I'm still not altogether convinced that we'll break resistance at SPX (cash) 1092.

    As you can see from the 15min chart, SPX has been repeatedly making H&S and IHS patterns inside a broadening descending wedge, and those patterns have been indicating to the other side of the wedge:

    http://www.screencast.com/users/springheel_jack

    The IHS is also a little doubtful because if you look closely, it may instead be a smaller IHS with the neckline at 1084. If so, we can expect a failure at 1092 as that would be very standard for an in-channel pattern.

    If we break 1092 though then I have found a potential new channel on the 60min that, if we reached the top trendline today, should be reached at slightly under 1103-4. That would fit well with the potential larger IHS target at 1104:

    http://www.screencast.com/users/springheel_jack

  • momac

    I'm glad you posted Mole. My resolve was weakening and it needed some confirmation so I could stand my ground. 🙂 Thanks for the update

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    I just took an adicional hour and a half nap 😉

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    BOB! Don't be a bitch 😉

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    I just knew V-OL-UME, but I'm still trying to figure out P-Rice

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    Agree, a rise is far from certain

  • amokta

    What is liquidity, and does it involve Heineken? Apparently there is less Heineken going into the stockmarket, which might favour further market correction (if the lack of Heineken persists)
    By the way, i sold my spx puts while they still had some of profit in them – which usually means an immediate market fall!
    I am fast formulating the opinion that I should trade without trying to 'catch' P3 (had i done so, i would have banked more profit here and there)

  • http://dreadwinaard.livejournal.com/profile dreadwin

    The IHS seems to have played out, although it hasn't reached my target yet. I think we will hit it today.

  • http://channelsandpatterns.blogspot.com/ springheel_jack

    Not done yet IMO. The IHS & provisional channel both indicate 1103/4. I
    think we'll get there.

  • https://evilspeculator.com molecool

    Yeah – forgot to promote you to an editor. Don't worry about it.

  • https://evilspeculator.com molecool

    Are you trying to get your ass banned?

  • rosocecasita

    Daily EMA 23 Crossed MA 59 Down. Very Bearish indeed: http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=0&

    MACD 23,39,13 lead is about to go negative (daily)

    RSI is retouching 50.
    ATR is ticked up to about 14.5

    a Move of 30+ points or more downwards is eminent. (1110 retest is very possible, but then a 45+ point move is easy)

  • http://sshamster.blogspot.com/ Stainless_Steel_Hamster

    Boss, I warned him…

    p.s. The hamster wrath took place and the post is tidy again, I left the Lulugate afair for a while because I wanted to test a theory… someone we know has telepatic powers…. I once saw a cover of Gmak's broken clock elsewhere