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Scaring The Children

Scaring The Children

by The MoleApril 14, 2011

One of the rare traits I share with George Carlin is that I do not give a rat’s rectum about being politically correct, and thus have made it my personal mission to roll over the gentle feelings of my contemporaries’ with a mental monster truck equipped with an Army edition flame thrower.

That’s right nothing like getting in touch with your inner feelings. I say – we need more flame throwers and a lot less politicians – enough said.

Another disdain I share with Carlin (and W.C. Fields) is that of children. Now, I don’t really hate children. Don’t get me wrong – I guess I can appreciate the appeal of creating little feces flinging copies of yourself and to call them cute names. To each his/her own. But where my already stretched sense of tolerance comes to a screeching halt is when the little rascal decides to test the high pitches of his brand spanking new vocal cords within the echo chambers of a public building. Much to the dismay of my eardrums which are already taxed by decades of high decibel Rammstein exposure.

In the good old days you simply slapped the little stump behind the ear and be done with it. These days however you quickly find yourself cuffed in the backseat of an LAPD squad car surrounded by an angry female mob chanting unreasonable demands involving a branding iron and your testicles.

So, the only place left where it’s relatively legal to scare the children are the capital markets and it’s one of the reasons I became a trader in the first place. It’s the only remaining vestige where it’s legal to prey on the hapless, the unsuspecting, the weak, and the retarded. The latter in particular had it coming – what were they thinking – oh, right – they weren’t.

Looking at equities today scaring the children just begs to be the theme of today’s post – so, let’s look at some charts:

If you were a Zero sub then the gap lower this morning probably didn’t impress you very much. And if you weren’t then thank you for being the fool on the other side of my trade. I promise to spend the money in an ill advised fashion – most likely lap dances and easy to pawn bling.

Now take a look at the blue arrow on the chart above – it seems thus far my 25d MA is holding and this morning’s tape was a nice shake out of some weak hands. Was this it or will there be follow through to the downside just like back in November? (marked by the orange arrow)
Charts and commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.

Alright, now take a look at this chart and tell me if anything stands out. Come on – I know you can do it – just rub those two remaining neurons together, a bit of friction usually does the trick. Yes, that’s right – Mr. VIX did not push above Tuesday’s highs this morning, despite the fact that we briefly made new lows. That (and the Zero Lite reading) should have been the give away that this was a long opportunity.

Of course this does not mean the longs are out of the woods yet – the day isn’t over yet. But even IF we continue lower the downside potential here is pretty limited. The MAs on the VIX chart are dropping and the 100-d MA on the SPX chart is closing in. So, if they decide to take this thing lower then the 1290 – 1300 cluster should pose as some might support.

This is something I hacked together this morning – simple SPX:VIX ratio plotted against the cash S&P. On the bottom you have a little histogram plotting the delta between those two for further illustration. Now, if you use this chart over several years it becomes useless as those delta spreads are most likely relative to a few months time. But short to medium term this chart offers pretty nice clues about the momentum of the unfolding trend.

And what we’ve been seeing in the past few weeks was a long overdue pig skewering which was followed by the obligatory short squeeze. That’s right – Mrs. Market is a cruel mistress – you better wear a helmet. Now, look at the blue arrow – despite the fact that we institutional traders indulged in scaring the children this morning the delta between SPX:VIX and the SPX is increasingly narrowing. In other words – less risk is being priced in – and that means that market makers are looking up, not down.

To round things up here are my current net-lines buy/sell levels – again inspired by Chris Carolan. Always remember – plagiarism is the highest form of flattery ๐Ÿ˜‰

The new buy level dropped to 1330 today and considering today’s drop lower it will be 1320.52 tomorrow. And that’s currently 13 handles away as I’m typing this. Not exactly a bagel throw distance but definitely attainable, maybe by early next week.

Bottom Line:

I am not discarding the chance of a follow through drop over the next few days – it’s very much possible. But SPX 1310 is a great spot to get positioned long with a stop a few handles down – especially if we get an inside candle tomorrow or Monday. If I get stopped out I’ll definitely jump in once we reach 1300, IMNSHO that would be one sweet long setup given what I’m seeing on the momentum and volatility side.




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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  • ultra

    Cool post, matey. Did I miss the bit where you went into the buy/sell lines and where they come from?

  • Onorio

    GBPCHF bollingers are tighter than a virging, the breakout could be explosive, in a pair that usually do 50 pips in 5 min this shit could do 100/200 pips in a hour or so. The trend is down so the move should be down too, i`ll wait to see.

  • volar

    Mole great post- loved the videos- LMAO

    Have u looked into better sine? reminds me of buy/sell lines.

  • OldChicago

    We are talking about CHILDREN here!!! ๐Ÿ™‚ And, it spells virgin – vir gin. Time for a drink? ๐Ÿ™‚

  • Onorio

    oops ๐Ÿ™‚ corrected

  • OldChicago

    Just teasing you.

  • molecool

    No, never heard of that – can you send me some material?

  • Clint

    Quite amazing they brought the DJIA back up well over a 100 points to actually being green now…but barely budged GS of it's low. GS still down almost 5. -Just when you think you've seen everything.

  • BobbyLow

    Well that was that.

    I Added a few June DIA and SPY Calls to get closer to neutral and have enough Gamma to be Long if we continue to go up.

    It is what it is.

  • tradingmom

    Mole — some pretty clear support lines on the 5 min zero, not sure whether its fair to call it a triangle, but there are upper and lower boundary lines going back to the highest and lowest peaks.

  • bisq

    George Carlin – one of the greatest. RIP.
    Market acting inverse to yesterday – going to see some chop and then more selling later tomorrow afternoon.

  • BobbyLow

    Mole I think I understand what you say about the MM pricing in less risk but isn't the VIX construed as a contrarian indicator? Also aren't we at support in the 16 area? Perhaps we go back to single digits of 2004 but not without QE3? These are just a few things running through my mind at the moment.


    By this time of the day my mind gets like silly putty so I don't know if I made any sense. ๐Ÿ™‚

  • Clint

    Well they ruined and stopped out the overnite longs this morning….then kept them from getting back in with GS down 5 all day…as well as suckered in a whole bunch of Apr put players in thinking we had a downtrend day going for an easy profit…also because of GS staying down 5…and have now absolutely destroyed them with this 140 pt rally form the depths of hell. Mr. Market got 'em comin' and goin' with this one. Glad I'm on the sidelines today…I would have been butchered otherwise.

  • mothwhoflysbackwards

    Ahhhh, things getting back to normal. I feel insulted and enlightened all at once. Love the vids on the zero spx, and I like the dual BBs you are using.

    The VIX did rise through a declining 20 ma in Jan, April and August of last year. The one in August came right after a Big pinch on the 2,20 BB. The other two (also with a pinch)times the VIX did continue to decline for about a month before turning.

    Then you have a nice pinch last october that resolved itself (quickly) to the down side.

    Going by the 2,20 the VIX has a few more points on the upside then the downside (2 vs 5) but maybe the upside could be hit with 1290? Beats the hell outa me. But I know the pinch is either on the T or on the Bottom. Guess right you get paid (if you are a gigalo like me) wrong and you get slapped…. How about a nice straddle (that's what she said!)

  • skynard


  • finansreven

    Well, it's not only the stock market players that has been royally fucked today. The euro has been quite wild, with a massive surge in Asia, before London hit it hard down before another reversal in the US session. They absolutely raped me (sloppy SL management, making a nice profit turn into a huge loss).

    A bit of a comfort that the SPX is going the right way, but have still lost several days profit after the euro (mis)trading.

  • volar

    yup just sent it out

  • Clint

    Sorry to hear that…but thanks for being brutally honest.

  • BobbyLow

    Discretion is the better part of valor and I just covered a portion of SPY at 131.65 that I had shorted at 132.80. So a +1.15 BFD.

    Mole called this market a “cruel mistress”. He's too kind. I prefer to call it a syphilitic whore.

    So I'm now slightly net long SPY and slightly net Short DIA with plenty of Gamma and not too much Theta so I can wait for further adjustments upon a clearer horizon. Not waiting for hope or anything to make sense. Just trying to go with the flow. ๐Ÿ™‚

  • amokta

    Ok, did silver go up today?
    Looking carfully at past price action, i expect some further days up, although not in a straight line. Of course, the best laid plans can fail, so use of stops, money management i leave to you

  • ultra

    “despite the fact that we institutional traders indulged in scaring the children this morning”

    Spot the odd word out. Mole – has the poacher turned gamekeeper!?

  • finansreven

    Wonder what after hours and overnight shenanigans they gonna pull now. Closing all positions.

  • molecool

    Thanks mate ๐Ÿ™‚

  • amokta

    I nearly thought you said discretion is the better part of Volar !

  • Onorio

    GOOG missed down 4.5% AH

  • Clint

    Well…GOOG'S down only 25 here in AH. We should be up at least a 100 pts tmrw on the DJIA.

  • BobbyLow

    You beat me to the punch. I was just going to say the same thing. BTW, this is number 3. AA, JPM, and now GOOG that either sold off after beating or just plain missed. I can't imagine that these estimates are gigantic either.

    So here we go again and the “market” will continue to defy conventional logic until it doesn't anymore.

  • captainboom

    Wondered that myself.

  • I_got_Prechterized

    silver is in full retard mode at the moment. There's going to be some pain felt by those buying up here, imo.

  • raised_by_wolves

    Mole, I don't like the idea of pampering kids, and I really don't like the idea of pampering dogs. The parents of spoiled kids should be slapped, and the owners of spoiled dogs should be kicked.

  • raised_by_wolves

    Valor is what I used to call Volar before he set me straight.

  • amokta

    There is also 'Voltar'
    “Voltar is the main character in The League of Super Evil”

  • raised_by_wolves

    And not a single fuck was given that day.

  • DarthTrader

    Don't Kick me, Bitch

    Great Dane Gets what the Great Dane Wants!

  • volar

    if u r not F***** over people when trading you are loosing. hehe

  • volar

    sheesh, how about Vulgar

  • raised_by_wolves


  • raised_by_wolves

    And not a single fuck was given that day.


  • volar

    LOL that is hilarious!

    honey badger style

  • raised_by_wolves

    “Don't kick me, bitch!”


    “Don't you fucking dare kick me.”

    [Kicks again]

  • amokta


  • amokta

    What i dont know is if silver is making a twin-peaks top, or if it will go much higher

  • raised_by_wolves
  • raised_by_wolves

    So, I asked my buddy. . . .