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Hurdles Ahead
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Hurdles Ahead

by The MoleOctober 21, 2014

We have come a long way in the past three sessions but the easy part of the journey is now nearing its end. For there are hurdles looming ahead plus I’m seeing some signature signs of short term shenanigans flashing all over the place. Let’s start with where we are right now:

2014-10-21_spoos_update

Quite a climb since that is and there’s probably room for a few more handles. But bear in mind that we are now facing a trifecta of previously tested moving averages – at least per my lens and more often than not they have been observed.

2014-10-21_NQ

On the NQ things are looking quite a bit more bullish – AAPL definitely had a thing or two to do with that. However daily resistance is right ahead and we’re about to smack into it. On the weekly panel we’re however above the 25-week SMA, so that’s pretty positive.

2014-10-21_UVOL

Today’s session looks like it’s been on cruise control – the Zero also suggests that the bots are driving this one higher.

2014-10-21_VXV_VIX

Quarterly volatility has eased off quite a bit along with the VIX and the ratio has been leading the advance in the past few sessions. All good and given that we’ve got more than a week of trading ahead of us it’s not impossible that the bulls may actually pull this off and close the month above the NLSL.

So much for the good news – now let’s talk about some of the concerns:

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

    So the VIX:VXO, you mentioned it last week (Falling Swords)
    any conclusion from that Mole?

    http://stockcharts.com/h-sc/ui?s=$BPSPX&p=D&yr=1&mn=0&dy=0&id=p19082017562

  • https://evilspeculator.com molecool

    Reserved for paying subs mate. After six years you ought to consider joining buddy… it won’t break the bank (I hope).

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

    ah. my bad. looks like I’m reaching the limits of leechdom.
    which is a good thing.

  • ridingwaves

    watch out for fed tricks or treats on FOMC meeting 28th-29th….’
    I’m scaling into long vix for next 10 days..maybe the spx can float here thru the election….some big set waves should roll thru after that…they always catch a lot of people inside and they pay thru blood, loss of oxygen and fear….

  • tradingmom

    spx daily — back to trendline

  • tradingmom

    closeup — 2 hr chart

  • tradingmom

    so…the big questions is…does the next pullback retest the lows, or just the 1905 level?

  • Scott Phillips

    Nobody knows yet, anyone who tells you they do is full of shit. Objectively this rally which *should* be a counter trend rally is stronger than it should be, increasing the odds of a massive short squeeze for the bulls.

    Yesterday I thought the odds were 60:40 in favor of the bears, now 50:50

  • tradingmom

    thanks, and thanks for your comment re: the vix yesterday, which was very helpful.

  • Scott Phillips

    Time for you to get with the new evilspeculator program, which is MEASURING AND TESTING everything we believe about markets.

  • Scott Phillips

    I think VIX is extremely useful for trading, just not in the way people think it is. There is no basis for thinking that trendlines have any validity on VIX, but breakouts from a low base are extremely tradeable

  • BobbyLow

    Interesting.

    I began using 2 Hour Charts as part of my lens a couple of weeks ago. It gives a nice perspective.

  • ridingwaves

    if there was ever a time in last 5 years to look at VIX instruments to play, this is it….

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

    We have to measure and test our beliefs? OMG, I dunno.

    this use to be fun. you want me to work? can i outsource it to Sean?

    I’m not even quant, not even a Jr. one!

    So, let’s give this a shot.

    http://s30.postimg.org/o3sy2k8qp/Quant_21.png
    Belief
    if an open or close is with 0.5 delta of the Keltner, the variation of open/close will be with 0.036% of the median.
    ie: it’s really F’in close.

    something like that?
    sample size is small, perhaps Sean can back test it a few years.
    -GG

  • https://evilspeculator.com molecool

    See, I never get that part about you guys. It’s like fashion almost – what the VIX is suddenly en vogue? The time to play the VIX was when I wrote about it, right around when it was scraping 12. NOT after it already painted the biggest spike in YEARS! Now near 30 – fine, if you know what you’re doing. Otherwise near 12. But right now – please – are you guys TRYING to make things difficult for yourselves?

  • Scott Phillips

    That’s a start 🙂 The way to do it is to rough guess estimate on it visually, not caring too much if you are right or wrong. Just get a blank sheet of paper and tick on the left side for win right side for loss. Then go back until you have 50 different occurrences.

    You absolutely do not want to do this with a computer. You will be throwing away 5 shit things for every good thing

    In this case it’s a valid hypothesis to test treating the market as an auction for fair value in the middle of fair value you should get fewer gaps. Is the OPPOSITE true? Because if so, that is a tradeable hypothesis

  • Scott Phillips

    How about a public google docs spreadsheet and test those T theories in advance? That would be good work 🙂

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

    baby steps. have to work up to that.

  • Scott Phillips

    Really? What that is telling me is the fundamental problem is not a lack of work ethic but a lack of willingness to throw out potential bullshit. What if you’d been believing things with no validity (like me)? How would that feel?

    Stated another way this is an unwillingness to face the emotional pain of flawed beliefs. That’s a dealbreaker for trading mate.

  • Scott Phillips

    FYI for those trading Thor because of the discrepancy between IB and Kinetick data Moles system does not flag a short setup in AUDUSD, but it exists for me. Advise to take if you are paper trading or small trading

  • Scott Phillips

    And instead of new shit, how about testing the things you’ve been posting, sans evidence, for years now 🙂

  • newbfxtrader

    hmmm wont you have to break previous candle to the downside?

  • Scott Phillips

    Yes correct short on break of lows .87565 stop .88315

  • Scott Phillips

    If you are unwilling to do this rudimentary work for any reason, you should discard your hobby of being interested in markets because it will be literally impossible for you to be successful.

    Do you get the idea? Nobody gets a pass on this stuff anymore, not me, not Mole, nobody!

  • Scott Phillips

    The Fly’s post from a few days ago seems apropos

    http://ibankcoin.com/flyblog/2014/10/21/shhhh-its-vix-season/

  • https://evilspeculator.com molecool

    Haven’t laughed this hard in a while :-))

    And spot on he is – if I ever get the chance I got to buy that cheeky bastard a few beers.

  • Sean

    So what’s the trade you are proposing?

  • Malcolm O’Mara

    I focus on XLF for a clue on direction and it’s starting to
    get interesting. For me, 22.89 is a price point I will pay attention to on the
    15 minute. 22.89-22..52 is shorting territory
    for me. I will concentrate on FAZ and TZA, with the position sizing concentrating
    on FAZ.

  • Scott Phillips

    It is a reflection of how much he absolutely does not want to measure his results or his methods that when prodded he proposed not his usual bag of tricks to test, but a non-tradeable hypothesis that opening gap will be small. I’m going to continue to kick his ass on a daily basis until he shapes up 😉

  • DollarChaser

    thanks Scott. order placed.

  • Sean

    I actually read it as “if it closes inside the 0.5 Keltner band then it will be very close to the mid-line of the band”… Didn’t see anything about gaps in his belief above and doesn’t look like he is measuring gaps…

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

    correct. no gaps.
    opens and close tend to be dam close to the median.
    the band is just a filter, excludes the outlying movements.

    with the proper stat, you could have a fuzzy estimate of how close you want to use the median and be filled, either for entries or exits.

  • Scott Phillips

    OK but how is that a trade?

  • Sean

    Ok, so your idea has something to do with opens & closes near the 112 period Keltner band… What next?

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

    it’s part of a trade. say you have a positioned entry, and price gets within the boundary, and you want to exit. Do you want to just pick the median and hope? no. You want to know with success what the variation from the median can get you. It’s a discretionary trade, and tomorrow is a big event, creating even more pressure to exit proper.

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

    any open or close near the 112 Median, how far away was it from the median.
    what’s the variation from the line.

  • ridingwaves

    been hitting singles, doubles, some walks and steals with occasional long ball working right now on the vix long or reverse for me….your correct, this trade is not for everyone…..timing the tops and bottoms is money losing odds but playing the middle channel can deliver R’s both ways…..

    key word…so far…

  • Sean

    A trade is an if-then statement, if (condition) then (action), I’m not seeing that above… Why don’t you start there?

  • phylum

    Complicated is a neg edge ….. KISS

  • Scott Phillips

    OK I can see that being a tiny part of a proper set of exit rules. Good stuff, you go up a notch 🙂

    You are now at notch 1

  • Scott Phillips

    I read his blog, and I like it. He is typical of the swing for the fences high beta accumulate a portfolio type of actual stockbrokers. Doesn’t use R, just judges things by eye, but I’ve watched him put together triple digit returns every year for a few years until he took a 40% drawdown this year. He is a fair way to trading out of the hole and I wish him well with it.

  • Sean

    Isn’t that only useful as an exit rule if you can get an entry that is 3-4R away? Which means you need a reversal entry system, which means you need a ranging market type? So, if it is ranging, then you want to go through it to the top of the range, which I think is the only way you get to 3 or 4R… But it might be useful as a trending system where you can place limit buy orders on pull backs?

  • https://evilspeculator.com molecool

    Trading is not a spectator sport. Shape up and grow up. Don’t be afraid.

  • https://evilspeculator.com molecool

    But he is clearly not trading and has not for years. He is engaging in a fantasy. Perhaps he got burned and he’s afraid. That is something only he can overcome.

  • https://evilspeculator.com molecool

    Which I told everyone for years but who’s counting…

  • phylum

    Interestingly you are now delving into Ivan K territory … he can elaborate better than I 🙂

  • phylum

    What gives? MCD 30% decline in net income …. mmmm, maybe healthy is the new norm!

    http://www.youtube.com/watch?v=0sW5xEwTmwA

  • phylum

    Bobby … what’s your take on the influx of $ into oil funds this month, apparently, the most since Oct 2012

  • Scott Phillips

    Very minor use if anything. In my opinion the way to start system development is with the big things first.

    What edge am I going to use?

    Opening gaps, support/resistance in a trading range, breakouts in a trend, pullbacks to support in a trend, sentiment measures or put call ratios in a trading range, volatility breakouts, bollinger band squeezes, failed breakouts, intermarket correlations and non-confirmations, multiple timeframe stacking, seasonality, days of the week, time of the day, fed day behaviour, volatility contraction after trend days, and many more.

    Once you pick an edge to exploit you can then think more about objectively defining it.

    Once you define it you can test some different stops and see if you have a real edge. A real edge will be present in various different initial stop loss measures. A curve fitted edge will vanish except in specific conditions. You are looking for good results in a forest of good results.

    Then you can start measuring MFE and designing an exit algo to suit.

    Anyone here who wants to do the real work involved, Mole and I are happy to contribute. Everyone is capable of building a system every bit as good as Thor.

  • Scott Phillips

    Exactly

  • TexasRube

    Still long ES (and happy, …dumb and happy?) Took CL Long last night. Do you expect CPI report to be very disruptive to price today?

  • https://evilspeculator.com molecool

    You don’t have to be smart to be a successful trader. There are hundreds of people here who are smarter than both you and I tother, BUT they continue to trip over their inability to abide by a system with simple rules. I’ve said it before and I’ll say it again – most successful traders I have come across are not mathematicians, those guys write books about trading. The guys who bank the coin are the street smart husslers – the ones with the balls to push that button and put it on the line.

  • https://evilspeculator.com molecool

    To answer your question – yes, but only temporary. It’s a good opportunity to shake out the muppets. You are an honorary member of the strong hand club now – enjoy it and do nothing. Every time you are in a campaign there is only one equation you should be concerned about:

    What is ratio between opportunity and risk?

    Meaning, what are the odds the tape is going to advance (or drop) more than the odds for it to reverse and stop me out (wherever your stop is). This is not an easy answer and it depends on your trading style. For me personally here I am more concerned about the possibility for the bears to have their faces ripped off. The odds here are about 50/50 – we may still retest the lows or drop even lower. BUT I’m happy to endure a deep retrace because if this continues higher I’ll be holding it all the way.

    Remember the Dollar campaign two months back. Same considerations.

  • newbfxtrader

    Die coffee die… Who wants some steak?

  • newbfxtrader

    Looks good for long above 1920. Below that I would reverse positions…Still dont see anything bulllish on /CL other than oversold…

  • TexasRube

    I have 5R in ES right now. Stop set at 4R. Is it reasonable to sit here and if I get stopped still be very happy at a big win. Then consider re-entry?

  • BobbyLow

    It’s probably an oversold situation. Oil is showing some signs of life. We’ll see if this attempt of price stability has any legs. Some interesting price action (see attached chart) over the last few days from the Spike High of 10/16. Now price has just now filled the gap from the Spike Low of 10/20.

    Kind of screwy but also the kind of price action that “might” signify a change of trend.

  • https://evilspeculator.com molecool

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