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The Bulls Are Back On Notice
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The Bulls Are Back On Notice

by The MoleMay 26, 2015

Just this morning I was hoping for some movement, but this may be a bit more than we bargained for. Right after the open the red candles started to stack up and at 10:15am EDT our trend day alert suggested the moderate possibility of a downtrend day. Yeah, no kiddin’!

2015-05-26_zero

The Zero shows us several strong signal swings to the downside. This is real selling pressure folks and all dip buying attempts (quick spikes up above the zero mark) thus far have failed. This could easily continue into the close.

2015-05-26_spoos_update

Boy, this is one ugly chart – several bearish signals triggered today: First up the NLBL at 2134 was never even touched, then the NLSL at 2113.25 was sliced through like a hot knife through butter. We also are failing a weekly NLBL that we have been testing since last week. We are now back to accumulating bearish evidence – yes, again.

I told you guys LT market tops are tedious – no way to predict when it finally turns and until it happens you have to remain nimble. I’m sure you’re glad now that you listened! You’re most welcome – the Mole’s got you covered as always. In any case, today’s plunge certainly goes on the books as significant technical damage.

2015-05-26_SPX_PnF

The point and figure chart brilliantly visualizes the ongoing market conditions – noting but sideways congestion since late last year. Every sudden drop to the downside has been mechanically bought again thus far – but there will come the time when this game will finally find its maker. In any case – take note that we are triggering a high pole reversal warning today. And that means the bulls are officially on notice. If we drop through 2090 there will be hell to pay.

2015-05-26_AUDJPY_setup

It’s always difficult to find entries when things are moving fast but I was able to dig up a few victims. On the Forex side we have the AUD/JPY which is painting a shooting star today. However it’s happening right on top of the 25-day SMA and if we can hold it then we may just trigger a failed shooting star long (I wrote hammer on the chart – sorry). I’m actually taking an early long position here – 1/2R – with a stop below 94.903. If it breaches the daily NLBL at 95.755 then I’ll add another 1/2R.

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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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  • buysidetrader

    zero saves the day again

  • Skynard

    Lots of time left

  • Skynard

    /ES 2100 back test, now res.

  • DudePlunger

    Strong move up in the dollar today. Looks like the trend is back up on that one. USDCAD & USDJPY were big movers today, especially the latter.

  • Skynard

    At VWAP, full short again. WTF

  • mugabe

    on a medium term time frame, still higher highs and higher lows. pity that the breakout hasn’t held, though (from a bull perspective)

  • http://www.ProfitFromPatterns.com/ Ivan K

    Serendipity II

    The ‘real’ outcome for a person following / trading their own RBT … or one created by someone else … is dependent on quite a few factors … besides the obvious one of the RBT being a robust one that will be able to withstand whatever the future / out of sample data may serve up.

    Two of these factors are inextricably linked … the starting point … and … the acceptable drawdown (in terms of time / R / dollars / percentage) that a person is prepared to wear. Without the latter, the former is a rather mute point. Both factors are totally a matter of choice by the person. As you saw from the responses to my question about when to start using a RBT, there were a number of different suggestions / ideas ranging from … ‘it does not matter’ … to ‘now with a reduced size’ … to ‘wait for 2 or 3 losses in a row’ … to ‘at new Equity Highs’ … this link may help you recall them … https://evilspeculator.com/introducing_lamm_automated_trading_service/#disqus_thread … yet not one addressed the downside!

    To go live full size with a RBT at new Equity Highs is to ignore the fact that the next drawdown lies ahead … and, by definition, is closer than it was before … when, size and duration of said drawdown are all unknown … and yet will have to be endured. Should the personal USL (Ultimate SL) be too small, then the ensuing run to new Equity Highs will have one fewer participant on board.

    Drawdowns tend to be easier to deal with when they only take back profits … when they begin to erode starting capital is a different situation … yet a drawdown is simply a drawdown … go figure!

    One suggestion was to start with 1/2 size at the new Equity Highs and to build that up to full size during a draw … certainly an improvement on going full tilt from the start.

    From the combined Day by Day EqC (updated chart below) it seems that a 10% draw occurs quite frequently … if / when this occurs going forward the 10% draw level could be used as a marker to go full size. Or indeed could be used as the actual starting point … but that would require a great deal of patience and detachment!

    Another approach, based on the Day by Day EqC, would be to start after just 1 day of being in a draw … perhaps this same observation could be harnessed in a different fashion as well! No (new or old) concept is complex or difficult when it is broken down into small bite-size pieces …seemingly an art unto itself.

    The Campaign by Campaign EqC of the three futures markets (featured in a previous post) …exhibits a similar 10% draw character … but do they occur at the same time is the real question to ask. Should they not occur at the same time, then a road ahead could be to treat each market separately … food for thought … or not.

    Life is all about choices … conscious or otherwise … exercised or not.

    NB. Most of the above becomes of academic interest unless you are dealing with an actual RBT … and, as I have said before, every RBT has its own unique DNA.

  • mugabe

    part of the problem / dynamic is that if you look at the eq curve, new equity highs were historically a good time to get on board ie it’s made a ton of new equity highs.

    edit: notwithstanding your excellent point about looking under the hood at the different markets

    PS good to see you’re back to your old self!

  • saltwaterdog

    The EqC serves to paint a 30k foot view and support the need for consistency, but the exercise of when to begin is anything but 30k feet. If I started trading full size at day 58 of this curve, 10 days later I’d be down nearly 20R and trying to meet the challenge of sticking with the plan on day 11

  • Scott Phillips

    As usual it depends on the system. If your system is already very good, and your performance is also very good, then by all means engage in this kind of nitpicking.

    Ivan is dead right a draw is easy to deal with if it comes from profits.

    If your system is some kind of marginal edge, coating the turd in glitter is just a waste of time compared to getting the small scale practice necessary to eliminate errors from your game.

    I think there are maybe 2 or 3 people who could benefit from this stuff right now, most of the participants here have a year of work before they get here.

  • http://www.ProfitFromPatterns.com/ Ivan K

    If a 20R draw is a real concern … then the solution may be as simple as … making your R value 1/2 or 1/3 of 1% of your account.

    On the other hand, it may turn out that the size of draw is not ‘real’ concern … ‘Enquire Within’ is a great read from about 1900.

  • mugabe

    this is very personal and there’s no logic to it, but I find drawdowns easier to handle if the system is NOT trade-intensive ie I’m not required to physically place trades that often. Hence my interest in the automated version of CI where you don’t place any trades at all.

  • http://www.ProfitFromPatterns.com/ Ivan K

    Mugabe – Now that is insightful … and perhaps very logical actually!

  • mugabe

    we’re back to the mantra of finding a system which suits you.

  • SirDagonet

    Personally, I’ve traded broker-assisted (ie – they execute system generated trades) systems, and I didn’t have an easier time dealing with a drawdown than if I had placed each trade myself…

  • mugabe

    fair enough. this is very personal. and my experience so far is only between manually implementing fast and slow styles …and I know which I can live with better. perhaps I’m wrong about automated systems. only time will tell 🙂

  • http://www.ProfitFromPatterns.com/ Ivan K

    SirD – Do you prefer to sit in the front seat of a car or in the back seat?

  • mugabe

    a lot may depend on how much of your wealth is tied up in the account

  • mugabe

    isn ‘t that what Eliot Spitzer said?

  • SirDagonet

    I prefer riding in the front. But, to re-phrase Mugabe a bit – if I have confidence in the driver, I don’t mind being a passenger. And, I have no real objection to riding in the back.

  • http://www.ProfitFromPatterns.com/ Ivan K

    Long term survival in most fields of endeavour is to expect the unexpected … to be aware as opposed to dwell on it … after all life is dynamic.

    Bernard Baruch – “We can’t cross that bridge until we come to it, but I always like to lay down a pontoon ahead of time.”

  • Scott Phillips

    I find a great deal of freedom in dudeplunger executing the systems of my design

  • Billabong

    What about a 20R draw that comes from mistakes? I suspect the worst scenario is a drawdown combined with increasing mistakes. As fear takes over and negative energy increases, the grip on the steering wheel gets tighter and tighter…

  • Billabong

    Thanks for all of your trading wisdom. “Drawdowns tend to be easier to deal with when they only take back profits”, This also applies to position size. A position size suited to the trader, will make a drawdown more palatable compared to a position size too large. Mix a large position size with margin and the drawdown is very quick …. followed by all the weeks and months to rebuild the account.

    EDIT: The psychological impact of a large drawdown can’t be over estimated.

  • captainboom

    New post