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The Day After
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The Day After

by The MoleDecember 5, 2013

Since the onset of QEx I have seen this script play out countless times. We get a downside correction which pushes toward the edge of daily or weekly resistance (Mo – Wed). Then some news or rumor induced headlines start injecting a healthy dose of volatility into the tape (yesterday). What follows is a complete flatline – a.k.a. the day after.

The tape basically freezes and there is little participation – all the sellers (or buyers) have suddenly gone MIA. This serves to reel in anyone with a strong opinion – especially the retail crowd which enjoys playing options.

Here’s a snapshot of today’s session as seen on our Zero indicator. As you can see the signal shows almost no participation. And based on prior occurrences over the past few years both sides usually get screwed the day that follows as vega squeeze serves to devalue winning long option premiums and of course eviscerate anyone holding short. Of course that is assuming we punch higher  from here – which has been the case nine out of ten times. Should recent history be our guide? What if it’s different this time? What to do?

My answer – as always – stick with the charts. Despite the recent gyrations we now have excellent context to plot our way forward. Let’s get started – shall we? Here’s the SPX which now sports a beautiful inside day right on top of the 25-day SMA. Not only that but we also have an NR4 (narrowest range in four days) and an LV4 day (guess what that one means). So excellent context here.

The Dow cash in a similar configuration. Here we’re sitting right on top of the SMA, thus allowing both sides a fair shot at the big price.

And the RUT – exactly the same idea but the bears also enjoy a Retail Variation Short starting tonight. So no guesswork required – we have excellent setups across equities and you won’t need a crystal ball to get positioned. Simply follow price.

Now on to Forex and the futures – we’ve got some goodies tonight!

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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://dartht.blogspot.com/ Heisen_Gerb

    vega squeeze, and that’s why I didn’t push my options on that volatility day.
    the day after (when things settle) is like two pit-bulls locked together, both bleeding.
    no winners except the bookies outside the ring.

    ..I like anecdotes.

  • https://evilspeculator.com molecool

    Exactly – this may be the exception but the trap is definitely set….

  • Skynard

    Zzzzzzzzzzz, OMG!

  • CorporalCarrot

    LOL

  • Darkthirty

    Where’s VWAP?

  • Skynard

    What a creepy tape

  • newbfxtrader

    Standing aside. Zero not giving any clues.

  • Skynard

    Ya, well. Could be calm before the storm, remaining short:)

  • bdoone

    creepy as in scary or as in creepy crawly? Or both? I’m going with both.

  • CorporalCarrot

    Aw these shenanigans into the close never get old do they? 🙂

  • https://evilspeculator.com molecool

    Interestingly there is no push to the upside EOD. So continuation lower cannot be ruled out.

  • https://evilspeculator.com molecool

    We still have the daily triggers – but yeah, this is strange. No attempt to paint the tape EOS.

  • newbfxtrader

    Might surprise the people waiting for a retest 🙂

  • Greed is Good

    Hope so. I’d like to see the trading range widen at least a little.

  • Skynard

    Or the infamous Xmas rally:)

  • Skynard

    Both until OED it seems:)

  • bdoone

    Looks like SPX will close a point above 25d sma. Keeps everybody guessing into another ‘most important number ever’ tomorrow. Guess it will be launch pad on way or the other.

  • http://dartht.blogspot.com/ Heisen_Gerb

    I prefer the 20. looks like the line has been crossed by 2 pts. let’s see if the numbers revise. still, today was an inside day, and if tomorrow is an inside-inside day, well – trade the plan.

    http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=0&mn=3&dy=0&id=p90142637797

  • https://evilspeculator.com molecool

    Has anyone noticed that disqus is broken? Whenever I click on a new comment to open it the whole page scrolls up.

  • newbfxtrader

    Yeah. Same for me. But then Discus is always crappy.

  • https://evilspeculator.com molecool

    Yes, I just tested it on both Chrome and Safari – same behavior.

  • http://dartht.blogspot.com/ Heisen_Gerb

    yep. when I click on show 1 reply, page scrolls down.

  • BobbyLow

    Me too.

  • Greed is Good

    Yes..I’m seeing that too.

  • https://evilspeculator.com molecool

    what a pain – must be some conflicting script…

  • Ronebadger

    don’t worry…they’ll fix it quickly!

  • https://evilspeculator.com molecool

    Yeah, but perhaps it’s on my end. I need to look for another blog that uses disqus…

  • https://evilspeculator.com molecool

    Hey, what do you guys think of the new setups? Good stuff on the plate today – some feedback would be nice.

  • newbfxtrader

    gbp/aud is a risky short. Against the trend. Looking for a reversal candle to go long. Same for gbp/nzd. Gold I would wait for a retest of the bottom to see what happens.

  • http://ibergamot.blogspot.com/ i Bergamot

    Fantastic set-ups on equities.
    Just what the doctor ordered

  • Sean

    Equities look to be in a good spot for tomorrow, though I might set the short entry a tick below yesterday’s low because I wouldn’t be surprised to see today’s low get taken out before turning up (if up is the way it wants to go), and it’s only 3 pts and gets price more comfortably below the 25d MA making continuation to the 1760 area more likely… Also, digging gold, but what about going long on a breach of the 25h MA? breaching that would also overcome the 100h, 50h and an hourly NLBL… If the long entry on the daily is going to work seems like overcoming hourly resistance is a good start and could get you in earlier? (sorry, no chart for gold, at work and only looking at my phone)…

  • Rightside_ot_trade

    Good context now in equities; now its stop management ahead of possible colatiloty mañana
    Been stalking the first currency; already in the last

  • CorporalCarrot

    I wonder how the bears feel this morning…….went to bed last night thinking…..”this might be it”………”we’re gonna get dem bitches this time”.

    Open your trading platform and……”what!!!! Dow futures up 60!!!! It can’t be!!!!!”

    So the jobs number……..theoretically should be irrelevant at this stage since all the data earlier in the week is pointing at a strong, i.e so good it’s bad number. The market has already digested the possibility of tapering over the last few days.

    As I said yesterday eventually the fear of tapering will fade and the market will embrace the recovery and an improving jobs market.

    I think this data has an asymmetrical risk reward profile therefore. A plunge on good data will be the last buying opportunity into the year end but I’d expect it to be relatively contained. It might be enough to draw in late to the party shorts however which will increase the strength of the rebound. A weak number however and we have a 100 point+ up day. Especially after 5 days down on the trot.

    Stay safe dudes.

  • https://evilspeculator.com molecool

    Ooooorrrr you could just follow the charts. Just saying…

  • https://evilspeculator.com molecool

    “this might be it”………”we’re gonna get dem bitches this time”

    Very counter productive way of approaching the market. I’m as upset about what’s happening on Wall Street as any of you guys – my wife and I bitch about it every single day. But when it comes to trading I turn all that shit off – there are no side and the only winners are the ones who come out ahead in their trades. It’s a zero sum game and one of the toughest you can be engaged in – leave your emotions at the door or you will be crushed.

  • CorporalCarrot

    I think you know that it’s not how I feel either and I was just engaging in a bit of slagging above. (Which you are prone to on occasion yourself I might add even though we both know that to all intents and purposes “bears” are irrelevant to the market and it is not going to correct meaningfully until longs start selling or reallocating capital). I have long since left my emotions at the door which is why people will see me flip long/short at a moments notice.

  • https://evilspeculator.com molecool

    Yeah, you keep saying that. But subconsciously it seems to be a dominating sentiment. If you believe it doesn’t affect your trading I have to take your word for it as I don’t know what you’re doing. In my case my work speaks for itself – and remember every word I type can potentially be thrown into my face. That’s not an easy gig by any measure as I have written several thousands posts in the past five years.

  • CorporalCarrot

    I’m not just saying it but in case something got lost in translation I was not talking my own book since I have documented here quite extensively over the last few days with charts showing entries and exits that I am long this market. Therefore the sentiments in quotes above are not my own. And unlike 95% of people I have shown actual entries and exits which also leaves it open to be thrown in my face if I get it wrong (which I do of course).

  • https://evilspeculator.com molecool

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    ¨°º¤ø„¸F R E S H „ø¤º°¨

    ¸„ø¤º°¨ M E A T“°º¤ø„¸

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  • https://evilspeculator.com molecool

    Your charts and entries are appreciated. But such musing may be interpreted as your own and taken at heart. If I misread such comments than I can assure you others will as well – and although I’m not the sharpest tack in the box I do have seen more impressionable one’s make their way here.

    What you post is up to you – not going to babysit the process here. But if I get the impression that someone may be at danger of slipping then I’ll call it out as I always have. I myself measure my work against the criticism of everyone here. If I fuck up then you can be sure someone is going to point it out and rub it in my face 😉

  • CorporalCarrot

    With half an hour to go and 90 points up on my cost base I’m taking profits on half as I don’t like this event risk. Will buy back if we plunge and will take the inside day trigger to the upside should that be the direction.