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The Last Bear Standing Is A Bull
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The Last Bear Standing Is A Bull

by The MoleJanuary 29, 2015

The annoying thing about late stage bull markets and in particular the formation of long term tops is that they take forever to play out. Navigating increasingly volatile swings accompanying the final throws of a dying bull cycle takes considerable amounts of patience, discipline, as well as skill. Like Bob The Horse reminded us the other day: Bear markets go out in a bang and bull markets go out in a whimper.

Now the dirty little secret about early stage bear markets is that the last bear standing is usually a bull. Yes, you read that right. Traditionally it’s not weak handed bears who take down a bull market, it’s simply a lack of buyers. Guess what – all those snarling bears who were printing some mighty coin in 2008 are long gone, wiped out during their persistent attempts to call a top when there was nothing but green candles ahead. I myself have seen their (virtual) faces disappear right here – one by one they simply vanished. The few who survived the ravages of one of the most significant bull markets in history relented and changed their approach just in time before their accounts had melted away like late winter snow in the glows of a spring sun.

Arguably this has been one of the most hated stock market advances in history, rife with controversy, bail outs, and market manipulations. But let me assure you that in retrospect – many years from now – you all will miss it. Because it was just too sweet and too easy while it lasted. Your children and grandchildren will look at those monthly charts and ask you how in the world you managed to fail banking a fortune in five years of such bull market extravaganza.

And I’m not talking about fairness – you all know how I feel about QE and Fed/ECB interventions. But from a trading perspective – boy – it was pure manna from heaven and it won’t ever come back – not in our lifetime at least. What awaits ahead won’t be as directional and it won’t be as easy. If you thought trading was difficult in the past five years then you ain’t seen nothing yet.

2015-01-29_spoos_briefing

Now as you may recall I managed to squeeze in an ES short at 2040 yesterday morning and I consider myself extremely lucky as it went straight down from there. Now we’re basically hanging by a thread here and I’m not going to claim that we won’t see yet another FU rip higher, killing a boat load of shorts in the process. But that’s part of our existence as traders – not knowing. You don’t have a crystal ball and you basically just have to pick your battles as they present themselves. The war never ends and the goal is to simply keep winning more than you are losing. Choosing to be a trader is a bit like being born into European royalty in the medieval ages – there’s always a war on and participation is mandatory. And if you win enough you get to pillage 😉

Anyway, if you take out shorts here then put your stop above ES 2040. Yes, it’s a huge range but that doesn’t matter – if this thing really breaks you’ll need that range anyway not to get shaken out. And if it bounces here and breaches 2040 then the bears are dead in the water (again) and we are painting new highs. Alea iacta est.

2015-01-29_EURUSD_briefign

EURUSD – I’m long here and I hate it. Stop below 1.1251, very much hope it’ll get touched but as you know I’m a lowly expat who earns in Dollars.

2015-01-29_DX_briefing

The Dollar index however is looking pretty solid here and I’m long with a  stop below 94.6.

More short term goodies below the fold…

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You have been briefed – now have fun but keep it frosty. See you guys later this afternoon.

Cheers,


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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  • Ronebadger

    Long Dollar AND Euro…interesting… I don’t play those things though…

  • https://evilspeculator.com molecool

    Hehe – I knew someone would pick up on that 🙂

  • https://evilspeculator.com molecool

    Nice Mole signals lately 🙂

  • mugabe

    Mole, you seem to have decided that we are now witnessing a long term top in US equities. I’m not saying you’re wrong -how would I know?- but isn’t that sort of entrenched thinking rather dangerous?

  • mugabe

    hedges:)

  • https://evilspeculator.com molecool

    Good point – let’s put it this way: There is significant potential for the formation of a top here, at least a medium term correction. Potential meaning that the tape is currently acting like it and I’m trading accordingly. However in the end price is always right. IF this situation changes – i.e. IF we push above 2040 and especially above 2060 then I’ll be the first to revise that view – I have no directional bias in my trading. In the interim however I simply play the major swings and let the tape point the way. I

  • https://evilspeculator.com molecool

    As I said in my post above: “And if it bounces here and breaches 2040 then the bears are dead in the water (again) and we are painting new highs. Alea iacta est.”

  • BobbyLow

    Mornin Folks,

    The last time I said we could probably have a quiet day following a loud one, the day was almost equally as loud. I guess we’ll all know how today turns out by 4 PM EST.

    Current positions Short DJUSEN via DUG, Delta Neutral on Oil and new position in short AUD/USD

  • https://evilspeculator.com molecool

    Now we wait….

  • mugabe

    good point! I know that I have in the past been guilty of forming a market narrative and then feeling ‘cheated’ when it didn’t play out. I think you probably have too (back in EW days), but are now much more zen/agnostic about direction.

  • ridingwaves

    10 wks of 60 minutes without mike wallace

    http://s11.postimg.org/ik8v0asrn/10_weeks_of_60_minutes.jpg

  • https://evilspeculator.com molecool

    Hey, I’m glad you brought it up. I don’t want to give anyone the impression that I am predicting a bear market. I always always speak about potential and today right now this minute the bears have a huge chance to inflict some massive damage. If my ES 2040 stop is touched (now at b/e) then I simply write it off as an experience and look for new entry opportunities.

    But at the same time I don’t want you guys to be mechanic about BTFD like in previous years. Things could get ugly here in a NY minute. So being long here is possible but it carries a lot of downside risk. Be nimble.

  • squirrelsome

    At least us, Canadians, need the “narrative” 🙂
    https://www.youtube.com/watch?v=wkDvqQKGgDA

  • ridingwaves

    Mugabe throws a jab of tough love..

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

    Hell hath no fury like a woman Bullish Percentage scorned.
    but – yeah, let’s see what happens.

    http://stockcharts.com/h-sc/ui?s=$BPSPX&p=D&yr=0&mn=6&dy=0&id=p82302227726

    -GG

  • Skynard

    To long now, extreme

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

    liberal trash IMHO, but I always gave Andy my time.
    http://www.forevercash.com/wp-content/uploads/2014/06/110927andy-rooney1.jpg

    Long eyebrows! R.I.P.
    a 1990 algo? that’s an old algo. 😉

  • ridingwaves

    NG bull capitulation….took long position…

  • Skynard

    Absolutely, hanging on tight

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

    S&P ’80’
    1992, she held in mid-December. (the band, ignore price level)
    do you feel lucky punk!?
    http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=0&mn=3&dy=0&id=p38955781929

  • ridingwaves

    liberals, conservatives, democrats and republicans….
    same shit, 2 different piles…

  • Vince_Clortho

    SPX is currently in a descending channel. Look for a bounce @ 1983. We can go as high as 2050 (which coincidentally coincides with Mondays gap down) and the bear case will still be valid. I traded the bear market of 2007-2008 and yes it is a bitch, and yes you will cry…hard.

  • captainboom

    How are you using that Gerb? Longs when the EMA is pointing up, shorts when it’s pointing down? Or as a filter that prevents shorts/longs respectively?

  • MK Ultra

    Under yesterday’s low on crude, looking for entry………….

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

    Filter.
    BP under ema, don’t fight it – bear.
    BP over ema, don’t fight it – bull.
    the ema lags, so this is the crudest of tools.
    http://ecx.images-amazon.com/images/I/717pY6WrVWL.gif

    I’ve been SPX bearish since the crossover around New Year’s.

  • BobbyLow

    There was a brief discussion yesterday about whether or not to hedge certain positions. I’m not an expert on this but if anyone is not trading the actual future /CL and are trading ETF’s such as UCO/SCO or USO instead then I just want to stress how important it is to understand the Delta (Rate of change) of the ETF to the (Underlying) Crude Oil /CL. This Delta changes with every Tick so it’s always a moving target. However, it is possible to maintain a fairly accurate handle on this.

    So back to hedging; This AM, I said that I was Delta Neutral on Crude (Long UCO Long ITM USO Puts). Since then, a further decline in Oil occurred this morning. My Weekly ITM Puts have now gotten deeper ITM so that my Delta has now flipped over to the Short Side with a ratio of 1.2 to 1 Short (On my actual positions) This ratio is always going to be Fluid and probably will have changed by the time I finish writing this.

    One can argue that instead of being hedged that it is best to be either Long, Short,or Out and this is valid. However in my case, I only trade energy related markets and Forex. My lens in Forex is very clear to me. However my lens on Energy is very cloudy. The increasing shrill of lower prices is sending alarm bells off all around me. My charts tell me that I should be short oil and I am (in part) but . . .

    Valid arguments can be made for both sides whether to hedge or not to hedge. Also the trickiest part is knowing when to stop hedging. Most experienced traders here will probably understand what I’m saying. I just wanted to put this point of view out for anyone new to this business. Not saying it’s the right thing for everyone to do. I’m just saying that in this case it’s the right thing for me to do.

  • ridingwaves

    and 1 errant Ukraine missle starts a war and oil will soar…nimble world we live in…

  • squirrelsome

    I don’t think oil would interest me anymore if a US-Russia war starts. I might not have the time…

  • ridingwaves

    Jumped in on GENE at 1.74 this morning, if it breaks thru 2.60 it could find 3.40 area fast…low float of 4 million…

    ZGNX is about ready to breakout too…edit…here we go…

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

    ZL signal moving down, back to short for a test of the lows now.

  • ridingwaves

    me either…a hot spanish lady, bottle of Don Pilar along with a big fatty might be better…since it will be the end of the world

    https://www.youtube.com/watch?v=lW4s7TETtJA

  • ridingwaves

    still in and sugar rush high 2.85 1.57(123.39%)
    3.40? come on baby…

  • ridingwaves

    out at 3.40….love those low float multi-baggers….time to surf…

  • M E

    still holding my shorts from yesterday ES 2030 when the blue arrow appeared

  • https://evilspeculator.com molecool

    Very much possible – embrace the pain 😉

  • https://evilspeculator.com molecool

    This is hilarious 🙂

  • https://evilspeculator.com molecool

    Ah – you were around back then?

  • https://evilspeculator.com molecool

    For me it was more an accidental hedge – not sure if you guys caught that.

  • https://evilspeculator.com molecool

    Meaning I didn’t approach it with the mindset of ‘hedging’ – I merely saw a super juicy ST short opportunity and decided to grab it.

  • https://evilspeculator.com molecool

    Hot spanish ladies – we have tons over here. They are beautiful but hard to crack – I’m sure mugabe knows a thing or two about it.

  • MK Ultra

    Hey Sky, are you still looking at crude?

  • Darkthirty

    Traded PMs and grains, got hurt a few times with the manipulation. Started scalping options only on the minute charts. Not willing to see a trade go red, if it doesn’t respond appropriately, I GTFO!! This “market” is like any casino in vegas, and the hours of operation are about the same.

  • Guest

    What does that spike on the Zero mean?

  • BobbyLow

    Cool. But if you trade options using minute charts then I would think you would need a lot of size to make any money with the spreads and all that. If you can do it more power to you.

    Fastest charts I’ve traded is 5 Minutes and when I did that it turned something that I loved to do into nothing but stress.

  • Darkthirty

    Trade naked front month options, and yeah, it can be a workout. How much $ do you need is the real question.

  • Skynard

    No hurry on this new low, waiting for this evening to review.

  • Skynard

    Comment below, will review it tonight for a potential retest on the new low.

  • BobbyLow

    I’ve traded Naked Options and mostly OTM that had very little chance of getting “Put” to me or make me Short the underlying. I stopped doing this after a friend of mine got caught with a bunch of Naked SPY Puts on Flash Crash Day of May, 2010. By the time he could cover it had cost him $6K.

    I just took a peek and Oil is back to almost flat and my “hedged” position is saying to Oil for now, “do what you got to do because I don’t care”. 🙂

  • https://evilspeculator.com molecool

    Spike? You mean the Mole reversal signal – the blue one? Look at yesterday’s chart for a hint. They don’t always work but during days like today (sideways and range bound) they often precede ST reversals.

  • squirrelsome
  • ridingwaves

    this as to be buyout….if not, downhill run will be faster….crazy day for GENE

  • MK Ultra

    It’s going to be a fast ride up dude……………here was your retest 🙂

  • Darkthirty

    Flip positions all day. 20 contracts is 1 K a point. I pay .25 point round turn.

  • Skynard

    Yep, stop run with the signal. Remaining short, div now on 5 min.

  • ridingwaves

    just learn how to lead in salsa, crack opens wide …

  • BobbyLow

    Maybe so but you might want to watch the price action between 2:15 PM and 2:35 PM as bigger players adjust their positions and settlement just before and shortly after the close of Open Outcry.

  • MK Ultra

    meh, I just follow the rules………………….

  • BobbyLow

    And obviously you’re not holding naked options overnight. We all do different stuff that fits our individual personalities and that helps to make this business as interesting as it is.

  • BobbyLow

    Understood. 🙂

  • Darkthirty

    You got it! Always looking for fresh info and ideas. That’s why I hang out here. And sometimes I actually miss the x. So when scott tells me I’m a stupid piece of shit, that cures it quick!!

  • ridingwaves

    here goes ZGNX…..

  • mugabe

    not as much as I’d like! Ideal combination- spanish looks with north european or possibly US mentality. good luck with that one.

  • mugabe

    that is true

  • mugabe

    intermittent lurker but I saw you go through the process of reinventing /re-finding your trading in full public view .. very brave

  • Skynard

    Indeed, although according to my rules it made a new low instead. Will take a shot at it this evening and will post.

  • https://evilspeculator.com molecool

    Looks like the bears are going to blow this one again – LOL 🙂

  • Skynard

    Counting on your Mole signals’s today:)

  • https://evilspeculator.com molecool

    ) ( ) (
    ( /( ( ( ) ) ( /( ) ) * )
    )()) ( )))( ‘ (()/( )()) (()/(` ) /(
    ((_) ) ((_)() ) /(_))((_) /(_))( )(_))
    _((_)((_) _(())_)() (_)) ((_) (_)) (_(_())
    | | || __| ((_)/ / | _ / _ / __||_ _|
    | .` || _| // / | _/ | (_) |__ | |
    |_|_||___| _/_/ |_| ___/ |___/ |_|

  • PipCyp

    “that’s part of our existence as traders – not knowing. You don’t have a crystal ball and you basically just have to pick your battles as they present themselves. The war never ends and the goal is to simply keep winning more than you are losing. Choosing to be a trader is a bit like being born into European royalty in the medieval ages – there’s always a war on and participation is mandatory. And if you win enough you get to pillage”

    Now that’s a piece of trading wisdom I haven’t heard before. After 8 years a trader, I can only agree and tip my hat – WELL SAID!