Discretionary Trading
Now Reading
Volatility Begets Volatility
136

Volatility Begets Volatility

by The MoleFebruary 28, 2018

Markets never move in a straight line and the 12% correction in the S&P 500 in late January sent an IV shockwave through the financial system from which it is still attempting to recover. What usually follows a large volatility event is a counter reaction followed again by smaller events until either the old market regime re-asserts itself or something even more dire happens.

We now find ourselves at that very threshold at which the market direction for the remainder of this year will be determined. Β And that incidentally not only applies to equities but also to the FX and crypto space. What happens here will set the stage for whatever transpires over the rest of this year and beyond, so we’d better pay attention.

I best speak in charts, and I usually put my money where my mouth is. Which is why I just grabbed a long position here with a stop below 2705.25. For one the formation on the short term panel is looking very bullish to me, so does the sequence of higher highs and higher lows on the daily. Until I see a breach < 2682 I have to be long here.

Should we breach below that then I would have to get confirmation via a breach and retest of the 100-day SMA. Only a spike high below that mark would get me to take on short positions. The exception being that I see very concerning divergences on my momo charts and of course our trusted Zero indicator:

Which by the way consistently pointed downwards during yesterday’s sell off. However I don’t see any major warning signs on the hourly panel (left). It is slightly divergent but not sufficiently yet to warrant short positions. If you are a short here then I suggest you trail your positions and keep an eye on the Zero signal (in case we get a bullish divergence today or tomorrow). By the way if you trade the E-mini and you are not a subscriber yet then sign up here – you’ll be glad you did.

Now on the currency front the EUR/USD has been somewhat weakening recently and then stabilized in a ‘wait and see’ formation in anticipation of Powell’s speech. I wasn’t even aware that he was scheduled to speak until sometime Friday when I checked the event schedule for the coming week. Which once again speaks to the power of simple price action to tell you what’s up without having to follow a ton of fundamental or macro-economic data.

Since Jerome Powell’s slightly hawkish hearing in Congress the Euro has once again descended lower and in the process managed to trigger a short position I had proposed sometime last week (to the subs that is). It’s a bit too early to move my stop to break/even as price action is choppy and there may be another push higher. As a matter of fact I don’t think the odds are great for this campaign and it only was presented as the potential payoff could be large due to a potential long squeeze scenario. My target range for this campaign would be near 1.2 from where its 100-day SMA currently hails.

Crude is a stop out at about 1R of profits – not much given the time it was active but we always need to adjust our time horizons to the price action and not the other way around. Some symbols move slowly but steadily, some more volatile (BTC sends its regards), and some do both for extended times. Crude isn’t in an easy market regime right now and trading it takes patience. However when it starts trending then it usually makes a b-line for its target range – hopefully we’ll see it switch back to that soon again.

evil_separator

It's not too late - learn how to consistently bank coin without news, drama, and all the misinformation. If you are interested in becoming a subscriber then don't waste time and sign up here. The Zero indicator service also offers access to all Gold posts, so you actually get double the bang for your buck.

Please login or subscribe here to see the remainder of this post.


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.
Enjoyed this post? Consider a small donation to keep those evil deeds coming!

BTC: 1MwMJifeBU3YziDoLLu8S54Vg4cbnJxvpL
BCH: qqxflhnr0jcfj4nejw75klmpcsfsp68exukcr0a29e
ETH: 0x9D0824b9553346df7EFB6B76DBAd1E2763bE6Ef1
LTC: LUuoD6sDWgbqSgnpo5hceYPnTD9MAvxi6c

  • http://www.captainboom.com/ captainboom

    Mole, I don’t recall seeing ‘wiggles’ on the middle panel of the hourly Zero like have appeared over the past few days. Seems like it’s usually more well defined, i.e. zero or +/- some value. Can you provide any insight on that behavior?

  • Tomcat

    Mole, I am curious…did you add to your existing position ($ES) or is this a new position after getting stopped?

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

    High Yield daily.
    fluffed up, by the trend.

    http://stockcharts.com/h-sc/ui?s=HYG&p=W&yr=1&mn=9&dy=0&id=p09589017930
    -GG

  • Tomcat

    Did you mean “buy” the trend? πŸ˜‰

  • Dyellowflash

    If want to go long, maybe SnP 2745. I will clear off 1/2 of my last 1/3 of shorts there if it gets there.

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

    Zero signals both hourly and 5 min are bullish at the open

  • Dyellowflash

    but price is not.

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

    what’s the range?
    if it’s 0.3 – I’m going back to sleep…at work. πŸ˜‰

  • Yoda
  • Yoda

    Your free sub expired?

    πŸ˜‰

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

    yeah. beggars can’t be choosers.
    πŸ˜‰

  • Yoda

    Well let just say the signal was in the significant range

  • Mark Shinnick

    Ok, I got the labd covered worked out well so standing by, see what happens.

  • Richard Adler

    Slight neg divergence here on zero?

  • Mark Shinnick

    Short again via labd, tight, lower probability trade.

  • Mark Shinnick

    Ok, standing aside. Break of vol support would argue for some crushing.

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

    5 local tries at making new local highs last several daz, no joy quite yet….just saying…

  • Mark Shinnick

    Resumed labd

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

    I hear you.

    I’m looking over last several months.

    and Copper.

    https://finviz.com/futures_charts.ashx?t=HG&p=h1

  • Mark Shinnick

    Volatility appears to be bouncing.

  • Mark Shinnick

    …and failing.

  • Dyellowflash

    Cleared off my final 1/3 of shorts as i said i would at SnP 2745. Waiting for zero to figure things out for tmr.

  • Julie

    USO and UNP shorts Yeah ! TLT long Yeah ! Ya gotta believe
    JULIE

  • Tomcat

    BRAVO Julie. Well done.

  • Julie

    Thanks TC How have you been ? I want to short the homebuilders I thought that XHB would retrace more as it only retraced 38.2%. I will try to nail the next bounce. Watch bonds in previous posts and charts I computed that yields were going lower not higher. A trade against the majority. Way too many on one side of the boat thinking that yields were going higher
    JULIE

  • Julie

    Chief I like your volatility sign on top of thread. Reminds me of this one ….. JULIE https://uploads.disquscdn.com/images/0ccdebd5c6216d2bcab2dcc01801189724a493bc3059f94f3a7ab39e4de5e0d8.png

  • https://evilspeculator.com Sir Mole III
  • Edgy

    You think he’s playing himself, a la Pete Rose?
    Making hidden bets?

  • Julie
  • Julie

    Chief VWAP and Volume at Price are great indicators Great job !
    JULIE

  • HD

    and the 50DMA at 2737,,, oldschool

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

    Yup HD ! Price below usually indicates a dead cat bounce. Shrodinger’s black cat that GG once posted !
    JULIE

  • Tomcat

    Julie, yields going higher is not a matter of IF but a matter of WHEN. In the short term, you may be able to exploit the one sided bet, so I agree with you there. Longer term, rates are going HIGHER.

  • Mark Shinnick

    Yes, so much retesting has now failed, this appears imminent.

  • Julie

    TC If the market tanks which is my premise there has always been a flight to safety to bonds.(treasuries) This time IMO no different. Just saying TC
    JULIE

  • Tomcat

    Too many “ifs” there for my liking. We have seen before indexes and bonds having a positive correlation
    http://schrts.co/bZ47RJ

  • ridingwaves

    Marketwatch Headline-Pending home sales tumble to a 3-year low as housing β€˜crisis’ worsens
    this is hilarious, come to my city and buy a 1 million dollar tear down…..
    they are setting up Fannie and Freddie for more money from us taxpayers…..my take

  • Tomcat

    Collecting coin, I am pretty sure. Old school

  • Julie
  • HD

    sell rips and buy dips, there is some EW developing but I will wait till its more probable to present.

  • ridingwaves

    depends if they are seen as safety, the time to buy treasuries was the initial Bernanke Put. I know a fella that stated it on a blog in 06 and is now retired off his treasury strategy…my lens, it looks like the fed has had enough of the market bubble…while trying to figure out how raising rates is helping inflation?

  • Tomcat

    I happened to be on the opposite end of that, I am S $CL

  • Julie

    HD I see a 1 – 2 down developing from yesterday. Definitely an ABC (correction) up from February 9 and an impulse down from January 26 to February 9
    JULIE

  • BobbyLow

    Thanks for asking GG. I’ve been spending time in Physical Therapy for my back and hip. BTW, I passed on the steroid shot for now and am going all in on PT.

    On the trading front, I’m currently short crude via OILD and short XLE via ERY.

  • Julie

    TC I am short oil too. A close above the cloud on this bounce today would be a concern. Decreasing volume as I pointed out in previous posts on the bounce from February 14. The large and increasing selling volume on the decline preceding the bounce. The bounce from February 14 a corrective 3 waves with one of my targets posted 12.87
    JULIE

  • Tomcat

    You are my boy Bobby πŸ˜‰

  • Julie

    RW TC Quite possible that equities and bonds tank simultaneously . I too have that scenario on my radar.
    JULIE

  • Julie

    YES BL ! You the man ! Hope your physical therapy helps
    JULIE

  • BobbyLow

    I’m thinking that one way to bring the cost of housing down is to raise long term mortgage interest rates back up to 6 to 9 percent. It was ridiculously low interest rates especially low variable rates that helped put housing prices out of sight. The banks charged less in interest but more than made up for it in the forever increasing amounts needed to finance a home.

  • ridingwaves

    6% 30 year will take down housing big time, 9% would be depression…..
    bad risk modeling, fico score adjustments for 2008-2012 repo folks (rediculous)
    low rates, low down payments etc.

    I own a flat in SF, it’s overpriced, it needs to come down by 20%….I’m a realist, not some puppet consumer that the players can trap at the top…Not in housing….never….the one thing about California if you live here long enough, you get a feel for the RE cycles….20% move down in price is not only needed, it’s a must for the state to grow….

  • Julie

    You got RW !
    JULIE

  • Julie

    INTC Yesterday the false https://uploads.disquscdn.com/images/a4d7bba62cf2667ebc4958e3197ce3aacfdeef0d67c7e12d863499e2d08a048f.png breakout of the channel and breakout point failure at resistance. not good IMO INTC ain’t gonna make it JULIE

  • Brishort

    Mole, you are missing an XMR wallet. The one with real technological value of encryption and anonymity! :-p

  • Julie

    Remember the tv show (soap) As The World Turns. Anyone long this market it’s gonna be As The Stomach Churns !
    JULIE .

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

    Hi GG In a previous post I stated pattern recognition RSI 70 has led to a decline. Again same page GG
    JULIE

  • Julie

    Also GG INTC A possible bearish broad form pattern developing. Also the possibility of a diamond pattern developing
    JULIE

  • BobbyLow

    In 1977, I bought a home for $34,000 and financed it at the going rate of 9%. I put about an additional $30,000 into it over the next 20 Years. The last time this house sold (not by me) was for $330,000 during mid 2,000’s. The house and overall property looks almost exactly the same as it did when I sold it in 1997. I remember the late 70’s was very infationary and by the early 80’s mortgage rates were around the mid teens after Volker raised rates big time to reduce inflation. Raising rates actually worked and the inflation rate was reduced after which mortgage rates came back down, housing came back and went crazy for awhile until the next bust. BTW, in the mid to late 70’s if you decided that you needed to buy something you bought it that day because there was a really good chance that the price would be higher tommorow. (There was true inflation during this time because most wages increased along with prices and not the squeeze that we’ve had in recent years with prices rising and wages stagnant.)

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

    Sometimes watching a trade run is like watching sausage being made. πŸ™‚

    BTW, I used to be hooked on “All my children”. We used to tape and watch it everyday.

  • Julie

    BL “All My Children” Is that the show with Victor in it ? I think Victor is in some soap today. He has got to be the longest running actor on tv Too much ! Hey BL USO now below it’s 5 ema and Ichi Cloud conversion line (8) Yeah !
    JULIE

  • Julie

    GG A young Marty Feldman ! Lol !
    JULIE

  • Yoda

    you bet he does

  • Julie

    Hey Where is The Yoda ?
    JULIE

  • BobbyLow

    I don’t remember a “Victor” in AMC. AMC was the soap that starred Susan Lucci as Erica Cane. Over a 40 year period, “Erica” was married and divorced at least 6 or 7 times, been charged and found innocent of murder at least twice, and that was just the minor stuff. LOL

    Crude had me puckering for a little while today but then I remembered that it was Weds and that during most EIA days price is a little crazier that normal crazy. One good thing is that it appears that price resolved in our favor between 2 and 2:30 PM and that’s a very good sign.

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

    #MeToo.

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

    filming another hit video.

    it’s a catchy tune!
    https://www.youtube.com/watch?v=NxF8L3pbJdU

  • Julie

    BL UNP doing what I expected too. Now look at RIOT now as I type 10.75 way above it’s 5 ema Will buy some at the close if above 10.46. I posted a chart RIOT below
    JULIE

  • Julie

    10.60 now
    JULIE

  • Julie

    RIOT 9.51 very strong support. It’s 5 ema now 10.53. At close above 10.53 will buy some JULIE https://uploads.disquscdn.com/images/a9169ec6bbb084b354035402a86f6e60ccab30bec8d0d0dda26531832e790e59.png

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

    what’s your R:R?

  • Julie

    GG Approx target 14 with a stop approx. 1 buck below purchase price better than 3 to 1
    JULIE

  • Brishort

    Potentially ugly month end close on deck. Correlation CL & NDX is oddly high as well at the moment.

  • Julie

    Brishort this correction is not over by any means
    JULIE

  • Mark Shinnick

    Jeez…general all markets survey showing hints of acute liquidity problems. I’m short…and something different seems to be happening.

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

    another word for Credit.

    Muwahaha.

  • Mark Shinnick

    There you go, everyone and everything hooked on the credit teet. Could be good for dust.

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

    Actually high yield is holding pretty well so far

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

    dam. I know, huh?
    kind of influences holding shorts overnight.

  • http://www.linkedin.com/in/sharondsessions/ Sharon

    day over

  • Julie

    RIOT At close bought some
    JULIE

  • http://www.linkedin.com/in/sharondsessions/ Sharon

    next 2 days will be interesting

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

    why? Month Begin?

  • Julie

    Yes it will Sharon
    JULIE

  • BobbyLow

    3 X’s OILD and ERY really rocked today. Holding with trailing stops on both.

  • http://www.linkedin.com/in/sharondsessions/ Sharon

    markets giddy up got lost with 2 days to week close.

  • Julie

    BL We hit the Mo Fo ! I knew it BL never go against the Commercials COT report. They have a huge net short position oil
    JULIE

  • http://www.linkedin.com/in/sharondsessions/ Sharon

    time for a nice cup of black hot tea with cream. my favorite drink.

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

    I’m sticking with chamomile.

    good for churning stomachs.
    πŸ˜‰

  • Julie

    Me too Sharon but hot chocolate Glad you and others had a great day too !
    JULIE

  • https://evilspeculator.com Sir Mole III

    Now that session went to shit in a jiffy…

  • Julie

    GG “As The Stomach Churns”
    JULIE

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

    ..never crossed vwap?
    πŸ™‚

  • https://evilspeculator.com Sir Mole III

    Nobody is fucking donating anyway :-/

  • Yoda

    Should have kept my VXX. Grrr

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

    Gartman head fake.

  • Yoda

    Your audience is probably too old to have cryptowallets anyway.
    To get donations in them my suggestion would be for you need to create a junior clone of this site but for millennials only where only gender neutral pronouns would be in use and a safe space for those who get offended by fellow bloggers. πŸ˜‰

  • https://evilspeculator.com Sir Mole III

    Boy oh boy – I really need to time my dinners differently.

    Anyway, Zero reversal signal was rather impressive today!

    https://uploads.disquscdn.com/images/ee05c21c5e9ede558ffaa6f53bbf128622f7ab83eede73e073f6a492576444c5.png

  • Yoda

    It is really the opening strength of the zero that made me change my mind. Well if it is to get ugly, I’ll jump on board along the way.

  • BobbyLow

    The problem with “Experts” like Gartman is that they do get one right every once in awhile and get to say “I told you so”. I would love to see what his actual Win Rate , APE and SQN is and I’ll bet it’s doggie do do.

  • BobbyLow

    What is the time difference between where you are and NYSE time?

  • Julie

    BL Give a monkey a cue stick and he is bound to make a ball sometime Lol !
    JULIE

  • Yoda

    6 hours

  • Yoda

    Tim Knight did some stats on that and I remember that it was an excellent edge to play contrarian

  • Julie

    Yoda is that 6 hrs from Starship 3 or 4 ? Lol !
    JULIE

  • Yoda

    Time and dimensions exist only in your mind so you can comprehend the world that you are living in

  • Julie

    Raff Regression called the exact top. Let’s see if it calls the bottom Will be watching closely https://uploads.disquscdn.com/images/8a3d9a65a07305084e40ce3c25e4f46d613db519884bd4f5a5b5e9e47395c3cf.png JULIE

  • Dyellowflash

    Not sure if its reads late ramp down on the zero. Could be an up day on Thur

  • http://www.captainboom.com/ captainboom

    Saw an interesting presentation over the weekend by an economics prof from a local university. He does this every year for the local rental housing convention, and does a nice job. He compares his prognostications from the previous year to actual data once the year is done, and usually comes pretty close.

    He pointed out this year that particularly in West Michigan, the drop in pending home sales is due to very tight supply. Especially in houses priced under 200k. I think the median home price in Grand Rapids is ~$250k. I live about 45 min south of GR, and homes near me in the 150k range are selling in under a month, which is very short for this area. I’ve been monitoring local supply for the last year, and I agree it’s tight.

  • http://www.captainboom.com/ captainboom
  • Edgy

    And for that, I dedicate this song for today (post mortem).
    “Is it worth it? Let me work it. I put my thang down, flip it, and REVERSE IT!”

    https://youtu.be/UODX_pYpVxk

  • Edgy

    Yoda, you remind me of another wise alien:
    https://youtu.be/NON4hksO77I

  • Edgy

    Already a classic!
    What amazes me is the great diversity of people I’ve met across the country who share these videos….this one in particular!

  • Mark Shinnick

    Yes, really is true that “Volatility Begets Volatility” The volatility picture is appearing stable at higher assumed levels.

  • Edgy

    No Patreon yet? I just got on that to send Neebs Gaming $10 a month because I love them so much. (hint. hint).
    But yeah, I understand I’m talking USD.

  • kudra

    greetings. long time, no post. Mole, amazing what you do day in and day out. thank you.

    been observing some US futures fluctuations tonight. I’m still holding a big TZA pos initiated in late 2016. need a 30% correction to break even. also have some QID from July 2017. need a big bear for that one too. yes, i’m that guy. started trading in 2008-2009 and that fiasco forever tainted my lens. good news is i have but less than 40K free to trade with.

  • Yoda

    you’re still living in hope and dreams, not trading.

  • kudra

    indeed. been waiting for a better exit now for what seems like ages.

  • Yoda

    If you’re lucky to get one…

  • BobbyLow

    Hey Kudra good to hear from you. πŸ™‚

    It appears that you’re going to hold onto those two positons until if and when they come back. I wish you luck and hope that you’ve made a promise to yourself not to fuck around with your remaining $40K. The worst thing you can do now is to send good money after bad. Your remaining $40K might seem like a Million Dollars in hindsight if it were to go up in smoke.

  • Mark Shinnick

    SA investment?
    “…anyone opposed to expropriation of land without compensation is the enemy of our people, and such a person will be dealt with.”
    https://youtu.be/M21YRO1T9h8

  • https://evilspeculator.com Sir Mole III

    I am following this train wreck closely. If nothing else the situation in SA exposes the hypocrisy of Western refugee policies.

  • HD

    HD β€’ 2 days ago
    Last year 2/27/17 marked a high, 80 point hit into March.

    This stat is cleared now. Wish I would have traded it better.

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

    Sorry Kudra, I claim total BS at this point. Regards

  • werewolf

    is the zero not working?

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

    History has a way of repeating. Regardless of race or nationality.
    {sigh}

    “To keep you is no benefit, to destroy you is no loss.”
    1.7 million souls, is a lot of blood.

    “money, free markets, normal schooling, private property, foreign clothing styles, religious practices, and traditional Khmer culture” were all abolished.

    https://www.washingtonpost.com/news/worldviews/wp/2014/08/07/why-the-world-should-not-forget-khmer-rouge-and-the-killing-fields-of-cambodia/?utm_term=.8d19c8ebb36a

  • https://evilspeculator.com Sir Mole III
  • https://evilspeculator.com Sir Mole III

    uuuh – it should – lemme check

  • https://evilspeculator.com Sir Mole III

    Time on top sez 9:43 – it’s current. Reload your browser or use another one.

  • werewolf

    working now thanks

  • randomuser6789

    You lose more money each year than I make at my day job. Just make donations to charity rather than to Wall Street Fatcats. It is much more fulfilling.
    Seriously, take the loss and stop trading. It will save you all of that self loathing.
    Or you can do the research about how often a 30% correction occurs and then take the loss and stop trading. Obviously you have not done this as you continue to pay dearly for your ticket to fantasy land.