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Welcome To The Long Stretch
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Welcome To The Long Stretch

by The MoleJanuary 28, 2019

My mission over the weekend was to put together an iPython notebook that demonstrates how to simply and quickly correlate any type of alpha factor (i.e. Net-Lines, candle patterns, moving average crosses, etc.) with the ensuring price action within a varying time window. So we are talking scatter charts of course which are the visual representation of linear regression and its fit function.

It’s something I have been doing during the development of VIXEN but it was fairly specialized. The notebook I’m working on now will make it fairly easy to drop any type of idea/brainfart into the notebook, express the trigger rules, define the entry threshold, and Bob’s your uncle.

The end result will be featured as part of my system building video series that I am in the process of completing. It’s been a boatload of work already and has taken up almost all of my spare time, i.e. weekends and evenings during weekdays.

Absolutely worth doing however as the end result will be a complete and comprehensive guide on how to build a system from the ground up, starting with early alpha factor analysis to rule definition, campaign management and optimization, implementation, all the way through back testing, market phase optimization, forward testing, live trading, etc.

If you’re an aspiring system trader or are already developing systems (discretionary or automated) then I expect that you will find quite a bit of value in the series. It should be available at yet to be launched educational platform in early March, or April at the latest.

Alright per the theme of this post – welcome to the long stretch of bullish bias (historically speaking) that, with three one-week exceptions, extends all the way into early summer. Of course that doesn’t mean that it’s easy time for the bulls but it does suggest seasonal backwind.

As with everything in trading we always need to put things into the proper context. So if equities fall off the plate it would be wise to respect the price action and to not engage in spurious contrarianism simply because of historical precedence.

Speaking of which, where are we in equities on a long term basis? At this point the bulls have two closes > the 100-day SMA in the bag and a close > the 25-month is only four sessions away.

Failure here would represent a very nice LKGB setup before a major plunge closer, so the next few sessions should be very interesting.

On the E-Mini volume profile we are in the center of the storm with a few minor volume holes above us and several more severe ones below.

Nevertheless I don’t think that the odds yet favor the long side as the onus now is on the bulls to demonstrate that they are determined to not let another profitable season of the year slip away again.

If they can’t make this happen over the next three months then they will be in big trouble come this fall.

Implied volatility remains pinned near the 18 mark and the VIN/VIF as well as IVTS are near medium term support, all of which shows that market makers are still pricing in potential trouble ahead.

CPCE has been dropping but also seems to have topped out near the 0.7 mark (the chart’s scale is inverted as I’ve flipped the signal), which is not unusual when you consider the long term median (dotted line).

This actually gave me an idea for a new ratio chart – put/call ratio vs. the VIX – we are basically pitting market maker sentiment against option buying/selling interest.

Yes, I can definitely work with that and it’ll be another valuable tool in our charting arsenal. Not all of those BB breaches are great contrarian plays but they do mark periods when it’s time to cash out and head for the hills.

Gold made a big jump to the upside last Friday but I don’t trust it and I’ll tell you why below the fold.

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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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  • Jason13

    +1 especially on the Gold/Yen call…I like it.

  • Sp00nman

    A couple big earnings misses, cat with a miss and NVDA with a big miss. Looks like we’ll open in Thursday’s range where we chopped for a couple days.

  • Sp00nman

    I’ve been watching the Yen and I wonder if the correlation with Gold has been weakening..?

    On the note of Gold.. I remember TTP said he had Gold in “safe” places. All I’d say is be careful. Nothing is guaranteed unless you can get your hands on it. https://www.ft.com/content/4ffb02b4-226e-11e9-8ce6-5db4543da632

  • HD

    Wednesday: Q4 GDP (est. +2.6%), the ADP, pending home sales, and the FOMC meeting concludes

  • HD

    Moon, not a 1 day hit after 12%.
    Whatever system you build it’s still best to know the characteristics of the market.
    Double t in play

    https://uploads.disquscdn.com/images/5ddd63dd4964c0d3628ae9b4f1a5ddc3e2f9873d16285b7e858273a5f24c4474.png

  • Sp00nman

    I made this post in the other thread and was curious if people had some thoughts.

    Interesting info regarding debt issuance is the US had $1T+ in 2018 and
    expected to be another $1T+ in 2019. At some point it should be bullish for gold and hard
    assets. I have wondered and asked myself how debt/deficits matter these
    days with the existence of primary dealers at auctions. They exist to
    make sure all the debt gets purchased. On that note, seems like a great
    investment for them. Levered up, a guaranteed 2-3% coupon turns into big
    money risk free.

  • Sp00nman

    Interesting price action in NG. Went and touched the recent lows ~2.88. Sure is quiet here today.

  • Jason13

    Yeah I saw that.

  • Ted

    Hourly chart. potentially the most bearish looking – could take them all down. https://uploads.disquscdn.com/images/de7fa13d6aca97189ba01cdb31be63460d9024fbbafa9fff4813c453b3d5707c.png

  • BobbyLow

    Got stopped on my last 1/4 position of long Oil (UCO) this morning and flipped over to Short via SCO.

    BTW and FWIW, because /CL is not a continuous contract, the last time I back tested charting /CL and trading UCO/SCO, I tried something different. When doing an extended back test the /CL Chart usually gets distorted at rollover time. The last time I back tested, I charted each individual contract back as far as it made sense for example, right now H19 is the current contract and the last contract was G19 and before that it was F19 etc and I was able to sew them together. This will still not be 100% accurate and could make a difference when actually trading /CL when each penny movement of /CL is = to $10.00 but I believe this to be accurate enough for ETF’s like UCO/SCO. I used to think that just charting UCO was good enough but not anymore. Charting and making trading decisions based on /CL that trades almost 24 Hours per day eliminates the overnight distortion gaps of UCO charts that only trade only 6 1/2 Hours perday. This should make trading the Oil ETF’s more accurate IMO.

  • Julie 35 – 25 – 36

    Hi Ted Patience always pays .. ! Friday was key per post previous thread reply to Jason concerning SPX stalling
    JULIE

  • Darkthirty

    In a discussion of PM’s, I mentioned the problem with paper and buying physical with traceable funds. Got the deer in the headlight look. Got them to goggle the1933 gold confiscation……LOL!

  • Jason13

    Looking a classic double bottom on the 5min and Zero divergence…I have 2626 as a weekly support so trying another long here with stop just below low of day.i

  • Ted

    First, how was the skiing? Second, you were charting when you should have been enjoying apres ski. LOL
    I like that all the charts failed to make a new high including aud/jpy.

  • Julie 35 – 25 – 36

    Hi Jason my lens looks like a double top @ 2675
    JULIE

  • Darkthirty

    Bizarre if you consider the east coast uses fuel oil for heat, and the Midwest uses NG………..

  • kim

    Tape begs for more down today

  • Julie 35 – 25 – 36

    Skiing was great Ted.After skiing went to Montana Ale Works and had a Merlot Cannonball with a burger
    JULIE

  • Ted

    Fantastic! yum

  • Julie 35 – 25 – 36
  • BKXtoZERO

    TVIX is on a tear…… wish I held more but not bad! I am holding for longer move looking to add on somewhere too intra day scalps over my daily position

  • Julie 35 – 25 – 36

    Hi BL Looking for an IH&S pattern USO per previous posts. IMO Possible pullback to approx 10.35 Excellent trade BL
    JULIE

  • BKXtoZERO

    Out of TVIX, 43.8 to 49.5, will re-evaluate hopping back in. I really wanted to leave it on but it was looking like RSI divergance

  • Jason13

    Stopped out…wait and see. Maybe I can get a short entry.

  • maxcherry
  • Julie 35 – 25 – 36

    BK what time frame ? Just curious.TVIX 60 min now above MACD center line and RSI (30) above 6 front weighted moving average giving a bullish bias TVIX
    JULIE

  • BKXtoZERO

    me too…. waiting for them…. evil plan I have…. involves TVIX

  • Darkthirty

    PPT is working

  • maxcherry

    i’ll go short weds if it doesn’t break down first, via puts, if it makes a new high i dont think it stays there long

  • BKXtoZERO
  • Julie 35 – 25 – 36

    MAX I have today’s low as a line in the sand on my 60 min cloud . Watching closely
    JULIE

  • Julie 35 – 25 – 36

    Hi BK I see one min chart WOW !
    JULIE

  • BKXtoZERO
  • Jason13

    It’s around 2630 on Zero…different source?

  • BKXtoZERO

    Trust me I dream of the TVIX play where I ride off into the sunset on a 1 month monster rally hold, but I fare better taking large chunks most of the time and keeping it tight. I just wussed out last year at year end to chase it.

  • Julie 35 – 25 – 36

    I understand BK
    JULIE

  • maxcherry

    2600 maybe

  • Julie 35 – 25 – 36

    2609 important
    JULIE

  • Darkthirty

    2636.5 on TOS, zero might be SPX?

  • randomuser6789

    I find the Y axis scale questionable above 2680, at least for the timeframe shown.

  • Darkthirty

    appears to be an island on DJI, don’t have a chart to see morning gap……..

  • StockTalker

    Bulls 2nd attempt failed, playing 100 pt Ping-Pong.

  • Julie 35 – 25 – 36

    SPX I may scalp a short here Will post if I pull trigger

  • Julie 35 – 25 – 36

    Na .. Wait for the close … Will probably add to short at close below 2639.03 Busy at work unable to monitor presently Looks like scalp would work nicely LOL!
    JULIE

  • Julie 35 – 25 – 36

    Bulls just wait for the real selling and profit taking when it breaks below the 50 day. IMO coming soon
    JULIE

  • Julie 35 – 25 – 36

    Bulls pinning their hope on the Banks ($BKX) When this goes south … Curtains . Watch the negative divergence CCI (20) JULIE https://uploads.disquscdn.com/images/81942d046f0cffdf49c95e67c54db878718f2984f7c01f2cc636b3ee203e3774.png

  • Ted
  • TomW4

    Hope so.

    It’s ramping up again…

  • BKXtoZERO

    Mole, Nice post, Thanks for put/call and look forward to the VIX/put call chart idea. Also fav part of prior post 3 days ago was this (attached) I guess MKT phase depends on time period. https://uploads.disquscdn.com/images/28cd791c4904c35e98bbc7157849436f1d5392f6a4469abd24e8082e05152ace.jpg

  • BKXtoZERO

    “to Zero”

  • Darkthirty

    Thanks, looks like 24700 or so

  • Julie 35 – 25 – 36

    SPY Chart Did not add to existing short as parameters posted below did not occur i.e. bearish close below SPX 2639.03. SPX can go higher but will not stay there long per Max post below. Today’s gap down tough resistance JULIE https://uploads.disquscdn.com/images/4ee3fd572a0c9c302addbee74899704bb7e50fcf0e6dcf296236fc7eb4a173f3.png

  • BKXtoZERO

    Still expecting upside….waiting on vix expiry and FED as catylists. Taking shots.

  • Ronebadger
  • BKXtoZERO

    ya… maybe that too!

  • evilasevildoes
  • evilasevildoes

    oil between 52.50 and 52.29