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You Only Have Yourself To Blame
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You Only Have Yourself To Blame

by The MoleOctober 11, 2018

I know – great timing on calling in sick on a sell off day like yesterday. But in my defense, the possibility of a pending medium term correction was discussed in rather exhausting detail in last Friday’s momo update. So plenty of ahead warning and if you cheaped out of a membership and blissfully bought the dip again on Tuesday, well then you only have yourself to blame.

Now I wish I could tell you that I feel a lot better today but unfortunately this is not the case. Which is why I am going to keep my commentary to a minimum and mostly speak in charts (update: of course that didn’t work out as planned – LOL). Of which I have plenty of course as I thought it would be a good idea to show you leeches what exactly you missed out on last Friday.

Tuesday I told you that I was done with BTFD after having been stopped out of two lottery ticket longs. My point in essence was that going forward price had to lead the way by breaching over the then significant ES 2900 inflection point, which was touched later that day but produced an instant reversal lower.

Overnight trading produced additional selling which only intensified yesterday afternoon, in the end resulting into an > 830 point loss on the DJIA and a drop of over 100 handles in the (much more significant) SPX. Which incidentally appears to be followed currently in early trading, so we may not be done just yet.

As we speak Dow futures are down over 350 points, which may be an attempt to scare the children but technically speaking there is very little to hang our hats on right now when it comes to BTFD opportunities.

Very much worth noting are two consecutive buy signal failures on the realized volatility indicator. One failure means that a short term correction isn’t done just yet. Two mean you’re probably heading into a medium term sell off.

Okay, let’s talk momo – what follows is a revisit of the material I covered in last Friday’s post.

And once again it was one of our oldest, simplest, but most reliable chart that pointed the way: our trusted weekly stochastic, it’s the gift that keeps on giving. If nothing else it has kept us out of several dozen bull traps over the past decade or so.

The VIX shown above has a tendency to produce cyclical spikes every six months or so. The wave of realized and implied volatility that follows usually subsided within a few weeks UNLESS it pushes > the 30 mark, in which case it lingers for a few months.

Here’s our VIX Buy Signal chart and I think makes it fairly clear why our rule set includes a close back inside the upper Bollinger and then an even lower close for confirmation.

The Implied Volatility Term Structure (IVTS) did not give us a warning breach over the 0.9 mark this time. As a side note – during my work on VIXEN I actually discovered clear statistical evidence that market conditions change significantly beyond that threshold.

SKEW vs. VIX shows us something interesting however it’s very subtle. This time there was no pre-warning after several short signals were effectively ignored (only resulting in a small response lower in equities).

NYMO vs. SPX also produced a short signal back in June which was only followed by a humble dip lower. That’s fine and not necessarily bearish. What is however is that price continued higher unabated afterwards while the ratio continued to drop. Last time this happened was in spring of 2015 and we all know what happened afterward.

And understanding this is key as we may be looking at more than just a quick wipeout here after which it’s back to bullish business. Like on the SKEW:VIX chart extended bearish divergences often are followed by a wipeout and several months of continued volatility. Of course how this all fits into what traditionally marks the pre-Christmas buying season remains unclear at this point.

So you want to know if now is a good time to go long? For answers and more charting goodness please meet me in the lair:

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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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  • rmwaddelljr

    It’s all about gravity. It’s easier to walk down steps than up them. Keep your powder dry.

  • Mark Shinnick

    For the level of suffering I imagine you are in, that you’ve knocked this new post out is damm impressive.

  • Rightside

    Mole, can you check the zero, thanks

  • Mark Shinnick

    Well, so far, of the major indexes I still don’t see S&P having yet broken its Trump rally trend.

  • Ronebadger

    Anyone having problems with Stockcharts.com today? I can’t hardly navigate anywhere or look at the usual stuff I look at.

  • Mark Shinnick

    Yeah…doesn’t sometimes fully load

  • Mark Shinnick

    S&P trend mauling begins.

  • Ladywandering

    thank you

  • BKXtoZERO

    Iza tryin to tell ya that NUGT was a takin off yesterday…….. pounding the table. Now the hardest part (for me) is the sitting on my hands and waiting……

  • Mark Shinnick

    Getting close to objective there.

  • BKXtoZERO

    15.3 is first resistance, this time I am leaving some on! unlike TVIX jeeeez louise

  • Mark Shinnick

    Yeah, I see 15.26

  • ridingwaves

    going long auction done…

  • BKXtoZERO

    sold most of it at 14.8

  • BKXtoZERO

    My account is back to the highs of February. I only got 3$ of this TVIX move, but in the last few weeks had an 11% move on nugt 2 weeks ago, now today a 20% gain, also a small oil short. I’m BACK! https://uploads.disquscdn.com/images/a3ce81b8938cd149682ebc550b7db0ac4be97d8762a4b1d468759a3a069feec4.gif

  • BKXtoZERO

    CL is right at it’s equivalent chart point if you are a wanker… 71.31 is a hold point for bulls

  • StockTalker

    Hit my 7k mark, trying a long. If 7k does not hold kiss her goodbye.

  • BKXtoZERO

    Long SVXY 50.82 (day only) unless rip fest takes hold

  • BKXtoZERO
  • BKXtoZERO
  • bankwalker

    Just got a buy signal.

    long /RTY at 1573.50

  • BKXtoZERO

    sold the rest 15.02. Now looking to BTFD on metals going forward.

  • BKXtoZERO

    out of USLV 6.05 to 6.48 although I may not even mess with this symbol anymore…. NUGT moves much better and it’s all paper anyway.

  • https://evilspeculator.com Sir Mole III

    Getting there – I hit the gym today. Thanks 🙂

  • https://evilspeculator.com Sir Mole III

    Sorry for the late response – I was at the gym as I feel a bit better this afternoon. Seems to be ticking – what’s the problem?

  • https://evilspeculator.com Sir Mole III

    Thanks Mark – that’s very kind of you.

  • Mark Shinnick

    Pretty interesting here; not huge breaches of the Trump rally daily trend and S&P held not bad…arguably fuzzy-logic still intact.

  • BKXtoZERO

    So the Fish-head pattern played out, and now I think I see a very rare “Mushroon-“d”-ick” bottoming pattern in play

  • Rightside

    It was just stuck for the first 10-15 minutes at the open

  • https://evilspeculator.com Sir Mole III
  • http://gerb-reloaded.blogspot.com Gold_Gerb

    What a Yo-Yo Market.
    I’m on Fall Break with my family, so for now, enjoy!

    [NYSE]
    https://uploads.disquscdn.com/images/cbe6b32389b401baa792f22ea6cb0da1c6b17c60354d1bd328f1cda79b575522.png

  • BKXtoZERO

    If this rare inverted Mushroom “d” pattern plays out, you know where we rally to 😉 https://uploads.disquscdn.com/images/f8eb1c243519228b710ddf5b15653280a52b49ae91f69537114ad001f4d0dfa7.png

  • bankwalker

    out at B/E

  • BKXtoZERO

    Enjoy!

  • Yoda

    Making good coin in PM miners today. Thanks to Julie for convincing me to “hang in there”. You rock!
    https://www.youtube.com/watch?v=pZXEpXyW9Ns

  • BKXtoZERO

    More coming Yoda? I cashed out….

  • Yoda

    I surely hope so as we are witnessing a breakout of a 2 months range with expanding BB
    https://uploads.disquscdn.com/images/b128d53c7f89ad444489fff8f2b221bdcdeb58c2d1eb089e8adf9eab41767a2b.png

  • Mark Shinnick

    My own models have this still as short covering from my short exit in August. Figuring too that flight to safety bonds aren’t as a good a option as normal by comparison.

  • bankwalker
  • BKXtoZERO

    Out of Svxy flat. Not looking good..

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

    Have ya missed me? ya, kind of tough. But I really have to run.

    One more chart. Put on the Big Boy pants. (3 year /ES)
    the 50ema weekly (high-of-candle) is working as support…for now.

    https://uploads.disquscdn.com/images/1ff0c80af4c85bd2b8a82dd7ccf782785e0e2323c88a843c69ae9dfd0139c4e4.png

    -L8ter.

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

    +66
    great find!

  • BKXtoZERO

    Thanks Gerb! Have fun for me too.

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

    wait a minute, Julie get’s all the credit?

    what about “silver, the bottom is in, grab it with both hands”?
    damn, now I know how Mole feels.
    😉

    https://stockcharts.com/h-sc/ui?s=GDX&p=D&yr=1&mn=2&dy=0&id=p92669758357

  • BKXtoZERO

    Wow. This time looks different.

  • Julie 35 – 25 – 36

    SPX Chart from last night Weekly 55 ema @ 2716. SLV per previous chart chart shown showing the inverted head and shoulder pattern and a re entry (today) Yes ! All systems go ! JULIE

  • Julie 35 – 25 – 36

    EXAS Per previous chart and comment Down to the 89 ema Watching now for a bounce to a lower high.to short An impulse down so the bounce should be corrective. This market is ours guys Love it
    JULIE

  • Julie 35 – 25 – 36

    I am in meetings all day today and tomorrow and also next week.Darn !
    JULIE

  • Julie 35 – 25 – 36

    GG Enjoy your Fall Break with your family. Guys again this market is ours ! If not short or on the sidelines Patience The lower high on a bounce forthcoming SPX A great one !
    JULIE

  • Julie 35 – 25 – 36

    SPX Today.s low just a measly 6 points below the weekly 55 ema per chart
    JULIEl

  • Julie 35 – 25 – 36

    Correction 4 pts not 6 pts SPX 55 ema 2714
    JULIE

  • Julie 35 – 25 – 36

    Everyone Have A Great Rest Of Week
    JULIE

  • Julie 35 – 25 – 36

    GG You are on the money 50 or 55 ema’s weekly
    JULIE

  • Julie 35 – 25 – 36

    You rock too Yoda ! Everyone on this great blog “ROCKS”
    JULIE

  • BKXtoZERO

    Are you still in? I think this whole wedge from November will be taken out.

  • Yoda
  • Julie 35 – 25 – 36

    Yoda The bounce is now off the weekly 55 ema
    JULIE

  • Julie 35 – 25 – 36

    Guys One last item SPX Target for bounce 2825
    JULIE

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

    good eye

  • BKXtoZERO

    Sir. Are you sitting down? Going long Sir. 1x in the boring part of the 401

  • ridingwaves

    yep,pretty amazing last couple days…but it too shall pass…

  • Julie 35 – 25 – 36

    Guys 2808 is also a target for the bounce SPX 2808 and 2825
    JULIE

  • Julie 35 – 25 – 36

    MNKD breaks down out of the triangle The Ichi cloud conversion and baseline keeps us on the right side
    JULIE

  • bankwalker

    ES +46 from today’s low

  • Ronebadger

    Wow…look at the 1 hour during the recent downdraft….nothin’…strange….is that thing working properly?

  • Ronebadger

    I dumped my last 1/3 short toward the end of day…not quite the bottom, but not horrible. Lots of oversold indicators all over the place. I see Yoda posted the Fear/Greed index…that’s one of them.