Week Wrap

Today we had a dominant P/V relationship and it made sense considering today's price action, it was Price Up and Volume Down which if you recall, after a move up like we've had the last 3 days into a very small candle today, would make sense. Both the Price Volume relationship and today's relatively small range, indicate trader's unwillingness to chase prices higher.

Today's small candle is typical of a short term reversal, which of course can lead to a larger move.

The P/V broke down like this
For all NYSE, Close Up/ Volume Down was nearly double Close Up/Volume Up, that's dominant.
SP-500: Close Up/ Volume Down at 322 stocks, again dominant
DOW-30: 21 Close Up/ Volume Down with 23 gainers
Russell 2k: 871 Close Up/ Volume Down with 1237 gainers
NASDAQ 100: 48 Close Up / Volume Down with 63 gainers.

As I pointed out earlier, the AUD also seems to be calling a reversal with a small candle and a divergent 3C chart.

Overall it was a tough week to have the opinion that the market wouldn't continue to sell-off after Monday's performance. Most traders would be short on a break like that, but I'm not making guesses, just following the chart.

After the break down on 5/23, as you can see, 3C was in a positive divergence. It took a couple of days to accumulate and that's the move we've seen since. The green arrow denotes confirmation of the uptrend. Usually when a 15 min chart goes negative, we are at a reversal. Based on today's action, it seems the most likely outcome for Monday would be at least a gap lower. There's still enough potential in the 3C charts to make a move to SPY +$135, but we are certainly getting close to a downside move.

What I found strange today was the broad based weakness in commodities with the dollar taking the hit it took today.

Commodities should have performed better.

Another view of the dollar also supports the ideas floated today about a pullback in silver, a downside move in equities on Monday and some other calls. Take a look at this late day chart in which UUP ($USD index) went into a leading divergence at 3:30 p.m. and kept going from there.

Other then the last 30 minutes, and really the divergence wasn't really strong until the last 10-15 mins, UUP was in confirmation all day.

The Euro, which we would expect to have the opposite reaction, did, and did so around 3:40 p.m.

As mentioned, strangely considering the dollar, oil made no progress.

USO 5 min-flat today.

As for Silver...

 SLV hourly 3C looks like the trend is not over, however, I do expect to see volatility within the trend.

 This 10 day average is an ideal pullback point

There was a positive divergence just before 3 pm and SLV gained a bit, it closed into a negative divergence.

PSLV is showing what looks like a pullback coming along the lines of the target above.

PSLV trend in confirmation (15 min) at the green arrow and a negative divergence at the red arrow. This would make sense with a rising dollar.

Some shorts that have been setting up...

DB

 DB triangle top, which has broken down and bounced a bit. This volume spike looks like a bad print, but DB is setting up for a short.

Here's DB's 10 min chart, there was a small accumulation zone and since it's gone negative, so this should be a decent short trade. The downside target is at least $50 which retraces the Q1 bearish ascending wedge. The target is based on the triangle top, but it fits well with the ascending wedge as the measuring implication for a wedge is a retrace of the base, also in the area of $50.

FSIN

 This is a large top, the target on this one is close to $2 based on the price formation. This is a Chinese company and there have been numerous frauds out of China so if this is one of them, the target would make sense.

 When originally posting this idea, I wanted to see a good bounce, we got that bounce yesterday, today it formed a Harami reversal or inside day so this one is looking good as well. I know many of you have emailed me about this one so we'll keep an eye on it.

FSIN saw no accumulation in its bounce, a true dead cat bounce. Today 3C went into leading negative divergence.

Financials

 This is XLF's top with a cumulative volume indicator I created. If you trace the rise and fall of volume in the top, you will see it rises on declines and falls on rallies, this is exactly what we are looking for in a top.

 The daily 3C chart looks horrible

And the 15 min chart went into a leading negative divergence today.

Many of these charts had dramatic changes today and toward the end of the day. It seems like the market is back to aggressively de-leveraging risk in commodities and equities. For every trade, someone is on the other side of the trade, so what we are seeing is Wall Street money flowing out and retail getting stuck holding the bag.

FAZ of SKF are both good options if you want broad industry coverage and leveraged (3 and 2x respectively). They are also good choices for anyone who cannot trade short in their account.

I don't want to overwhelm you with charts as you are starting your weekend. It's been a long week for me as well so I'm going to run some scans and let the computer do a little work. I'll be adding a list of short stocks, inverse ETFs

There's still the chance that the market does pull off a bigger head fake and moves to the SPY $135+ area, this would actually be a very good thing for us. We'll have to see what happens after the open on Monday.

I'm looking at adding 1 more feature to the site, I just need to figure out how to embed it. This week, I started using a model portfolio and only made trades in stocks and based on information after it was posted at WOWS.  Thus far the performance of the model portfolio has outperformed the S&P-500 by a wide margin and is in the top 15% of over 13,000 portfolios that are active on the site for the week. I think this model portfolio will give you ideas on how to use the information and updates posted here at WOWs. For instance, I made some trades based on negative divergences in the averages and I'd shut down those trades when a positive divergence was posted in a market update. While this kind of trade may not apply to some of you, you'll also see longer term trades, how I phase into them and hopefully you'll see responsible risk and trade management. You certainly don't have to follow these trades, but I want to give you ideas of how you can benefit from the information here that you might otherwise see as just information. I'm getting use to the way the portfolio works, it deducts for commissions, margin interest and has many of the same rules you have in your trading accounts so it is very realistic. I'll try to figure out how to code it into the site this weekend.

Everyone have a great weekend!