Daily Wrap

As you know, it's been tough lately to get a clean signal on the market, I've had my suspicions that we would see one final bounce that was AAPL/Tech led. As we have expected, volatility and unpredictability have increased, the unpredictability aspect has grown beyond my wildest expectations with the Greek/EU situation. In any case, these are the charts right now that I'm most interested in as they have the cleanest signal to date and on an important timeframe that usually leads to a significant move.

 The DIA is the only short term 1 min chart I'm featuring as the DIA's underlying trade has been the worst, today it's underlying trade was the best so it seems it's making up for the recent weakness there.

 The rest of the charts are on the 15 min scale and are leading positive like the IWM

 The QQQ which is now leading above the last rally on May 1st

The SPY which is also leading positive 15 min and near the May 1st rally as prices are down significantly from that area. As we have seen so many times before, accumulation tends to occur in to falling prices while distribution occurs in to rising prices. Being all of these charts look nearly identical across 3 different versions of 3C, this is about as strong of  signal as we can reasonably expect. I've made many good calls on signals that weren't this strong.

One of the ways I use to judge market sentiment was by looking at a lot of stock charts and when I found more short setups and no long set ups or vice versa, I had a pretty good idea where the market was going. Applying 3C to that same principle to some important stocks and important sectors (without overwhelming you with charts), take a look and remember, 3C is short for "Compare, compare, compare".

Note how all the different stocks across 3 versions of 3C all look similar, this isn't coincidence.

 AAPL 15 min new leading high (while the longer term I still remain bearish, but as for a good bounce, this chart should lead to one).

 BIDU 5 min-this stock is my biggest gainer of my shorts, yet it's 5 min chart is leading with momentum.

FCX/Copper 15 min is leading to nearly new highs.

 GLD 15 min is leading at new highs

 SLV/silver is leading at new highs

 The flight to safety trade, TLT/Treasuries saw the start of a negative divergence yesterday, today the momentum was much stronger with a huge leading low put in-if there's to be a decent bounce, we'd expect money to move out of TLT

 Energy, while I have recently felt Energy would be a laggard, still is showing good momentum that has hit new highs.

 XLF/Financials 15 min is leading positive

And most importantly (when considering I have felt the last bounce would be led by tech), XLK/Tech's 15 min chart is leading positive at new highs.

Nearly every one of the risk on assets above held the hammer support from yesterday, they may have shaken out stops intraday, but the close was above yesterday's hammer support.

I could list many more stocks, but the major groups are all covered here and most look nearly exactly the same, 3C doesn't do that on its own, it judges the accumulation/distribution for each stock individually. To see this kind of confirmation among so many different assets classes and industry groups looks very encouraging.

Many of you know that I try to be very patient with my trades, the fact I put on 3 trades alone today should tell you something about how I feel about these signals.

The underlying market is deteriorating and that has been going on for a while, but the entire point of a bounce is another shot to short in to strength. If this market can't bounce with these signals, it is done and over, but I suspect it will bounce.

In sector rotation today, one significant difference I haven't seen in a while is the defensive sectors that have dominated rotation started to fall out today and the risk on sectors started rotating in.

Utilities, Healthcare and Staples all looked choppy today rather than their normal strong/increasing trend. Financials look as if they are rotating in during the afternoon, Discretionary as well, and most significantly Tech is building in.

As I alluded to earlier, I think to get the most bang for the buck, the move will have to happen quickly and catch shorts off guard, for this market to put in a meaningful bounce, there will need to be a short squeeze. Based on the bigger picture I'm content to sit with my shorts although I added a few long positions today to hedge out some risk and hopefully add to the gains, but I intend to use any market strength to fill out my short positions.

I could make a lot of different arguements and show a lot of different charts, but these are the ones that move me and moved me to take action today in some trades. We've had 6 straight days down since the last really clear signal on May 1st when the negative divergences were clear, just as we were able to take advantage of the "Buy the dip" mentality to short in to failed bounces, the psychology is firmly bearish right now and a perfect time to run a short squeeze.. Volume has been up the last two days in many key places and as we have seen so many times before, a volume swell, like we saw in the SPY today with a bullish hammer yesterday and support held today, most often leads to a reversal.

While the EU remains a fundamental wildcard that even Wall Street likely has no edge on (as it is the voter's voices that are moving events there), this is the best bounce set up I've seen in a while and to think just a few days ago the market was very foggy, it seems pretty clear today.

Just don't forget that if we get a bounce here, because of the increased volatility and amplitude, should be a very strong sentiment mover. For this bounce to do its job, it will need to be VERY convincing and it's difficult to short in to a market that may be up huge on the day, but if we get this chance (I feel more confident about it now than at any time over the last several days) try to remember what the big picture looks like and use what may be the last chance we get to short in to strength. Even though we have no evidence of the bounce starting in real price terms, I can tell you with a pretty fair amount of certainty, it will move you emotionally. If it is the kind of bounce that Wall Street uses to manipulate emotions and knock traders out of positions, by the time it is close to ending, you should feel fairly scared to short the market, just remember that is the point of running such a bounce.

If I need to, I'll run all the long term charts and indications to remind you of what this market truly is just under the sheets.