XLF (short) / FAZ (long)

As you probably know, FAZ is one of my personal positions (long) which is a 3x inverse ETF or 3X short Financials ETF), I have liked it for some time and I have held it, despite drawdown because I believe it will bring a much larger return on a downside move in financials, in other words, at this point in the market, I'm less interested in trading around smaller moves and more interested in making sure my positions are aligned with the large picture signals  and can weather any short term drawdown as I have said before,  at this point in the market, the signals are so extreme we are literally off the chart or in uncharted waters, which is exactly the opportunity I have long felt this market was building up to, an opportunity that no one alive has seen so long as you are on the right side of the trade/market. 

This isn't based on opinion although I do have opinions about the unbelievable Central banks actions that have brought us to the edge of this cliff and I'm far from the only one.

When the Bank for International Settlements (the Central Banks' bank) says in their annual report,

"it is hard to avoid the sense of a puzzling disconnect between the markets’ buoyancy and underlying economic developments globally", with additional comments about the "World's leading central bank" (I wonder who that could be?) and the BIS's belief that their balance sheet is so overextended, that this central bank likely lacks the ability to respond  to EVEN A GARDEN VARIETY RECESSION".

 ...and in the most recent quarterly update today, in talking about Central banks and their effect on the fragility of the markets, 

"The highly abnormal is becoming uncomfortably normal. "

In any case I wish I could have gotten this update out sooner after the initial warning today, Quick Head's Up XLF / FAZ , however this is all just an extension of the ongoing analysis , especially of the last couple of weeks with another strong warning this last Friday, Index Futures Like Last Week  as well as, 30-year - 2 year Yield Curve Flatter than when Lehman Failed and Daily Wrap all from last Friday warning today was coming and looking a lot like last Friday, the 28th of November with Important Intraday Update , CHANGES IN CHARACTER LEAD TO CHANGES IN TRENDS also from 11/28 and the following Sunday's Index Futures that continued Friday's very ugly charts on Sunday November 30th with Sunday Night Index Futures  and more specifically, my continued belief in Financials short / FAZ (3x short Financials) long, such as last Friday (December 5th's), Still Like FAZ (3x short Financials) as XLF looks to give up gains.

Hopefully you were able to take advantage of all of this and specifically FAZ which has been called out numerous times recently.

As for the charts that prompted today's earlier Quick Head's Up XLF / FAZ at 1:09 p.m.

*There are a lot of charts below, the larger point is despite my distaste for chasing any trade, I think XLF is well with in a very reasonable area for a longer term position (short) and while I think there's a time and a place for trading, the last few weeks with all indications as weak as they have been and such slight moves in the market, for example as of today the last 2 trading week in the SPX have yield a total move of -0.39%, THIS HAS NOT BEEN THE KIND OF VOLATILITY THAT LENDS ITSELF TO TRADING SHORT TERM AND ESPECIALLY NOT WHEN THE MARKET LOOKS THIS BAD AND IS THIS FAR OFF THE CHART SO TO SPEAK

XLF...

 This is today's intraday 1 min chart that was one of the charts that led me to post the quick "Head's Up" at 1:09 today, well before it saw downside off intraday highs...

 The larger 1 min chart with Friday's weakness that was warned of in so many posts and assets which all looked like today would be similar to last Monday as the signals from the previous Friday and Sunday night's open of futures were very similar to this past Friday and last night's open of futures trade.

 The 3 min chart has seen clear migration of the divegrence as it has gained in strength (negative/distribution) and moved to longer term charts, this one leading negative in to last week.

 Along with a closer view of the 3 min from last Friday's leading negative divegrence (Black Friday-a day I thought the market might be calm and quiet , but was anything but), which led to a short term flameout on the downside with a parabolic drop on volume, creating a short term oversold condition which was easily identifiable by 10:30 a.m. which caused us to call for an oversold bounce, which has been this flag-like price pattern I was talking about earlier.

 The 5 min XLF chart showing accumulation at the October lows as well as distribution in to the stage 3 top and along the lines of the "Igloo with a Chimney" type price pattern top, the chimney representing  a head fake/false breakout, above the yellow line or rounding top- almost always seen before a major reversal in any asset and any time frame.

 The XLF 10 min intermediate chart showing accumulation for the upside move we called in to the October lows as well as distribution in to a stage 3 top for the October cycle and the head fake move with a deepening divergence/distribution.

 I haven't marked the divergences on this very powerful underlying trade 60 min chart because I believe they are obvious enough, but I did mark the area of price in which distribution set in the strongest and I'd make note of where 3C is now relative to price and where it was at any relative point in the past relative to price.

 And the very strong, long term 2 hour chart showing the September distribution leading to the October lows and the accumulation seen almost 2 weeks in advance, although people were so bearish few could imagine the market under accumulation for a strong bounce.

This also covers the 3C concept of price exceeding the area in which the divergence was first seen represented by the yellow line so even if you had gone long this early before the October lows were put in, price almost always far exceeds the area in which the first divegrence showed up, thus those who couldn't possibly believe there was accumulation and signs of such a strong rally that early in October as the market was that bearish, you can see clearly 3C was not only correct long before anyone could identify the same, but also would have produced a profitable trade even at the first site of the divergence.


Since I've covered multiple timeframe analysis above...

 This is a quick look at multiple asset confirmation using FAS (3x long Financials) and FAZ (3x short financials), FAS above should give the same or similar signals as XLF and FAZ should be the exact opposite.

As you can see as of this capture, FAS was showing distribution today with XLF which is the reason I put out the 1:09 p.m. heads up for Financials.

The green arrow just shows 3C confirming the price trend which bounced off Friday's close yet remains intraday leading negative.

 FAZ 2 min with a strong leading positive divegrence (accumulation) intraday today, confirmation.

FAS 3 min leading negative both Friday and today, with more distribution today at a new leading negative low for the two days.

FAS 5 min trend showing distribution through the week of Black Friday which we expected to be up as consumer sentiment was already horrible and the market declining would have caused it to be worse the same week of the busiest shopping day of the year when many retailers move from red for the year to black). Then Monday's oversold market decline and the expected bounce off the oversold condition along with an increasingly negative leading 3C divegrence in to late last week just like the previous week/Friday.

The 30 min FAZ chart has a clear divergence going from in line or downside trend confirmation to a clear, very strong leading positive divegrence,  thus "Changes in Character Lead to Changes in Trend". This is certainly a huge change in character.

And FAS (3x long Financials) 4 hour chart showing the strong distribution in to the September high(head fake move on the August cycle's rounding top) ;leading to the very bearish October lows where there's a relative positive divegrence/accumulation leading to the current move which is FAR, from in line and deeply leading negative.

Lots of confirmation for short XLF/long FAZ of SKF.