In looking at the charts tonight, I'm reminded of what a properly read chart can show you, human emotion. The market moves because of human emotion, it's called sentiment and Smart Money is not even immune to it.
While I know for sure there will be stocks that are up huge tomorrow, I'm finding it very difficult to find that obvious accumulation that makes for a good long call and even more surprising, given today's events, I'm finding it hard to find negative divergences that are out of line with what the market in general put in. 3C tonight, on the shorter timeframes shows a listless, almost lateral trend in so many stocks. It is something I'm not sure I've ever seen, at least I've never noticed it to this degree. What is my interpretation? The same as how I described Ben Bernanke's statement about the market, “unusually uncertain prospects “-SHELL SHOCKED. I think the market was looking for something, scratch that, let me restate... I think the market was “EXPECTING” something particular to flow from Mr. Bernanke's lips. When that didn't happen, I believe the market's big players almost felt a sense of betrayal. They had gone through the trouble of accumulating a position as I mentioned before the rally ever took place, and now they are faced with a position they don't know what to do with. The words that rang around the financial globe today, “unusually uncertain prospects” did damage, but as a reader points out, CNBC had read those words before Bernanke opened his lips. I do not doubt that Wall Street would have been aware of that statement or aware at some point today. This is why I posted on Trade Guild the question, “What time did he say it” because I wanted to see when the distribution began vs. when the words were uttered.
It's pretty clear when the public first hear the words as this chart demonstrates, around 1:58 EDT as Smart money rarely responds like this when it comes to distribution and the chart below makes it clear why they don't respond in this matter-the huge volume puts downward pressure on prices and they want to distribute, just like you want to sell, into higher prices.
At 11:09 this a.m. I posted an update that showed two negative divergences in two timeframes.
At 1:15 p.m. Today I posted this , “ Here is the long term 3C on a ten minute chart in a leading negative divergence-this is very powerful”
Here is the continuation of that same chart-notice the negative divergence never let up.
So we went from a gap up, which is what we would expect to see from a strong day like yesterday, we expect to see follow through which confirms the validity of the move. Here's what solid follow through looks like.
This may all seem a little forensic, but you can't determine which direction you need to go until you determine where you are.
Speaking of which, it is all too easy to get hung up in daily moves that in the big picture, really mean very little. Sure you can plan for “Plan B” and you should, but there's no sense in worrying over something that hasn't happened. So every once in awhile, it's good to step back and see the big picture, see the forest.
Here we see a clear stage 3 top. Almost all stocks/markets go through this cycle. On a scale this large and an index this big, this is not trickery, it's institutional emotion/sentiment. The only thing I did not notate was the very last candle in this 5-day chart which is showing a failure at resistance. There is nothing strangely unusual about this top, this is what we see and have seen for over a hundred years of charting.
The Bottom Line-
Tomorrow will be what it will be. From what I see today, the institutions that accumulated a position that I initially thought was large enough to take several days to distribute, seem to have begun that process WAY before Bernanke's testimony, Whether they got wind of that phrase that I will not utter again or they got wind that something they expected to be in his remarks was not and will not be there, or if it's something else like insight into some major earnings that will take a cumulative toll, I don't know, but what I do see is institutional money running scared early on today, the little guys jumped off the cliff later in the day-that makes some sense doesn't it? If you have smart money connections and you know that the little guys will be runnng scared and making it difficult for you to unload your position into high prices, wouldn't you tell your people, “Start moving that inventory out”? I would.
So the very last question is, this: Prices took a big hit, if smart money wants to run up the market a little higher, wouldn't they take the opportunity to pick up a few things on sale? So back to the charts.
As I told you this am, the blue 3C picks up on signals the fastest and it is showing about an hour of light accumulation on the 1 minute chart-BOP and MS seem to confirm this.
However, when we move to the 5 min scale, which would show a stronger degree, we don't see anything more then confirmation
When checking another 3C on the Q's, we see the same thing
And checking the DIA-same thing. One thing does become apparent though and it does make a little sense. There's a Bear Flag formed.
As you can see, the volume for a bear flag is correct-it should diminish and it's actually a rather well formed bear flag. If we are seeing some 1 min positive divergences, is it possible/probable that we see a move in the a.m. (perhaps a gap up to the upper line of resistance) and then see the flag broken somewhere around $101 which is also a significant support/resistance level if you look back on a daily chart and a whole number where stops and orders are bound to congregate.
Being everything we've seen, being we are certainly in the Bermuda Triangle, this is my best guess.
This would mean it would probably be a decent time to add shorts or establish your position for new members. Being that it is earnings season, I would recommend going to the June List (June 3rd) and look at the shorts available there. The reason I mention those shorts, especially now is precisely because earnings season is still underway and this is a market of stocks, meaning that stocks can buck the market trend or it may take a day or two for a stock to realize it's potential after earnings which can be misleading. If we are indeed going to break that bull flag, the measuring implications/target put us around $105 which is very close to the trigger for another break of the H&S top and I strongly doubt we see another upside breach of the top.
Remember our main strategy is still in effect so abide by it and as ALWAYS, RISK MANAGEMENT FIRST!
Remember our main strategy is still in effect so abide by it and as ALWAYS, RISK MANAGEMENT FIRST!
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