The Dollar Did It?

I think most of today's moves can be summed up with one word, "Dollar". Here's the Euro against the dollar today.

This is a dropping Euro or a rising Dollar. For the Euro we are seeing a bear flag, for the dollar, a bull flag. I know currencies and commodities tend to trend better then stocks, I don't know whether they see the same amount of game playing with patterns like we saw near the end of the day today with the bear flag in the major averages. As you can see here, it appears not. Instead the breakout to the upside back into the flag after it had already broken down (something we see probably more then 85% of the time with patterns like this) was caused by AAPL and SMH-or at least they were a big part of the reason.

The correlation between the dollar and the market was nearly spot on today as you can see below.

The only time it deviated to some degree was at 3:40 p.m. which was the time we saw the head fake move back into the bear flag.

Compare the same time in AAPL and SMH

The volume in both  increased dramatically. The question that remains, "is this the market maker/HFT firm head fake or an intervention?" At present, I'm assuming it's the HFT black boxes or market makers as we have seen this so many times and not at critical junctures.

As Gold/GLD is highly correlated to the $USD, GLD took quite a beating today. As you know, 3C has shown negative divergences in both (recently in the dollar and for awhile in GLD). The volume in the first hour of trading was above the previous day's volume.

The candlestick pattern formed here would be considered a confirmed reversal with a star yesterday and a bearish engulfing pattern today that nearly took two day's of previous candles. As I mentioned, volume was exceptionally high.

I don't need to show you the charts again, but you know in the last few days 3C has picked up distribution in the dollar. 3C has also been tracking a long string of distribution in GLD-that's a lot of volume today.

Last night I described the lack of follow through on Tuesday's big move in essence as troubling, but it didn't stop there. Of the 10 important averages, 8 were down. 14 of 16 breadth groupings Don Worden follows were down.

Today the thematic price/volume relationship in 3/4 major averages was price down, volume down which is the typical pattern seen during a bear market.

While the averages didn't crash, a few and some other notable equities did put in some interesting candlestick patterns as well.

 The NASDAQ 100 with a no-name pattern, but in late September we saw something similar that led to a decline.

 The S&P-500 put in a Harami reversal confirmed by a bearish engulfing pattern-with a bit of a hanging man look to it as well.

 UUP, our proxy for the dollar which has seen recent accumulation put in a fairly strong day on a big increase in volume not seen since August. It's also emerging from a bullish descending wedge.

XLF, the ETF for financials highlighted a couple of nights ago for it's distribution put in a star confirmed by a bearish engulfing pattern.

USO put in a nice star with a huge bearish engulfing candle today.

I haven't updated USO's 3C chart in awhile it's interesting today and definitely shows why it's such a bearish close.

You can see the negative divergence building since October. Today's gap up was met with a leading negative divergence seen at the second arrow. In essence, the gap was sold off right from the start. USO lost -2.26% today.

Last month there had been signs of accumulation in the dollar, they dissipated and then the last few days have been making an appearance again.

While I can not say that today's market averages were HORRIBLE, I can say we have seen some very distinct changes that come to the market or at least the retail side of the market as very surprising. The move in GLD, the move in USO, the move most certainly in the dollar and while not as noticeable on a chart, the 3C readings which are positive in financial inverse ETFs and negative in financial ETFs.

On the Positive side of 3C divergences recently: FAZ (Financial bear 3x leveraged), TZA (Small cap bear 3x leveraged), SKF (Ultra Short Financials), TWM (Ultra Short Russell 2000), TYP (Technology Bear 3x leveraged), BGZ (Large Cap bear 3x leveraged), FXP (Ultra short FTSE/China 25), DTO (Crude Double Short), DXD (Ultra Short Dow -30), QID (Ultra Short QQQQ), PSQ (Short QQQQ),  SCO (Ultra Short DJ-UBS Crude Oil), EEV (Ultrashort Emerging markets), EDZ (Emerging Markets Bear leveraged 3x), SMN (Ultrashort Basic Materials)

As for ETFs that have shown negative divergences that may be in different timeframes, but ultimately I consider to be important:

FXE (Currency Euro Trust), UDN (US Dollar Bearish Fund), UYM (Ultra Basic Materials), DJP (UBS Commodity Index Total Return), DBC (Commodity Index), UGL (Ultra Gold), HAO (China Small Cap),  SLX (Steel ETF), VGK (Vanguard European ETF), IAU (COMEX Gold Trust), GSG (Commodity Index Trust),  EWY (South Korea Index), VWO (Emerging Markets), EDC (Emerging Markets Bull 3x leveraged), EEB (BRIC ETF), VPL (Vanguard Pacific ETF), OIL (Crude Oil Index), DIA (Diamonds Dow Jones 30), DBO (DB Oil Fund), QLD (Ultra QQQQ), RSX (Market Vectors Russia), DDM (Proshares Ultra Dow), XLK (Select Sector Technology), SPY (S&P-500 ETF), OIH (Oil Service ETF), FXI (China 25 Index), EPI (India Earnings fund), SSO (Ultra S&P-500), ROM (Ultra Technology), SMH (Semiconductor ETF), XLF (Financial ETF), MVV (Ultra Mid-Cap 400), BGU (Large Cap Bull 3x leveraged), TYH (Technology bull 3x leveraged), UWM (Russel 2000 Ultra),  USD (Ultra Semiconductor), TNA (Small Cap Bull 3x), FAS (Financial Bull 3x)

These are not cherry picked, this is an index of ETF's that I've used to backtest some trading strategies. I think if you go through the ETFs that have positive divergences at the top you will find nothing but bearish ETFs, if you go through the second group that show negative 3C divergences, you will find nothing but bull ETFs. No two ETFs have the same divergences, but all I consider to be important as they are not just 1 min charts, they are substantial time frames with multiple confirmations. I haven't looked at ll of these in such a comprehensive way until today and I was kind of shocked that not 1 deviated from the path, the path which seems quite bearish for the market in many different industries.

Before 3C, and before the market was really manipulated by the Fed, (Pre 2008), I always had a good feel for the market direction by the number of good looking long or short trades. This is a similar concept although more effective and comprehensive.

Tomorrow we have some important reports due out, although I'm a little distrusting after seeing the revision rate of reports accelerating. In any case, we have non-farm payrolls, non-farm private payrolls, the unemployment rate, wholesale inventories and a few more. Tomorrow may be a watershed day, it may be nothing. Quite often though you will find that things you believe to be bullish reports are sold off, and bearish are bought-it's Wall Street. I'd recommend taking a look at some of the ETFs I provided above. If you have specific interest in any, feel free to email me and I'll try to get you a more detailed account.