Newer Post At Trade Guild

I forgot to publish the last Trade Guild post so please read it and pay particular attention to the parts about the VIX and TRIN Index which is also called the Arms Index then come back here and read on.


OK, got it? There's still nothing that leads me to believe we are seeing anything other then a bull trap. I was interested today to see if the 1 min charts would lead to the 5 min charts starting to reverse and become bullish-JUST THE OPPOSITE. The 5 min charts are again pegging new lows.

The two advantages we have tonight on the short side are both the VIX hitting multi month lows and the TRIN Index hitting a level that is commonly sold off as I demonstrated in the Trade Guild post tonight. The VIX is the CBO volatility index or known to traders as the fear index. It trades inversely to the market. When we have high VIX readings, we see a rally as fear is strong in the market. When we have low readings like tonight's multi-month low, it shows complacency in the market and typically we see a sell-off from there. The other bit of good news for bears is the TRIN Index also hit a multi month low and in the Trade Guild article I told you the results of the last low reading. A low reading like today's is usually followed by a move the next day or two, but usually the next day. When it's low it indicates an overbought state and when it's high, ESPECIALLY if it is above "2" you almost always see a rally the next day. We are well within the range to produce a sell-off and considering we are probably looking at a bear trap, a sell off just needs to break a few nearby support levels which WILL trigger the bull trap, which most commonly and reliably leads to a panic sell-off. So tonight we are in good shape, beyond the 3C charts and breath readings. The fact that 29 DOW stocks closed up in and of itself, is a bearish event showing an overbought market, the same thing the TRIN and VIX indices are pointing to.

I have custom tailored some trades (there are over 20 tonight) to this situation to take maximum advantage of the situation.

Check out the most recent spread sheet "July/August Trades" for tonight's trades, many of which will execute tomorrow. If you have any of the high flying cats and dogs trades, email me for the most current info and stops. When we see the "cats and dogs trades", which are low priced and high flying like JDSA from last night, it is a sign that we are at the end of a rally or bull move.

Statistically and probability wise, tomorrow is the best setup we have seen in awhile. Get out there and make some of those trades! Remember to use your risk management plan but also remember that as traders, we re paid to take risks. We just try to mitigate the risks and put the probabilities in our corner.

Best of luck!

Read Trade Guild 's last 2-3 posts tonight

to get up to speed on the broader picture, I will post here as soon as I'm done with the details

Like I said,

If you are truly concerned about the market moving higher (which it certainly can-does it create a technical situation that changes trends or the bigger picture, not now-there's no evidence of that yet; however we save 25% even in a fully loaded bear position for longs like JSDA that I threw out there for you last night-up 12.39% today and from a buy at market on the open nearly 10%. That in itself is a profitable hedge. However, you can also use UPRO (3x leveraged long SPY) to offset any move without giving up positions that you amassed at better pricing on the short side. This is why I say keep at least 25% in cash.

Take a look at this 1 min chart

This shows a decent trend at 3pm, volume was rising, but keep it in perspective-it's a 1-minute chart. The MACD did well until the end. At the last minute of the day we saw sell side volume pick up-this in my mind was computer programs executing sales-the actual pattern of the last 6 candles is a candlestick reversal pattern and the volume on the last one sure make it look real.

3 out of 4 3C/4C indicators followed the end of day trend up, but only 1 confirmed it, the rest remained in a relative-negative divergence. One of the more important 5-min charts confirmed the move, 3 actually made new lows which is to say the selling is getting worse. I suspect the one that did confirm it is not in tune with the trend as it hasn't performed well in the past on SPY in this timeframe, the others have.

If you feel worried, the market is down already in after hours last time I looked, you can buy UPRO which is the 3x leveraged long on the SPY and it will partially or fully hedge you and make your portfolio market neutral if you buy enough shares to correspond with any losing short positions.

I don't see any real harm in taking out this insurance policy except that it will have a small premium, you will have to close it should the market move down, but as you saw today, we broke one fairly important support level and one not so important. You need real confirmation otherwise you'd be closing on a break like that just to see the market head higher-using today as an example. This means you'd have to probably wait for a major breach of support like $110 or you would have to wait for a lower close at the end of the day, in which case, the short positions would not make you any money as the market heads down because you are market neutral. So I don't see it as a big risk IF you are feeling shaky and this is scaring you, it will give you some comfort, or as I said, you can reduce your exposure by selling part of the short position and if the market heads up for a day or two more and then reverses, you can add them back at better pricing and make up any loss on the way back down.

Personally I don't like making rush, emotional decisions, but everyone has a different portfolio, style of trading and different risk tolerance so you must do what you are comfortable with. I'm comfortable with hanging in there right now as nothing of any significance has changed yet-$113 hasn't been taken out, 3C hasn't moved into an accumulative stage, the market has increased on rising volume-in fact the opposite, volume is lower today then yesterday.

Your other route is to take some of the long trades I've been putting out there, several did very well today.

That's the info I want you to have right now as the after hours market is still running and you can buy something like UPRO if they haven't closed it for the day, at a discount from the close.

I'll be writing more tonight with more trade ideas and more in depth analysis.

Not that I would at this point,

but if you are concerned about the market going up, but some UPRO right now. i personally wouldn't at this point, but it can't hurt

CURRENT 1 MIN 3C

We broke a support level or two and as is normal we're getting a bounce, you can see 3C called this last one as well. Right now, we're just waiting for that to turn negative on the 1 min. You can see below on the LONG term 3C in red how it stayed pretty much above the middle line most of the day and now has dived below it. It takes a long time to move this one so I regard that divergence as serious. We'll just have to wait and see if they keep this thing hovering as it has been all day or if they sell it off into the close.

I'm a little impatient and would like to see the break soon, but it doesn't really hurt for it to be up here as long as they are distributing which they are, it just makes the bull trap more powerful. We keep seeing these early moves up and then lateral trends most of the day. I'm taking this to mean that the early trade which is largely the small fries like us are bidding the market up, but once their demand is gone, there's no institutional demand pushing the day higher. I' thinking it's because they are distributing at higher prices and who wouldn't want to sell/short at higher prices?  At some point though it will end and they'll pull away the little support they give to keep prices stable/lateral and the market will sink and no retail morning trade will be able to compete with what they have in store-that's my take.

Update 3

I know, It's getting to the spam level. We got the break off the negative divergence and the trendline I mentioned, it was a minor move so volume didn't pick up much on the break. For the rest of the day, here are the intraday resistance levels you want to watch and the volume if/when they break. If you see a lot of volume on the break, you know it's an important level and should provide resistance. Here they are:

The $111.15 level which is being broken now as I can not type fast enough (I only use two fingers-it's the hunt and peck typing method). Volume picked up moderately.

$111.00-this is a whole number and will bound to be an important level. Watch for volume there.

$110.80

$110.50-$110.60 area

$110.00 This is the really important level and after the level above ($110.50) is broken, there's not much in the way of support until $110 so if volume picks up at the $110.50 level, we could very well see a move right on down to $110 which is very important as it represents th Bull trap I've been talking about.

If you do not have a charting system to watch this, then the only FREE charting system that I know of that is in real time with a lot of great indicators is Worden's www.FreeStockCharts.com

Everything else web-based that is freee has a delay of up to 20 minutes. FreeStockCharts requires that you install Microsoft Silver Light, it will do it automatically and coming from Worden you can trust it.

If you want charts with serious capabilities, like the ones I use, then click on the tabbed links at the top of the page to TeleChart or StockFinder (please let them know that Trade Guild sent you as I'm an affiliate, but before that a long time user-about 10 years now).

Update 3

Remember, if you don't want all of these updates, let me know and I'll take you off the email list and you can check in as needed.

The last update I warned of the test of the high of the day about the high of the day being retested several minutes before the move got under way. At 1:56 p.m. we saw another divergence, this one negative, again small but inline with the larger trend. Now I'm watching (micro-outlook wise) for the trend line created by that test to be broken around $111.25 (SPY). 3C is back inline on the micro view with price which is starting to move back down.

Update 2

All of the 3C indicators to some degree and it's rather small, show a slight positive 1 min divergence, although it is in the context of a larger negative divergences plus the 5 min chart negative divergences. My interpretation is that the SPY is getting ready to make one more run at the days highs around $111.47

This is not a strong divergence, it's subtle which means it could also reverse before it plays out.

WOW

And not the acronym! This 5 min leading negative divergence just came out of nowhere and fast

Remember that AAPL was on the short list, I think originally last Friday intraday or perhaps Thursday, in any case, it's on the spread sheet.

Update

Here's the first leading negative divergence in the SPY. I was expecting late morning weakness, this may be it.

Last Night's Trades

Many of the short term longs (speculative longs) that I posted last night have made decent profits already today, JSDA was up well over 11% for a nice gain this a.m. Do not be greedy when the market gives you a gift. Like I said, you can always take some off the table and let the rest run with a trailing stop, just don't let those profitable trades turn into losers.

The market did what I pretty much had been expecting, there were 3 charts posted on Trade Guild last night, early strength which we saw, looking for late morning weakness to start to develop and later some more weakness in the day. I'm seeing the start of a negative divergence on the 1 min chart so that forecast may be pretty accurate, I'll have to update you as the longer timeframes catch up to the market.
If we do see a downside reversal or lateral movement in the next 45 mins, then I think we're still on track from the forecast- you can see the charts at Trade-Guild.