Kind of a Volatile Day

But remember, for what it is worth, the TRIN below .75 as it was yesterday or above 2 almost always produces a close down or a close up respectively the next day. IT's a short term indicator, but all moves/reversals start on the short term indicators.

Here's the fast 1 min 3C chart

The yellow arrow shows a positive divergence, it worked great in forecasting the move back up through resistance (former support), the red arrow shows the negative divergence and the red box shows a leading negative divergence. Note the volume the second time around (in the blue boxes) is a lot less then the first as the stops were cleared out leaving a clean slate.

Afternoon Update

Here's the situation on 3C 1 min charts.


IWM looking good all around-positive divergences

Q's in confirmation with 1 negative divergence

DIA 4 negative divergences

SPY 1 positive, 2 confirming and 1 negative

Interestingly, in the 5 min, all 4 market averages have 3 leading divergences to the downside and 1 either confirming or slightly positive.

Update and a Quick Lesson

Traders love to call support at exact levels like $109.33. The fact is this, support and resistance are zones or areas and that is because of they way they are formed. Remember me saying a correctly read chart will show you human emotion, fear and greed-the two siblings that move markets. Quickly imagine that you have bought the SPY on the way up at $111.45 and now today, it's down below that level. LEts assume you even went in heavily leveraged and even used you kids college money on the trade. Right now, you are at a loss and you are feeling really bad about it, but you don't take the loss when it's rather manageable, instead you say, "I'll sell this position when it gets to my entry price". THAT IS HUMAN EMOTION, the reason is, A) you don't want to take a loss. We've been taught ever since we first walked into a class room with our lunch box, that 60 or 65 is an "F" a failing grade. Therefore we expect to perform in the passing grade level when we trade, we want to see 70 or 80% of our trades succeed, IT IS SIMPLY THE WAY YOU HAVE BEEN CONDITIONED YOUR ENTIRE LIFE. It's not reasonable to believe someone can make 80% of their trades correct, consistently. Instead, think about it in baseball terms, a 300 or even better a 400 batting average can put you in the hall of fame, but that means you only hit the ball 40% of the time, the way we look at the world, that's a failing grade, except in baseball-that's an amazing average. This is how you need to look at the market and risk management will allow you to be wrong more then you're right and still make a pile of cash.

Back to resistance....

So we wait for the stock to come back close to our levels because we don't want the loss and we have an attitude of "I lost it here, I'm going to make it back here". So when prices move close to your level and maybe start to vacillate a little, you get nervous and you sell, maybe for a percent less then what you bought it for-the crowd will do the same thing, therefore your selling creates resistance or supply and keeps prices from moving higher, unless demand overwhelms supply. That is why resistance is at an area, not an exact level-same with support.

Now looking at the chart we see volume pick up a little bit, nit huge so this wasn't a strong zone of support and can and is being broken on a bounce. $111 is the area that will provide support and is the level we want to see broken on big volume.

As for right now....
I warned a bounce was building, here's a look at it now.

Here's the 1 min 3C that called the bounce last update, it looks strong still, but the long term 3C in blue at the bottom is not following prices.

Here's the 5-min 3C chart (stronger signals then the 1 min chart) and it is showing the move stall out, blue 3C looks even worse. As of right now, I don't see this as a threat. i'll let you know if anything changes, but it can be used to get better positioning on any shrorts you might want.

Bounce coming?

It looks like the market will try for an intrady bounce. This is not important for many of you, but day traders or those looking to get into better short positioning may want to use this bounce.

Some Trades

Here are some trades from the spread sheet (L)=long (S)= short a few I have updated the stops for, otherwise the stop on the spreadsheet or in the notes is still effective.

LONG TRADES:

DDE is a long above $3.30 which is $.02 away

PRSP is a long or add to/hold right now with the stop at $33.35

FRX can be bought now, but I'd move the stop up to $28.48 on a closing basis -This isn't my favorite trade, thus the tight stop.


SHORT TRADES

WLT is a short now or on any pullback that offers a better entry.

LINTA keep an eye on this one it is very close to triggering

LCC is a short now

RDY was a short at market, it could still be entered if the risk:reward potential makes sense to you

DUSA is very close to a short now-check the spreadsheet for info.

MGAM is a short now

VRUS is a short now

NGD is a short now

BYI can be shorted now, the stop will move down upon a close lower.



An update is in the works.