There's a 1-min positive divergence and a 5 min positive divergence, it seems unlikely we'll break $110 today and may rally back up to $111 where we'll see if resistance holds.Wednesday, July 28, 2010
Bounce
There's a 1-min positive divergence and a 5 min positive divergence, it seems unlikely we'll break $110 today and may rally back up to $111 where we'll see if resistance holds.
Afternoon Update
DRAM
Short term speculative long position listed on the Spread Sheet- DRAM is breaking out through our buy limit order and this on weakness. This is a "cats and dogs" trade, as you may remember, C&D trades come near the end of a bull move and they ma be trying to get this long off before the broader market tanks
UPDATE
3C is in a huge leading negative divergence, you can see the highs at 7/26-7/27 and 3C went divergent there. It's currently leading below $110 which will be the during on the bull trap. TSV55 which is a long version and doesn't react to minor noise is also below it's moving average and just about below the zero line.
Watch for the break of $111, the next stop will be $110 if that happens soon. On the other side of the coin, there's always the chance of a false breakout, but because this is a 15 minute chart, I hardly would label this as an obvious price formation, I doubt many technicians see it.
LINTA
LINTA has just triggered a limit order, this two was listed on the new July/August Trades Spreadsheet. Take a look.
On the SPY, we saw the first hit of the $110 level when it was breached around 10:35, volume picked up a lot. So this is certainly an important level, if we continue lower and 3C seems to be suggesting we may bounce around the $111 level for a little bit, then the next important level to break will be $110.
When you see volume pick up on breaks of whole numbers like that, you know that there were a lot of retail stops piled up there. This is exactly why I encourage you to stay away from obvious levels and whole numbers which the human mind gravitates toward.
On the SPY, we saw the first hit of the $110 level when it was breached around 10:35, volume picked up a lot. So this is certainly an important level, if we continue lower and 3C seems to be suggesting we may bounce around the $111 level for a little bit, then the next important level to break will be $110.
When you see volume pick up on breaks of whole numbers like that, you know that there were a lot of retail stops piled up there. This is exactly why I encourage you to stay away from obvious levels and whole numbers which the human mind gravitates toward.
Update
KIRK can be found on the list from Sunday or Monday night, it has triggered the short level limit just a bit ago. Take a look.
A Couple of MArkets Worth Watching.
I read an article today that basically said we are in for a bull market, nothing like the last, much shorter, but more upside. This assessment was based on things like this-BP has been taken down to low and the sector with it. I don't know what the appropriate valuation should be for BP, there's things in the news this week like doctored photos of the spill, etc. The Us has satellite reconnaissance capabilities as does NOAA and dozens of other agencies. I seriously doubt pictures were doctored without the approval of administration higher ups. Thereby giving meaning to my moniker of, "Never believe what you hear" and in this case, what you see as well. Who knows how many more secrets lurk beneath the proverbial oil slick?
Wikileaks produced thousands of documents this weekend and NY Times released their stories covering the leaked information on Sunday. I'm sure it came as a surprise to many Americans, that our great ally Pakistan's secret service or CIA equivalent had been coordinating and conducting planning of terrorist mission with the Taliban and apparently the old grey bears surrounded by hundreds of AK-47's which would imply Al Qaeda . So things are never what they appear, but back to where we were.
The things that convinced the author of raging bull at the gates were these several events:
1) Europe learned from the US crisis and made all of the right moves. Yet there's Greece, Spain, Portugal, Hungary and perhaps Germany herself as well as others that all face their own debt crisis and are bound to a limited tool box of a phillips head, a flat head screwdriver and maybe a money wrench as they have no ability to inflate or deflate themselves out of crisis being they are bound to the Euro (Hungary isn't yet). 7 of 91 or 93 banks failed, not bad, but taken with the fact that all of the hard situations that could really cause a bank to fail were conveniently left out of the test-they learned something from us alright!
2) 2nd Quarter Earnings have been great and the sentiment pendulum has swung to bullish sentiment. First of all, it's not what you have done, it's what will you do and retail doesn't understand this. No doubt this is why we see the early morning bid up as pseudo traders place their limit orders and head off to their 9-5, causing a massive morning mark-up. However, the "BULLS" that run Wall Street seem to be content to invest just enough to keep the trend from falling apart as they continue to distribute (which can also be selling short-there's no way to make the distinction). Considering last quarter and YTD, it's not hard to come in above. Again, it's what they say they will do, which brings me back to the days of massive loan write-offs and the CEO's decelerations, "We have no exposure to that market" or "We expect this to be our last charge off" only to see bigger charge offs the next quarter. Show me a CEO who shoots it straight as an arrow and I'll show you a former CEO. And exactly when did the market swing so far on the bearish side of sentiment that the expression, "pendulum" which brings up connotations of extremes, used? As far as I can tell it;s been fairly down the middle with the exception of one sell-off and recently, as in most of July, it's been pretty darn bullish. I will admit that I believe most analysts sided on the side of pessimistic caution, which makes a surprise beat, a fairly easy thing to accomplish.
3) The leaders to the downside have stabilized GS and BP.
Time to whip out chart or two...
This has to be one of the biggest tops I've ever seen and the volume-is that capitulation that ends a stage 4 decline or just a high volume breakdown from the incident? I can tell you for sure IT IS NOT FINAL CAPITULATION, perhaps enough to let a relief rally carry it to the neckline+.
I think stage 4 which is a decline will be a bit longer than a few months considering the size if this top. This is not capitulation. the triangle to the right is a continuation pattern, in bull markets (as it is bullish) they tend to be more reliable then in bear markets, but t could breakout or create false breakout. This is certainly not the end of the story for BP. I will say there are a few in the group that were drug down with BP that may very well rally.
As for GS...
Again, a break of support of capitulation? And does it just rally through 10 months of sellers?
As you can see, there's no stage 4 so there can't be capitulation or a beginning to base a new bull trend which is a process, not an event. The triangle (much like BP's) right under the neckline could breakout for a false move, or it could fail, but this is hardly the picture of a chart that is out of the woods.
4) The First higher low and higher high are in place.
TRUE! The higher low is in yellow, the higher high is in blue.
This is the right shoulder of a recent H&S top and it made not only a first higher low and high, but a series of them. Pretty bullish huh? Lets see what happens next...
5) Dr. Copper and Oil are forecasting a strengthening economy.
There are a lot of indications forecasting a weakening economy, but I digress.
There's a high degree of correlation between copper and the SPY, sometimes the SPY leads, sometimes copper leads. You can see copper has broken out of a downtrend and a slanted inverse H$S. At the same time the SPY and market have all advanced creating what I believe, at this point anyway, to be bull traps. In order to do that, they too needed to breakout from a similar pattern. I'm not sure I would say this is a solid case for copper demand forecasting strength in the economy.
This chart of JJC (Copper) is overlaid with Worden's MoneyStream. Does it look like MoneyStream is confirming the trend? No, in fact what we see is a negative divergence further lending to the possibility of a bull trap.
And the Black Messy Stuff that you really don't want spewing unchecked from the ocean floor-oil....
In green we have Light Sweet Crude Oil, in light blue we have the U.S. Dollar Index. A quick look and you will realize that oil and the dollar have an inverse relationship, when one is up, the other is down.... Why? Crude oil contracts, for now anyway (Chavez, you wish!) trade in $US Dollars. So if the value of the dollar drops, the price of crude must go up accordingly to make up for the loss of value in the dollar. This is why we saw such a huge rally in oil under the Bush administration as their wide-out-in-the-open "POLICY" was that of a weak dollar. I bet that one was hashed out in that first meeting between Dick and his Pals in the second week of the administration, So yes, the recent weakness in the dollar has led to crude oil appreciating, it is not necessarily ot because of consumer demand as the author points to.
This is USO and it is sitting in a triangle below a substantial uptrend in a very nice trading channel stretching back over a year. The breakdown out of the channel on heavy volume can no way be construed as a healthy, bullish development. As we know, nothing goes straight up or down in the market for long and USO promptly formed a symmetrical triangle just below the resistance of the channel. Today it almost appears as if we got confirmation of a false upside breakout from that triangle.-Volume was heavy on the downside today. It's important to remember that symmetrical triangles are neutral and only take on meaning when found after a preceding trend. In this case it is a bearish continuation pattern meaning that the expected move is to the downside.
Here's a 30 min chart close up of the breakout of the USO sym. triangle. The 30 min chart in 3C is very powerful and can define swing trends of days to weeks. Here we see not only 3c version 1 i yellow negatively divergent at the breakout, but also the very long term 3C chart in blue at the bottom in a full downtrend, it didn't even hiccup during the breakout.
So... why am I tearing apart someone's bullish analysis. I know that the market, despite the probabilities we see, can do anything it wants. It could launch the mother of all bull markets tomorrow, but we deal in information we have at hand right now and 3C even has a predictive nature to it, so we even have that edge. We try to find the highest probability and make our assumptions based on that and we must be ready to change when the data changes-sometimes even smart money is not all that smart uuhhh..uuuummLEEMANouhhh! Bless me, thank you!
The point is, you can't take what you read and just assume it's got to be the truth because someone wrote it and it appeared on Yahoo Finance. You should fact check everything including me, I miss stuff too. However looking at this article that was long on assumptions and short on objective data I decided to dig a little, it's good to exercise the mind.
As to the market today...
As I pointed out yesterday, the VIX/TRIN combination is quite reliable and we got what it implied, we didn't get the break of support that would have made today truly meaningful, but trades have been backing away from rising prices this entire rally. It's been a rally marked by bullish sentiment in the little guy camp that drives up the market early on limit orders as most retail market participants work a 905. So the market makers mark up prices, make them pay up for the shares and the rest of the day we have been seeing distribution with just enough support to hold the markets lateral to up and an end of day push to get retail peeps getting bull crazy and the cycle starts again, every day. Today, the TIN and the VIX broke that cycle, for how long?IDK (text vernacular for I don't know in case you don't have kids).
For whatever it's worth, large caps finally outperformed small caps and midcaps as well, that's a big shift considering the Russell 2 or 3k's recent performance. It may be the end of the "Cats and dogs trades" -under $5 longs I've been posting that tend to end a bull move. Perhaps a flight to quality? Maybe just earnings, I haven't looked at them.
The MDY ETF for midcaps put in a small "Dark Cloud Cover"-you can tell by it's name it's not bullish, in fact it's a reversal signal of an uptrend. It also did so on a decent rise in volume. The SPY was 75% there to putting in a hanging man, not quite though, again on higher volume. The Dow 30 put in an "evening Star" reversal on higher volume, the DIa almost a hanging man on higher volume, the Q's were almost there too for a hanging man on higher volume, the NASDAQ composite just about put in a Dark Cloud Cover.
Judging by the SPY and 3c 1-5 min charts, it seems we will see some strength in the am, I'm not sure I'd bet on it holding though. A beautiful day tomorrow would be a gap up with a close below todays close causing an engulfing pattern; in ant one of the averages this would be a solid, reliable reversal signal.
You have a lot of trades out there already. I'm going to add a few more to tonight's list, but I'd like to see where things lead tomorrow before getting overly aggressive and sending a bunch of directional trades your way.
We'll see tomorrow. By the way, if you have TeleChart, use the alerts feature for the limit trades I set up last night.
Wikileaks produced thousands of documents this weekend and NY Times released their stories covering the leaked information on Sunday. I'm sure it came as a surprise to many Americans, that our great ally Pakistan's secret service or CIA equivalent had been coordinating and conducting planning of terrorist mission with the Taliban and apparently the old grey bears surrounded by hundreds of AK-47's which would imply Al Qaeda . So things are never what they appear, but back to where we were.
The things that convinced the author of raging bull at the gates were these several events:
1) Europe learned from the US crisis and made all of the right moves. Yet there's Greece, Spain, Portugal, Hungary and perhaps Germany herself as well as others that all face their own debt crisis and are bound to a limited tool box of a phillips head, a flat head screwdriver and maybe a money wrench as they have no ability to inflate or deflate themselves out of crisis being they are bound to the Euro (Hungary isn't yet). 7 of 91 or 93 banks failed, not bad, but taken with the fact that all of the hard situations that could really cause a bank to fail were conveniently left out of the test-they learned something from us alright!
2) 2nd Quarter Earnings have been great and the sentiment pendulum has swung to bullish sentiment. First of all, it's not what you have done, it's what will you do and retail doesn't understand this. No doubt this is why we see the early morning bid up as pseudo traders place their limit orders and head off to their 9-5, causing a massive morning mark-up. However, the "BULLS" that run Wall Street seem to be content to invest just enough to keep the trend from falling apart as they continue to distribute (which can also be selling short-there's no way to make the distinction). Considering last quarter and YTD, it's not hard to come in above. Again, it's what they say they will do, which brings me back to the days of massive loan write-offs and the CEO's decelerations, "We have no exposure to that market" or "We expect this to be our last charge off" only to see bigger charge offs the next quarter. Show me a CEO who shoots it straight as an arrow and I'll show you a former CEO. And exactly when did the market swing so far on the bearish side of sentiment that the expression, "pendulum" which brings up connotations of extremes, used? As far as I can tell it;s been fairly down the middle with the exception of one sell-off and recently, as in most of July, it's been pretty darn bullish. I will admit that I believe most analysts sided on the side of pessimistic caution, which makes a surprise beat, a fairly easy thing to accomplish.
3) The leaders to the downside have stabilized GS and BP.
Time to whip out chart or two...
This has to be one of the biggest tops I've ever seen and the volume-is that capitulation that ends a stage 4 decline or just a high volume breakdown from the incident? I can tell you for sure IT IS NOT FINAL CAPITULATION, perhaps enough to let a relief rally carry it to the neckline+.
As for GS...
As you can see, there's no stage 4 so there can't be capitulation or a beginning to base a new bull trend which is a process, not an event. The triangle (much like BP's) right under the neckline could breakout for a false move, or it could fail, but this is hardly the picture of a chart that is out of the woods.
4) The First higher low and higher high are in place.
5) Dr. Copper and Oil are forecasting a strengthening economy.
There are a lot of indications forecasting a weakening economy, but I digress.
And the Black Messy Stuff that you really don't want spewing unchecked from the ocean floor-oil....
This is USO and it is sitting in a triangle below a substantial uptrend in a very nice trading channel stretching back over a year. The breakdown out of the channel on heavy volume can no way be construed as a healthy, bullish development. As we know, nothing goes straight up or down in the market for long and USO promptly formed a symmetrical triangle just below the resistance of the channel. Today it almost appears as if we got confirmation of a false upside breakout from that triangle.-Volume was heavy on the downside today. It's important to remember that symmetrical triangles are neutral and only take on meaning when found after a preceding trend. In this case it is a bearish continuation pattern meaning that the expected move is to the downside.
So... why am I tearing apart someone's bullish analysis. I know that the market, despite the probabilities we see, can do anything it wants. It could launch the mother of all bull markets tomorrow, but we deal in information we have at hand right now and 3C even has a predictive nature to it, so we even have that edge. We try to find the highest probability and make our assumptions based on that and we must be ready to change when the data changes-sometimes even smart money is not all that smart uuhhh..uuuummLEEMANouhhh! Bless me, thank you!
The point is, you can't take what you read and just assume it's got to be the truth because someone wrote it and it appeared on Yahoo Finance. You should fact check everything including me, I miss stuff too. However looking at this article that was long on assumptions and short on objective data I decided to dig a little, it's good to exercise the mind.
As to the market today...
As I pointed out yesterday, the VIX/TRIN combination is quite reliable and we got what it implied, we didn't get the break of support that would have made today truly meaningful, but trades have been backing away from rising prices this entire rally. It's been a rally marked by bullish sentiment in the little guy camp that drives up the market early on limit orders as most retail market participants work a 905. So the market makers mark up prices, make them pay up for the shares and the rest of the day we have been seeing distribution with just enough support to hold the markets lateral to up and an end of day push to get retail peeps getting bull crazy and the cycle starts again, every day. Today, the TIN and the VIX broke that cycle, for how long?IDK (text vernacular for I don't know in case you don't have kids).
For whatever it's worth, large caps finally outperformed small caps and midcaps as well, that's a big shift considering the Russell 2 or 3k's recent performance. It may be the end of the "Cats and dogs trades" -under $5 longs I've been posting that tend to end a bull move. Perhaps a flight to quality? Maybe just earnings, I haven't looked at them.
The MDY ETF for midcaps put in a small "Dark Cloud Cover"-you can tell by it's name it's not bullish, in fact it's a reversal signal of an uptrend. It also did so on a decent rise in volume. The SPY was 75% there to putting in a hanging man, not quite though, again on higher volume. The Dow 30 put in an "evening Star" reversal on higher volume, the DIa almost a hanging man on higher volume, the Q's were almost there too for a hanging man on higher volume, the NASDAQ composite just about put in a Dark Cloud Cover.
Judging by the SPY and 3c 1-5 min charts, it seems we will see some strength in the am, I'm not sure I'd bet on it holding though. A beautiful day tomorrow would be a gap up with a close below todays close causing an engulfing pattern; in ant one of the averages this would be a solid, reliable reversal signal.
You have a lot of trades out there already. I'm going to add a few more to tonight's list, but I'd like to see where things lead tomorrow before getting overly aggressive and sending a bunch of directional trades your way.
We'll see tomorrow. By the way, if you have TeleChart, use the alerts feature for the limit trades I set up last night.
