Last night I said I wanted to see a gap above $113.25 in the SPY and a move above $123 in GLD. Both, in my analysis would suck in the longs and eventually pull the markets lower in GLD and the broad averages. That's all well and good and we saw both happen and after the SPY broke $113.25 twice intraday, we saw a pretty nasty fall on volume, the anticipated part was saying "A gap above", it gapped down and ran up above, but it doesn't matter how it happens, as long as it happens so that's the anticipation I'm talking about.
So above the $113 SPY level we saw quite a few green spikes, that's generally retail as smart money doesn't want to drive prices against their position, they are sneaky about that stuff and that's why subtle changes in volume can mean a lot more then spikes.
So I think we sucked in longs in both trades, enough though? Price action this afternoon would suggest it was enough, but who knows? We can only see what they're up to, we don't know how much and when so again, anticipation is probably best left to the pundits unless it's objective.
Here's another good example, the VIX accumulation. Initially (being I'm not an options trader and certainly not a VIX trader) I assumed they'd expire with quad witching Friday which made sense to me for a decline, it gave time for the SPY breakout we saw intraday today and enough time to see that $45 open interest hit. When I discovered Tuesday was the last day to trade before the VIX options settle on Wednesday, I was so focused on the accumulation in the VIX, I didn't bother to think it could be the next month's contract. So today I looked at the last time we saw accumulation in the VIX that lead to the biggest sell-off we've seen in well over a year and discovered something, the contract expired a good 2+ weeks before the decline so they were obviously working in the next month's contract. That's an example of being so focused on one thing that you have tunnel vision to the other possibilities. So I've learned some lessons today and I have some personal work to do to overcome that kind of behavior.
However, today was still a good day for us. We have those longs in the trade now, they didn't like it when the SPY broke $113 and this chart proves it.
As for 3C...
Note in all 3 charts (you have to look close on the 60 minute), the second move above $113 today saw a distinct negative divergence from the first.
So these tops can play out a number of ways, we could see a gap up like I had been looking for that leads to the big sell-off or we could just move down from here. I'm not going to speculate as to how it's going to go down except to say I didn't see any 1 minute positive divergences at the EOD. So I don't think a gap up is a high probability.
As I said today, I think you can start getting your toes wet, you don't have to short everything at once. There's plenty of downside room and the volatility is still very high so I'd go easy into them. Depending on tomorrow's action I'll start adding more shorts with stops.
Interestingly, I understand that AAPL accounts for 19% of the weighting of the NASDAQ 100, you won't see it in price, but in 3C there was a definite change in character, so it may be that their days of picking a few weighted stocks to advance the averages may be coming to an end.
One thing that's very different about WOWS vs. your normal technical analysis site is that they are following price for their signals, and we know that price is not dependable. They are waiting for the market to show them, we are watching smart money that works well in front of the market. So for this reason, you can't trade the same. You need wider stops until we've reached our destination, you need excellent risk management and typically you want to do what smart money does, you want to ease into positions, albeit for different reasons.
We are looking inside of the market, at intention and that intention is generally misleading to those who follow price. This is a totally different analysis and requires you to think differently about how you construct your portfolio. One thing I can say is, you don't have to get in at the top and sell at the bottom, you have time and plenty of room to make money. Patience is key.
So keep AAPL specifically on your radar, GLD too. Quad witching this week, considering this month's bullishness could very well be a huge pay day for Wall Street-that is if they take the market down before Friday, my feeling based on what we have and are seeing is that yes, they will.
We have a bunch of reports out tomorrow and Thursday I think we're in for a real treat when they have to give the real number revisions to the 9 state initial/continuing claims guesstimate.
There'slots of stuff this week that has the potential for a lot of promise and today was an excellent start to the second and final component of the "malicious bounce".
Sleep tight, I'm going to.
