FEW NEW TRADES ARE UP

PLEASE do not forget to put these trades into alerts on your trading software, if you don't have it, check out TeleChart above(linked at the top) or try www.FreeStockCharts.com they have real time, free charts and you can put in alerts.

If you didn't put in alerts, here are a few trades in the last few weeks on last month's list that you missed:

GOK 8/24  +69.58%

EJ 8/25  +13%  

GMT 8/25 +12% L 

CHP 8/23  +65%

SPRD 8/23 +35%

MMR  8/22 +18%

EXPE 8/22 +12%

VGZ  8/16 +25% and this one had an even bigger move.

Real quick..

Above is about the only thing the bulls are getting excited about, you can see it in intraday volume every time we cross SPY $113. This also happens to be good for a decline, in essence it's a bull trap and as a colleague of mine puts it more succinctly then I do, "From failed moves, come fast moves". By now you should understand why.

Here's an example on the micro level from today. We have a support area, everyone who can draw a trendline can see it as far as intraday traders go. At the red arrow we break that support, then we head back above it-a failed move and watch what follows-a fast move up. This is due initially to short covering getting momentum going, then longs pile in especially as we approach that magical $113 level. A move back below $113 will have the same effect, EXCEPT, stocks fall a lot faster and further then they rise. Why? Because fear is stronger then greed and those are the two dynamics that move retail traders-from that we get imbalances in supply and demand which is the mechanical reason stocks move.

I wanted to show you this, we had a minuscule move up today, but for the bulls, $113 is the level they are slobbering over. If you look at the VIX which trades the opposite of price, it rose today, you'd expect to see that on a decline. I put an earlier white box that shows the same thing and a nice decline after. The SPY is in red, the VIX in white. So increased volatility on an up day... it may be nothing, but it has been something in the past.

OK, new trades are up and they're a mix of a few different things, volatility squeezes, dividend yield plays, chart patterns that have historically treated us well in the position the market is in. As long as you have good risk management and I linked a nice article I wrote about it, there's no reason you can't try any of them with a minimal loss of 1-2% of portfolio if all goes wrong. You get paid to take risks, you just need to take the high probability ones and back them up with good risk management.

Any of the shorts that have been listed this month that haven't gone into play, put them on our SWING 1 Entry system. Again, there's a short video linked at the top of the site that clearly explains our entry system. I don't want you missing a trade that can be taken if we get an abrupt shift.

Until the a.m. 

Bird's Eye View

See late day comments under the post, "Not Unexpected"

Above is what gets the bulls excited, I've covered this in numerous posts, the idea of a H&S bottom. In any case, the last part of the scenario for this bounce, published before it began so this is not a case of changing perspectives as the trade goes on. The only time you are truly the most objective is before you enter the trade. After that, swings create emotional doubts.

Last night I talked about the chance of the price being taken into Bull optimism territory, like the EOD today.

Here's a bullish bull flag. For the bulls, the implication of a breakout is much higher prices. However, as I warned in the comments, look for a false breakout here. Even though Institutional money may want rices back above the $113.25 level I pegged the other day. Here we see the upside breakout, then the return back into the flag, this is basically creating chaos with longs in and then out, shorts in and out, etc. The real catalyst to a downside move is a break below that bull flag. Just as earlier in the day, the catalyst to move prices up like we saw was a break below support, that caused shorts to cover, creating demand which moves prices higher. The earlier break of support at 2:33 and then the move back above it at 2:53 was the catalyst for moving the market higher, as I explained, this caused shorts to become buyers. Note the negative divergence (relative) between the two points where price is the same.

Here's the 5 minute 3C chart, while it appears to follow price we can see at the same relative price levels before, there is significant negative divergences at each point in which price reaches that level. This could be taken as institutional selling, but I think that was complete much earlier, I'd guess it is institutional short selling.

The 15 minute shows the initial accumulation BEFORE the move even started, telling us this was not a market wide oversold bounce, but an institutionally instigated bounce. As prices move higher, 3C moves lower indicating they are bearish on the move, selling/or short selling.

The 30 minute chart is a longer perspective, still like the charts above we see the buying at the white arrow that instigated the bounce-this is institutional. At relatively the same price levels (red arrows, you can see how much distribution has occurred.

Finally the 1 hour, again shows where the institutional buying started before the bounce, this is what we picked up on August 25 and I wrote extensively about August 30, again BEFORE the bounce even started. You can see the negative divergence into the bounce has been persistent, regardless of the gains in price. This is called selling into demand. OR short selling. Creating demand is the only way they can sell or enter short in big positions at favorable prices. They don't want to sell or go short into falling prices. This is one of Technical Analysis' biggest misunderstandings, that institutional money creates rallies by buying them, they have bought long before it started at favorable prices.


I hope this gives you a better perspective of Wall Street and what we see on a daily basis, especially as it relates to conventional technical analysis and how often those patterns are manipulated.

Not unexpected...

The SPY run above $113.10 or so brought the longs back into the trade, it's since kind of paused, there's a long-term 1 min negative divergence, so now what would be interesting to see is a run below $113, volume would be interesting at that level.

The Volatility Game

I took this screen shot 15 minutes or so ago and got distracted. I was going to say look at the obvious support line and the high volume break of it, stops hit. Then I was going to say watch for volatility up and down around this as traders reset stops on newly formed support (the same level just broken.).

This is a mini version of the Judo concept, the longs had their stops hit, which created buying pressure which moved prices up. New longs will enter as other significant technical levels are reached, this is how the intraday volatility game works and on a daily chart it's no different, that's why I wanted to see the SPY higher a few dys bck, because it trapped longs. As I said last night, they may gather more firewood-longs, you can't tell what their tactical intent is, just have a good idea of the strategic intent. So we watch, when the level is broken again except to see volume rise again and then we see where they take it from there. Tomorrow is "The Great Revision" to the guessing game-fill in the blanks Washington got to play last week. The numbers are out, Wall Street knows what they are, we just have to wait, but I'd guess the revision will be lower, if it's dramatically lower or if we see bad numbers then expect to see a panic from the bulls as this whole month has been based on bullish readings, some of which were guessed at. A reversal of that sentiment could be key.

AAPL made a breakout high and turned down, there's a negative divergence there so that looks like a bulltrap.

AAPL as a leading indicator

AAPL's weight on the NASDAQ 100 make it a great leading indicator regarding manipulation of the average.

Here are the charts...

Lots of sell side volume

3C 1 min in a leading divergence down.

Clarity

As I have mentioned a few times this week, sometimes in the forest you can't get a very good perspective, you step outside and things are more clear.

Clearly the 5 minute chart shows a trend, where the 1 min chart on top isn't telling us much at all.

Update

Now is the time I'd start tightening up my USO/related trades/ stops.

Still eerily quiet on the institutional side today.

USO update

Well that last USO update pretty much hit the bottom of the morning decline, it's been up since. I have 5 of 6,  1/5 minute 3C charts in a leading upside divergence, so I'd expect we aren't done with this run up, but like I said, it can reverse quickly, so watch for consolidation areas.

SPY broke out of the range as I warned it might and formed an ascending wedge, now that it's moving 3C will be clearer. There's still not a lot of clarity as I like to confirm at least several timeframes and 3-4 averages. The SPY itself looks like is putting in a negative divergence. The ascending wedge is so small I don't know if the MM's will run it as it doesn't jump off the chart, it's not obvious to all.

UUP Update

Dollar update, there's some leading positive divergences in UUP. This would tend to confirm, or at least price following these divergences up, would confirm the false breakout in the dollar yesterday out of a bull flag, at the same time the upside breakout of a bearish gold chart. If so, the gold goes down, the dollar goes up and a rising dollar isn't good for the market generally speaking.

USO update

It appears this may be a short intraday bottom for USP, but I would be very careful with this trade, I see divergences higher on the 1-5 min, but then come the 10 minute on, they are much lower, so this implies to me there could be a fast reversal down.

A Little more certain

Consolidations are tough for any indicator, especially 3C when they are short as the way it is constructed it is comparing institutional investment at two relative points, when those points are bunched up in a consolidation and there's only a few candles between them, it makes it very difficult, not just for 3C , but most indicators.

However, there are enough negative divergences that I'm leaning toward calling this choppiness on a one minute chart a reversal. As always, be prepared for the false breakout up which is the gas in the tank of the engine that drives prices down. Still I'll have to keep a close eye on this until we are clear of the zone and trending down.

Morning trade is growing increasingly difficult, typically it's just filling of retail orders but more and more professional firms are specializing in particular hours of the day, some the morning, some only after 3 pm, some only after hours, so we are seeing a change occur as it's occurring and will have to unlearn and learn some new concepts as the trend toward "Laziness" in institutional trading develops. One of these firms, the guy talked about "I trade an hour a day and play tennis or golf the rest of the day".

I think back to all the companies I've worked for that built up a nice business and then took to golf or tennis and were there at the business increasingly fewer hours. It was always the same story, within a year or two, they lost their business.

The cafe my family bought, the former owner was there 4 hours a week! We were there 10-12 hours a day, 7 days a week and increased sales by 50% in the first two weeks alone.

Crude Inventories

Crude came out with what appears to be on the surface a fairly bullish report, but we also saw 3 weeks ago a bearish report and we made money on the long side.

3C is showing  what appears to be some short term strength, but the longer charts still look pretty bad, so I'd be careful and if you're in, I would check in often as those short time frame divergences can change in seconds in some cases.

Morning Update

So we gaped down, not a big surprise as there were no positive divergences toward the close in the 1 min. chart yesterday, however, one formed this a.m on the gap down, thus we've seen price fill the gap. Right now it's getting into a consolidation. There are hints at a negative divergence, but until they are formed I would not make a call on that. So far nothing to out of the ordinary.

I'll be watching for a possible recovery in UU/ the dollar and see if GLD traps those longs.

Take a look at the August list for HMA, it just triggered.