There's about 23 trades up tonight, some are based on the FAZ/XLF/UUP divergences, some are based on other factors. There's a few Cats and Dogs in there as this is still rally season for those kinds of trades.
I STRONGLY ENCOURAGE YOU TO PUT THESE TRADES INTO SOME KIND OF ALERT SYSTEM LIKE TELECHART OR FREESTOCKCHARTS.COM, I can't keep track of all the orders and prices, I have to have them in an alert system that is real time. The two I mentioned above are.
Apparently we have another POMO day tomorrow. The typical POMO days have seen buying/front running the day before, and a move up until 11 a.m., after that they tend to fall, today's didn't do that.
I'm not sure what to expect tomorrow with POMO and the strong signals we are seeing that are not congruent with a POMO day. However as I have said a few times, once a pattern is established on Wall Street and it becomes easy money for the average retail trader, they find a way to somehow throw a monkey -wrench in the mix to end that relationship so we'll just have to see what comes of it. It's another one of those Bermuda Triangle moments that I've seen so often with reversals, like the September rally reversal, everyone was so bearish and there were seemingly a million reasons to be bearish, but it reversed. The big dollar reversal, there seemed to be no plausible reason for the dollar to go up. yet it did. You always find out later. Like Paulson's "Buy Stocks" Monday, and we come to find out that his fund is just at or just over 0% on the year, which means there's a high water mark in most finds ad he's probably not making a penny until he gets his portfolio above the high water mark. So he had his reasons for being out there Monday of last week pumping stocks, as I said at the time.
Again, insiders are fleeing stocks like rats on a sinking ship. They aren't doing it because they believe stocks or their stocks are going higher. The numbers are astounding. If the Fed wasn't pumping liquidity into the markets, this market would already be in the crash zone with all of the selling and fund outflows. That's probably why we are seeing more of the HFT sponsored flash crashes.
In any case, I suspect we'll see over the next few days what the real story is.
Tuesday, October 5, 2010
Different Perspective.
I was going to go on and show you more 3C charts of the market showing negative divergences. It's important you understand what a negative divergence in 3C is. A Negative divergence is showing the act of distribution, a positive divergence is showing the act of accumulation, IT IS NOT an immediate signal, but more like a breadth indicator on steroids as it tells you what is happening in the underlying action of the market.
Today, BULLISH move, no doubt, last night I warned there was accumulation. 3C does not tell you where, how much or when, it is impossible to know that unless you know exactly what the accumulators/distributors are doing, how many shares they have, at what rate per day are they buying/selling/shorting, etc. It's common sense. It does tell you that a day like today, which many retail traders bought, is not as strong as it looks, if it were, why then would there be big movements of money out of the positions into higher prices? Certainly not because they think it's going much higher, or that they'll have enough time to complete their transaction. There was a lot of retail demand today, making distribution easy.
So instead of going over breadth charts, which are not much changed in a day, or 3C SPY charts, I'm going to show you an interesting occurrence a member mentioned. The $USD. I mentioned a few days ago we are seeing some indications of a "change of character".
Understand that each sotck or component is read individually by 3C, there's no bleed over unless there's underlying action to suggest it.
So lets start with what a member mentioned, FAZ showing some late day strength.
Here's an Envelope Channel, no bias of drawing trendlines, it is what it is. Look at the EOD today, FAZ trading higher and higher and breaks out of the channel at the close.
1 minute 3C Leading positive divergence
5 minute 3C leading positive divergence
10 minute 3C leading positive divergence.
Confirmation between each timeframe is difficult to get unless it's there, it's unlikely all 3 timeframes would by chance say the same thing.
Now, compare it to it's inverse counterpart, XLF Long financials. Again, there's no 3C correlation between two different stocks or timeframes unless one truly exists.
XLF 1 minute, LEADING NEGATIVE DIVERGENCE!
XLF 5 minute LEADING NEGATIVE DIVERGENCE
XLF 10-minute LEADING NEGATIVE DIVERGENCE.
XLF IS EXACTLY THE OPPOSITE OF FAZ, the chances of that happening in 6 timeframes and 2 different stocks is almost impossible.
Now, remember I told you that there's distribution in GLD and the Dollar is showing a "change in character"
So lets look at UUP the proxy for the dollar.
3C 1 minute LEADING POSITIVE DIVERGENCE
5 minute LEADING POSITIVE DIVERGENCE-HUGE TOO
UUP 30 MIN HUGE LEADING POSITIVE DIVERGENCE
15 minute POSITIVE LEADING DIVERGENCE.
In all 3 symbols, we are seeing the most powerful leading divergence. Can I explain the catalyst for strength in the dollar no. Could it be financials alone get taken down and the dollar is untouched, possible, but not likely. Why are we seeing what we are seeing, I believe there's something going on here that is causing smart money to distribute into higher prices, to accumulate short positions on financials and long the dollar.
Again this week, insider selling activity last week was 1411 share sold to every 1 bought. This week it is 2341 shares sold to every 1 bought.
Here's the article, read for yourself how much ORCL and GOOG are selling. Why? Because they think the market is going higher?
I hope this different perspective, will help you keep you mind open to the charts I'm showing you. When I show you 3C in a negative divergence and the stock moves higher, THAT IS THE MEANING OF DISTRIBUTION-they do not sell into declines, they sell into demand.
So lets see what happens with these charts, combined with last night's breadth charts, 3C's call for a move up today and other things such as insider selling, I think it's not wise to ignore these charts.
Today, BULLISH move, no doubt, last night I warned there was accumulation. 3C does not tell you where, how much or when, it is impossible to know that unless you know exactly what the accumulators/distributors are doing, how many shares they have, at what rate per day are they buying/selling/shorting, etc. It's common sense. It does tell you that a day like today, which many retail traders bought, is not as strong as it looks, if it were, why then would there be big movements of money out of the positions into higher prices? Certainly not because they think it's going much higher, or that they'll have enough time to complete their transaction. There was a lot of retail demand today, making distribution easy.
So instead of going over breadth charts, which are not much changed in a day, or 3C SPY charts, I'm going to show you an interesting occurrence a member mentioned. The $USD. I mentioned a few days ago we are seeing some indications of a "change of character".
Understand that each sotck or component is read individually by 3C, there's no bleed over unless there's underlying action to suggest it.
So lets start with what a member mentioned, FAZ showing some late day strength.
Here is my Trend Channel, it is set to 1 day, it stays short all day until the EOD, in the red square, it's long.
Here is FAZ, leveraged short financials
Confirmation between each timeframe is difficult to get unless it's there, it's unlikely all 3 timeframes would by chance say the same thing.
Now, compare it to it's inverse counterpart, XLF Long financials. Again, there's no 3C correlation between two different stocks or timeframes unless one truly exists.
XLF IS EXACTLY THE OPPOSITE OF FAZ, the chances of that happening in 6 timeframes and 2 different stocks is almost impossible.
Now, remember I told you that there's distribution in GLD and the Dollar is showing a "change in character"
So lets look at UUP the proxy for the dollar.
In all 3 symbols, we are seeing the most powerful leading divergence. Can I explain the catalyst for strength in the dollar no. Could it be financials alone get taken down and the dollar is untouched, possible, but not likely. Why are we seeing what we are seeing, I believe there's something going on here that is causing smart money to distribute into higher prices, to accumulate short positions on financials and long the dollar.
Again this week, insider selling activity last week was 1411 share sold to every 1 bought. This week it is 2341 shares sold to every 1 bought.
Here's the article, read for yourself how much ORCL and GOOG are selling. Why? Because they think the market is going higher?
I hope this different perspective, will help you keep you mind open to the charts I'm showing you. When I show you 3C in a negative divergence and the stock moves higher, THAT IS THE MEANING OF DISTRIBUTION-they do not sell into declines, they sell into demand.
So lets see what happens with these charts, combined with last night's breadth charts, 3C's call for a move up today and other things such as insider selling, I think it's not wise to ignore these charts.
UPDATE
I have more charts, but I wanted to get this out ASAP
Forget about the insider selling ratio even higher today, this is why I do NOT trust this move.
Afternoon update
UPdate
The Dollar is showing a little life, GLD has a leading negative divergence that started at 11 a.m. and has moved consistently lower. Just two to keep an eye on.
Update
Here are the most current charts, there's definite distribution, SMH shows several bars of no movement at all. It seems there was a push to breakout of a trading range after 11 a.m., which is very typical. Now we have a leading divergence and not too much more upward movement, it looks like a reversal is in the making here.
2nd Divergence
Usually POMO days start to sell -off around 11 a.m. So we'll see in minutes what's happening. Gold saw the bulk of the advance.
Morning Update
Well that was quite a breakout. In any case, we have our first negative divergence in all 3 averages, it's the strongest in the SPY, the weakest in the Q's. So lets see where this takes us.
