The Dollar Did It?

I think most of today's moves can be summed up with one word, "Dollar". Here's the Euro against the dollar today.

This is a dropping Euro or a rising Dollar. For the Euro we are seeing a bear flag, for the dollar, a bull flag. I know currencies and commodities tend to trend better then stocks, I don't know whether they see the same amount of game playing with patterns like we saw near the end of the day today with the bear flag in the major averages. As you can see here, it appears not. Instead the breakout to the upside back into the flag after it had already broken down (something we see probably more then 85% of the time with patterns like this) was caused by AAPL and SMH-or at least they were a big part of the reason.

The correlation between the dollar and the market was nearly spot on today as you can see below.

The only time it deviated to some degree was at 3:40 p.m. which was the time we saw the head fake move back into the bear flag.

Compare the same time in AAPL and SMH

The volume in both  increased dramatically. The question that remains, "is this the market maker/HFT firm head fake or an intervention?" At present, I'm assuming it's the HFT black boxes or market makers as we have seen this so many times and not at critical junctures.

As Gold/GLD is highly correlated to the $USD, GLD took quite a beating today. As you know, 3C has shown negative divergences in both (recently in the dollar and for awhile in GLD). The volume in the first hour of trading was above the previous day's volume.

The candlestick pattern formed here would be considered a confirmed reversal with a star yesterday and a bearish engulfing pattern today that nearly took two day's of previous candles. As I mentioned, volume was exceptionally high.

I don't need to show you the charts again, but you know in the last few days 3C has picked up distribution in the dollar. 3C has also been tracking a long string of distribution in GLD-that's a lot of volume today.

Last night I described the lack of follow through on Tuesday's big move in essence as troubling, but it didn't stop there. Of the 10 important averages, 8 were down. 14 of 16 breadth groupings Don Worden follows were down.

Today the thematic price/volume relationship in 3/4 major averages was price down, volume down which is the typical pattern seen during a bear market.

While the averages didn't crash, a few and some other notable equities did put in some interesting candlestick patterns as well.

 The NASDAQ 100 with a no-name pattern, but in late September we saw something similar that led to a decline.

 The S&P-500 put in a Harami reversal confirmed by a bearish engulfing pattern-with a bit of a hanging man look to it as well.

 UUP, our proxy for the dollar which has seen recent accumulation put in a fairly strong day on a big increase in volume not seen since August. It's also emerging from a bullish descending wedge.

XLF, the ETF for financials highlighted a couple of nights ago for it's distribution put in a star confirmed by a bearish engulfing pattern.

USO put in a nice star with a huge bearish engulfing candle today.

I haven't updated USO's 3C chart in awhile it's interesting today and definitely shows why it's such a bearish close.

You can see the negative divergence building since October. Today's gap up was met with a leading negative divergence seen at the second arrow. In essence, the gap was sold off right from the start. USO lost -2.26% today.

Last month there had been signs of accumulation in the dollar, they dissipated and then the last few days have been making an appearance again.

While I can not say that today's market averages were HORRIBLE, I can say we have seen some very distinct changes that come to the market or at least the retail side of the market as very surprising. The move in GLD, the move in USO, the move most certainly in the dollar and while not as noticeable on a chart, the 3C readings which are positive in financial inverse ETFs and negative in financial ETFs.

On the Positive side of 3C divergences recently: FAZ (Financial bear 3x leveraged), TZA (Small cap bear 3x leveraged), SKF (Ultra Short Financials), TWM (Ultra Short Russell 2000), TYP (Technology Bear 3x leveraged), BGZ (Large Cap bear 3x leveraged), FXP (Ultra short FTSE/China 25), DTO (Crude Double Short), DXD (Ultra Short Dow -30), QID (Ultra Short QQQQ), PSQ (Short QQQQ),  SCO (Ultra Short DJ-UBS Crude Oil), EEV (Ultrashort Emerging markets), EDZ (Emerging Markets Bear leveraged 3x), SMN (Ultrashort Basic Materials)

As for ETFs that have shown negative divergences that may be in different timeframes, but ultimately I consider to be important:

FXE (Currency Euro Trust), UDN (US Dollar Bearish Fund), UYM (Ultra Basic Materials), DJP (UBS Commodity Index Total Return), DBC (Commodity Index), UGL (Ultra Gold), HAO (China Small Cap),  SLX (Steel ETF), VGK (Vanguard European ETF), IAU (COMEX Gold Trust), GSG (Commodity Index Trust),  EWY (South Korea Index), VWO (Emerging Markets), EDC (Emerging Markets Bull 3x leveraged), EEB (BRIC ETF), VPL (Vanguard Pacific ETF), OIL (Crude Oil Index), DIA (Diamonds Dow Jones 30), DBO (DB Oil Fund), QLD (Ultra QQQQ), RSX (Market Vectors Russia), DDM (Proshares Ultra Dow), XLK (Select Sector Technology), SPY (S&P-500 ETF), OIH (Oil Service ETF), FXI (China 25 Index), EPI (India Earnings fund), SSO (Ultra S&P-500), ROM (Ultra Technology), SMH (Semiconductor ETF), XLF (Financial ETF), MVV (Ultra Mid-Cap 400), BGU (Large Cap Bull 3x leveraged), TYH (Technology bull 3x leveraged), UWM (Russel 2000 Ultra),  USD (Ultra Semiconductor), TNA (Small Cap Bull 3x), FAS (Financial Bull 3x)

These are not cherry picked, this is an index of ETF's that I've used to backtest some trading strategies. I think if you go through the ETFs that have positive divergences at the top you will find nothing but bearish ETFs, if you go through the second group that show negative 3C divergences, you will find nothing but bull ETFs. No two ETFs have the same divergences, but all I consider to be important as they are not just 1 min charts, they are substantial time frames with multiple confirmations. I haven't looked at ll of these in such a comprehensive way until today and I was kind of shocked that not 1 deviated from the path, the path which seems quite bearish for the market in many different industries.

Before 3C, and before the market was really manipulated by the Fed, (Pre 2008), I always had a good feel for the market direction by the number of good looking long or short trades. This is a similar concept although more effective and comprehensive.

Tomorrow we have some important reports due out, although I'm a little distrusting after seeing the revision rate of reports accelerating. In any case, we have non-farm payrolls, non-farm private payrolls, the unemployment rate, wholesale inventories and a few more. Tomorrow may be a watershed day, it may be nothing. Quite often though you will find that things you believe to be bullish reports are sold off, and bearish are bought-it's Wall Street. I'd recommend taking a look at some of the ETFs I provided above. If you have specific interest in any, feel free to email me and I'll try to get you a more detailed account.

ADBE Second Glance...

This one looks to have been setup for a few days, this is a 30 min 3C chart and I backed it up to 1 bar (30 minutes) before the breakout.

Before the lift off, this was already in a huge positive leading divergence. Prices are close to their lows and 3C is near a new high. This has been planned for several days.

Count ADBE in on the PARTY

HFT firms? ADBE, although I'm not sure of their weighting, was also probably a contributor. Take a look at the volume.

Intervention

As I said, the question was whether the bear/bull flags would see the false breakout which is so common. IT appears currency DID NOT SEE IT, instead equities, as usual did and they did by at least these two Patron Saints

So now the question is, "is this typical market maker money making" or "is this some kind of general market intervention?"

The seeming reversals now in both charts seem to suggest the first, but who really knows. As Usual, we'll have to wait it out and see who's playing the game.

UPDATE

The correlation is no longer the dollar, it just turned AAPL/SMH, take a look at the charts, you'll see.

Update

As you can see, the 3C chart has followed the Q's up, but it remains in a negative divergence.  A negative divergence is a negative divergence.

UPDATE

It seems the market is nearly perfectly correlated to the $USD right now, which in intraday terms is experiencing a bear flag. Now I know the chances of an upside breakout from a bear flag-the opposite of what is supposed to happen, is very high, I do not know if that same rule of thumb holds true for currency markets. I'd think there are more sophisticated investors in the currency markets, but who knows. So we have a bear flag, which way does it break?

Correction, there's a bull flag in the dollar, a bear flag in the market.

Update

The last divergence didn't hold, we can see one here on the Q's get run over by a sudden surge in tick volume. Lets see if this one holds.

Bulls testing Range support

There was a range prior to the Breakout on Tuesday, that range is serios support and the bulls are launching a bounce from there. There's a 1 minute divergence on the SPY. This is to be expected, especially at a range that held for over a week. GLD is also bouncing off a small positive divergence on the 1 min chart, but it looks like it's turning negative now (just starting to). The SPY is also starting a negative divergence around the top of this bounce. Next support level for the SPY at %115.15-$115.20

The Judo Concept

This is what we are seeing right now. I mentioned SPY $115.50 would be the next support, as each of these levels are broken the snowball gathers momentum. The False breakout two days ago also figures into the picture.

 DIA 1 min -as I said earlier, market makers weren't buying the gap up. Most of the 1 min charts are confirming the trend, but when they pass the red horizontal arrow and move a bit lower, they'll be in leading divergences.

 For the real trend, here's the DIA 30 min. chart.This really is already in a leading divergence considering where prices are, you can see the breakout on Tuesday was a false breakout and as 3C 1 min suggested, was being sold into-distribution.

 The QQQQ 1 min, again, this one is in a leading divergence, but breaking to a new low under the red arrow will worsen the negative divergence.

 The 30 min chart shows the Q's in distribution for awhile very clearly, also the false breakout on Tuesday. This is a powerful leading negative divergence.

 The SPY 1 min-green arrow means confirmation, but it is also in a negative leading divergence.

 The 30 min (out of scale to show the false breakout).

As I said, $115.50 would be next support, you can se the volume pickup on a break of that level.

GLD is now engulfing 2 daily candles on huge volume.

The EUR/USD Hourly Chart

You can see why the dollar has gained this morning, thus affecting Gold, the Market, Oil and many other commodities and dollar correlated securities.

As I have said many times, you see something strange on 3C that makes little or no sense, and only later do the reasons come to light and I'm not even sure we are that far along the reasoning side of this, but obviously smart money knows about things in advance and act on them.

$115.50 Next Support on the SPY Coming Up.

GLD Showing positive divergence

At 11 a.m. GLD started a positive divergence on the 1 min chart, it seems to be behind this recent move up, but again, how far does it go as volume has increased dramatically and the intraday lows have taken out the last two day's candles. The 5 minute chart is still looking bad.

GLD's Candle in the Wind

Again, an hour doesn't make a day, but look at today's GLD candle-then look at the volume, in the first hour it's already at the average day's volume and the candle has swallowed yesterdays and is moving toward Tuesdays. If this were a closing candle, we have not seen a bearish engulfing candle this size in the entire trend up since August went it went straight line-parabolic.

The Opening Gap

As you can see, the opening gap was almost surely doomed to fail.

3C didn't move up at all, not to where it should have been, which would have been a new high on this chart. So the Specialist wasn't liking anything about the open, wasn't willing to support it and faded the move instead.

ECB Press Conference May Have Been Behind the Euro slide

In the press conference, it was said, "The US wants a stronger dollar" along with some other things, the timing of this makes a little more sense the the UE numbers. Again, who knew what, when and how?

Update

Unless I missed some other news, Wall Street is back to it's normal Willy Wonka state, good news is bad, bad news is good. The market gave up that initial gap in pretty quick order as the dollar gained against the Euro; making the strength we saw this week, rather the apparent accumulation we saw this week in the dollar a curious event to consider. As in, "Who knew what, when and why?".

Well, just as a day doesn't make  trend, an open doesn't make a day. Let's see where the rest of the day is headed.