Bounce tomorrow

This is a 1 min positive divergence I mentioned in my last post, an adept and nimble trader may be able to cash in on a quick move. I'm guessing we see a gap in the a.m., perhaps a close higher, but that's way to early to tell. The bounce is normal so don't be too concerned with it at this point.

As for AAPL, this is a dangerous trade to embark on going long. There were a lot of people today who have been conditioned over the last month or so to believe the market will act a certain way-for instance, AAPL will rise forever. When there's that kind of an attitude, Wall Street brings the pain to the masses.

 Here's the positive AAPl 1 min divergence

For a swing trader, this is the trend channel and the red box is the stop you want to watch for, then it's much safer to enter the trade short.

This is also my trend channel, this time it is set for a trend trader or investor, and in the red box, this is the stop where you should feel comfortable entering a trending/longer term position.

End of day ramp

There are 1 minute positive divergences in the Q's, the SPY and AAPL. You may see that bounce I mentioned or a gap up tomorrow, this is normal behavior.

Technical Analysis is About Going with the High Percentages

As I said, 85% of these patterns are recognized by black box trading systems and broken up. A bear flag should break down, end of story, this one did and then re-entered the bear flag. This is not commentary on the direction of the market, but how pervasive this event is in the market now. The popularity of technical analysis has made it easy for Wall Street to take advantage of "What traders THINK will happen". So traders see the bear flag, it breaks, they enter a short and put a stop in the bear flag, so they are taken out in a matter of minutes. Do not fall for this trap-it happens every time there's a common technical pattern. So a tool (technical analysis) is now a weapon, just used against you.

The Dollar vs. Euro

A lot of the weakness we are seeing across the board is attributed to the strength in the dollar, specifically today, but last week we saw the first warning signs of the Euro trend breaking with 3C showing dollar accumulation.

Please read annotations.

DIA as an example

We now have a bear flag in the DIA, experience tells us that the black box systems are likely (85%) to create a false breakout/down or two. The area to watch right now is the resistance level I've drawn in with the trendline. 3C doesn't look like an upside breakout is coming, but it can change quickly on a 1 min timeframe. A break above resistance is not automatically bad, it depends o what 3C looks like if or when that happens, but this is a serious break and the flood of margin calls could force the market lower.

Always Try to be Open Minded

The market is as dynamic a place as you will find, more dynamic then  a, well never mind.

In any case, 3C has been saying distribution in GLD-IT MADE NO SENSE!

3C has been saying a reversal in the dollar- IT MADE NO SENSE!

3C has been saying distribution in the markets  VERY HARD TO BELIEVE WATCHING DAY TO DAY!

I'VE BEEN SAYING THAT THESE MAJOR CALLS FROM 3C NEVER MAKE SENSE, THEY JUST SEEM TO WORK OUT IN THE END.

Smart money rarely gets caught with their pants down in the market, that is why 3C shows distribution, they sell into strength, as we saw before the rally started, more then a week before we saw an upside reversal, smart money was buying into the decline. That's just how the market works.

Here's the Dollar Index...

recent 3C signals have called for a reversal in the dollar, today the Dollar Index broke the downtrend on a big move for that index.

GLD seemed like the impossible short bet, and I'd still wait for further confirmation unless you just get your toes wet, but here's GLD...

This is a big time daily chart, they don't get more important then this, right about the time GLD hiccuped, 3C was negatively divergent-distribution and as GLD has made higher and higher prices, 3C has refused to confirm the trend-meaning there seems to have been distribution in GLD each day as GLD marched higher. Again, that's a big drop in GLD. For those with good risk management, I think you can get your toes wet, but I might wait for a bounce and 3C confirmation before committing serious capital to any shorts on GLD. Price action is the final judge.

The DIA, SPY and the QQQQ reversals-again, toes can get wet, but defense is the name of the game and there's plenty of room below. Bulls make money, bears make money, pigs get slaughtered.

 DIA 10 min chart. Remember last week or so I said there was negative divergences on the 1 and 5 minute charts and they will get more serious if they migrate to the 10 min chart. Here you can see, yesterday was used by smart money to GET OUT OG THE WAY-distribution and maybe some short selling. They aren't called smart money for nothing. Note the increase in volume as the trendline support is taken out.

 The QQQQ on a 15 minute chart, again, yesterday, "GET OUT!" was smart money's actions according to the negative divergence we see here. In the red box you can see a serious leading negative divergence forming. A break of the $50 level in the Q's will be a very important event, volume should be huge should that come as it looks like it will soon.

And as we saw yesterday in the SPY, higher prices into a negative divergence, this seems like a nasty bull trap. Prices were nearly vertical and 3C was going the opposite direction.

So we'll continue to monitor trends. I implore you to get up to speed on the risk management article posted on this sight at the top right corner with the other links. There's no need to rush into anything, let the market continue to confirm. WE WILL HAVE BOUNCES and those may provide excellent opportunities to enter positions.

On the Fed front, there were some serious speeches today from Fed members questioning the Fed's actions, I'll show you later. It was rather astounding, the degree of dissent and the language used.

Despite the ALL OUT RAMP ATTEMPT in AAPL

It seems 3C was right on, showing distribution in the 5 min chart as AAPL just broke an important intraday support level around $309.50

I'll be keeping an eye on this one.

IBM, I guess no one cares.

Remember, the CROWD was buying AAPL, I can't imagine how many margin calls are going out today?

AAPL Update

1 min 3C AAPL

5 min 3C AAPL-now in a leading negative divergence. Distribution seems to be occurring now.

Financials about to reverse....

 FAZ positive divergence

XLF negative divergence-1 min 3C charts

Update

 DIA 1 min negative divergence
 QQQQ 1 min negative divergence

SPY is inline on the 1 min, the 10 min chart shows a negative divergence.

More updates soon.

Not a Good Start

Maybe GS will open up, we'll see how long that lasts, but for AAPL, IBM and the market at large, this does NOT look to be a god start.

Overnight China raised their benchmark rate by 25 basis points, this probably explains the deal that was made so the US would not label them as a "Currency manipulator)", if you remember last week, that report was due out and at the last minute cancelled.

The net effect of this action will hurt the Chinese markets (just as 3C showed in the China 25 ETF last week), it should also hurt the US market a bit a help the dollar.

The dollar by the way, vs the Euro has now reached just about the level in which I said it broke it's trendline last week after 3C had shown a little more then a week of weakness.

So I'll be out for a bit, but be back soon and we'll see who's who in the zoo.

No Victory Laps

I'm a lifelong student of the market, not a guru, a learner. Therefore I don't take victory laps, especially based on after hours action. However I would like to point out the charts of AAPl showing the divergences, the short interest that was there in the beginning of September and nearly unchanged at the end of September. For all that think 3C wasn't doing it's job, it was showing you what was there, what was going on and if you think smart money was caught in this downdraft after hours, think again, it's more likely they perpetuated it. The flash crash in the SPY after hours was a pretty strange event to have occur wouldn't you say, especially after IBM had come out and gotten a real spanking, 15 minutes after the flash crash AAPL had it's turn in the wood shed.

Distribution of a large position doesn't happen quickly, it takes time and in a low volume environment (remember I told you the volume I think Thursday was the lowest in 190 days on the Dow) it takes even more time. The point is to buy at depressed prices and then they feed out shares into rising prices to come up with a good average gain.

After hours AAPL (which almost always blows away earnings, I can't remember the last time they didn't) was down -6.13%. IBM was down -3.31%. Even financials that carried the day were down in after hours.

We'll have to see how this pans out. While 3C shows the strength or weakness of a trend, I always want confirmation first. Today I thought FAZ was a good buy right near support and INTC I believe will make for a decent short sale.

The dollar as of right now has reversed yesterday's losses against the Euro and is headed back toward that region where I said the Euro looked like it had broken it's trend. 3C has been picking up on this the last week or so.

It wasn't easy to post the 3C charts showing distribution of AAPL because I know the game they play with earnings, but the objective chart is the objective chart. I owe it to you to give it to you the way it is and apparently it was correct in showing the major investments of smart money were being taken off the table as we approached earnings. There's been a "Buy the dip" mantra going around about AAPL even before earnings (just in case they disappointed), but I'd give 3C some time to see if that is what in fact smart money is doing or not.

QE2-whatever it is, seems (by Pimcos actions) to be largely centered on buying more toxic Mortgage Backed Securities-"Bail Out the Banks Part Two?". It seems they are going to need t sooner or later and probably sooner.

The Home builder Index came in strong, about a week or so ago (maybe a bit longer) I mentioned that I was seeing some 3C strength in Home Builders. NOW we know why. With title insurers hesitant or unwilling to write title insurance on Bank REO and foreclosure short sale properties, it seems that either private sales, of which there are not a lot or new construction is where potential home buyers will be looking-good for the home builders for a bit, so tomorrow we'll see who looks the best in that arena.

I can't control what smart money does, I do believe that 3C can show you. There have been a lot of instances of manipulation from HFTs to the Fed and Brian Sacks use of POMO to ramp the market, still persistent negative divergences have remained, just like the persistent short position that I'm 97% sure is largely smart money.

So tomorrow we go on, another day. I'll be out early in the morning but should be back in around 11 a.m. and I'll have some more ideas for you, especially as we work out our own nifty 50. Keep the ideas coming in if you have a stock you like.

Have a great week.