The Wrap

One of the bullish looking trades that has been developing, despite the stronger dollar has been USO, the only reason I can think of would be inventories released tomorrow. If inventories cause oil/USO to rally, you can be sure the number was leaked because it's sure not coming from a weak dollar as the Euro dropped 2% today, which is just off a one day decline record for the year.

On the flip side of the coin, there has been some decoupling in commodities vs the dollar, gold gained today on a stronger dollar as did agricultural commodities.

Again today it was a heavy news day, in fact had it not been for th Korean conflict, you'd notice the flow of news and fundamental problems and mysteries is accelerating, whether it be out of China on fear of monetary policy tightening, out of Europe on fractures in the E.U. And the rising risk of a Spanish bailout and “Contagion” or the other-wordly, all out war the SEC, FBI and Justice Department have taken up against every type of institutional fund, adviser or trading firm. Why they are doing this and why now is a complete mystery. I was asked if I think it'll effect 3C, it may very well effect the market as funds see increased liquidations and legal costs-which will be bearish for the market and depending on how deep they dig, they may hit a few unintended causaluties, or better put, “Friendly fire” against some institutitons that they really don't want to rock right now. As for 3C, it tracks accumulation/distribution, funds will still take massive positions whether they are less informed or not, 3C should continue to see those positions. Maybe in cheaper stocks that are more apt to be manipulated, but I doubt it'll have any negative effect.

The 3C charts today were very suspicious, I resorted to looking at MoneyStream just because the 3C charts didn't drop at all like I'd expect. MoneyStream did drop, and badly, but it's more of a heavy blunt indicator and doesn't give the same quality of signals so I hop to see some return to normality tomorrow.

The daily 3C SPY chart looked like this...

On the daily chart, we did in fact see a big move down and that's where it counts the most. Also that zone of support is pretty close. It looks like we'll be adding to short positions this week. EDZ is near the top of my list.

To be honest, the news is getting to the point where it's pretty hard to keep up with and none of it has been good. I can't imagine this market can go too much further either up or lateral without an extreme shift in sentiment. Judging by today's losses, that sentiment shift may already be under way. By the way, they were on increasing volume as well-a sign of panic.

I love the markets, but I actually can't wait for Thanksgiving. I'd like a day to step back and see something in the puzzle that seems to be eluding me and sometimes a day away from the markets allows you that perspective.

The Euro right now is just starting to turn down from a light 7 hour bounce. If recent history is our judge, then we'll wake up to another story out of left field and a Euro that is tanking again.

Be sure to take a look at the recent ideas I've posted, especially any of the several wedge pattern trades, their all starting to move out of that zone of volatility from their breakouts that requires wide stops and the fact that is happening means the trades are working as they are supposed to.

I think I'll be up extra early tomorrow morning, and probably for no good reason. It may be the one day when nothing interesting happens. That would be nice, it would give me some more time to put out some more trades for you.

WOW, SEC is doing what?

The SEC, FBI, Justice Department seem to be going after everyone in every class, HFTs, Hedge Funds, Mutual Funds, Prop traders, Data Analysts, and any other type of institutional firm you can think of.

Quoting George Bush, "They opened the Spigot" and the flow of news from the US securities investigations is truly unbelievable as the suits are raiding and visiting just about everyone, or at least they seem to be headed that way.

I wonder why they don't start with Brian Sacks and Ben Bernanke, manipulators extraordinaire?

EOD Update

Indicator wise, it's been a very strange day. I decided to show a couple of views of the same chart and add Don Worden's MoneyStream to the charts

 The DIA 1 min 3C isn't showing much of anything, it's pretty much in line with price. However, you can see a dramatic plunge in MoneyStream right of the open that has shown no signs of improvement today.

 DIA 5 min shows only a very slight upward deviation from inline toward the end of day, this isn't an overwhelming positive divergence, but it is slightly positive, MoneyStream on the other hand plunged horribly again and shows no sign of improvement today.

 Here are the Q's 1 min zoomed out, it appears to be positive, because 3C did not fall as far as I'd think it would. Again, MS plunged and has been worse all day.

 When looking at the same chart on a tighter zoom (3C's pattern is the same) you see it is inline with price and MoneyStream shows more detail as it continues to drop.

 QQQQ 5 min chart is actually in line although due to the zoom factor it appears to be higher, this is not a positive divergence. MoneyStream shows the plunge again.

 The SPY 1 min shows the same positive divergence toward the EOD I mentioned before, MoneyStream plunged and is not confirming the positive divergence, but 3C tends to pick up on small sublties better so I'd guess that is a real positive divergence in the SPY 1 min chart.

 This is the exact same chart as above, just zoomed in closer, you can see there is a positive divergence, but it is not as big as it appears on the chart above, furthermore MoneyStream is near the lows of the day.

The 5 min chart in the SPY does show a slight upward-in-line positive leaning, again, it did not drop down to the level in which I'd expect, MonsyStream did. I assume there's some sort of PPT manipulation going on here. I haven't seen this situation before.

In any case, if there is any strength or positive divergences, they seem to be centered on the SPY which has the largest exposure to financials and as I showed earlier, XLF has shown some positive divergences today.

Update

The Euro has been somewhat lateral with some slight upside for the last few hours.

 The DIA 1 min isn't showing much

 The QQQQ's are mostly inline and doesn't tell us much either

 However, the SPY (with financials) is looking positive. Remember I updated XLF looking better.

 UUP is now in a negative divergence, the trend is nearly the opposite of the Euro.

And here's XLF.

If I had to guess, i'd say that XLF will lead the SPY higher intraday and probably drag the rest of the market with it. Today has bee a strange day and although I can't pinpoint where it's coming from, it seems the PPT may be in action trying to prevent the market from plunging.

Trade Ideas

Above is an example of what I was talking about last night, Channel Busters, although last night we were looking at a linear regression channel, this is my Trend Channel. The first example is the doubly serious upside, downside move that snowballs due to the false breakout. The second example is a smaller example of the same.

On the daily chart above we see the serious move down after the parabolic false breakout. The question is whether the current gap up is also a false breakout?

The 15 min 3C chart suggests it may be a false breakout, this could of course lead to a snowball sell-off effect.

The 5 min chart suggests the same, although we are seeing a positive divergence suggesting a bounce, which could be helpful for better risk management entries.

There's obvious resistance around $39. If you like the trade, you can put it on an alert watchlist and wait for a bounce, or you could phase into the position. With world events happening as fast as they are, technical bounces could be irrelevant.

You know how I feel about the Real Estate market, MAC may prove to be a Chanel Buster.

The first part is complete, the bounce looks to have failed at the lower LN line.

Both bounces that are of concern on this chart show up as negative divergences on the 15 min 3C.

Again, you can wait for the bottom channel to be penetrated and look for a possible “kiss goodbye” or you might consider phasing into the trade. The Trend Channel stop out for the uptrend is at $43.65, that may be another potential area of interest for an entry.

Here's another possible channel buster-FOE

The daily chart shows this breakout as a negative divergence as this looks to have seen a long run of distribution. The parabolic moves or channel busting tends to come at the end of the trend. I would be interested in this trade if it were to move below the top channel.

shows the same negative divergence on the channel breakout.

The 1 min chart shows a leading negative divergence.

AAPL's most unambiguous charts

 10 MIN


60 MIN

1 DAY

USO Update

While the 30/60 min charts have not changed and still look bullish, the 1 min is showing a negative divergence.

Financials Bounce?

 XLF 1 min positive relative/leading divergences

 Same for the 5 min chart..

The hourly chart shows a relative positive divergence.

Some members have commented that based on the dollar's strength in today's session, it seems the market is being supported from a much more vicious fall. I'm inclined to agree.

Fundamentals Update

Last night I talked about the obvious things-with an analogy “keep your eye on the prize/the ball” and suggested looking where the focus is not. This may not be the best example, but as tensions in the Korean Peninsula dominate press coverage, one of the most risky things that could happen in Europe, Spain needing a bailout, just got worse. Overnight Spain's spreads widened to record highs. Last night I said I thought the EU had Ireland under control and could probably absorb a bailout from Portugal as well, the real trouble would be Spain. It seems I may have been wrong, very wrong. The German Finance Minister said this today in a budget speech to Parliament:

"In this context, I want to say very clearly that our common currency is at risk,"

"We have to assume responsibility," he urged. "If we can't defend our currency effectively as a stable currency, the economic and social consequences for our country and the people in our country would be incalculable," he warned.

We haven't even reached the details of Ireland, much less a Portuguese bailout.

HERE'S ANOTHER ONE OF THOSE WEDGE PATTERNS WITH A NEGATIVE DIVERGENCE I LOVE LATELY IN THE FXE EURO TRUST ETF-If we get a close around this area, I think we are reasonably out of the breakdown range of volatility and a decent entry zone.

In addition, the Swiss are sounding early alarm bells regarding the strength of their Franc which is killing their exports. The Eurozone is looking worse everyday. There was a website that took all kinds of bets regarding everything from sports to elections and it was pretty accurate, I wonder what their current bet looks like on the EU totally collapsing?

Last night at Trade Guild I published this article,

“The SEC Grows Some Misplaced Teeth” 

In addition to this article, the NY posts that the next target are the HFTs (High Frequency Trading Firms) and prop trading, which is an ongoing battle that has been in the works for years. Basically day traders can get a series 7 license and wok-and I use that term very loosely, for the firm. They trade their own money and have access to absurd levels of margin. Now don't get me wrong, I'm all for a more transparent and level field in the market, it's just this manipulation ad inside information has been going on for over a century with almost no action from the SEC, and now the Justice Department and FBI. The question is why now? Could it have something to do with the HFT firms effectively replacing the institutional bank's market makers and specialist system? I really don't know, but this is not a new issue in the markets, the SEC actions are new and it makes one wonder, “Why now?” when they've spent decades doing nothing other then picking on some high profile societal figures like Martha Stewart? UPDATE-Hedge Funds are now being targeted as well!

Last night I tangentially mentioned bank runs, well guess where they are now commencing...? Ireland and the money s going into Switzerland, which is exacerbating the problem noted above in the Swiss currency. Again how long before the E.U. Just totally collapses? With contagion running on it's own despite what the EU does, it seems the Union's destiny is already written on the wall. One word... “FXE”

Another hint the Tech sector is falling apart. BRCD beat by a penny but gave weaker guidance then Wall Street expected. BRCD is currently down over 9%. While BRCD is probably not the best fit within SMH, I've recently showed charts of SMH showing weakness in the tech ETF. Here's a more current update.

 SMH 10 min chart breaking at the highs on a negative divergence

SMH hourly showing the larger problem in the tech space, especially semis. If we do see a bounce, we may very well see sector rotation, to what? I'm not sure, financials, PMs, etc.

Asian shares traded down due to continued fears of China tightening and raising interest rates

 Here's that wedge pattern I love with a positive daily divergence and a breakout that looks pretty safe from the initial breakout volatility area.

A close here or higher looks like a pretty decent area to enter the trade as it has moved out of the volatility area. The last 2 night's I've ben discussing how successful these patterns have been and how they are showing up as shorts in the sectors that have been pumped lately.

South Korean President Lee Myung-bak escalated tensions on the Korean peninsula by ordering his military Tuesday to strike North Korea's missile base around its coastline artillery positions if it shows signs of additional provocation.

As for today's POMO, it came in weak, it should be a non event.

Updates coming ....

USO

USO, thus far is in better condition the I would expect. I mentioned last night this may be a snap back trade in which the dollar (this rarely happens) doesn't mater due to the oversold nature of USO.

 USO 1 min showing a negative divergence on the 1 min chart last night, we got the gap down and a positive divergence early on this morning. Right now we even have a leading positive divergence.

 The 5 min chart has showed the more important accumulation going on as USO headed lower, this is the underlying strength of a security that I mention. Right now, we have a confirmed price trend.

The hourly chart which has been the most important in the bounce analysis has shown a 3 day positive divergence. I think considering everything, USO looks surprisingly good.

ADBE

THE FLAG IS BROKEN. This is a trade I just featured on the short side...

 ADBE 30 min 3C and the flag portion...

The daily ADBE chart...Watch volume, it is already increasing. I think this trade can be entered in a number of different ways, including a stop in the flag or phasing in. The target is at least $20 according to the measuring implications of the flag. I don't see anything currently that suggests a bounce.

For those who entered long positions today

On the SPY and QQQQ there are the first hints of possible 1 min positive divergences that may form, the DIA is not showing that. So far the Euro is showing no signs of letting up on the downside.

The US Dollar

As you know the dollar has an inverse correlation with most commodities, including the P.M.s and equities. I've ben talking about these wedges with divergences being some of my favorite patterns.

The daily chart of UUP. If the chart closes anything like it looks like now, I'd guess that we are out of the breakout zone of volatility these charts have been seeing and the dollar or UUP more specifically should have an upside target of $25 or so.

The P.M.s

GLD is a bit stronger today as it was deeply oversold, but I think the strength in the dollar is having a negative effect on the precious metals.

 GLD 1 min with a recent negative divergence that may turn this trend around in the near term intraday.

 GLD 5 min showing the white positive divergence leading to the move up, the 5 min is in a leading negative divergence.

 The 10 min GLD has not confirmed the move up yesterday and today

 The trend is rather new, so I don't think it's made it to the 30 min chart as we just see green confirmation. The red divergence was the pullback.

 The hourly chart is likely also not seeing the recent shorter term chart action yet and is showing a confirmation, but relatively speaking it is still too low compared to the highs at the left to be considered a leading positive divergence.

 SLV 1 min shows the negative divergence late yesterday and a slight positive divergence this a.m.

 The more serious 5 min chart is still in a negative divergence. Right now the 1 min chart is not showing strong enough positive divergences to effect the 5 min chart.

 The 10 min chart is also showing a negative divergence.

 The 30 min shows the start of accumulation on the 17th leading to the latest move up, but we are seeing a negative divergence now, reflected in greater detail on the 10 min above.

The hourly chart still looks pretty decent.