Update

 DIA 5 min -the DIA has been a bit more stubborn today, but the 5 min chart shows clear distribution  with a leading divergence.

 QQQQ 60 min, shows a bearish ascending wedge with negative divergences/distribution that has broken down. It too is in a leading negative divergence.

SPY 1 min the bear flag is in the red box, it's still in play and we may stil see a bounce in the area as black-box systems identify these technical patterns and create volatility around them. The negative divergences are clear.

Market Update

The averages have been treading lower after the initial negative divergence I posted this morning. They are all now in bear flags, which are very often manipulated. This seems like a reasonable time to expect to see an intraday bounce-it may offer opportunities in any shorts you may like to enter at a better cost basis.

A Few others...

FXP and EDZ have been on my long list, both are performing well today.  FXP is a little harder to buy here as it is a bit extended, but it also is breaking out, which can lead to follow through gains. If you like the position, then you may want to consider phasing into it.

EDZ also has a decent gain today, but it is closer to support and hasn't broken out yet. I like both.

We have recently bought SRS, hold FAZ and will add to FXP and EDZ on pullbacks.

SRS Update

A few days ago I said I liked SRS long (ETF which is a leveraged inverse/short real estate).

The white box shows the pullback I considered a buy a couple of days ago.

 Here is the daily 3C positive divergences/accumulation in SRS

Also the long term pattern is a bullish falling wedge with an upside target of $32-volume is correct for the formation as well. Wedges have been pretty successful patterns lately, in part because they tend to be so large and see less daily manipulation or in other words, the patterns may see some volatility, but they rarely fail.

 Here the Trend Channel kept a short position open through most of the fall from the $31 area to about $21, there wasn't even a single false stop out. Right now the Trend Channel which will lock in gains on a daily basis as the trade moves up, is showing a current daily stop out of $18.70-this is not intraday price action but on the close.

Right now we have a breakout from a smaller triangle, but if successful, SRS should breakout of its recent resistance around $20.04.

A longer term trade can use the Trend Channel with approximately $1.25 in risk per share or a shorter term trade can use the triangle to stop out around $19.50 for about $.43 risk per share. 

A 200 share position in the second trade would see a loss of about $86 if the trade failed with potential upside of $2400. The longer trend trade which would have a higher probability of not being stopped out, would have about $250 in risk with the same potential target of $2400-in either case, the risk reward ratio here is very high. It's a trade worthy of consideration.

Market Update

 DIA 1 min

 QQQQ 1 min

SPY 1 min

USO Update

One of the best short term trades we've had in USO was a build on an expected drawdown, USO fell in the hour ahead, but showed very positive divergences, some members took a long position as USO was at the lows (turned out to be the lows of the day) based on positive 3C divergences. They made a nice profit that day and over the next couple of days.

Today we have the exact opposite, a huge drawdown, way out of whack with consensus, USO has rallied off this morning's opening lows, but shows a negative divergence forming

This scenario of contrary trade may play out again, it seems to do so in USO every once in awhile. I'll b watching for a test of this morning's highs at $38.24 and see if the divergence is worse. A speculative trade may consider taking a short in USO with an intraday cover past the highs of the morning, in other words cover if a new high is made. Right now the risk on that trade would be about $.24-$.30 per share. Or the other trade scenario, a test of $38.24 that fails with a continued negative divergence.

SCANNING CONTINUES

I'm running more scans tonight. Last night I mentioned resorts and casinos look bad, of 239 industry sub groups, they were the 5^th worst performing today, down as a collective, -2.29%

Residential construction was in the top 10 worst performing of 239 today, while our SRS position gained another 1.75% today. Regional banks (financials) were in the top 4 worst performing of 239. Retail was the top 15^th worst performer-again of 239. Filling out the top 20 worst performers were variations of these (i.e. residential REITS), including semi conductors mentioned as well.

Here are some areas of weakness in the market I've identified using multiple criteria in extensive scanning. There are pockets of strength as well, but as I posted last week, the market breadth is falling apart and financials which rotated into upside momentum have steadily deteriorated and today we saw that again with FAZ gaining some upside traction.


There are quite a few groups I've identified, the trick is to catch them at a time in which they provide high probability, low risk trades. 


The initial Sectors identified include:


RESORT AND CASINOS
REITS (RESIDENTIAL, RETAIL, and OFFICE)-tonight's trade list feature REITS-make sure if you choose more then one, they are not in the same space. I chose these tonight because they offer excellent risk:reward setups now.
LEISURE
REAL ESTATE
DIVERSIFIED INVESTMENTS
AGRICULTURAL CHEMICALS
COMPUTER HARDWARE
SURETY & TITLE INSURANCE
MAJOR AIRLINES
REGIONAL AIRLINES
FOREIGN REGIONAL BANKS
CLOSED-END FUND-DEBT
UTILITIES
TOBACCO PRODUCTS
DIVERSIFIED UTILITIES
AEROSPACE/DEFENSE
MAJOR DRUG MANUFACTURERS


Tonight I'll be running long scans. All of the above groups are now in sorted watchlists, when they provide good positioning, they'll be on the Trade Ideas List. A word of caution, the low risk entries are only an advantage to you if you use proper risk management and position sizing. If you have any questions about that, please feel free to send me an email. Don't forget to check out the new trade ideas and set alerts for the new trade ideas, although many can be taken now at market.