Looking To Tomorrow

As I said earlier today, "Whenever the market is dull, you need to be extra vigilant". Call it the calm before the storm, or perhaps it's one of Wall Street's gimmicks to catch you off guard, but dull markets always force me to be extra vigilant at a time when my mind naturally wants to wonder off in boredom.


In looking through a lot of charts tonight, I decided to take a look at my "go to chart", AAPL. AAPL is important because of the degree in which it is weighted. I'm not sure what the new weighting is for AAPL since the NASDAQ rebalanced the NASDAQ 100, but formerly it stood at approximately 19% of the index, which was equivalent to approximately the bottom 50 NASDAQ 100 stocks combined, so a move in AAPL has disproportionate weight on the rest of the market. If you want AAPL's true weighting, as NASDAQ keeps it as a proprietary formula, you can pay up the $10,000 they want to disclose the indices current weight for each stock. That alone tells you something about how Wall Street is rigged.


In any case, here's AAPL...

 AAPL held today at a long term support level, this is important for AAPL and for the market.

 Looking at the 5 min intraday chart of AAPL we see some interesting behavior. Friday at the end of day and on the open this morning, AAPL staged a shakeout below support, just look at the volume in the red box to the left. A second shakeout occurred on the market dip today at 1 p.m., note there was significantly less volume, this is important because of the fact that I pointed out Sunday night, Friday's price / volume relationships were dominant at price down/volume up or short term capitulation often associated with short term market bottoms. The second shakeout had little effect and a third penetration of support near the close actually saw some bullish volume. Now compare to the intraday 3C chart below.



Note the positive divergence at the first shakeout (Friday and today's open), it appears all the stops triggered were accumulated. Subsequent shakeouts today saw 3C move into a very positive leading divergence. This is bullish behavior.


Now lets look at the SPY

 Remember the Trade Guild post I just put up about false breakouts/breakdowns? Today's close was slightly positive, but what was important was the lower low today serving as a shakeout-these remain some of our best timing indications. Plus the fact the S&P held its ground and lost downside momentum. The candlestick formation of the last two days is also a bullish reversal pattern called a Harami. The heavy volume on Friday also looks very much like the Price/Volume relationship for Friday-short term capitulation which allows a reversal to form.

 Looking at the closing 3C data for the SPY, it looks a lot better then the last post of the SPY I put up before market close. 

 Here we see today's 1 p.m. dip which broke to a new low, but did so on a 3C positive divergence.

The SPY 60 min chart has a very strong positive divergence. Any bounce that materializes from this point, should have a pretty decent move.


Finally in one of the most significant and under reported news items today,  the Wall Street Journal quoting the Dow Jones Newswire said,


"Fed Chairman Ben Bernanke has told people that he agrees with J.P. Morgan CEO Jamie Dimon on over-regulation and the Dodd-Frank rules being not clearly written, Fox Business Network’s Charlie Gasparino reported Monday."


This meeting with Dimon which I speculated about last week on our FAS trade after it seemed Wall Street was aware that the NY Fed announcement was coming at 2 p.m., based on a discussion Jamie Dimon had with Bernanke 3 days before arguing that the stricter financial regulations were not properly considered for their ramifications. Bernanke seemed to agree and I believe Wall Street was well aware of it before the 2 p.m. announcement was made that the Fed was considering lowering the BASEL reserve requirements from 3% to 2-2.5% which sent financials higher with our FAS trade.


Following this, today the Wall Street Journal continued that Bernanke believed the bill put forth by Dodd/Frank lacked clarity and that enforcing it would hinder growth-the same argument Jamie Dimon made at the meeting in Atlanta on June 7th.


It seems that Bernanke's position is the same as JPM's CEO, Jamie Dimon which is lending support to financials which I already mentioned, performed well today on a relative basis.


This could be the catalyst to start a bounce, it certainly seems it has given the market a foothold from the prevailing downtrend which has been in effect.


I suppose we'll see over the next day or so, but it seems to me that things are starting to pull together.


That's the view of the trees, the view of the forest is still quite dark and any bounce in the market should be viewed as an opportunity to get short positions in place at a better price point, with less risk and a higher probability.