Eurozone Contagion-Again

Tonight I listed several more trades, several of them are European banks, their stress tests have been deeply flawed. Tonight the Euro is razor thin to the $1.30 level which may push the dollar up to new recovery highs. Commodities are going to be an obvious causality if this happens. Oil too-see posts on USO lately.

Multinationals are already showing signs of trouble-MCD which we have covered, but also take a look at KO, it's broken its trend ad probably will make for a good trade, but the setup right now is a bit risky, a bounce would be great there. Tomorrow I'll be looking at other multinationals.

It's a bit complicated to get into now, but the Fed's buying of treasuries, is becoming more and more dangerous for the Fed itself. I've also been talking about the oversight of the Fd by one Ron Paul, who will be looking to strip the Fed of its dual mandate and have it handle inflation alone. Expectations for QE3 I suspect will start to diminish and the markets, attitude of "There's no risk with the Fed here" may have already started to shift. This week should be the end of the clean up after last quarters window dressing and this is why you are starting to see more long term trades.

The Euro bank trades I posted tonight are worth a shot and many at very low risk. The difference between amateur and professional traders is that amateurs take one shot at a trade and if it stops out, they forget about it. Pros use risk management and thus are able to take several shots at the trade until they get the position they want. The risk on the trades I posted tonight will allow you (if you use risk management) to take several shots if need be. I think the talk about bod holder haircuts in europe that have re-emerged just today, will have a dramatic shift in sentiment for the continent.

Take a look at tonight's trades and if you have questions, let me know.

Tomorrow we'll be looking at lot closer at commodity trades, with the dollar n a position to pt in some big gains-WATCH COMMODITIES and when the trades arise, I'd suggest making a decision on them-I think there's going to be some interesting events to the downside, GLD and SLV are also two to watch, they have broken support and while they re still in the volatility range to bounce around it, in a few more days we should have an idea of what the PMs plan to do-there may be some Swing trades in the PMs.

Market Update

 10 min QQQQ seeing selling pressure-usually on the 10 min timeframe 2 divergences produce a reversal, we have 2.

 The SPY flag I spoke of earlier has ended, you can see there was distribution in the flag as well.

XLF 5 min is also showing what looks to be a reversal as distribution has been present since noon yesterday. This will also put pressure on the S&P

AAPL Swing Short

 AAPL is breaking support rather drastically. This may be worth a shot at a swing trade.

 $334.50 is the stop I have assigned here, but you can adjust it higher or lower. With the small amount of risk, the trade is worth a shot.

The negative divergence into the highs was expected yesterday, but the downside leading divergence seems a bit extreme.

STI SunTrust

There's something about today's trading action that doesn't look right in STI.

First an intraday break of support on increasing volume.

3C distribution into a false breakout attempt and heavy subsequent distribution.

I'm ok with the short trade here and now, despite the possibility of an oversold bounce. It's on the new Trades list and the stop is at the red trendline. See the trade list for further details.

Market Micro Update

As I suggested in the last post, the decline from today's intraday highs was pretty severe intraday, I suggested there may be a bear flag developing and the 1 min chart seems to indicate just that. We'll have to watch for signs of distribution on the 1 min to know when it's ending.

Bear flags always consolidate away from the preceding downtrend in an upward slanting parallelogram

Market UPDATE

Before I move on, I just want to let you know we are experiencing an pretty intense electrical storm here in mostly sunny (but rather cold) South Florida. The lightening is within a half a mile and is shaking the house so if I lose service temporarily, you'll know why.

Lets hope that doesn't happen.

In any case, the market tried to squeeze in a new high this morning. There's a lot of things boiling up under the surface around the world-later tonight hopefully I can address a few, but one that is shaping up to me a major disturbance is the issue of Eurozone Bank Bond-holders "Haircut" theme which as of this morning was back on the table. I'd expect we'll be seeing some more very poor Eurozone auctions especially among the periphery.

Here's what our markets did this morning and it's important because of that concept I've mentioned a half dozen times this week, the concept of a "False Breakout" and the aftermath which is generally a quick and painful move in the other direction-it was just covered in the USO post. Is that what we saw this morning?

 DIA 5 minute 3C chart-note the negative divergence at the attempted break higher in the red box. We saw a pretty substantial intraday sell-off from there over the next 30 minutes and may be forming some sort of bear flag consolidation/continuation pattern.

 QQQQ 10 min 3C chart, we saw the same action this morning, again in the red box, but equally disturbing is the negative divergence that was forming up yesterday into the highs, suggesting that the upside failed breakout may have been nothing more then a run of the stops and /or a bulltrap.

And the SPY 10 minute chart, again the same theme.

I've added some more trades to the January trade list and have updated some stops from older trades that several of you are in.

USO Follow Up

Friday I started growing suspicious of USO's 3C chart, Monday I saw what I believed to be a false breakout and since then we've seen about a 2 point decline.

This coincidentally is around the same time the dollar was seeing positive divergences as these two have an inverse correlation.

There's a zone of support around $37.40 or so, watch for a break of that as false upside breakouts as we saw Monday tend to lead to fast and fairly deep corrections.

ABCW a C&D trade, just triggered at $1.36

The Dollar and Euro

Obviously yesterday's bad auction in Portugal on short term 6 month bills, with the yield nearly doubling has set about another round of contagion fears and as such the Dollar is gaining while the Euro is sinking.

I've been bullish on the dollar since October seeing this pattern and the accumulation associated with it. These wedges continue to be successful patterns, but they are nowhere as easy to trade as they use to be and require wider stops. As you can see, today the dollar broke out of a large consolidation pattern. My target for the US dollar is via UUP is up around $25.50 (Wedges retrace their base-is a good rule of thumb for setting price targets.)

Here's the 3C chart that shows all of the early 3C signals showing the change of direction at each turning point.

As you can see, the red negative divergences have consistently led to sell-offs and the white positive have led to rallies.  We're in a rally phase now and being we broke resistance today, it may be an important one with the next leg moving higher. Typically this would have negative implications for commodities including precious metals as we have seen this week in a few featured posts on GLD and SLV. It effects other comodities and equities, especially multinational corporations. Perhaps that's part of the MCD weakness we have observed.

Here's the Euro trust.

You can see the target at minimum in white.

As of this a.m., the Euro is trading at $1.3018, perilously close to the $1.30 level that many believe will lead to a technical breakdown.

Commodities are worth a look, as are the PMs and of course, if there's any correlation left that Brian Sacks hasn't destroyed, there may be some negative impact to equities.

CRIS AGAIN

This one already produced a profitable trade, it's now headed toward resistance at $2.16-currently a penny away. An alert will set off at $2.17

INTC

The INTC trade from the new January list is moving in the right direction, which is not a great indication of market strength being INTC is a bellwether.

I do believe this could be a good trending trade, but if anyone wants to trade it on a swing basis, email me for the swing stop.

CNXT a C&D trade just triggered long

WEST- a C&D trade just triggered at $.55

Keep an eye on SOMX, the trigger is >$3.49

I Hope Everyone Got the Message I Sent Last Night

Last night, unfortunately the text editor in Google's Blogger system wasn't working, I spent a lot of time on my computer trying to fix it, which was wasted time as I found out through their site, everyone was having the same problem so there was no analysis last night. I sent out a Google Group note about it, something I haven't used before. If you received it, maybe you can shoot me a quick email and let me know.

In any case, Quickly, a synopsis is this, another theme that's developing in the new year is the usually quite volatile Baltic  Dry Index is heading lower.

This is a composite of shipping rates for Dry Bulk Carriers as opposed to crude tankers. It can be a sign of the economy and many including Cramer-not that he invented it, but he does talk about it, use it as a forecasting indicator for the economy. Obviously the more demand for goods, the higher the demand for a limited number of ships and prices rise. However, I'm not using this in that sense. I'm looking at shipping as a theme that's developing and the falling profits, especially if oil rises. If this trend continues, I'll be looking at shipyards as well.

Last night I added 4 trades to the list, they are shippers, 3 of them are short and 1 is long.

 DSK is toppy looking, it's broken support-the white box is an area I feel it could rally to, I'd especially like to short it in that area.

GNK has in the past been a momentum crowd play on shipping so it can move and it can be volatile. I added this trade as either a market order or a limit order on a break of support, it depends on your tolerance for risk. If entering at market, you may want to adjust the stop up a bit-and take less shares initially. You can always add on a break of support.

 It looks like the recent bounce off support is under distribution right now, how much further it has to go?  There was about a week of accumulation before it so it could be a day or two longer I'd think, but that will also depend on the volume. You can always email me for an updated 3C chart.

 NMM is showing heavy daily distribution in this wedge, the breakouts from wedges can be volatile, so even though I like the trade in this area, I placed the stop up a bit higher to account for that volatility.

And here's a long, ONAV, it seems like it has a great deal of daily accumulation and I thought anyone who might want to run a pair, might take a shot with this one. It's actually just a penny or two away from the trigger now.

CPST has triggered at $1.05

GSI Just triggered a long at $2.97

TEST