Today in a Flash

One of the most dull events was the FOMC release. Besides their delusion that core CPI is trending downwards, just December we saw that's not so. One of the more interesting events was something we've been talking about here since last year around November 6th-the fact that the Fed is about to come under congressional scrutiny from people who actually understand how destructive the Fed can and has been, that would be the Paul family. Today Rand Paul in the Senate (son of Ron Paul who'd like to abolish the Fed and now sits in a position of oversight in Congress) introduced legislation for a FULL AUDIT of the Federal Reserve. As I've been saying, Bernanke is about to have his sheets pulled. This should be incredibly entertaining and hopefully productive. Specifically interesting is this bit, that will strip away the Dodd-Frank bill protecting the Fed's opacity (in bold):

WASHINGTON, D.C. – Today, Senator Rand Paul introduced legislation allowing for a full audit of the Federal Reserve. This legislation is a Senate version of similar legislation long-championed by and introduced this session in the House of Representatives by his father, Congressman Ron Paul of Texas. Co-sponsoring the “Federal Reserve Transparency Act of 2011” (S. 202), are Senators Jim DeMint of South Carolina and David Vitter of Louisiana.

“We must take a critical look at the Fed’s monetary policy decisions, discount window operations, and a host of other things, with a real audit – and not just pay lip-service to the idea of an audit,” Sen. Paul said today. “At a time when we're seeing great volatility in small Euro-zone economies like Greece, Portugal, and Ireland, it is more crucial than ever that we have real transparency at our own central bank.“

The bill will eliminate the current audit restrictions placed on the Government Accountability Office (GAO) and mandate a complete audit of the Federal Reserve to be completed by a firm deadline, finally delivering answers to the American people about how their money is being spent by Washington.

How about a big Hurray! Finally some politicians that WILL do something.

As for the market today, as I said last night, the accumulation we saw on Tuesday highly suggested a green close today. However today we did not see the same level of accumulation, I'll show you.

As far as Price Volume relationships, they're all over the place, nothing can really be gleaned from that information. NFLX did report earnings today and was flying high in after hours, that may carry over into the market tomorrow. Personally I have the service through my Wii and will cancel it. Their idea of new releases is something like "Pretty Woman", the service isn't worth the $9 a month and I'm quite sure NFLX's valuation is quite high. Remember, After hours trading can be very deceiving, it happened to AAPL after earnings up 5%, then they sold the news in regular hours.

Here's a snapshot of the market today -I was surprised that the accumulation we saw Tuesday did not show more promise today. I will say that there was enough on Tuesday to support a couple of days of upside.

Here's the charts:

 SPY 1 min chart. I don't know why my text is printing, but in the white box it should read "good start". It didn't take an hour though before all upside was halted with the first negative divergence. From there, as I said earlier in the day, I'd like to look at 3C at a test of the day's earlier highs, we got that this afternoon and another negative divergence, and look at the volume toward the close-not pretty.

 5 min chart confirms the same thing and the day ends on the nastiest looking 5-min candle of the entire day on the biggest volume of the entire day. Remember, the pros tend to trade the close.

 more confirmation from the 10 min chart.

 and the 15 min chart? Confirmation.

 Now this is a real surprise, enough negative divergences to reach the 60 minute chart, that's saying something as it can take days for the 60 min to be affected.

Looking at the Heiken-Ashi Candles, in the yellow box, we saw a bunch of indecision candles, no momentum, Looking at the Bollinger Bands, we started the day walking the upper band (very bullish), that didn't last long and the wide volatility quickly narrowed significantly-this is a possible sign of a reversal, in either case, it's an inflection point. The closing candles were mixed, but the closing volume was ugly. Look at the volume by price on the left side of the chart where I have a white arrow. There's  lot of sell-side volume in that $129.75 area.

Either way, today was a disappointment. We'll see what tomorrow brings. There's some great trades, a lot of them are shorts, I'd like to see the market move a bit more to get those great set-ups. As I've been saying the past few days, something feels off with the US markets. We know something is off with the Chinese market and Europe? Give it a few days, it'll be back in the fear rotation cycle which should be good for the dollar (see today's dollar post).

Until tomorrow, have a great night.

Municipal Have to Take it on the Chin

Check out this article, I've talked to great extent about unfunded pension liabilities, I did NOT know how bad some of these were. Since I don't have a better idea on playing pensions, municipal bonds seem to be the way to go so presenting again, the short trade on MUB

Here's the article


MUB has been bouncing, we are seeing some initial signs of distribution meaning that a position in MUB may soon be looking very good as the correction ends and MUB continues its trend lower.

 15 min negative

 10 min negative

 5 min negative

 1 min negative

Here's a wide stop, the closer we can enter a short to that stop, the better the risk:reward ratio. I think municipal bonds which are already being sold in a wholesale manner are going to eventually lead to defaults in many states. From what I understand and remember, this is one area that the Fed actually thinks it doesn't have jurisdiction, which is probably more the Fed saying,  "we don't want to have anything to do with this mess" then a matter of jurisdiction as the Fed creates jurisdiction just like they create green cotton bills-out of thin air.


Put MUB on your radar-it's a pretty sterile trade as far as correlation goes.

Chart Requests-GDX, SLV, NEM, UUP

Many, many charts ahead! 

GDX

 GDX showing heavy volume on a 13.58% decline puts GDX in an oversold condition.

 GDX 60 min 3C chart showing the negative divergence at the top, it broke support and seems to have broken down out of a topping formation. Corrections right after such a break often will test resistance which is around $57.50-$58.25. The white arrow shows the positive divergence that has developed for the correction. There seems to enough accumulation there to provide a pretty decent corrective run up.


 a 10 min chart gives us a closer look at the accumulation which often occurs at price lows. 3C is also showing confirmation of the trend on this chart indicating that no major distribution has occurred yet.

 Here's the stop I would use if I was in a trending trade, a little north of $60

For those looking for a tighter stop, the $58 level is another trend channel stop. I think if you go much tighter you might as well just stop out here and now and re-enter the trade upon a reversal/distribution.

NEM

 NEM has clearly broken down from a top congestion pattern. Volume has been heavy and it too is in an oversold condition. Note my long version MACD is negatively divergent as well.

 NEM 30 min 3C. Distribution at the highs, there's some accumulation recently leading to this move up.

 Nem 1 min shows mostly confirmation of the trend with some afternoon profit taking

 I'd probably use a stop in the $60+ area as this has enough accumulation to run a bit higher.

15 min chart isn't showing any heavy accumulation so this is most probably an oversold bounce.

SLV

 SLV has declined 13% and is oversold and due for a correction. Again we see distribution as price highs, this is likely a midterm-maybe long term top. MACD is also divergent.

SLV shows a false breakout in the yellow box-as usual with false breakouts, the reaction was a sharp downturn. Yesterday put in a doji which is a high probability reversal candle as downside momentum fades leaving the door open for the bulls to take control.

 The daily 3C chart especially highlights the false breakout and the negative divergence associated with it. This is an area in which institutional money went short.

 the 60 min. chart confirms the false breakout as well and shows recent accumulation for a correction. Like I said above, these events are planned, not spontaneous.

 The 15 min SLV chart shows a decent amount of accumulation, it's likely this move s just getting started.

 More confirmation on the 10 min chart.

 more confirmation on the 5 min chart.

 The 1 minute chart shows confirmation of the trend, there's no real distribution to speak of except some late day profit taking.

Here's a recommended stop around $28.75. You may wish to raise it a bit.

UUP

 UUP is putting in a star (reversal candle) on increasing volume (increases the chance of a successful reversal.


 The daily chart has remained fairly positive despite the price trend. UUP will move because of the EUR/USD pair, but the actual ETF's accumulation or distribution is determined by market participants.

 UUP hourly positive divergence


 UUP 30 minute positive divergence

15 minute positive divergence of some consequence

Here's the bigger pattern, a bullish descending wedge and some base work. A breakout around $23.50 should start a trend up, in the meantime there's some support in the $22.25 area.

Chart Request...

I was asked to look at some miners including HL, UXG, EXK, URRE, TGB and DNN.

I haven't been able to take more then a quick look at the others, but HL I did look at. I feel this is a bounce and probably not the start of a new uptrend. The others I can't say the same for until I get more time to look closer at them. Here's HL's charts.

 This first daily chart is from Worden's new TC2000 (version 11 of TeleChart) if you need an excellent charting package CLICK THIS LINK. So what we see here in yellow is the volatility getting extremely wide, this is indicative of a top. The Heiken-Ashi candles used here are signifying an indecision candle which often is a short term reversal, but note how the red candles walked the lower Bollinger Band, that's pretty extreme downside action.

 Here's the daily candlestick chart, note where the volume spikes are. In the white box yesterday we saw a doji or morning star which is a common short term reversal candle and today we saw the reversal. MACD doesn't look good and I'm using a long setting to filter out noise, you may want to try it (settings:  26/52/3 exponential).

 Here's the daily 3C chart, in green we have price confirmation, in red negative divergences/distribution. I also included TSV 55-another long term setting that few people use, but it reduces the noise and lets you see something that most people won't. The red square around 3C is a leading negative divergence.

 The hourly chart reveals distribution in a top-like setting.

 The 30-min chart shows some of the accumulation leading up to today's move up. These events are not random, they are planned days in advance. You must understand that about this market, it is choreographed ahead of time, the outcomes are often known well in advance, this is due to inside information, leaks and just a much better flow of information. How many of us can have lunch or play golf with the CEO of a major company? However, we can often see what their doing.

The 5 min chart shows the accumulation yesterday at the morning star-lateral trends like that of a morning star produce nice even buys at low volatility guaranteeing those who are buying a low price. Often in the 1-5 minute timeframe it is market makers and specialists accumulating for their accounts as they have often filled the bigger accumulative order as seen above, so in a sense, they are front running the move.

The accumulation i fairly significant. Because of this, I feel we may see another day or to (maybe more) of upside. We need to watch for the unwinding of that long position and at that point this may make for a good short trade.

IOC Trade Alert

This is a short sale trade.

 Daily chart of IOC seems to confirm our view on the DUG long trade. Note the accumulation period in white, they marked up price at the green arrow and then started distribution at the red arrow. The recent leading negative divergence is leading and making new lows.

 The 10 minute chart is showing recent accumulation, this led to the move up today.

 Here's the 5 minute chart showing some accumulation

 However, the same chart zoomed to scale shows negative divergences and a new leading low so the accumulation that started around the 20th has been sold or distributed almost immediately. This is near the inverse of what we saw in the DUG update earlier.

As far as trade stops, this one needs a wide stop until it gets rolling. Currently the stop I'd use is around $77.75

If you have any questions let me know. I feel the move up today offers an opportunity to scale into the trade at more favorable prices.

Developments in the SPY

The white box is today on a 5 min 3C chart. Note how 3C has recently turned down, it should be keeping pace with price, instead it's diverging.

It's possible that this is a false volatility move which will suck in longs only to head lower and start a snowball chain reaction of selling. We'll have to see what it leads to, but 3C hasn't been cooperative up until this point.

SBCF Trade Alert

This is a Cats and Dogs trade that trigged on 1/13/2011 at $1.58. It made nealry 18% on a closing basis and  nearly 23% on an intraday basis. There were follow up post suggesting a pullback and that the bease in SBCF is big enough to support a move to the $2.10 area, perhaps more. Well it's pulled back and has earnings after market-That makes this a double SPECULATIVE trade, but it may be worth a shot. RISK MANAGEMENT is KEY!

There's been some recent accumulation and the pullback is well within the normal trading characteristics of the chart.

 10- minute accumulation as price trades laterally and 3C rises.

The long screen signal remains long and the pullback is to the 10-day moving average which makes perfect sense. I'd say it has the look of a stock that is ready to launch a new leg higher and earnings may be the catalyst to light the fuse.

Remember both earnings and C&D trades are speculative trades, for me that means money I can afford to lose, but they also have shown an overwhelming tendency to give us double and triple digit returns.