Can't say I'd be surprised

Read George Fridman's book, "America's Secret War". He's a principal at Stratfor.com, one of the most well respected strategic forecasting sites you'll find. The book is riddled with American misjudgment with regard to political undertakings and the unintended consequences of such. Along those lines, this story just broke:

http://www.telegraph.co.uk/news/worldnews/africaandindianocean/egypt/8289686/Egypt-protests-Americas-secret-backing-for-rebel-leaders-behind-uprising.html

Market Update-

It looks like we are seeing the false breakdowns associated with these common black box patterns. It does not mean the positive divergence has failed, it just sucks shorts in and gives the upside move a boost when they cover at a loss.  Watch for any strength on the close, the probabilities are fairly high.

SPY Possible Target

If the accumulation in the market does go ahead and lift the market, there's an inverse Head and Shoulders top in the SPY.

The price pattern may or may not be abused by black box recognition trading programs as it's fairly obvious. In any case, in a non-manipulated situation with upside, the pattern implied target for the SPY would be $129.05

As Portuguese and Spanish Bond Spreads hit All Time highs today

The E.U. seems to have an answer, a very unlikely to pan out answer, but something to calm the markets nonetheless and I'm betting the release form Reuters below has something to do with the last market update I just posted.

From Reuters:

rr

European Union officials are considering extending euro zone bailout loans to Greece and Ireland to 30 years in a bid to draw a line under the bloc's debt crisis, two euro zone sources said on Friday.

The sources said European Central Bank Governing Council member Axel Weber, head of Germany's influential Bundesbank, had suggested stretching out the maturities from three years for Greece and seven for Ireland as part of a comprehensive package to overcome the crisis.

The idea surfaced in intensive talks among euro zone ministers, central bankers and officials on the sidelines of the World Economic Forum in Davos this week, the sources said.

"There are all sorts of ideas. I don't know how much weight this one carries. But of course it's not unheard of. Britain and some other countries only paid off some World War One bonds just recently," a senior euro zone source said.

Market Update-

Something is brewing, probably straight from the Plunge Protection Team

 DIA 5 mins-this is as far as I could find positive divergences.

 IWM 1 min positive leading

 IWM 5 min positive leading

 IWM 10 min positive leading and that's as far as the IWM went. The Q's are not included as they showed no positive divergences, but if the market moves, thy'll likely lift-"A rising tide lifts all boats"

 SPY 1 min -very positive leading divergence.

SPY 5 minutes a relative and positive leading divergence-20 min is still confirming the negative downtrend with no divergences.

Something is up and I think it has to do with the fact that if the markets close where they are right now, it would be one of the largest one day drops since summer.

One of our members just sent this

I love Stratfor, it's a great site and luckily we have a member who sends me updates from the site. Hosni Mubarak's worst fears may be unravelling. The wild card in the Egyptian crisis has been the military which is widely revered by the public as you may have seen in my last post and a previous one in which protestors have greeted police with barrages of rocks, but the military with cheers and handshakes. Mubarak dispatched the military apparently to enforce the curfew that has been ineffective. Stratfor reports unconfirmed reports that the military is clashing with the police.

If this is true and if it escalates, Mubarak may face a military coupe just like Ben Ali did in Tunisia, the apparent catalyst for active reform and this in Egypt, a country who's civil protests over the last 30 years were lucky to number in the single digit thousands (1-3 thousand). All modern leaders in Egypt have come from fairly high ranking positions in the military including Mubarak who I believe was an air-force general. Right now his party's head quarters are ablaze and there has, as of yet, not been the promised address to the nation he was supposed to make.

I don't want to stray too far from the situation into hypothetical land, but one of the main shortcomings of US foreign policy, much like economic policy, is a lack of imagination when it comes to consequences. Look at IRAQ years after mission accomplished or the defeated Taliban. The very fact that one OBL still fills his lungs with free air. The US has been widely been criticized for its quantitative easing programs which essentially export inflation throughout much of the rest of the world and this is amplified in the developing or emerging markets-even China. If the Muslim world fractures nation by nation, this is exactly what, as Bruno called him, "Your King Osama, a dirty Santa Claus" wants.  Militant extremist Muslim organizations seek to reshape the middle east into a more radicalized faction. They've been fighting in Yemen, Iraq, Afghanistan, Pakistan, etc. and have succeeded in fracturing solid support for the governments, but in all they've done over the years, it's not nearly as big as what has transpired in the last week or so in Tunisia and Egypt. While this may fall out of the scope of technical analysis, it may very well play an important part of economic decisions the Fed makes in the near future, especially with the new Congressional oversight they are about to fall under. Someone with a brain in Washington must be putting the dots together and formulating the questions like, "What consequence does American economic policy have on American foreign policy?"  Just food for thought. Now back to what you actually pay me for.

A Couple of Trades

A member emailed me about some other questions and included an article with some Demark buy and sell signals. I've looked at Demark indicators, I never used them and wouldn't say I understand them well. In any case, there were 2 buy signals and I decided to take a look at them. GMI and GMR-to my surprise, 3C was positive on both, but in different ways so these may be some potential trades you might look at.

 GIS 5 min. To me this one looks more like a bounce trade as it doesn't show the same level of 3C confirmation as the following trade. Still, it could produce a nice, quick profit. This is a positive 5 min 3C chart.

 GIS looks even better on a 1 minute chart and may in fact be beginning its move now.

 GMR has significant confirmation and looks like a longer term play. Here's the daily with a bullish price pattern. Perhaps a stop is set a few % below the recent lows. the implied eventual target is around $8.

 The hourly chart confirms the positive divergence

 The 30 min chart confirms the positive divergence.

 The 10 min chart confirms the positive divergence and sets up just before the start of the move up today

 The 5 min chart is the same as the 10 min chart above.

and the 1 min chart s the same, although there's been a pullback, it looks like another intraday positive divergence is setting up so this could be a good entry point.

I'll look at the short trades of which there were more and if I see anything interesting, I'll bring it to you attention.

Market Update

 DIA 1 min-yesterday there was significant distribution, it was propped up yesterday and today has fallen in line with it's 3C profile.

 A closer look at the 1 minute chart shows a little bounce, there's not any 3C support for it at this point, but it would make sense that the market relieves a little of the selling tension with short profit taking.

 The 10 min chart is solidly negative in the DIA

 IWM 1 min has rallied into distribution, there's a slight positive divergence here on the 5 minute chart.

 IWM 15 min-the bigger picture shows the heavy distribution at the recent top yesterday. Right now, 3C is in line with price.

 QQQQ 1 min. has been confirming price, even the bump, no real positive divergences here at all except a very small bit around 12 p.m.

 The QQQQ 5 min showing a very negative divergence yesterday. right now, confirmation.

 The QQQQ 15 min. There's the negative divergence at the apex of the wedge and upon the false break higher out of the wedge. Then the small positive divergence that had me thinking we'd see a bounce (bounce only) in the market this week up until Friday-as was my theory. Now a important 15 minute negative divergence at yesterday's highs.

 The SPY 1 min is a bit ahead of confirmation so it's a positive leading divergence.

The 10 min chart though shows a very negative divergence, in green we have downside confirmation. Look at the volume. I've been saying this week that I have a bad feeling in my gut about the market.

Out of Egypt, the curfew is not effective at all. Egyptian military has rolled tanks down the streets. They were surrounded by, get this.... CHEERING PROTESTORS Cheering, "Long live Egypt, Long live the Army!" The army had to literally get out of their tanks and shake hands with every protestor so they could clear the streets and keep their tanks moving to their locations. Unbelievable and not a good sign for the president.

TZA, EDZ and even DUG-all up today

Yesterday I updated my bullish bias on all 3. DUG is a bit or a surprise, and obviously events have given a catalyst to the other two, but as I have pointed out, we are behind the information curve. Institutional money is not and as such, the end game for these stocks is set in advance. Accumulation in something like EDZ or TZA is done for a purpose, they are taking those stocks higher. When a catalyst presents itself, maybe the timeframe of the original plan changes, but the point is, these events are NOT random and I think the 3C charts show you that.

The link at the top will show you my recent take on these 3 and the 3C charts. Here's what they look like today.

 EDZ 15 min

 EDZ 1 min showing profit taking

 EDZ 5 min no negative divergence, just confirmation.

TZA 15 min.

DUG with a negative divergence, but still way stronger then I'd expect.

DUG-

I didn't expect to see DUG hold up this well today.

EDZ Update

If you held EDZ, congratulations. TODAY is BREAKOUT DAY!

 EDZ breaking out +8.26%!

The hourly chart shows why I have maintained confidence in EDZ, there has been accumulation on every pullback.

Since the September Rally Started

This looks like the biggest decline we've seen for 1 day

 QQQQ daily

Here's the wedge that I thought would show a false breakout, it did, it's had negative divergences meaning that the move up has been distributive. When a market has so little breadth, a single stock like AAPL can do major damage-it's a double edged sword.

Hillary Clinton Speaks

She tells Mubarak to turn communications back on and allow peaceful protests. The thing is, it's beyond that. Anytime several thousand people gather with a grievance, it doesn't take long for things to spin out of control-Washington knows this more then probably any capital. So the speech is obviously the US administration hedging their position as they can see the chips are falling into place-they just don't know what type of extremist political group may come into control and they are extending an early hand of cooperation to them, in my view.

This is not a bounce, it's a flight to safety.

 GLD

SLV

Being the protests are viral and in the oil producing region of the world, I think you can figure out the move here in USO

Etainty.taigypt Update

In Egypt we have reports of police stripping off their uniforms and joining protesters. Protesters also stormed police head quarters, gathered guns, set it ablaze and engaged in a firefight as they tried to sack another police station.

Nobel Peace Laureate, Mohamed ElBardei who flew in to join protesters today and has put himself forth as an alternative leader, was placed under house arrest. It seems earlier ElBaradei joined protesters earlier and was trapped inside mosque after police used water canons to trap them inside the mosque and surrounded it.

Internet and cellphone services have been suspended throughout much of Egypt. Interesting that our own government recently gave the president the power to shut down the Internet in the U.S. Speaking of the US government, it is not readily known whether Mubarak, the US's closet ally in the middle east, still enjoys the firm backing of Washington as Obama has made some remarks about the protesters needing an outlet to vent their frustrations.Right now, the White House is responding by “tweeting” on Twitter?

Mubarak's NDP political headquarters in Egypt are ablaze.Right now on live coverage you can hear very loud gunfire, it's almost as loud as artillery.

According to the Jerusalem Post, King Abdullah II of Jordan is under heavy pressure for reforms. Syria also has shut down Internet services interestingly. Mubarak is set to address protesters, but this seems a situation that is all but finished.

Unrest is spreading worldwide as we have see by recent food riots. In Spain today, the unemployment rate surged past 20%. 

As they say, the market hates uncertainty, I'm uncertain whether it's reacting to GDP or the possibility of a multinational set of government overthrows, especially as protests have already made their way into Eastern Europe. I was there when there was the last huge protest in Hungary, it was scary. I wouldn't be surprised to see more Eastern European states as well as Arab and African countries join in this global festering unrest.

The market...

 3C confirms

By the way, AAPL?

confirmed.

EUR/USD FX

You may recall my analysis this week suggesting the dollar was about to find support and my belief that the Euro may have just undergone a false upside breakout.

Here's a look at today's FX action in the pair.

 This shows the entire trading week on a 10-min scale.

Here's the last 2 days on a 5 minute scale, look at the parabolic descent of the Euro.

Lets look at UUP (proxy for the dollar)

 The daily chart is very bullish, a bullish descending wedge followed by what I think is base forming activity. I suggested we'd see support at the red trendline, that happened yesterday and today we are bouncing off that support. Why did I think there would be support there?

As I have mentioned, one of the things that happens in the market is information is way ahead of us, thus planning by institutional money is way ahead of us, but a regular price chart doesn't show that. 3C did, note the very positive divergence, especially in relation to the duration of the two negative divergences.

As for FXE-the Euro Trust ETF...

 a bearish daily chart with what I thought to be a false breakout in white. Remember the market is like a pendulum, it swings too far one way and then too far the other. Also remember false breakouts turn suddenly and in this case, tend to fall fast an far.

Here's the counterpart to the USD, a negative divergence in the FXE on the breakout.

This may be a worthwhile trade as it is likely that we will see the Euro retest lower support so long as today's trend holds. With trouble brewing in Eastern Europe-almost a early stage of Egypt and Portuguese and Spanish bonds back to commanding all new high yields, cotagion is back in rotation in the fear cycle.

Reading the GDP Release

Lots going on today. I'm reading the GDP release and trends in the constructs of GDP tend to have some rationale to them a they shift, there are many here that have no rationale, just sudden, abrupt reversals. I'm still of the opinion that this GDP will be revised lower.

The S&P stands at 24x P/E, the historical norm is 16.1x. Since the stock market started trading there has never been a time that the P/E rose above 20 and did not see a significant pendulum like retracement. Just an interesting fact.

Baltic Dry Index continues down

This is an exceptionally volatile index, but the volatility has been tame and the trend has been smooth. It's down again today, take a look....

and our GNK/DSX shorts are liking it.

History is Being Made

I'm watching the market, I saw GDP come in below consensus-not a big surprise. If we use history as our guide, we can count on the GDP number being downgraded several times from here.

What's big is Egypt right now. One of the biggest developments I just saw live on Al Jazeera. An army armored vehicle pulled up and what did protestors do? CELEBRATE! The people have been calling on the army to protect them from the riot police. Washington's main concern all along has been what will the army do? It seems we may be getting some initial ideas about the Army's role in Deposing Mr. Mubarak.

What comes next in the Political Center of the Arab states is a major unknown.

I'll have some market reports up for you shortly.

Interestingly about the GDP number, I'm not sure if my theory is correct or not? However so far judging by opening action and volume, my theory may have been correct, after all GS was one firm that came in below the average consensus and is a Primary Dealer and perhaps part of the backscratching club. If the advance GDP was known in advance, which would be no surprise, then the rally in the beginning to middle of the week would make absolute sense. Any good trader needs to have a healthy dose of skepticism mixed with a little paranoia and even that may not be enough.