Check out my recent video series

Most of this you already know, but I think it's worth the time when you have 30 minutes. Potential risks are very high, that means potential opportunities are just as high. We'll continue to monitor events, but I think this sums up many posts I have published, all in one place.

Here's the link

Reversal in the market?

This may not be the big one, but the 15 minute chart has been fairly good at calling reversals in the swing trade timeframe or a bit less depending on the size of the divergence. Currently the 15 min divergences are on all of the majors..

 DIA 15 min.

 IWM 15 min.

 QQQQ 15 min.

SPY 15 min.

The size of the divergence seems to have an effect on the length of the pullback. One day, maybe tomorrow who knows, that divergence may be the last in the uptrend so for those of my members that are trading average ETFs, here's a post for you.

GLD, Why Not SLV?

Here's a look at SLV-GLD is on the trade list for Feb. as a semi-spec trade.

 Here we see in red a false breakout in SLV, could we be looking at another coming out of a bearish ascending wedge. Remember these patterns are highly manipulated.

 on a 60 min chart the wedge is more visible, even though it's rising, it is bearish because of the wedging activity seen.

 Money Stream called the first false breakout, it's not looking too bullish on this breakout of the wedge either.

 3C daily made the same observations and 3C is not coded at all like MoneyStream, it's a totally different code so the findings when they agree, should be taken seriously, especially as MoneyStream is not as sensitive to divergences.

Here's the 1 min chart in SLV, no confirmation of today's move. Interesting.

If you chose to trade this, obviously you want to keep the trade somewhat speculative until there's a reversal, but there's a zone of resistance in white, I might put a stop just above that area.

All in all, it seems the risk is not too large with that resistance zone nearby, it may make for a decent r:r entry here. Or, you can wait for confirmation.

Forgot About the POMO

Here's the direct link to the New York Federal Reserve so you can look it up anytime you wish.

Here are the results:

The submitted:Accepted ratio is near the median of 4.1x at 4.28x-a little on the high side meaning the PD's didn't walk away with a boat load of cash.

Furthermore it seems Indirect bidders (this would include the formerly biggest holder of US debt before the Fed stepped in to monetize it, China) didn't show much in the way of participation. Of course the slacking of participation was noted long ago-about the time the Chinese started complaining to Hillary Clinton about the state of the US economy. In my view, this is part of the reason the Fed had started to monetize the debt as foreign countries were no longer dependable and perhaps the U.S. administration wanted to keep on spending which put it at odds with indirects as that adversely affected their current holdings-why buy more?

Today was a prime example of how little interest there is from indirects in US debt-another warning sign, but from a source whose only dog in the fight is the truth and protecting their investments, not continuous revisions and the now completely ridiculous wealth effect that the market is supposed to create driving US consumers to spend and borrow again. The lack of participation by indirect bidders such as China is taken by me as a vote of "no confidence". By the way, the lack of indirect bidders was the lowest since Q2 2007. That' a pretty harsh vote.

Another Perspective on GLD-

 This looks like a variation of a complex top, they tend to have symmetry and if you count, this last rally would make this symmetrical. Note the false breakdown as well which would have given a boost to the current bounce. finally note how over-extended the bounce is from any near support and t's taking on a star like candle indicating a loss of intraday momentum-if it closes like this, we'll have an evening star candle which is a downside reversal candlestick.

 Looking at the cumulative volume indicator I showed you last night to judge tops/H&S tops, the volume looks right, it fails on rallies and expands on declines.

 3C daily has been negative and now also shows a leading negative divergence.

As does Worden's Money Stream

This may make for a decent probing trade with a stop around the 2-day Trend channel just under $134. If you have questions, email me, but I on't see a lot more upside risk here.

GLD Intraday Chart Request

I think I pointed out earlier that GLD is near gap resistance, so these charts aren't all that surprising...

 GLD 1 min showing a negative divergence at the top of today's range and a leading divergence in effect now.

 The 5 min chart hasn't confirmed today's gap up, not good for GLD.

 The 10 min chart is showing what looks like a trend reversal from the short term trend.

And finally the 15 min chart seems to be showing the same trend reversal with a lot of distribution into this recent pop.

Other Shippers

There are several bullish looking shippers, again I don't know if recent events will reverse the bullish looking charts, but one bullish looking chart is GMR. There are more if anyone is interested in a pairs trade.

As for bearish looking charts, here's a few worthy of investigation:

TK, ALEX, TDW, CKH, VLCCF, TNK, BALT, SFL, TGP, SSW, DHT and TOO

From Our Boots on the Ground

Here's an email from a member within the mortgage industry who has provided excellent insight into what is happening on the ground vs. what we see in data that is constantly revised. This is his industry, he knows it well and knows what trends are emerging. In response to my earlier post on real estate, here' what he sent in an email message.

"Remember that I said the mortgage market part of the real estate industry remains soft and that a lot of the recent sales have been investors buying REO’s with cash.  I continue to see this and furthermore, some of these  investors are looking for returns to build a base of income should their jobs suddenly disappear.  Rather than invest in the stock market or bonds, they are looking for rents to give them something to fall back on."


There's a few ways to look at this, I know investors who pick up property for rentals. In the past, they leveraged the equity to buy more. Even now as prices are much lower, they are yet to jump aggressively into the mix, but they are picking up properties here and there. 


What I take away from this email is the fact that longer term investors, many of which prefer tangible assets to stocks, are not looking favorably on the market' returns in the long run and who can blame them. From an earnings standpoint in comparison to the past, and considering stubbornly persistent unemployment and the trend toward renting as many feel the real estate market will not bottom any time soon (it is in a double dip in many regions) or they have no other choice due to foreclosures, it seems tangible assets are going to be an emerging trend. There are certain REITS that I'll take a look at.

Chart Request-DRYS

DRYS used to be one of the high flying-ultra volatile shippers back in 2007-2008 when we still had some economic activity. Remember that the 2003-2007 rally was largely supported by consumer spending as everyone leveraged their homes, it made sense for shippers of dry goods like DRYS to profit from that (recall my post yesterday looking at the DJ-20 transports versus the DJ-30 there's an obvious disconnect between the market and consumer spending as transports show). Here's DRYS:

DRYS experienced a 96% fall from it's highs (roughly).

 When I originally looked at shorts in shipping, I did not choose DRYS because of this long flat-line base. Of course what smart money thought a year ago may change drastically with the political BlackSwan events we are experiencing now, it just didn't seem to have the best profile for what I was looking for then.

 Here's the daily 3C chart which still looks bullish to me, there's a leading divergence in the white box.

 We see the current small correction showing signs of a negative divergence, but there is not overwhelming confirmation among the various time frames.

 The current consolidation is starting to wedge a bit and may very well break down, I'm just not sure to what extent as other shippers looked like they had more to lose.

 Here's a Swing Trade stop, which we are close to, but it's held for 2 months.

Here's the longer term trending stop.

All in all, I think there are better short sale candidates in the sector then DRYS.

Shippers-NMM Short

Here's the last post covering trades in Shipping


Here's an update on NMM. There are other shippers covered as well and if you want analysis on any, let me know. I have only so much time to cover the market and I could spend a day covering shippers alone. NMM has stayed below the stop provided and thus the trade is still open, I'm adding it to the Feb. list.

 Here's the typical upside false breakout of the linear regression channel-remember, in technical analysis this would initiate a long position, but Wall Street knows what technicians will do, thus we have a very high % of false breakouts, I'd estimate near 85%. Thus we adapt, use risk management and stops that are wide enough to handle the initial volatility of a breakout/breakdown. This is also a trade options players may want to look at.

 Here's the area of extreme volatility mentioned above as well as a break below the 50-day m.a.


 3C daily negative divergence.

 3C nd MoneyStream 30 min negative divergences on the false breakout.-Note the volume.

10 min chart seems like NMM may be preparing for the next leg down. I'd still use a TC stop, but as the trend starts, volatility will ease up until the next consolidation.

Don't worry, the Marines Will Be There Soon

Some breaking news, although not surprising-SUEZ CANAL WORKERS STRIKE.

Wasn't it just yesterday I mentioned the warships heading to the Suez and last week the odd comment from the Chairman of the Joint Chiefs of Staff about the American military standing at the ready. A VERY odd comment to put out there considering the region is turning on America as Egypt's puppet master.

I Couldn't Have Done a Better Job

So I present this article which is a MUST read and touches on the things I've been saying about the market. My job here at WOWS is to find the opportunities and for many, they've found incredible returns. More importantly though is keeping your portfolio intact and while some may think my constant calls for risk management to be inconsequential to performance, look at it this way: You have a $50,000 portfolio, you've lost 50% of it, leaving you $25,000-now you need to generate a 100% gain just to reach break-even; that's how important risk management is and it's the only way to provide for your long term success. Overnight riches are a myth of Wall Street and one best left to others to chase after. Slow and steady wins the race. 


So here's the article.


Some things I'd like to note within it:


With regard to the POMO effect on the markets which is documented:


"Whether or not there is a direct connection between QE and a bid for stocks, the mere fact that the link is so widely believed has played a non-trivial role in the equity markets. Which begs the question: If the markets have risen on this scenario, does it matter whether or not an actual connection exists? After all, millions of investors have been benefiting from the ride. The cynical answer is that it probably does not matter -- if such manipulations could continue in perpetuity. There’s the rub: Nothing continues in perpetuity. "


The role of HFT firms undermining the market's structure that has provided for semi-stable markets-at least compared to what we may yet witness:


"Regardless of the Fed’s role, there have been other, more disturbing bits of evidence that we are in a Matrix Market. Exhibit One is the so-called flash crash of May 2010 during which stocks fell by 600 points in five minutes before staging and equally vertiginous recovery. The crash offered evidence that something truly scary lay behind the reassuring façade of buoyant markets. Subsequent investigation revealed that High Frequency Trading, which relies on algorithms to execute super-fast trades, exacerbated the collapse. Revelations about the extraordinary percentage (sometimes over 80%) of trading attributable to HFT programs in stocks such as Citi (C) and AIG (AIG) suggest that the metaphor of a Matrix Market may be literally as well as figuratively true, and also helped explain how a market suffering continuing retail withdrawals could still rise to a multi-year high during a very weak economic recovery. Economist Michael Hudson of the University of Missouri calculated that the average time a stock was held during 2010 was 22 seconds, not exactly buy and hold."


Regarding taking the market's current status quo taken for granted and not being vigilante in exploring and understanding the role various factions play and how it has reshaped the market structure by eliminating the traditional role of market makers to provide liquidity and the trap it sets. (Note this is not bad news if you are prepared for it, it's an opportunity, maybe a once in a lifetime opportunity)


"The recent example of the auction-rate securities market shows that fake markets can seduce and then trap the most sophisticated investors. Adapted for municipal finance in 1988 by Goldman Sachs (GS), the market grew to about $300 billion before it collapsed amid a series of failed auctions when the main players -- Citi, UBS (UBS), Morgan Stanley (MS), and Merrill Lynch (MER) -- pulled back from their practice of being the bidders of last resort."


"Those who paid attention (which did not include me) saved themselves much grief. Others remained oblivious for 11 months before the axe fell, and when it fell, it fell suddenly -"


"In hindsight it’s obvious that during that “dead man walking” period it wasn't in any underwriter's or broker’s interest to say that the ground had fatally shifted under what had been a highly profitable market."

MRNA LONG C&D TRADE

I NEVER WOULD THOUGHT I'D BE RECOMMENDING STOCKS UNDER $5, however the market has changed and we must adapt with it. The HFT firms have made a mess of the larger market, but there's little incentive financially to mess around with the inexpensive stocks. On another note, in the past over the last decade, I've noticed C&D trades tend to run near the end of a bull move when investors get greedy, but still look for bargain basement prices. The chart I showed you of margin rates is certainly qualifying as greedy.

In any case, here's MRNA which I like right here and now-it's on the Spec. Trade list.

 60 min 3C chart-

 15 min  chart

 5 min chart

Here's MRNA with a breakout and pullback that held support. The stop I have on the list is at $1.06, but if you lighten up o the shares, you can still maintain 1-2% risk on the position and have a wider stop. Personally I like the stock right here.

SPY update

Negative divergences are making their way back into the market. The relative position of the 1-30 min charts remains negative. POMO just ended, I'm going to get the results.

Yields Vs. Gold

I'm loathe to take a long term stance on GLD, partly because the technicals are not clear and partly because the fundamentals seem overwhelmingly bullish. It's that word "seems" that is dangerous. However, here is some past action between Treasury Yields and GLD (Gold). The implication right now is modestly bearish for GLD if these charts and the relationship is still valid.

 5 year chart with 5 year Yields in green and GLD in red-clearly there's an inverse relationship.

1-day chart showing rising 5 year yields. This seems to be a new established trend, how long it lasts is anyone's guess, but unlike much of the market it is showing a healthy pattern of moving up, consolidating and moving up again .

Here's GLD

 GLD 5-day chart with a 50-bar m.a. (click the chart for a closer view)

 GLD's next resistance zone (gap resistance-some of the best support/resistance you'll find).

 GLD's 1 day 3C chart-this is currently near a leading negative divergence

Just to double check, here's MoneyStream which rarely calls out negative divergences, but tends to be quite accurate when it does.

Gold may be another "Too obvious trade" or there may be unfolding events that smart money is privy to that we won't understand for some time, however, we are watching what they are doing, we don't always know why at the moment and it's not really important. It's not about being right, it' about making and protecting money.

USAT Long Triggered

This is on the speculative list from last night, it just triggered

Have You Ever Had Jury Duty?

I have, after trying to weasel my way out of it with more then a couple sarcastic remarks to the State prosecutor, I was selected. On a side note, the woman was convicted of DUI when there was camera evidence she clearly wasn't drunk-it was based on the arresting officers testimony that "I thought I smelled liquor on her breath" which in Florida is not a crime unless it surpasses a threshold of your blood alcohol limit. I was shocked she was convicted.

In any case, Jeffrey Lacker from the Fed is like it's 2011 versions of the alternate juror, he doesn't have voting rights unless someone else can't vote. Interestingly though he did come out as some other recent strange comments from the Fed have surfaced in the last week, and said the QE2 needs to be "Seriously" re-evaluated.

I can't quite figure out if the Fed is the boys club and these kinds of comments are orchestrated or whether there's true independence of thought there? However in the case of the former, this may be a first or second signal from the Fed that QE2 may make it until it's planned survival date. This may have something to do with Ron Paul who could easily show the Fed has not maintained any political independence and that QE2 or QE1 has not had the impact that we were sold on. Bang for the buck, it's a dismal failure, but it serves one purpose, and that is a political purpose being that China and other countries haven't been interested in our auctions of T-bills for sometime. The Fed is the backstop which allows the government to keep spending. Should Rand Paul's proposed changes to the government take hold and should the debt ceiling not be raised (about 0 % chance of that happening) it would almost immediately get rid of the need for the Fed's widespread purchases.

Listen to the nuances that come from Fed speakers, just in case the former is true.

SPY- a Healthy dose of positive divergences this morning

Surprisingly the positive divergences in the SPY this morning have already reached the 10-min chart on a relative basis, it seems some money came into the market. This may be pre-POMO action, I'm not sure, but as always these early indications have to be taken with a grain of salt.

 SPY 1 min positive divergence at the open

 SPY 5 min -again positive near the open.

The same goes for the 10-minute.

POMO will be wrapped up at 11 a.m., I'll bring you the results.

Another Failure in the Market Structure-Again Greed is Behind It

Greed can be summed up as the root cause of all bubbles. Yesterday I spoke a little about the ceteriorating mrket structure that will ake any eventual collapse in the market a very ugly site indeed. I've also spoken about how you can visibly see the greed on the charts as the "buy the dip " crowd won't allow the market to properly correct, this was in charts that compared price to the 50-day moving average through QE1 and QE 2 with QE2 having only 1 serious correction as QE1 had many. The reason is the buy the dippers step in before a proper Bull Market correction can occur.

Now we have more evidence of the greed forming a bubble that will eventually burst. As I read this morning, there is one entity that can, will and does fight the Fed and usually wins, it's the market itself.

So  I present this chart...

In red you see Total Margin Debt which shows traders leveraging up on margin to enhance gains/returns, this is also a very dangerous scenario, especially when the market's supporting mechanisms have been removed and liquidity has been removed. Anyone who has traded an illiquid market such as After Hours or stocks that have less then 50k of total daily volume know that liquidity keeps the bid/ask spread at a healthy rate, when liquidity disappears, that spread widens. I've even had times when I couldn't get out of a position for 45 minutes due to a complete lack of liquidity and watched my profits erode. This trend is another sign of a bubble and an exceedingly dangerous one, one in which we may have never seen such poor market structure beneath it. Right now, risk management is key and diversifying your portfolio long and short may be wise as well. We are now at new recovery highs for margin debt, but look back to the top of 2007 and compare margin debt then. This is trouble with a lit fuse, how long that fuse is, I don't know but I'll be watching and doing my best to alert you to changes that you need to be aware of as you are now trading in a market that no one has ever traded before. There are risks as I've pointed out, but for those who are on top of developments and make preparations, the rewards may also be like those we have never seen before.

Feel free to send me your thoughts. If you'd like them published anonymously, let me know.

SOMETHING I'M FAMILIAR WITH

Here's a WSJ article  talking about cash buyers of homes, especially in South florida-My home! We were just a cash buyer of a home, but the reasons weren't because we felt the market bottomed, we weren't looking for the market bottom but a good deal and something we could afford because, we felt the economic times ahead weren't going to get better. We are part of the crowd that is De-leveraging, trying to remove payments as the future of inflation and the economy look very uncertain to us, so in that regard-I personally disagree with motivations of some, but of course not all. South Florida is also very seasonal and anyone with some money from up north can find that second home to winter over at a reasonable price. Anyway, it's an article that hit close to home so here it is (really no pun was intended).

VRUS Just Triggered Short

This was added last night to the February Trade List-not the Speculative trade list.

CPSL Long-

Just featured CPSL yesterday Just now an alert went off triggering a long

Chinese Raise Benchmark Deposit and Lending Rate

I think I may have said this would happen a dozen times in the last week sometime in February. Inflation surges and they do what they have to do, again this is why I'm not a fan of the emerging markets trade. In any case, this was an unscheduled surprise hike of 25 basis points to each-the deposit and lending rate. In essence the Chinese are removing liquidity from the system-the same liquidity that we are opening the flood gates to here in the US.

As manipulated as Chinese data is, they at least recognize inflation and are sopping up excess speculative money to try to curb it, while we create it in such quantity, it is now one of our leading exports.

My next prediction on China is that they will do this every month for at least the next two months.