SPY Wedge

I've been poking around some sites and have noticed that everyone has the SPY wedge drawn on their charts, so I think the likelihood of a big upside (most likely false breakout) is very high. It may be an intraday move to new highs that closes lower or it may be over a period of days, it's hard to say, but the wedge is there for a reason, trading breadth has become very thin. That doesn't mean that HFTs won't take advantage of a very obvious pattern to generate revenues. So watch for a nice upside move, but at the same time, keep in mind that it's highly likely that it will turn out to be a false move.

RADS TRADE (Short)

 Remember, big triangles are usually tops or bottoms, not consolidation patterns. Note the volume surge on the breakdown from resistance.

 3C daily has been telegraphing distribution throughout the second half of the triangle.

 15 min 3C showing the distribution at resistance and subsequent fall

Here are a couple of stop levels, I'd prefer to go with the wider stop initially. I like the trade right in this area, but you can also wait for a break on the close below the triangle.

MEOH Trade (Short)

 This is similar to a rounding top, MACD also confirming the negative character.

The daily 3C chart

 The flag portion close up

 15 min negative divergence in the flag.

Potential stop based on the Trend Channel, around $29.75

USO

 USO's candlesticks showing two reversal patterns, a Harami or inside day, and a tweezer bottom the last two days. Volume is also picking up today.

There are many different positive divergences, but this 10-min shows a good leading divergence in USO.


It appears as if USO has bottomed.

January Fed Minutes Are Out

It does seem to me that the Fed is clearly signaling that QE2 is the end of the road and perhaps we don't even fulfill QE2. Their justifications for an improving economy are just absurd, like the unemployment print of 9.8 to 9.0 in one month. It seems the data is being massaged to give the Fed a reason to get out.

Let me be clear, I don't believe these projections for a minute, it looks like the Fed is trying to say, "we've succeeded in our task, we are out now" and the truth is seemingly much deeper then this thinly veiled facade. Something is not right with the markets. Very strange things have occurred in treasuries, in the Fed's tone, PIMCOs reversal in their investment strategy and in a number of other ways. Without the Fed pushing prices up, this market could fall like a stone and with no underlying traditional liquidity structure, this could be a very nasty fall. Keep you ears open to what Fed officials are saying, none of it is arbitrary.

READ THE KEY HIGHLIGHTS

market update

As I mentioned earlier, I'm seeing a lot of bearish wedges forming in important averages and
ETFs. Here's a look at the DJ, S&P and Q's


DIA

 Here's the wedge, which is easiest to see on an hourly chart.

 60 min 3C negative divergence

 30 min 3C negative divergence

 10 min 3C negative divergence

QQQQ

 Hourly wedge (bearish)

 30 min 3C negative divergence

 5 min negative divergence

SPY

 Hourly Wedge with volume and MACD confirmation.

 30 min 3C negative divergence

 15 min negative divergence

5 min negative divergence.

We'll have to see if the Plunge protection team arrives to save the market once again, but under normal circumstances, this is a very bearish set up going forward.

GTE Long

 Looks like the next leg up may be starting.

 3C calling the pullback and a positive divergence in the consolidation.

 10-min chart shows more positive divergences in the consolidation

 Today's upside action is confirmed.

Trailing stop using a 35 day simple moving average on a daily chart. If it breaks to a new high, you'll want to move that stop up to at least break even.

OPXT Trade Management

This has made almost a 110% gain for us since late December, if you are still in the trade, it's starting to get a little parabolic and needs to be managed with a trailing stop.

 This stop is on an hourly chart using a simple 35 bas moving average. I'd prefer a stop if it breaks the moving average on a close, but you may wish to stop out intraday.

HDY Long

 HDY run up, consolidation and possible 2nd leg up.
 3C looks really good here and it, like most indicators does not usually give such a strong signal during a consolidation.

Nice volume on the gap up, the red box is a potential tight stop, I'd consider this a long here or just over the recent highs around $5.17 or so.

SHZ Long

I don't think this stock is big enough to see the pattern recognition/manipulation we see in other stocks, therefore I'm more inclined to trust a breakout from the triangle you will see below.

We saw a nice run and a pullback which has narrowed the trading range into a consolidation triangle.

 Toy can see 3C calling the pullback from the first major run up and now showing a positive divergence in the triangle, which is a little rare to see.

 Again the 15 min chart confirms.

Here are a couple of potential stops, one at the trend channel near $6.30 and another around $6.65, depending on how you decide to enter the trade. I'd probably set an alert for  breakout of the triangle and see if we can't get a second leg up out of SHZ.

Weaning the Market off of QE

I've said many times I have a gut feeling something dramatic is changing behind the r.has found some legs.  We seen totally bogus numbers coming out of the BLS and other government agencies to give us the impression the recovery has found some legs. We've seen very strange behavior in Treasury auctions, and some strange comments coming out of the Fed. Today's Bloomberg saw the Fed's Fisher talking about ways of starting the end game.

As I noted it seems like the market and those manipulating the market averages have been in a rush to get it up as fast as possible as if they had a deadline, for if they truly were interested in creating a sustainable bull move, then we'd see the healthy bull market pullbacks that we have only seen once and in some averages not even once since QE2.

In any case, I feel something is just simply out of place. I'll keep looking for the tell-tale confirmation of such, and I appreciate the articles and thoughts you have shared with me. This has opportunity written all over it, we just need to find the right place and time.

XLF follow up

Here's the first break.

This is the bear trap part, typically we see an upside move breaking out of the triangle to the upside which knocks the shorts out and brings the longs in, then it heads back down and knocks the longs out. This is what happens when there's no liquidity in the market and the HFT firms need to make the most of every pattern that they know traders will respond to. Ultimately the pattern (bearish wedge) should be the final outcome. The MERS issue decided yesterday is a big blow to financials.

LNG

  Is up nearly 6% today and looks a bit wishy-washy. I'd trail a stop behind this one using a 30 bar simple moving average on a 60 minute chart.

XLF Update

Yesterday we saw an open volume melt up, which is a sure sign of manipulation and it came just as the story about the Judge who decided MERS was not a legal way of transferring mortgages saying:

“Merscorp Inc., operator of the electronic-registration system that contains about half of all U.S. home mortgages, has no right to transfer the mortgages under its membership rules, a judge said...U.S. Bankruptcy Judge Robert E. Grossman in Central Islip, New York,in a decision he said he knew would have a “significant impact,” wrote that the membership rules of the company’s Mortgage Electronic Registration Systems, or MERS,don’t make it an agent of the banks that own the mortgages..."

That's when we saw the open volume melt up to try to keep most of the market green. Here's XLF on its own.

 a daily wedge, we are seeing a lot of these recently.

 XLF 60 min wedge (bearish) looks like it may breakdown, but we know the volatility games so that would suggest we get a couple of moves down , up and down again as has been the norm.

 3C 60 min in a negative divergence

15 min 3C also negative.

It seems the MERS decision is a major stumbling block for the banks and anyone else golding the derivatives of such, like MBS. This could force a major putback if the decision is upheld and banks will have to significantly increase reserves.

FXE Euro

Contagion is back in the fear cycle and now we have seen a shift of the spotlight toward England with tising inflation and unemployment.

Here's the Euro, which I'm bearish on.

 Here's the fractal nature of price action, a daily H&S top and below....

 This is an hourly H&S top which is circled in the red box on the above chart,

3C looks perfect for a H&S top and it may bounce to the area of the white box, ultimately though, I'd say the Euro is going much lower.

TSO on the move Again

If you are in this position keep in touch with me, at this point it's just trade management.

UNP FOLLOW STEP

 DOUBLE TOP

60 min 3C negative divergence at th test of resistance. Many transports aren't looking good.