SLV and GLD

Not much has changed on the 3C chart in either, but as many of you know I've had my suspicion about both metals.

 First the daily of Gold, you may recall that I looked at this pattern in GLD and it looks very much like a top. I even thought we'd see a breakout of the wedge which we did as these tops tend to be symmetrical.

 This would be considered a complex H& top if we see prices confirm and break below the red trendline (neckline). The fall in both metals is being attributed to margin hike fears such as we saw today in Brent and WTI crude oil, no such hikes appeared, but they may. Since 3C is still on track since the last update, I'll just be watching for accumulation which may suggest this is other then a top. However when a trade gets a crowded as gold has, institutional money often takes the other side, even if they believe the asset is going higher in the end. Everyone on the same side of the boat makes for no profits.

Silver as you know is a different story, it's been held down in price by a short JPM has had on the silver market for some time. There's been a viral campaign to try to break up this position, but it failed 3x in the past. I've been suspicious of this latest attempt as margin squeezes caused by short covering in my opinion would have caused the metal to nearly double. Should silver fall below the trendline breakout, just from a brainwashed trader's mentality (which most are unfortunately), there will be an effective bulltrap set and all the longs who purchased on margin will be getting margin calls and forced covered positions from their brokers which will send silver plummeting much like we saw in December of 2010, except this time worse as the market liquidity structure isn't there and the main short is not going to cover to provide a bid in a falling market. This may be a trade we might want to take, but first I want confirmation. there's too much external market risk, I'll give up a few percent to know that my trade has a much greater probability.

I mentioned earlier JPM may still come in with a bear raid, today was not it (as evidenced by gold's drop and no 3C leading negative divergence) and if they do so now, they could likely pull off a victory.

So we'll keep an eye on both trades, it's a fine line to know when to trade with the trend and to know when you are being herded like sheep. I recommend some patience as the silver trade will probably be settled first and shortly.

Be sure to watch the video at Trade guild tonight. Hedge funds have done it again-last month too and leveraged up on margin. There are few shorts in the market and liquidity providers have been wiped out by HFT firms. This is a dangerous market, but in that there's great opportunity. If you have time, it's a short video.

Adding Volatility to the oil trade by trying to strip if of it

Another reason for the downside in oil this afternoon is that ICE just increased margins for positions in Brent and WTI crude. Effectively they are trying to cut out the speculators, but it doesn't do anything but cut out the little guy. The big speculators are well capitalized and this is the second hike in crude this week!

Watch for more.

The DIA and SPY

I wanted to get that last post out before the close. No doubt the Q's look stronger then the DIA, the SPY looks marginal. I wouldn't bet based on the SPY, but a rising tide lifts all boats. Here's the DIA and SPY 5 min charts which look pretty good for a bounce barring any unforeseen overwhelming events.

 DIA 5 min positive divergence in leading formation. It doesn't have the test of support the Q's had, but otherwise it looks pretty good for a bounce.

Like I said, the SPY has a small divergence, but I wouldn't make any moves based on this alone, it's simply not strong enough. Which means you might look into financials and start putting together some ideas for short trades, I will be as the S&P has the heaviest weighting in financials and I suppose that's what is dragging it behind. XLF was down more today then the S&P.

Question of a bounce

"W" base and a positive divergence in the Q's. Looks pretty strong to me.

A Question ...

I got an email asking if I think this market will bounce tomorrow. It's not unreasonable at all, it is also extremely difficult to say. Certain sectors could which may keep the losses to a minimum, 3C has showed that there was accumulation taking place for a bounce, it has certainly slowed the pace of the downside and the Q's are up so I'd say based on that, the momentum seems to be shifting toward a bounce. However, since the original accumulation, the amount of it has been significantly reduced which I interpret as traders not willing to hold the same size position as before. Which also means the bounce may not be as strong as before. I can't blame them for leveraging down. I'm guessing based on what I'm seeing, not on what I can not possibly know as to events that may unfold, I'd say we are probably closer to a bounce or at least lateral (maybe half % gains) then not.

USO Pullback proceeding as envisioned and then some

Here we have confirmation of the pullback and the rumor mill has caused that leading divergence in red plus most likely the drop below our second daily support zone although this is bounce to happen before any upside event takes place as a short squeeze will propel or kick start a bounce. I can't say we are there yet as there's no evidence of that. I want to congratulate at least two options traders that played this perfectly. One note, watch for any signs of Gadhafi making an appearance showing he is alive, that could send oil right back up very quickly.

The Rumor Mill

Gadhafi shot?  Don't put it past oil traders to float the rumor or even Gadhafi himself. In any case, the short term reaction does not take into consideration the larger implications of such an event. The best outcome for Libya right now is for foreign military intervention-the best for Libya, not the invading country. When Libya falls if we can't say it already has, the tribal warfare will reduce it to a central African state with each side sabotaging the other's link to western cash to finance combat operations, namely oil infrastructure. Libya is a very special case, it's kind of like Iraq x 3. When you consider the religious divides in Iraq they are no more dangerous then the tribal divides of say Rwanda circa 1995. So any short term reaction to Gadhafi being shot is extremely short sited and more then likely caused by il traders seeking to get into position.

I told you this was going to be the hardest to analyze.

USO surprisingly on track

Analysis of USO pullback targets from the 23rd  has ben surprisingly accurate thus far. Remember that the two trendlines were daily pullbacks, we had some deeper corrections that were possible as well.

 Here we have met the first and near the second.

in both cases the 15 min chart above and this 5 min chart remain negative so it doesn't seem like it' over yet, but this could turn on a dime. I just hope I can catch it when it does being I'm in about 30 different places at once. Anyone using 3C, if you see something don't be shy about sending me n email and I'll look into it, right now I can use all the 3C eyes I have out there.

Well the Q's have bounced a little with you know who....

In green the Q's in red, AAPL.

The situation in Libya is now turning toward an early Rwanda-like massacre. The market will soon start discounting international intervention in Libya as mercenaries fire indiscriminately at anyone on the streets and Gadhafi blames Al Qaeda for putting hallucinogenic drugs in their children's Nescafe-yes, he said that!

Smart money or not, when things get this out of hand it's hard to maintain the gameboard. We'll try to sty on top of it, but events that are not discountable by smart money are unfolding faster then I can read about them. In cases like this, institutions wold rather de-leverage and go to a risk off position like cash. Make sure you have your feet wet in some short positions.

Things are spinning out of control like I've never seen.

GM-Big Trouble in Government Motors

Take a look at the charts, GM is now trading below their IPO pricing meaning most , more likely all hedge funds that bought into this are at a loss.

 You might get your feet wet here or wait for  bounce or a phased approach of both. This seems like a trade that has gone very wrong.

There's not enough history for a daily chart as the 3C look-back period is too long, but the hourly shows nothing but bad stuff, TSV concurs and volume tells the rest of the story. When window dressing comes along, who's going to want this turd on their prospectus?  I'd get my toes wet in GM right here, but not swinging for the fences just yet, there's likely to be an orchestrated bounce to get out at IPO levels.

Why Truth all of the Sudden?

I told you that something in my gut just doesn't feel right, there's also been plenty of evidence and strange remarks from the Fed that have fed into this. The Association of realtors BIG miscalculation that puts 20% more home inventory on the market was released just this week and today home sales.

The hedline was that there were just 19,000 homes (non-annualized) sold which is the lowest ever. Homes above $750,000 -ONLY 500! Here's the non-seasonally adjusted home sales-several months ago we usd the word here "Double Dip" with regard to the housing market.

Here' the chart....

Well if that doesn't paint a picture! No wonder SRS looks the way it does. Remember SRS broke out a few days ago, so either the news of MERS or the National Association of realtors moved it, which hasn't happened in the past or.... yes, it happens, this report was leaked.

Market Update

I've been so busy looking at trades and answering emails the market slipped right past me. As usual the SPY isn't showing much that looks promising. I have a feeling XLF and the MERS decision is tearing that one up. Large caps with international exposure in the Dow, well, that's self explanatory. The Q's seem to be the one to watch.

 1 min, as all morning in confirmation not telling us anything.

 5 min though showing support and a positive divergence.

 The 10 min too.

 Anytime you look at the Q's, you have to look at AAPl as the heavy hitter in the Q's-note the similarities in the 5 and 10 min chart below.

This is obvious support so it'll most likely be hit with a run of the stops and limit order, it's what happens next. Pay attention to these two. Don't forget, this is short term "Bounce/correction analysis only-the longer term as of now is looking solidly bearish.

FXEN Just hit my Alert

Time to start paying attention to this one. I'd prefer to give up a few % and let it break out -the higher the volume the better.

Small Cap Oil Trades

We saw quite  run in BDCO, as of yesterday a 125%, but I'd be taking profits now. There's some potential for follow through in other names so I want to give them to you and hopefully you'll set an alert for a price breakout. If you don't have the software to do this, I use TeleChart which is linked at the top of the site, I've been using it for over 10 years.

They (Worden, the makers of TeleChart) also offer a free REAL TIME (no exchange imposed 20 minute delay) platform called FreeStockCharts and I'm certain you can set alerts there, it's a fantastic platform for free.

So here's the charts I've found that still haven't broken out.

 EGY is similar in some ways to BDCO, such as the rising or ascending triangle which is a bullish continuation pattern. I'd be interested in this trade on a break above $8.01 and that's where I set my alert. I'm not impressed by the volume, it doesn't have that going for it where as BDCO did, but we're looking for the quick double/triple digit pop, not a long term investment here.

 FXEN is a nice consolidation pattern, volume looks good and there's already been a head fake to the downside which I like to see. So my alert for FXEN is at $10.20, you may want it a bit lower for some time to look at it, but that's where I give it serious consideration.

GASS was easiest to see the trend on a 5 day chart, sometimes you just need to clean out the noise and longer term charts will do that. The green line is the breakout point, the red line is an automatic swing stop that's built into the way I like to play a swing trade like this. So the limit alert on the upside is $7.08 and the stop is $6.41, of course you can always move the stop to your entry price as well or just below.

So set those alerts, remember these are somewhat speculative by their small cap nature and no speculative trade or any trade for that matter should risk more then 1-2% of portfolio value if you are stopped out. The idea behind risk management is survive long enough to hit the big trades. You've been conditioned since you were 5 or 6 years old to think that you need 7 out of 0 correct to be even a marginal success. That simply isn't true in trading, get over it. You don't need to be right, you need to make money. Think of trading more like baseball and a batting average of 300 is pretty darn good, but it also means you only get on base 3 of 10 at bats. This is a healthier way to view trading and this is why risk management is so important. Those that say they have 80% win rations may have that (or may not), if you consider a penny profit a win, I consider that the fastest way to go bust.

Finally? SRS Trade

I can't believe that SRS hasn't flown already, this is a leveraged inverse short on real estate. The recent revelation from th Association of realtors that they "Miscalculated" the inventory for sale on the market by 20! seems to be the catalyst, meaning we now have to re-value everything real estate to count for 20% more overhead inventory to work through. An honest mistake I'm sure and not one they fessed up to until a private firm uncovered it.

So is it finally SRS's turn? I hope so.

 Here's the bullish descending wedge that has been getting tighter and the breakout on volume in white. Normally these wedges have been going lateral for a few months building a base, but if the market is truly changing character, then it may forgo that stage. In either case, allow some room on your stop for a false breakdown or a pullback. Actually a pullback would be great to buy into so long as the technicals hold up which I think they will.

 The hourly chart looks super bullish

 The 30 min chart is doing what we want it to, confirming!

 And the 15 minute, plus TSV in the middle window look strong as does the volume out of the wedge.

Finally ADX has turned down from +40 which typically signals the end of the trend (trend down). So SRS is finally showing promise and it's about time. If you want to diversify your portfolio a bit, shorts on real estate may be the way. The news for the bank hasn't been good lately and this may be the time to strike. Remember the dangers of ETFs, but there are plusses as well. If you have questions, email me.

The Ongoing Silver Question?

It would be so much easier to see a press release saying "Blythe Masters is leaving JPM", then we'd know who won this battle for sure. However, we don't have that so we must try to figure this out on our own.

 The daily chart, the breakout is very parabolic and I think that is partly because the Silver bugs got a head start while the US market was closed, a sort of sucker punch. However, we now have 3 days in which the daily candles are not going anywhere (correction through time?). Honestly for such a big breakout, I'd expect the volume to be heavier. Don't put it past JPM to allow a breakout just to cause a bull trap.

 We can clearly see on the 15 minute chart where distribution of the event occurred and now we have a bit of a leading negative divergence, although not a nail in the coffin. It does suggest continued downside for at least today.

Like much of the rest of the market the 1 min chart is simply in confirmation meaning there isn't any heavy institutional activity. If I were Blythe, I'd let the profit taking bring SLV down as much as possible, then I'd expend my dry powder on shorting the rest below the breakout point. At that point, the longs would be caught at a loss and would start selling on margin calls because this is a very personal trade. It's David and Goliath, it's those who have deep convictions against fiat currencies and their belief that silver and gold will replace fiats. So you can bet the leverage and margin is there. For JPM, it's a matter of survival to some extent. If they cornered the silver market and lost to a viral campaign, it wouldn't look very good to shareholders and some high management-high salary heads would roll.

So we'll keep track of this one, not because it's interesting, but because if JPM does succeed, there's a great trade waiting in the wings for a fast buck.

QQQQ/SPY the best and worst

If you've been here at WOWS for more then a week you know that I expected the ascending bearish wedges to breakout to the upside in a head fake move followed by a move to the downside, that is exactly what has happened thus far. Now we are looking at the possibility or probability of corrections, the same applies as to USO-through pullbacks and time. Here's the best and worst looking charts for both the SPY and QQQQ

 QQQQ 5 min positive leading divergence suggesting the correction has some more to go, but the red square is the initial stages of what could be this divergence falling apart, time will tell. As in USO the 1 min charts are offering nothing in guidance.

 30 min chart, this is the bigger picture and it's a leading negative divergence, this implies we are to see more downside and that we may have reached the inflection/turning point in the market as traders will seek to deleverage.

 The SPY has not showed much strength. Yesterday despite the 's being down the most, they showed the most promise and are the only of the 3 majors in the green this morning.

Here's the situation with the ascending wedge, head fake breakout-a negative divergence as expected and it has turned into a leading negative divergence. This is why I would be using any strength to get my toes wet in short positions.

Until the 1 min chart moves out of price confirmation, we won't have a good idea of where the 5 min charts are headed. Right now I still give them the benefit of the doubt for an upside or lateral correction and price has thus far agreed as we did not see follow through selling over 1% yesterday.

USO Update

Yesterday when talking about USO there was one outcome that I regrettably did not mention and that is this.... Stocks, commodities, currencies, anything that trades- corrects, it's good for a move to have corrections along the way. However what I failed to mention are there are two ways to correct, one is what was covered yesterday and that is through price pulling back in USO's case, the second way they correct is through time in patterns such as triangles or rectangles where there's not an emphasis on price pullback, but rather just biding time. That's the other possibility for a correction. In any case, lets take a look at USO now, still the most difficult asset (oil) to analyze in the current situation where Gadhafi who is said by close advisors to likely commit suicide before he leaves the country which has also been speculated. One thing is for sure, the volatile nature of Libya being a tribal nation is quickly closing the noose around his neck as even the military won't carry out orders and he has resorted to African and French speaking caucasian mercenaries to shoot anyone on site who ventures onto the street. It's also likely he'll pull a Saddam and destroy the rest of Libya's oil infrastructure before he goes, which is causing a lot of speculation in oil as Saudi Arabia seems to have need to pick up the slack in europe as it has promised billions of dollars to its citizens not to revolt.  Here are the charts...

 5 min chart, no confirmation and a negative divergence.

10 min chart, the same. Thus far this morning we can't get readings yet beyond 10 min. The 1 min chart isn't offering anything notable.

So looking at the action in oil, we do have the possibility of correcting through time as we are yet to make a new high and are starting to move laterally. I think longer term the path of least resistance is up, but it will be very volatile with news changing day to day and minute to minute. It's a trade that must use a wide stop and focus on the trend.

Danger!

Every day the danger level rises with these protests. Tunisia was kind of a country most people couldn't find on a map. Egypt's military was always together, Libya's is not and this presents a real danger. Saudi Arabia falling presents a real danger, but now violent protest in North Korea? And the danger here? When ever Kim feels threatened internally he acts externally, it's almost like divert the nation's attention to nationalism and of course the main target is always South Korea. So our newest member of the "start your own revolution in a day or less" in North Korea and perhaps one of the most dangerous yet.

It is About Inflation

Sure protesters have a long list of grievances, once you start complaining you can find a lot to complain about, but Tunisia started because of unemployment and the high cost of goods, Egypt followed-after 3 decades of rule, what did Mubarak do to the people that was any different? "It's the economy stupid" as they say. The Kuwaitis figured it out early and threw money and food at their population, the Bahrainis tried to unsuccessfully, Gadhafi has been much more up front and just dropped bombs on his people, but he's never been known for good judgement. Now the Saudis are trying to buy their way out of a revolution and Obama and Bernanke are trying something similar. The problem is the Saudis can afford it, for the Americans it will be little more then a token gesture.

These governments and Central banks are like bad traders that just can't admit when they are wrong, take their lumps and regroup. The scheme in America is especially futile, but once again, it's just more money on top of the trillions that may have actually had some beneficial use that is simply burned up in academic exercises of stupidity and of course, favoring those that keep them in power. We'll see how much time this buys the Saudis because that's the best it will do is buy time.

LEE Possible long trade/headfkae

Unlike UBA which was featured earlier, this is not a large triangle and more likely a consolidation pattern. The volume is also higher so it's a better candidate for a black box system head fake or false breakdown. It may be the real del, but I have some suspicions and if they are confirmed, this could breakout to the upside very quickly and rise very fast. I suggests putting an alert on this one for a move back inside the triangle looking for that false break down/head fake.

 Top triangles are larger and they appear after a protracted uptrend, not  few months. The volume is correct for a consolidation triangle as well.

Heres a 3C 5 min chart which DOES NOT confirm the breakdown so I'm keeping this one on an alert as I suspect this may be a false breakout and false breakouts are powerful movers in the opposite direction once the squeeze starts. At least put an alert for price crossing above $2.95.