Just keeping up with the world

Unrest has now spread to Iraq and the Ivory Coast as a woman was gunned down in a peaceful protest, now there are calls on the Ivory Coast for the President to step down. Also today we saw more unrest in Saudi Arabia. This has gone viral, 2011 is going to be the year the face of the world changed and I suspect it will be a decade before stability is found in some of these countries.

Which all dovetails pretty well for my macro-economic view, that we as traders and investors will see for the first time in our lives, a secular bear market in equities. Adapting as traders will be the key to success in years to come as no equity trader has eve traded a secular bear market. Don't lose any sleep though, change and being able to change quickly and adapt is where the big money is to be found.

We have some time yet before I believe that will come into play, but the macro economic trends, our debt spiraling out of control (Obama has added nearly 30% to our total national debt during his time thus far as president), the changing face of the world, reserve currencies, etc. will all play a part. We've been kicking the can too long, too far and we're running out of road. Bernanke's own flawed assumptions about economics, especially the recent faux pas on the Taylor rule, thrusting us into trillions of dollars of QE and bail out money was a huge misunderstanding of the fundamentals of economics by the world's most powerful economic entity. The very fact that the average American has nothing to show for all this stimulus spending after two years shows clearly that their economic assumptions WERE WRONG and now they've created a feedback loop, a self-fulfilling fate, a Chinese finger trap; only solidifies the fact that the hole they've dug is simply too deep to be addressed by conventional, historical means.

I grieve for our country and the world, but as a trader, I embrace the change.

Well that didn't take Long-Egypt Back in the Spotlight

Story/video here


Apparently protesters have taken partial control of the State SecurityBuilding

SPY continue to accumulate for a correction

It looks like Monday if anything, my first target is $132.35, then $132.75. As of now, I don't see it going much higher based on what is observable at this point. Should we sell off hard into the close and break below $131.80, this may all be a moot point as follow through downside would have a higher probability.

More on oil

Here's some nifty analysis from Morgan Stanley, remember that our view on oil is intermediate to long term-much higher, the post below about what's happening in USO today is short term-a week or two at the most.

Thoughts on Oil

Earlier I told you the CME hiked margin requirements on crude contracts, that goes into effect after trading today is closed. the thing I'm not sure about is whether those become retroactive to open positions. If so, that would explain the profit taking in Crude, traders would need to raise cash to meet the extra margin requirement.

the other possibility is that since ICE hiked margin on oil and now CME has done so also, traders may feel that the upside is a little more limited now, after all, that is the intension of hiking the margin requirements.

By the way, the hike is an extra 10%

USO Update

It looks like profit taking here into an unstable weekend and the earlier post about physical delivery vs. rollover.

 The 1 min has struggled all day to confirm the uptrend, it hasn't so I see this as at least profit taking in USO

 The 5 min is negatively divergent, this may be a little more then profit taking.

 The 10 min can't confirm either.

finally, what would have me taking profits, the 60 min which has been in confirmation lately is not today. I'd rather take my profit and have a peaceful weekend here then worry about Monday, or at least take some off the table.

SPY Update

It looks like an intraday bounce is coming, it may carry over to Monday morning, but I kind of doubt that.

The first 3 charts show positive divergences on the 1,5,10 min charts, not surprising as we've been trending down all day, it's a relief bounce or shakeout, nothing I'm to concerned about. The 4th chart, the 30 min continues to show the bigger picture which is considerably ugly.

Trade Ideas and Follow Ups

AMZN (short)

 AMZN is breaking below the 50-day moving average for the 2nd time, after a brief test of resistance at the 50-day, it's moved lower and could be traded here or you could wait for a new low to be made which is very close.

 The white line is a possible entry at the new low, the red lines are two possible stops, I prefer the upper (wider) stop initially in this market.

 AMZN's 15 min 3C with a negative divergence at the February highs and confirmation on the downtrend since.

ANR (short)

 Similar to AMZN in having broken the 50-day twice, this is a little better positioning with the test of the 50-day average today, thus far we have a negative shooting star daily reversal candle which makes this a lower risk trade with a better entry.

 ANR's 5 min 3C today on the shooting star daily candle, this is a leading negative divergence so I'm guessing that today is as high as she's going.

BRCM-follow up

 We have a bear flag and a stop in white that suggests this is still a good trade, whether you are in it or want to enter it.

 Here's 3C inside the bear flag on a 15 min chart, note the positive divergence in whte forming the flag/consolidation, but also a red arrow/negative divergence near the highs of the flag indicating this flag may be soon moving to new lows.

DBLE (long) Follow Up

 The false breakdown is something I like to see, DBLE has recovered from that move and is in excellent position to start a leg up, perhaps an entry around $11.50 or so?

GM (short) Follow Up

 Breaking below the IPO lows? That's not good and puts a bunch of hedgies at a loss. The white area is a potential longer term stop with the red area as a possible entry on a new low, or you can phase into the trade starting here and add on the new low.

 For short term / Swing traders, the trend channel on a 60 min chart has been holding, in that case, i'd enter here and use this stop as it continues to move down to lock in gains.

GOOG (Short)

 GOOG is also breaking the 50-day moving average (daily), the red trendline is a potential stop, the white an entry which would include right now as it has moved below the trigger candle signal today.

GS (short)-Financials are not looking too good.

 This is a large H&S pattern, it may see some volatility around the neckline which is broken today-a possible entry right here. Volume has been bad lately as it should be for the price formation.

 Here's a wider trending stop on a T.C. 2-day chart around $168, but if GS moves lower, the trend channel will catch up quickly, locking in gains every day.

 The 15 min 3C chart for GS shows multiple divergences, I suspect these are institutional short positions.

KBE (short)

 KBE is also breaking the neck line of a H&S top formation. The two short red trendlines are potential stops. In this market I always prefer the wider stop on positions like this that are possible trending candidates.

 KBE's daily 3C chart shows a vert negative divergence right at the head or highs, since then it's gone into a leading negative divergence which is quite serious on a daily chart.

 And the recent bounce, 3C 5 min shows distribution at the top of the bounce

LCC (short)

 Here's a weekly chart showing LCC in big trouble, about to break support and volume has been very significant.

 on a 1-day chart, the two white lines are potential entries, one includes the current price, the next is a new low taking out all support. Look at the red volume! Big problems here.

LVS (short) Follow Up

 Weekly chart showing the triangle top breaking down

 We see the same on the daily chart, really there's been no bounce with the market, that's underperformance and not good.

SMH (short)
 On the daily we see a marginal new high which appears to be a false breakout trapping some longs in losing positions yesterday.

 The 15 min 3C chart shows the breakout as having been negatively divergent throughout. I like set ups like this and would consider a short in the area with a stop above yesterday's highs, a good risk:reward ratio.

XLF (short)

 XLF has underperformed the market and has also moved to a short signal off of yesterday's signal candle. 3C daily looks horrible.

 XLF at the 50-day moving average, and it's breaking down a second time-I like this one right here.

There is a 1 min positive divergence so you may get better short positioning off an intraday bounce.


And finally on a personal note, can anyone tell me what this is a painting of?

SPY is now in a serious position

 I drew these trenlines earlier today, each one is more pressing. I had two scenarios for the bounce that we called on Tuesday based on an oversold condition with 3C readings. Last night I mentioned the Price/volume overbought readings and 3C. So the first target was the intraday wedge which we hit perfectly yesterday, the second possibility was a head fake marginal new high. It's looking increasingly like target 1 is the target and we will not see the marginal new high, at least not on this leg and if not now, it becomes increasingly unlikely.

 SPY 1 min negative divergence in red and confirmation of the downtrend in green

 The 5 min chart also confirming the downtrend today

Finally our 15 min chart where this negative divergence seems to have solidified the reversal as the 15 min chart is where we usually see divergences that turn the market on a swing basis.

Yesterday I also talked about trader's willingness to hold positions into the weekend and that would be a sign of the market sentiment, obviously they (as of now) are not willing to and thus sentiment from the bounce has now soured. If we take out the lower trendline on the close, the implications for the market become very dire indeed. This is why I have been saying to use this strength to get into short positions you like.

The next major downdraft is not likely to become oversold like the last one did, it is more likely to break the back of the uptrend in the market, although we do have a new POMO schedule for next week, I'm just not sure the Fed can fight this market.

The S&P caught between two trendlines of support and resistance, a break here could be devastating.

 A new indicator I shared last week in the top pane negative on the daily S&P, My MACD heat map-Negative, RSI negative.

Volume is ugly, MACD is negative and as I've mentioned before, the common "Kiss the channel goodbye" on a linear regression channel.

Finally, the VXX

MACD trend has gone positive, the trend has gradually sloped to lateral/short term up ad there's a triangle coiling up ready to explode higher (this tracks inversely to the market-so up here is down in the market). While there may have been some consolidations in the past, none have had all of this going for it.

The Two MOST Important indicators...

Price and Volume. Here's a simple cumulative volume indicator, for those with programable indicators like Telechart, just choose "Custom Indicator" and put in this formula: (V+V1)

Here's a look at the results.

The indicator is in white. In a healthy market, volume expands on rallies and declines on pullbacks, the exact opposite of what we see here. Just trace the rallies and watch the line fall and then the price declines and watch the line rise. This is a subtle, but very important chart.

The Chicago Mercantile Exchange Just hiked oil margins

The Chances of a US Bombing of Libya sooner then Later is Growing

I'm listening to SKY NEWS Live and they just witnessed a massacre of civilians by tanks and an military column. Protesters started marching after a Rebel Leader was shot by a sniper. As they marched, they were fired on by tanks, light arms, anti-tank missiles and RPGs. Apparently there is a sniper contingent as many of the wounds are difficult shots. The hospitals are filled with head shot victims.

Sky News went to the hospital and it is a mess filled with chest and head wounds. I shoot targets as a hobby, I have had high caliber riffles including a FN/FAL .308- I can tell you a head shot at 100 meters is not a lucky shot-it takes skill. Gadhafi continues to insist Al Qaeda is behind this with their "hallucinogenic" pills. I Guess when you are an isolated leader for 4 decades, you are a little removed from plausible excuses and reality.

Interpol has put out arrest warrants on Gadhafi and 15 senior officials as well. He'll fight to the death in my opinion and we should be seeing boots on the ground. This is a major escalation that I think the market will begin to aggressively discount.

GLD testing resistance-maybe kissing it goodbye...

 GLD testing broken support (resistance) 15-min chart.

 1 min 3C

5 min 3C

Although there is a gap higher that could be filled, I'm more inclined to think that this is the level it's going to test. I might enter or add to a short here or a long in DZZ if GLD breaks back below $139-ish.

BPZ Chart Request

We had a trade alert on BPZ @ $6.50 on Wednesday

Here's the current charts...

 The breakout from the Triangle thus far is pulling back, whether it holds support or not, we'll see. Often these patterns that are obvious are manipulated in the short term.

 10 in chart showing a negative divergence late yesterday

 5 min chart confirms the same with the negative divergence near yesterday's close.

On the 1 min chart we have a positive divergence building so I'd expect to see the downside abate a bit here, it'll be important to see what happens next. If the 1 min continues to build and bleeds over onto the 5 min, then BPZ should remain an active trade, if not though, then we are looking either at a deeper pullback or a possible failed pattern.