SPY is the only of the 4 showing some negative action into the close
Monday, March 7, 2011
Market Update
It looks like we'll see some carry through of this upside trend into tomorrow morning.
DIA 1 min
IWM 1 min
QQQQ 1 min
SPY 1 min
All are in leading divergences of some sort. So I'd expect to se that trend resume in the a.m.
For bears, the good news is the percentage loss today opens the possibility of some more downside tomorrow, but we'll have to see what the price/volume relationships look like tonight. I personally don't like to see extreme moves (unless it's on a real bonafide break). This way we can get some trending action before the market has to correct.
The good news for me is that several members used the 3C updates today to hit the bottom of the decline and made some money using options on the move back up in the afternoon. Good trades!
Tomorrow's outlook
Today has been a pretty bad rout in the market with the averages losing from 1 to 2% (about). The 3C 1 min chart is in line and suggests we may see some follow through to the upside tomorrow-at least in the morning. There are several averages that are at risk for a 1-day overbought situation, we won't know what the price/volume relationship is until after the close, but if it's dominant, then the chances of a 1-day oversold condition are good. I'd rather see the market more moderate in it's decline and be able to sustain a longer leg down.
The fact is we saw a 1-day oversold last week that led to the bounce and a 1-day overbought. The market breaks down when we get follow through selling two-three days in a row, until then, we get that top volatility I mentioned. So as of now, I'm leaning toward more volatility short term. I don't see strong evidence supporting a continuation/follow through downside move, which is great for anyone who wants to add shorts at a better risk/entry level.
In any case, it's hard to say when the market follows through on the downside, it could be any day with world events, but as far a what I'm seeing RIGHT NOW, I don't see tomorrow as another 1-2% down day, not to say it won't be down or relatively neutral. We are looking for that edge, we can only go on what we see, otherwise we are gambling/guessing. I'll keep an eye on it through the close for developments.
The fact is we saw a 1-day oversold last week that led to the bounce and a 1-day overbought. The market breaks down when we get follow through selling two-three days in a row, until then, we get that top volatility I mentioned. So as of now, I'm leaning toward more volatility short term. I don't see strong evidence supporting a continuation/follow through downside move, which is great for anyone who wants to add shorts at a better risk/entry level.
In any case, it's hard to say when the market follows through on the downside, it could be any day with world events, but as far a what I'm seeing RIGHT NOW, I don't see tomorrow as another 1-2% down day, not to say it won't be down or relatively neutral. We are looking for that edge, we can only go on what we see, otherwise we are gambling/guessing. I'll keep an eye on it through the close for developments.
Just so you know I'm not picking on AAPL
GOOG was also featured last week as a bellwether that wasn't looking too good.
GOOG breaking down out of a top formation today-volume is increasing.
Here's my crossover screen to help prevent false crossover signals. 3 things need to happen. The 10 day price moving below the 22 day moving average. The yellow indicator in the middle window is a custom indicator I created, the blue line is its moving average, that also needs to cross below its moving average. then finally, RSI 14 needs to be below 50, you can see even though price had 1 moving average crossover, the other indicators didn't confirm, recently, in the white boxes we have confirmation of a short sale signal. The red box is a possible pullback area as GOOG is likely to test broken support, usually to the 10-day m.a., but in tops things are more volatile so I'm putting the red box for a possible pullback closer to the 22 day m.a. So if GOOG bounces, know that this is a common occurrence when a major top breaks down-that appears to be what is happening now. So there you have it, I'm not just picking on AAPL.
More Pieces of the Puzzle
Last week I showed you the VXX-S&P VIX Short Term Futures which are inversely correlated with the market. The VXX was forming a consolidation pattern after what appeared to be an apparent reversal or start of a reversal (not good for the market bulls). Here's the post from last week... and here's another post on the VXX from last week
The charts for the VXX today....
For perspective (remember this does the opposite of the market) here's the 5 day chart, note the wedging in the price pattern and the curl up recently. Most importantly, look at that volume. This is why I'm saying-deleverage on your long positions, especially those that are market longs in market averages. Raise cash for a transition and to be able to catch opportunities as they will present themselves very quickly on a breakdown in the market and get some short exposure, it doesn't need to be a full on swing for the fences, but if we get a big breakdown on a big gap one morning, you'll want to have some short positions in place or at least in the process of being put together.
Most importantly, keep your eye on these longer term charts. the market will bounce around up and down from day to day in a top in a way that you won't see very often, emotionally it can be a real roller coaster. However, if you keep your eye on 5 day charts and the longer trend that these charts are portraying, it's a lot less of an emotional roller coaster and the last thing we want, especially now, is emotional decisions.
The charts for the VXX today....
Here's the daily chart which is breaking out of the triangle consolidation today on very high green volume recently.
Most importantly, keep your eye on these longer term charts. the market will bounce around up and down from day to day in a top in a way that you won't see very often, emotionally it can be a real roller coaster. However, if you keep your eye on 5 day charts and the longer trend that these charts are portraying, it's a lot less of an emotional roller coaster and the last thing we want, especially now, is emotional decisions.
Tracking a Bellwether or just being vindictive?
OK, so I'm a little upset with my Macbook Pro today, but I wouldn't send you all bad information because of my laptop troubles. Take a look at AAP, last week I covered a few market Bellwethers and AAPL was one that wasn't looking too good. Today it's showing some signs of a reversal to the downside.
You know what I've said about market reversals, we almost always get a head fake before the event and that's why equities that have already shown a top and a head fake are among my favorite shorts as they are well into the process. The head fakes (in AAPL's case or any other stock that's been in an uptrend and is topping) serve to trap longs and allow locals to go short, which usually results in a quick move to the downside. When patterns fail, they tend to fall fast. Just look at the first AAPL head fake to the upside on a new breakout high in the first red box and then the subsequent fast move down. Today we saw another, a new high n the current leg up that failed off the opening gap up-this was also a gap resistance zone which makes it even more important.
Here on the 60 min. chart which is a very serious time frame for the bigger trend, we see 3C called the first breakout a failed breakout as it formed a 60 min negative divergence. Today's gap up has already made it to the 60 min chart in the form of a negative divergence. This is not good for AAPL and considering its weighting on the NASDAQ 100-it isn't good for the NAS or the QQQQ, you could also say the market in general.
Market/USO
SPY a min-leading positive divergence...
In red is the area I mentioned a few updates ago about a break below the support (intraday) before a move up started.
On the 15 min chart, SPY still looks bad.
USO 1 min-looks as if it's being heavily discounted. This is why I mentioned several times last week that I'd be trailing a stop on this one.
The 15 min longer term chart is also looking like a reversal in USO is coming. These are short to intermediate term charts. I do still think that later this month the path of least resistance for oil/USO will be higher, but I wouldn't ride this out, I'd take my profits on a trailing stop and wait for the next opportunity.
And here's the area in which I'd have that stop trailing, depending on how tight you want it, between $41.90 and $42.20 as of now, the stop should continue to rise (try a 22 bar average on a 30-60 min chart as a proxy for the trend channel).
Market Sentiment
Today we have rumors of Gadhafi surrendering and leaving the country, because of the uncertainty of a military operation, this should have sent the market higher. As an brief aside, the last market update I showed you the 1 min (intraday bounce) positive divergences and said we'd probably see a move down first before they moved up (another take on the false breakout on a micro scale)-that seems to be happening now.
I digress, so why s the market not trading higher?
QE2 and whether it makes it through it's planned expiration as the Fed's Fisher said that he may vote to end QE2 before it' planned expiration which does not bode well for QE3 and the market DOESN'T like this. The market has been surviving on stimulus and QE spending since 2009, the hint that the music may stop and we may not get a QE3, in my opinion, is being discounted by traders today. Otherwise, I'd think the market would be trading higher on the MENA/Libyan news.
We'll see where this goes, but the charts have not been healthy looking since that wedge started on the daily charts back around January-mid-February 2011. The SPY is down .5% over the last two trading week, compare and contrast that to the recent QE trade/market melt-up. We haven'e seen a dip like that or trading that hasn't melted the market up since last November. This to me signals a definitive change in character in the market. Tops are tops and volatility is synonymous with them, but look at a 2 or 3 day chart and the action or lack of it becomes pretty clear.
I digress, so why s the market not trading higher?
QE2 and whether it makes it through it's planned expiration as the Fed's Fisher said that he may vote to end QE2 before it' planned expiration which does not bode well for QE3 and the market DOESN'T like this. The market has been surviving on stimulus and QE spending since 2009, the hint that the music may stop and we may not get a QE3, in my opinion, is being discounted by traders today. Otherwise, I'd think the market would be trading higher on the MENA/Libyan news.
We'll see where this goes, but the charts have not been healthy looking since that wedge started on the daily charts back around January-mid-February 2011. The SPY is down .5% over the last two trading week, compare and contrast that to the recent QE trade/market melt-up. We haven'e seen a dip like that or trading that hasn't melted the market up since last November. This to me signals a definitive change in character in the market. Tops are tops and volatility is synonymous with them, but look at a 2 or 3 day chart and the action or lack of it becomes pretty clear.
FAZ/XLF
This trade seems to have come about faster then some of the others, I think it's because of sentiment in the financial sector has changed so quickly. Remember last weekends "slew of bad news" all released when the market was closed over the weekend. Here's FAZ and XLF (it's inverse ETF ) for comparison.
The hourly chart tells the story and confirms price action. There was distribution into that wedge I mentioned and since then, even though XLF is holding at support without making a new low, 3C continues lower. Not good for financials, but it does look good for FAZ which is a leveraged inverse (bear ETF) on financials.
FAZ daily chart, there's some resistance overhead at the lighter red trendlines-closing resistance and intraday highs. A Move above these should start FAZ on a decent leg up, although it's already started moving. The white trendline is a long signal and the arrow is the signal candle so once price moved above the high of the signal candle, this became a swing long entry, meaning the trade could be entered here and now with a stop just below $39 at the red thicker trendline (AVOID WHOLE NUMBERS FOR STOPS).
The daily FAZ chart is going into a positive leading divergence.
As for FAZ's inverse ETF, XLF-You can see the ascending wedge which was the first sign things were coming apart. Since then it's broken down on good volume.
FXP is another I like long
and another that broke support last week. This break of support in this case, is something we see more and more often. It traps short sellers and allows locals to grab shares on the cheap. Any breakout-like GLD, we have to watch as the potential for these being these types of false moves I'm talking about are very high with all the HFT trading manipulation. Here's FXP
Again, a very positive divergence on the break suggesting accumulation. Watch for volume to increase as price moves into the channel around the white box.
FXP breaks a very obvious channel-that's the key to these false breaks-they are ALWAYS obvious to technical chart readers and because most have failed to adapt to the new dynamics of the market, they get caught on the wrong side of the trade, it only helps the locals' position.
EDZ-a long time favorite (long) Trade
GLD Possible Head Fake (possible short trade)
This is the 2nd time GLD has done this in a week.
Two probable false breakouts....
On a 5 min chart, today's looks even worse then 3/1-3/2 breakout with a lower 3C reading suggesting this is another false breakout. The possible short trade would be triggered at a move below $139.35 with a stop just above resistance near $139.60. If this is a false break, then GLD should slip pretty fast down toward support around $135 and ultimately below $130
Here's today's on a 1 min chart-negative right off the open...
Market Update Bounce?
IWM 1 min
IWM consolidation
SPY 1 min positive
SPY Double Bottom consolidation.
Looking for upside here shortly, there may be a quick false move down right before.
SLV Update
slv 1 min negative off the open
USO 5 min
SPY Update
OK, my mouse is working intermittently, which is frustrating. I apologize and will find a way to make it up to you all.
This looks like the positive divergence I have been expecting, watch for some intraday upside here soon.
SPY Update
Still having problems, but here's the SPY this a.m.
In white if Friday's positive divergence, this morning there was a brief negative divergence. I'd expect at some point the intraday move up will continue, but I have a lot of charts to look at
Murphy's Law
Updates will be up shortly, having a computer glitch. I'll try working from a backup.
I'll get to your emails ASAP-just wanted you to know I'm here and resolving the issue. Apparently a wet track pad on a macbook.
I'll get to your emails ASAP-just wanted you to know I'm here and resolving the issue. Apparently a wet track pad on a macbook.
