Scientists Say Japan Can Expect Another 8 Quake

Here's the story

USO update

See my earlier post today on USO.

We were expecting some more downside from USO-at least before Japan-again see my earlier post today for a more complete explanation. While nothing goes straight up or down and this could just be a wobble in the down trend, the 1 min chart has been exceptionally strong today.

Here's the 1 min chart showing a positive divergence most of the day. I mentioned earlier the dynamics of Japan and how it could effect oil, one new dynamic would be oil traders front running Japan's eventual energy needs once refineries and ports are re-opened. We need to watch and see if this is just a wobble in the downtrend which is intermediate in scope as we expect new highs in USO, or if this is the front running of the trade I mentioned earlier.

TSO Update

TSO's volume today has been excellent, I'd like to see it close above $25.83. The intraday chart appears that it is putting in an ascending triangle which is a bullish continuation pattern. This pattern is very obvious, thus we often see a false breakdown right before a new leg up, that may be what is happening right now.

AAPL showing some EOD intraday weakness

I've been watching AAPL today to see if it puts in a possible short sale signal candle today. It's been stronger then the broader market, but looks are deceiving until you get into the internals, a place few venture.

AAPL 1 min chart showing a negative divergence-contrast that to the QQQQ of which it is the heaviest weighted index component.

The Q's are still trading in line on the earlier intraday bounce, maybe even a bit stronger, so why the weakness in AAPL?

Market Update

I don't think our intraday bounce is over yet, the DIA shows why...

Note the recent positive divergence on the 1 min. chart. Also the accumulation was a bit bigger then the move up would imply. Remember to use strength to sell into.

Market Update

I don't think our intraday bounce is over yet, the DIA shows why...

Note the recent positive divergence on the 1 min. chart. Also the accumulation was a bit bigger then the move up would imply. Remember to use strength to sell into.

GM Trade

For those of you who are not already in the GM trade, HERE'S THE LAST FOLLOW UP, we have a new signal candle for a short position. Check out the last article for more analysis as to why we like GM short.

A move below $31.43 would trigger the next Swing Trade down, the stop for this trade I'm estimating at $32.40

GE Designed the Japanese Reactors-Possible Short Trade.

Furthermore, there are 23 sister reactors in the US.  Again, another company that has a chart that can't be helped by the news.

The red arrow is GE's closing lows, the white is the new intraday low, this looks like a probable breakdown in GE. Personally, if I liked the short, I'd use the brief strength we are seeing as the market catches a slight bid to short into strength.

Here's the positive divergence intraday today, it's inline with the market in general. It looks like it may have some further upside so if you like the short trade, you may want to phase into the trade a little at a time, up to 50%, then add the rest on a new closing low which may come today.

AT&T possible losses from Japan-possible short trade.

Underwater fiber optic cables keep Japan's communication services running smoothly. A number of Japanese companies trading on the Nikkei are down today because of the damage to submarine communication cables. However, the largest network of cables is owned by a consortium of 14 companies led by AT&T, the damage to these cables, repairs, loss of revenue and possibly customers won't help out T's already ailing chart.

The macro view- a large broadening top which has broke to the downside and has bounced and looks now to be heading back down. Note the heavy red volume. I'd be interested in shorting this one on a break of the consolidation trendline around $28.

Here's the daily 3C chart, you can see we have a recent negative divergence on the parallelogram consolidation.

On a Personal Note

I enjoy surfing, when I was a bit younger and didn't have a family, I took some dumb risks like surfing just as soon as a Florida hurricane passed-of course we were the first in the water because we were the only ones who didn't evacuate the island. I nearly died doing that and scared the hell out of my family in the process, but the California surfers who wanted to ride the tidal wave they were expecting set a new standard for dumb.

For me, it's enough just to avoid the sharks (A friend of mine was bitten by a Caribbean Reef shark and lives with the consequences 12 years later), but dodging mini-vans, fishing trawlers, ducking overpasses (I actually had to duck a pier in my hurricane surf session) and weaving in and out of buildings is really just dumb.

Take a look at this video, one of the first videos of the tidal wave coming in. It gives you some idea of just why Japan may be selling US treasuries and why Europe is now in deep trouble as Japan's investment in the Euro-Zone is now a distant memory all of about 5 days.

Oh and here's EWP-a short I think may be worthwhile which I mentioned last night. Spain is the bull in the china shop should contagion become an issue. A few months ago it was a "I doubt it" from the pundits, but the EZ is in such trouble, like the US, I don't see anything that will stop Spain from becoming the next Ireland-they are after all the "S" in PIIGS. If Spain falls and an alternate bailout mechanism can't be established (you know the situation in Germany which is pivotal to such a feat), then as I've suggested, the EZ and Euro very well may not survive.

EWP in a massive top-the recent 3 day price action sets up a nice short.

The daily 3C view of the top-not pretty.

Here's the hourly view, EWP was headed down in the intermediate/long term

EWP did see some accumulation, BUT now things in Japan have changed drastically. There are things even smart money can't discount.

The 1 min chart seems to reflect the Japanese situation with a recent negative divergence or distribution.

Here's a Trend channel stop you might consider.

Japan can't catch a break

This from the AP:

" a top Japanese official said the fuel rods in all three of the most troubled nuclear reactors appeared to be melting."


When the rods melt, the containment structure will be destroyed-so far 3 reactors are in danger. This is not at all good news.


On another note, US Treasuries are being sold today-my guess is that a Japanese entity is doing the selling, whether it be the government or insurance companies.

AAPL Follow Up

Here's the last Analysis on AAPL from last week-looking for strength to short into.

Here we are now. A lot will depend on the market's stance as of the close today, but the opportunity to short into strength I talked about on the 9th is here.

Here's the daily chart, AAPL broke down from a bearish ascending wedge. What we have seen since is the typical volatility associated with market tops.

The hourly chart shows the negative character of distribution in AAPL at the wedge top and the rebound bounce.

On the less influential 5 min chart we have several days of accumulation, starting the day I posted the last update last week-you can see price's reaction to the accumulation cycle.

This morning AAPL showed a negative divergence into the highs and since has formed a bullish descending wedge, implying AAPL will move back up towards $356, this would be an obvious area to start a short position. I'm not sure how fast it will move up and if we get another few days of price appreciation based on the length of the accumulation cycle, but we want to watch for a signal candle to break down before shorting this heavily.

Market Update

The DIA, QQQ and SPY are all showing 1 and some 5 min positive divergences as price starts to trend either in a bullish wedge or laterally (indicative of accumulation) so I'm betting we still have a very good chance of seeing an intraday bounce here, what happens next will be important on the timeline for the market and its probable breakdown.

DIA

QQQQ

SPY

Clean Coal Technology-EEE

After Japan, EEE saw a quick bout of heavy accumulation. There looks to be more upside, the real question is will this latest disaster which may be shaping up to one of the worst ever, have power utilities and governments looking toward clean coal, especially given events in MENA?

EEE's daily chart with accumulation in December, it seems that round ran its course, we may be starting a new round or at least a swing trade up.

It's not usual to see a divergence this big on a 15 min chart in 1 day, so there was some serious accumulation Friday. I'd guess there's more upside to come.

More confirmation of Thursday/Friday's accumulation-this is a leading positive divergence, again I'd think there's more upside to come.

Right now on the 1 min chart, 3C is trading in line with price-probably a consolidation. I do like EEE here and would consider buying this one for at least a swing move up.

Market Update

As you can see, the market is in a very dangerous position, we are making new lows on the S&P. Right now we have 1 min positive divergences in the DIA, QQQQ, and IWM. What happens next will be very important, whether the market can rally back above support and hold a close there or not.

The events in Japan, Bahrain and the possibility of a no-fly zone ever increasing, over Libya are coming together as a trifecta of really bad news. Each of these on their own are probably the worst news events and most disconcerting market events we've seen to date and all 3 are now happening at once.

We'll keep an eye on the market's behavior today, but as I said last night, "It's time to have your feet in the water, not just toes any more" regarding short positions. I'd use any strength to add to them here, but still I probably would not want to much more then 50% of my portfolio short at maximum. I'd want at least 25% in cash-and up to 50%.

The Eventuality of MENA and the Current Nightmare Scenario

Bahrain may very well be the micro version of macro events to come in the MENA region-remember last night I mentioned the Saudis are said to be sending military units into Bahrain. To better understand all of this, I'm publishing Stratfor's Red Alert from this morning.

Forces from Gulf Cooperation Council (GCC) countries will enter Bahrain to help the Bahraini regime quell unrest, according to a number of media reports, including by Bahrain’s Alyam newspaper, known for its close links with the ruling al-Khalifa family. The reports come one day after clashes occurred between Shiite protesters and police in the capital, Manama. Meanwhile, Bahraini state media reported that the Independent Bloc (a parliamentary bloc of the Bahraini parliament) asked Bahraini King Hamad bin Isa al-Khalifa to enforce martial law to contain the unrest.

These reports suggest that foreign intervention in Bahrain, or at least the possibility that the Bahraini military is taking over the security reins, is imminent. Such a move would mean the regime is getting increasingly concerned with Shiite unrest, which does not appear to be subsiding despite calls for dialogue from Bahraini Crown Prince Sheikh Salman bin Hamad al-Khalifa.

Troops from the United Arab Emirates are reportedly expected to arrive March 14. Al Arabiya reported that Saudi forces have already entered Bahrain, but these claims have yet to be officially confirmed by the Bahraini regime. The only announcement thus far has come from Nabil al-Hamar, the former information minister and adviser to the royal family, who wrote on Twitter that the Arab forces arrived in Bahrain. An unnamed Saudi official also said March 14 that more than 1,000 Saudi troops from the GCC’s Peninsula Shield military force entered Bahrain late March 13, AFP reported.

The ongoing tensions are exacerbated by the split between Bahrain’s Shiite movement, which became clearer during protests on March 11. The more hard-line faction of the Shiite movement, led by the Wafa and Haq blocs, has been increasing the unrest on the streets in the hopes of stalling the talks between the Shiite Al Wefaq-led coalition’s negotiations with the regime. Military intervention by the GCC countries would mean the situation is increasingly untenable for the regime. The paradox the Bahraini regime faces is that it cannot contain the unrest while trying to kick off talks with Al Wefaq. Al Wefaq finds itself in a difficult position, since it risks losing ground against hard-liners if it appears too close to the regime while Shiite protesters are beaten by the police.

The Bahraini regime has used the military option before. On Feb. 17, the military deployed immediately after a police crackdown in Manama’s Pearl Square and was able to calm down the situation for a while by encircling the area with tanks. If Bahrain indeed has requested Saudi intervention this time, the implication is that the Bahraini military is not confident in its ability to contain the unrest now. Riyadh’s decision to send forces to Manama could be taken for this reason, since wider spread of Shiite unrest from Bahrain to Saudi Arabia would aggravate the already existing protests among Saudi Arabia’s own Shiite population. Saudi military intervention in Bahrain is also not unprecedented; Saudi Arabia sent troops to Bahrain in 1994 when Riyadh determined that Shiite unrest threatened the al-Khalifa regime.

The regional implications of the unrest in Bahrain were underscored when U.S. Defense Secretary Robert Gates visited Manama on March 12 and urged the Bahraini regime to implement bold reforms. Gates said Iranian interference would become a greater possibility if Bahrain fails to do so. While Bahrain and Saudi Arabia seem to be coordinating to avoid that possibility, it is not without risks. Leader of the hard-line Haq movement Hassan Mushaima, who is believed to be increasing the Shiite unrest in Bahrain with Iranian support, said Feb. 28 that Saudi intervention in Bahrain would give Iran the same right to intervene as well. A scenario of regional Sunni Arab forces cracking down on Shia would apply pressure on Iran to respond more overtly, but its military ability is limited and it is a very risky option given the U.S. 5th Fleet is stationed in Bahrain. As of this writing, there is no sign that the Iranian military is taking steps toward that end, however, the situation on the ground could escalate if Shia in Bahrain ramp-up demonstrations.

USO Update

So far the calls on USO have been pretty much right on. Here's the situation.

Here's our original downside target in white for USO-although after that, I expect to see a move to a new high.

The hourly chart shows the current distribution has turned USO down from the last accumulation cycle.

On the 1 min chart we do have a positive divergence, this may be an intraday move or we may have to change our downside target based on Japan's need to import crude to make up for their nuclear power short fall. While it's true that refineries and ports in Japan are shut down, it doesn't mean that traders who understand this won't front run the trade. Still, they'd be better off accumulating at lower prices, so for now, I'm going to assume this 1 min divergence is just an intraday wobble until we have more evidence to suggest otherwise.

Emerging Markets and China 25

Both of which I'm long term bearish on. For broad market coverage I prefer to use the ETFs EDZ for emerging markets for short exposure and FXP for China 25 for short exposure. There may be some good individual stocks as well, but these, when trending will cover your bases pretty well.

Lets take a look at EEM and FXI (the long versions) on a short and longterm basis

Here's the long term view of EEM, it's a H&S top and 3C has confirmed it has broken down into distribution/short selling. The long term view is quite negative.

On an hourly 3C chart we see the last 2 accumulation zones in white, the most recent one has put in a negative divergence, I suspect the accumulation from the last round is all distributed by now.

On a 5 min chart we see a positive divergence, not out of line with the broader market and not very big, the distribution has just started on a 1 min scale so we probably have a little more upside here.

Here's the 1 min distribution mentioned above, it should show up next on the 5 min, 10 min and then 15 min charts, By the time we hit 15 min (which depends on how fast they are selling) we should be near a downside reversal.

FXI-China 25

There's 2 possible H&S tops here, I think the bigger one is valid at the red arrow.

Here on the long term chart 3C also shows distribution into this top-right at the head in fact.

Like EEM, here are the last two accumulation cycles on an hourly chart. Right now the hourly chart is in line with price.

The 10 min chart shows distribution, I'd think this is probably a reversal from the last accumulation cycle looking at the intermediate term-perhaps long term.

On the 5 min chart there's a positive divergence short term in line with what the market has been doing, the 1 min chart is still in line with price this morning so I'm not sure whether distribution of this short term up move has begun yet.

Longer term both look like excellent short positions. In the meantime, we are still inside the volatile top and there will be accumulation/distribution cycles of varying lengths, depending on how close we are to an actual break of the tops.

The Anonymous, Bank of America Leak

Here's the start of the scandal, it can all be found at this website.

It'll be interesting to see where this goes.

TSO Trade Alert (long)

TSO just broke out of the consolidation area, looks good right here.

CTIC Long

And VERY speculative. This is one I've been watching for a bit waiting for a break higher, today we've seen that. You know that we've often picked up trades up 10-15% and still made 50-300%, so don't let the price gain through you off in this category trade, just be sure to use very strict-double bag risk management here.

T minus 1 minute and other stories for the week.

At 12 a.m. EDT, the hacker group "Anonymous" is set to release the story that Wikileaks hinted at, but never released, the one in which Bank of America is caught in massive fraud. The story is here at Gawker


Anonymous is also leading a campaign of "civil disobedience" until Bernanke steps down and the Primary Dealers that I've mentioned so many times in connection with POMO/Debt monetization, finally get theirs. Here's that story.


I talked a lot in December about the new pressures the Fed will face with Ron Paul heading up the Sub-Committee on Financial Oversight. This time Paul has scheduled his second hearing, titled something like, "CPI Lies and Fed Created Inflation", a clear reference to the released CPI data which excludes "volatile" food and gas, the two things every American uses everyday. I never understood how inflation could be truly measured without considering these two influential data points. Furthermore, we have talked at length here at WOWS about stealth inflation and a possible stagflation environment as manufacturing survey after survey (all seemingly bullish) all confirm rising input costs and lower orders. The net effect is inflation, but because companies will try to contain it as long as possible before passing it on to the consumer, it's likely that we will see a stealth, heavy hitting bout of inflation. Which leads to the second part of Paul's hearing-"Fed created inflation". This stealth inflation HAS BEEN 100% created by the Fed as they have the printing presses smoking and are nearly giving away money which has fueled unprecedented speculation in all risk assets including commodities. So the input costs aren't at all a sign of consumer demand, they are caused by rampant speculation in the commodities complex and this is because of the Fed keeping the lending rate near zero. This is also something we've been talking about for awhile-it can only end badly, whether stealth inflation hits or the Fed does what it has to and raises rates to absorb all of the cheap money they've put out there. In the meantime, because of their non-stop printing, the value of a dollar has dropped dramatically (part of the stagflation concept), but more importantly, punishing baby boomers who have saved for a lifetime in anticipation of retirement which kicks into high gear this year. Their money is worth less because of the Fed's actions, only the banking cartels are making out like bandits, Anonymous knows it and so does Ron Paul.


Here's an excerpt from the announcement of the hearing:


"Ron Paul hearing on CPI lies and Fed created inflation

Congressman Ron Paul, Chairman of the Domestic Monetary Policy and Technology subcommittee, announced that the subcommittee will hold a hearing to examine the relationship between monetary policy and rising prices (with a particular focus on food and energy prices).

 The hearing is scheduled for Thursday, March 17^th at 10:00 AM, in room 2128 of the Rayburn House office building.

 

“It is unconscionable that published government statistics mislead Americans regarding the true rate of price inflation, which is much higher than commonly-reported CPI numbers,” Paul stated. “It is also unconscionable that Federal Reserve Bank officials continue to deny the effects of their monetary expansion on consumer prices.  Inflation, properly understood, is a monetary phenomenon.  The price inflation Americans suffer today is largely the direct result of relentless monetary expansion by the Federal Reserve over the past decade.  Our witnesses will explore how current monetary policy, including QE2, directly impacts the standard of living of Americans in ways that are not reflected in official government data.”

 

Congressman Walter Jones, vice chairman of the subcommittee, stated, “The Fed has attempted to convince the public that its money printing campaign is necessary to stimulate America’s economic recovery.  Instead of recovery, the real effect of the Fed’s money printing has been monetization of America’s exploding fiscal deficits, devaluation of the dollar, and creation of inflation in asset prices across the board.  As a result, working people in places like Eastern North Carolina are being squeezed at the gas pump and the grocery store as they struggle to make ends meet in a world in which their salaries have no chance of keeping up with Mr. Bernanke’s printing presses.”

Get ready for the PIIGS contagion to comeback into rotation in the fear cycle. Last Friday Greek 2 year bonds fetched an amazing 17% interest rate. There's not a lot of confidence they can repay the bonds in two years, but more importantly, Spain is on the brink and the bailout fund can't handle it. As for a new bailout mechanism, it isn't going anywhere without Germany and Angela Merkel is on the wrong side of the issue as far as voters in Germany are concerned. We already talked about her crushing defeat in one vote of more then a dozen. Her party now has the support of 39% of the people, while the opposition party has 43%. The message the German people are sending is clear, NO MORE EURO ZONE BAILOUTS!" So watch for that to erupt this week. A ticker you might be interested in, EWP on the short side. I'll try to feature it tomorrow.

As for Japan, this is a hot one. They've lost 26% of the countries power generation. While ports and refineries are still shut down, look for a huge move up in oil as an alternative energy supply as soon as they reopen, THIS FITS PERFECTLY WITH OUR USO OUTLOOK!

Furthermore a 15 foot tidal wave is headed for the reactor complex, this after reactor #3 just suffered an explosion. Things are not going well as far as containment goes. This has led to the Japanese government or rather the Bank of Japan for only the second time, to inject money markets with 15 trillion Yen in liquidity to try to prevent a total collapse. At last look, the Nikkei was down 5% and was tripping circuit breakers.

In MENA (Middle East/North Africa) tensions have heated up again in Bahrain, so badly that there is a fear that the very social fabric of the country is about to tear. This is the first of the MENA falling dominoes to introduce sectarian violence (Shiites vs Sunnis) so things could get very ugly there. Bahrain's Crown Price has asked Saudi Arabia 9who has so far avoided their day of rage) to send their military into Bahrain to try to contain the situation. And don't forget Gadhafi. This week is likely to see a "No-fly zone" implemented, which means armed western intervention which will not go over well with Arabs or the Arab League. 

This promises to be a historic week. Make sure you use any strength to get your feet, not just toes, but feet wet in short positions. Raise cash and get off long margin. I've mentioned several possible short term outcomes, but I believe the big picture will be a massive market melt-down (no pun intended there at all) and this week could very well be the tipping point.