WHEN THE MISSILES FLY, IT'S TIME TO BUY

A UN No Fly Zone has just been ordered, which may remove some uncertainty from the Libyan situation. Typically market's a nervous before war, it's the not knowing. When war commences, the market has a sense of certainty and typically rallies.

Below is an example, the white arrow denotes the start of the second Gulf War in Iraq.

Obviously Libya is not comparable, but in a micro sense, it may help to spur some market upside that we saw in late day 3C positive divergences in the Q's and IWM. We'll see if history holds.

Trade Idea-XLK

Technology stocks are getting hammered along with everything else, but this is a sector you should have some exposure to on the short side, whether it be XLK or individual equities.

 XLK has broken down from a top here. Check out the volume-this is massive deleveraging.

 When we get a top break with a daily negative divergence, rarely do these come back.

 Today XLK's 1 min 3C divergence looked a lot like the IWM's which was by far the best performing average.

I'd use any strength to get into this position short, the stop is in the white box, I'd short it right up to that stop.

Looking at the market tonight and the bellwether stocks, there has been a major dislocation, the one we've been expecting. Events are now moving so quickly that the market is having trouble knowing how to discount them, in other words, the market is starting to spin out of control. By now you should have short exposure, adding on strength and keeping cash on th sidelines for countertrend opportunities.

Tonight's dominant price volume relationship was close down/volume up-we knew it would be the heaviest, but dominance is what we look for. This should create an oversold bounce, if it doesn't, we know that the situation has changed, the worm has turned. Watch carefully how the market reacts to news. At some point, the point of no return, the market will react badly no matter what the news. That will be a sign that we are exiting the volatility of the top and moving into a bear market down trend, trading will be more profitable and believe it or not, a lot easier. Don't fight this market.

Unless Fukushima Gets a Lot Worse, Then...

We should be in for the bounce. The SPY is picking up positive steam into the close

news

The market just doesn't know what to think

Member Sent This In

Since we haven't seen a big accumulation cycle, I've assumed we'd see an oversold bounce. It may however, have something to do with this article

Zero Hedge Announces the S&P is negative for the year

While long term this is important to the overall picture which is bleak, that statement alone should drive the brainless retail traders into the market on heavy short margin, which would amplify any upside bounce.

More confirmation

It's looking increasingly likely that we'll see a decent upside bounce. If you are a short term trader, you may want to play it, you may also want to take profits in shorts. I'm talking about an oversold bounce here, not a renewed bull move in the market, although it may seem that way for a few days as the market pendulum always swings way too far in each direction.

Here's the QLD (leveraged long on the Q's) and QID )leveraged short on the Q's)-they are confirming each other, suggesting a market bounce.

 Above and below-negative divergences or distribution/short selling in QID 1/5 min timeframes.

 Above and below-positive divergences or accumulation/buying in QLD 1/5 min timeframes.

AAPL Bounce

 We caught a pretty good profit on AAPL's decline, a few of you used options and have a really nice profit. However, the wedge target to the downside (white trendline) has been met.

Here's 5 min accumulation in AAPL, which makes sense with what we're seeing in the Q's. I'd guess we will see a pretty volatile upside correction, it will have to be a pretty scary move up to shake lose the shorts, but once that is complete, it'll offer another great opportunity on the downside.  You could also take the opportunity to ride the bounce on the upside as it looks increasingly likely.

Q's and the IWM still suggesting an intraday bounce

 IWM 1 min

 QQQQ 1 min

As I said yesterday, "Don't underestimate the amount of damage done to the market". I even showed you that only 211 stocks did better then 2% yesterday-that's less then 1% of the market, not including pink sheets and pennies. This TICK chart on a 1 min scale shows something we rarely see, the tick count has consistently been hitting -1250 meaning at each tick for all the NYSE stocks, there are more stocks ticking down then up. Even in sell-offs, we rarely see more then 1 or 2 quick spikes down to -1250, today we've spent a lot of time in the area.

If this market decides to bounce on an oversold condition, even if it's up 2.5%, I'd still be using that strength to add and initiate short positions. The damage is done.

GE-Ahead of the Curve

In yesterday's GE Follow up  I said the following,

"Yesterday I highlighted GE-if you took the trade, you made money today, but the long term impact to GE's business model may be severely impaired. The reactors in Japan are 40 some odd years old and many of the US reactors are just as old. There has been a move to extend their useful lifetimes that has generated controversy. I wonder how this impacts GE in the long run?"


Today that line of thought was picked up by Bloomberg


I still consider GE a longer term short trade and would consider adding on any strength.


This Hieken Ashi Chart shows the momentum in GE, it's not good looking.

POMO Submitted : Accepted Ratio at 4

The median is 4.1 so this doesn't imply any serious PD interference in the markets today, unless otherwise directed by the Fed, but on their own, this ratio usually would not see them flooding the market with capital.

Bounce setting up intraday

 QQQQ 1

SPY 1

The IWM shows the same, the DIA has a smaller divergence. The 5 min charts are mixed, so I'm guessing this is a fresh start and we'll see if there's bleed through to the 5 min which would suggest a bigger, more important bounce then just this intraday one

Fed Cancels POMO

Now this is interesting. Why would they do that? Maybe because POMO is meant to manipulate the market higher and today would be a complete waste of money considering possible catastrophic events in Japan. Thank the higher power that my friend's brother got out of Japan yesterday with his family. They had about enough luggage for a family of four, for a weekend trip to Disney so they were pretty keen on getting out of there quick and this is one smart guy who is very well informed.

Is this Surreal?

Canadian Nuclear Power Plant Leaking

And Here's the Reason

Story Here

TMV Follow Up

Yesterday I issued a trade alert for TMV (short), there were other ETFs you could use as well. Right now we are seeing some pretty good downside action.

Market Update

Only the Q's and IWM showed distribution, something may be going on in the news, I need to check.

QQQQ 1 min

IWM 1 min

USO

Here's another one 3C called right at the bottom yesterday.

Our track record on USO lately (one of the more difficult stocks to analyze because of world events) has been flawless from calling the upside move, to trailing a stop and getting stopped out a day before the reversal to catching yesterday's bottom.

However, there's a more important lesson here. You hear me talk a lot about the accumulation/distribution cycle. There have been many events the past several days that normally would have shot USO up, but once smart money takes a position, they do everything they can-despite world events that run counter to their position, to see that position through. You can see how much firepower and support they will lend to their positions, despite world events that would move against them. That cycle I talk about is very strong and pretty reliable. Our view was after USO hit its target on the downside, which it did yesterday, it would move up, probably surpassing the last high near $42.50. We have at least 4 days of accumulation in the cycle, so be patient with USO, it should keep moving higher this week and into next week.

Slight positive divergences in the market

There have been two small ones at 9:40 and 9:50. We'll see if they can muster anything, yesterday for most of the day, it seemed like we'd see some strength today until the market went negative at 3 pm, we'll see.

UUP Update

Here's the Post/Trade Idea for UUP from yesterday

So far, it's working out and yesterday was a prime entry for the trade.

 The entry area in red

Here's one of several positive divergences that made the dollar trade look appealing.

We aren't that far from support so I think an entry here is still a viable option.

Data is not good

This morning's PPI showed, as we have known for sometime, that input costs are hitting or close to hitting record highs. Food costs are the highest is 36 years. Housing starts were also a major disappointment, all in all, not good, not good at all.

The Market is continuing the slide that we witnessed late yesterday with a negative divergence around 3 p.m., however, before that we had seen some accumulation for most of the day, whether this is a morning blip or a lower close remains to be seen. We should see some changes around 11 a.m. after they get done screwing the retail traders that left limit orders in place.