Getting Out

In the last update, I suggested we may see some distribution or selling into the close. The divergences aren't powerful, but none have been today as traders have been very cautious. It appears they rather be safe then sorry and some negative divergences have appeared in all of the majors.

 DIA

 IWM


 QQQQ

SPY

Hopefully you used today to add to or initiate some short positions. I think the locals are taking the better safe then sorry as they can always run the market up tomorrow if events warrant, but they don't want to be caught in a mini-black swan event.

Based on what we see right now, I wouldn't expect too much upside tomorrow, however, the 6 pm vote and subsequent actions will determine the end result. As I've made mention several times today, the commitment to this accumulation cycle is just not there, it wasn't strong yesterday (strong enough to deduce that we'd probably see the gap up though) and today they have been luke-warm at best.

So if it were me, I'd pull any longs that I may have had in place to ride this bounce and just sit tight, preparations should be made by now.

UN Vote

Apparently the UN will vote at 6 pm (after the market is closed) on whether to carry out airstrikes. Gadhafi's retort has been pretty insane saying he'll attack air and sea vessels in the Med. as well as civilian targets. This explains what I said earlier about the market not looking committed to this bounce and that the locals look like they are set up so they can pull the plug at a moment's notice.

That being said, all 4 majors-the Dow, S&P, Russell and NASDAQ 100 have all gone into a late day positive divergence following the lead of IWM that I mentioned this afternoon in a market update.

Whether this holds into the close will be the big question as they may be using an intraday move up to exit the market or hedge with shorts.

GLD/SLV

Today and over the last several days, both PMs have been acting in unison. Right now they are each forming bear flag consolidations (a negative consolidation that implies another leg down is coming).

GLD

 Here's the bear flag in the white box, volume looks good.

 So far  we have positive confirmation

H

 Here's the trend channel stop

 Another bear flag in SLV

 SLV is showing confirmation, so there may be some more upside.

The trend channel stop . Also ADX has turned down showing the uptrend in SLV appears to be done for now.

Looking for 1 more intraday move up.

Yesterday the SPY/DIA didn't show any positive divergences, the IWM and Q's did. Right now, that same dynamic is happening less the Q's.

I think this positive divergence will likely take the market up intraday for at least one more leg. We'll have to wait a bit to see if we can expect more upside tomorrow.

Today the Tick Index is not nearly as bad as yesterday, but yesterday the extent of the negative action there pointed to today seeing an oversold bounce. Typically these bounces will be pretty impressive as to shake out shorts, it remains to be seen if we will see that or not.

BTU, Coal and Clean Coal Technologies

In the days ahead, all of these will be worthwhile to keep on your radar. The rally in stocks like BTU is a knee jerk effect. Smart money didn't have time to plan and accumulate a position there.

BTU is nearing resistance, hopefully it will pullback and undergo an accumulation cycle.

Right now, nuclear countries across the globe are taking a second look at their exposure. We've seen reports of that in the US and Europe and certainly Japan. I believe Germany took several reactors offline for a period of 3 months to ascertain their stability.

For the US, the MENA situation may play a more important role in deciding whether to pursue clean coal as instability from oil producing countries is a huge unknown and we have the resources here to take care of our energy needs in coal.

For Japan, there's an inherent sensitivity in the culture to nuclear events, and who can blame them as they are the only country in the world that has been attacked with nuclear weapons. More importantly, they are 100% reliant on foreign sources of oil, much of it from the MENA region. It's not just the governmental instability in MENA, it's the terrain as well. There are numerous choke points that could prevent oil shipments from arriving in Japan. Clean coal technology however, offers them the opportunity to take delivery of the raw materials needed from stable governments. I think this debate will sharpen dramatically in the months ahead and this is good for coal producers and those that produce clean coal technology.

Being that events in Japan were without notice, the move in coal is a knee jerk market reaction, but I believe, just as we saw with oil when trouble started in Egypt, that coal will pullback and allow the institutional money managers to accumulate positions, much larger then what they can buy in a market that is rising due to a knee jerk reaction. We want to watch for that pullback for an entry. Keep these stocks on the radar and if you see what we are looking for, don't hesitate to email me.

Market Update

All of the major averages are now showing negative 1 min divergences except for the Russell which may indicate some Fed interference. In either case, if the russell moves higher, it's likely to take the other averages with it, but understand that they are showing broad weakness into the bounce today.

As for USO, I think the intermediate/long term is solid for upside. Short term remains in strong confirmation. I think there's enough accumulation in the cycle to move USO beyond the March highs. So far, so good.

WMT Trade Alert (short)

WMT has moved (I believe) far enough away from the volatility of the top that it can now enter a stage 4 trending decline and it may start that next leg down today.

WMT which is a stock that faces significant cost input inflation for many good, nearly all good they sell, is a prime target for diminishing EPS moving forward. It's a massive example in an equity of the problem of stagflation. As you can see, it tested the resistance level and has moved down from there. I feel better about stocks that are out of the range of easy manipulation that creates volatility near tops. Also note the volume. It appears that there is massive de leveraging occurring.

 The 1 min chart shows WMT in a negative divergence, that on top of the fact that it has shown no relative strength today. These are the things to watch for when a market bounces-the stocks that don't participate as they have a good chance of becoming the worst performers once the market moves down again.

I'd still try to keep my initial trade entry stop a bit wide, otherwise, I think WMT is very close to starting the next leg down and becoming a trending candidate.

MSFT Trending Trade

This is the kind of trade that makes money, this is the kind of trade we hope all of our trades will behave like.  This is the kind of trade that you add to on strength.

 Look at the tight linear regression channel, this is a beautiful-TEXTBOOK trend.

 We have some strength today, this is where I'd be adding to the trade. See my article at Trade-Guild.net on How to make more then 100% on a short trade

 We're seeing a little distribution, although we may have a day or two higher, I'd still be adding incrementally to the trade. THIS IS THE BIGGEST EMOTIONAL BASED MISCONCEPTION IN TRADING and Wall Street has propagated the idea for decades so they can keep your money and keep you spending on commissions. The "Dollar Cost Averaging Concept" is 100% wrong, you are throwing good money after bad. If you are going to add to a trade, it should always be a trade that is working for you. If you were in a hole, would you keep digging? That's what Wall Street's dollar cost averaging is. Instead, add to trades that are working.

Here's the trend channel stop. I'd also keep an eye on an ADX indicator which is showing a strong trend reading now. If it were to turn down, then I'd consider taking some profits off the table. By the way, as long as MSFT stays in the channel like this, it's still a viable trade.

FXI/EEM Update

The China 25 and Emerging Markets. The trades I prefer as both of these look bad, at least for broad coverage (individual names are preferable , but both ETFs could offer some decent coverage, especially if you need it in a pinch) are FXP for China and EDZ for Emerging Markets. As always, be careful when using leveraged ETFs (these are both inverse so they are a short play on China and EM by buying them).

Here's the China 25 FXI and Emerging Markets EEM charts.

 The daily EEM chart shows a decent size top that's showing some volatility around support as it has broken through it recently. The gain today is not in line with the broader markets so there is relative weakness there as well. Note today's gap up volume is quite shy.

 EEM on a 5 min chart shows a tiny bit of accumulation late yesterday, around the same time as the market, so this is not a move based on anything other then correlation with the market. Currently there's strong confirmation here -at least on the 5 min.

 The 1 min is showing the start of some weakness, we'll see if it continues, we may be heading toward the gap.

FXI-China 25 Index ETF

 Again, another large top that broke major support recently, it caught some support yesterday from the hammer in February. Note the volume. The bigger picture here is not pretty, unless you are a short.

 The 5 min chart is in exact confirmation, it to is headed down as of the capture.

The 1 min chart shows no such confirmation.

These are both looking weak, as the market is (see the previous post), this is a good time to add incrementally or to establish positions in FXP/EDZ if you like the trades. I personally do, but do not want to have too much exposure to any ETF until they begin to trend. ETFs are dangerous in sideways chop, even more so for leveraged ETFs like EDZ/FXP

Market Update

Well it's a bounce and the percentage gain is decent, but behind the scenes, there's not a lot of commitment here.

 DIA, 1 min not confirming

 5 min showing distribution

 IWM is close to confirmation, the IWM and Q's were strongest yesterday

 Again, the 5 min IWM is "close" to confirmation.

 QQQQ 1 min in a negative divergence

 The 5 min is also in a negative divergence

 Here the SPY 1 min hasn't confirmed and is in a leading negative divergence

The 5 min is close to confirmation.

I haven't quite seen 3C readings like this on a bounce, they are extremely weak, which implies to me that the locals have taken minimal positions, small enough to get off the boat at a moment's notice. That doesn't mean they will or that we won't move higher, they just don't seem to have committed to this particular cycle.

USO Higher Since Tuesday's Reversal Signal

USO has gapped up to 2+% this morning since we identified accumulation and called a reversal Tuesday as USO hit our expected downside target. The move thus far looks solid.

 The move since our reversal call

 This morning's gap is confirmed

In the white box you can see accumulation, this was the reversal call day.

In the meantime...

The charts below are various timeframes of EEE and they all suggest that the recent break below support was a false break down.

 15 min

 10 min.

 30 min.

5 min.

EEE Trade

This one was mentioned a few days ago, it looks like it's coming back in line, take a look and I'll update as the 3C charts catch up to the open.

Industrial Production disappoints, the market still gaps up

The market was set on a path yesterday to bounce, and as I mentioned last night, "Watch how the market reacts to news", the market more or less shrugged off the report.

Initial Claims were in line.

CPI increased which is not good for the bulls who want a QE3.

All in all, it wasn't a strong bullish day for news, yet the market still gapped up. This tells me that the locals still are exerting control over the market, it hasn't spun out of control. They set things in motion yesterday and despite some weak news, they kept them in motion.

This is good news for us as we can now add short positions into strength. Make sure you are shorting stocks that are solidly bearish and even better, in establishes downtrends. Now's not the time to guess whether a stock has topped, look for stocks that have topped. I provide several ideas every day and will continue to.

As I mentioned, since the downside volatility was so impressive, don't panic if you see similar bullish activity in a bounce, that's the nature of the market. When in doubt, look at the longer term charts and keep your eye on the trend. Daily gyrations can be enough to spook you out of a good position and that's what they are meant to do, understand that is the local's game plan and that should help take some emotion and fear out of your choices.