Semis and AMSC

Semis have been acting bad lately, it's been noted many times here. Today was an exception, then after hours AMSC announces that a Chinese company that it does most of its business with, refused to take delivery of goods already under contract due to Chinese overstock. AMSC plunged 40% in after hours trade. I do find the strength in semis today a bit strange with this news out at in after hours.

 AMSC has been in trouble for awhile. When you see the breadth posts I publish periodically, you can understand that not all of the stocks in the market are in uptrends, there are plenty that look like this, which s why the advancing market on poor breadth is a dangerous market.

 Looking at the recent bounce which is nothing more then "A rising tide lifts all boats", meaning it's simply following the market as the market's direction is the single biggest factor in an individual stock's direction we can see the quarter end effect. A closer look reveals more.


 AMSC had problems before this bounce as you can see the test of $30 failed, the recent behavior though is more curious.

In the bear flag (market bounce) note when 3C really turned down sharply, right at quarter's end which leads me to question when this information was first known (I doubt tonight's disclosure was the first time t was known) it also raises some questions about strength today in semis as they have not been performing well. Perhaps today was a final chance to sell semi stocks before the sector gets taken to the woodshed on the AMSC disclosure. If so, then what's coming out in the form of bad news in today' fairly well performing retail sector?

The complete story on AMSC can be found here at ZeroHedge

As I stated last week, returns for the market will be kept as high as possible into the end of March (just look at the above chart and dates), after that I expected to see some realignment of portfolios and de leveraging (selling). I'm growing more and more suspicious of this market's resilience and getting a bad gut feeling for events that could be unfolding rather shortly and abruptly. Breadth has been telling the story behind the market's advance, it is a multi-dimensional story.

PMs

We had a truly excellent price move in GLD/SLV today complete with volume, there remain some contradictions within the move so I'm not convinced. We've seen too many of these moves used to belly flop the PMs in days to follow. These contradictions that remain are exactly why I said in the earlier update on PM's, it's a bit early to be putting this update out.

We'll see shortly though and either way, there should be a decent short term trade in both. The key is positioning, risk and probabilities.

March FOMC Minutes

This is likely the source of our intraday volatility. Don't forget the Fed effect, just about everything out of the FOMC gets an initial knee jerk reaction, especially FOMC meetings. More often then not, almost to the point of predictability, the initial reaction is reversed within a day to several days.

Here are the key highlights from the FOMC minutes:

• GDP revised modestly lower from January meeting on surging commodity prices
• FOMC sees stronger recovery, higher inflation
• Fed officials divided over tighter policy
• Almost all Fed officials saw no need to taper QE2 buying

It wasn't too long ago that the Fed saw little risk of inflation, I've been documenting it in just about every manufacturing report that has come out this year and most of the second half of last year. Finally the Fed is admitting it. Don't think that they were not aware of it for a minute, but they had a goal and admitting to inflation wasn't conducive to their goal.

Market Closing Action

 DIA 1 mn positive divergence

 QQQ 1 min Leading positive divergence

SPY 1 min relative positive divergence.

If some strength doesn't materialize into the close, I'd be looking for it on the open tomorrow. There is still the matter of the longer term charts which are more important to the overall picture looking exactly the opposite (negative), but that doesn't preclude the market from a bounce intraday.

Nothing goes straight down or up, in fact you may have heard me say that in a typical bear market decline, there are usually about as many up days as down days, it's just the volatility and corrections in the market. These should be used tactically to further your strategic goals.

Rotation

I've looked through the charts and it seems like we'll have a little short term rotation in to retail and tech, semis as well.

I see this as a rotational shift/bounce, however it can still be a decent move so if you are looking at trades in either sector, you may want to take this into consideration.

INTC-  Although I don't see a big accumulative move, the trendline could certainly become a target, especially the way this market behaves.


 Some 15 min accumulation in INTC, but only about a day's worth, still 15 min is a significant timeframe.

 WMT is another (retail) that could certainly head for the trendline or north of it.

 The 5 min chart shows several areas where there have been accumulation at lows.

The 1 min chart going into the close seems to suggest some strength into the close or tomorrow morning.

USO potential pullback

Both the trendline and the 10-day moving average seem like they'll converge and this is my first target for USO in this correction. Remember, corrections can occur through time as well as price. Bottom line, I still like the oil (long) trade.

A Little Longer View

 DIA 5 min.

 DIA 10- min

 QQQ 5 min

QQQ 10 min

SPY 5 min

SPY 10 min

It will be interesting to see if the 15 min charts go negative into the close, the DIA is already there.

A Little Bounce

 DIA 1 min.

 QQQ 1 min.

SPY 1 min

AAPL

Selling in AAPL could very well pick up into the close with the NASDAQ rebalancing to cut AAPL's weight nearly in half, we'll see. For now the 5 min negative divergence has sent it lower.

Here's a common market trick, an obvious support line (red) is broken, this draws in shorts, at the same time the short sellers we're active on the break, institutional money uses their selling demand to accumulate a small position. When AAPL moves back above the trendline, the short seller's losses/covering produce more demand allowing institutional money to effectively make a nice little profit without having to do much of anything to kick start the bounce. It seems they have unloaded those shares and most likely have started some shorts. These false breakdowns/breakouts are such a common occurrence these days because of the predictability of retail traders, that it makes Wall Street somewhat predictable. I'll stick with my guess that 85% of reversals start with some sort of false move. Think of it as the tinder that ignites the fire. 10 years ago or so, when technical analysis started to get popular and more people managed their own accounts (technical analysis worked a lot more like the books say it should), institutional money was usually forced to kick start rallies or declines with their own money, either producing a volume surge or selling enough to push a stock below a technical level, which of course ate into their profits on the positions. It just doesn't hold up anymore and they've adapted, retail traders still haven't adapted years later. A lot of people believe the allure of technical analysis was laziness, in some ways I think I agree. Just watching the charts you can see how the market has transformed itself, yet retail traders haven't-that's laziness.

MARKET UPDATE

 DIA 1 MIN

SPY 1 MIN.

TSLA Follow Up (long)

TSLA was an idea from March 29  within 2 days we had a nice move up of 17%, since then it's pulled back a little which is not unexpected. Today it looks to be gathering steam again for a new leg up.

 Original date the idea was posted.

 Support holds on a minor consolidation

 Yesterday we see accumulation into a lateral price zone (often that's when accumulation occurs)

This is part of a bigger bullish descending wedge with an implied price target of $35 so there's still plenty of potential

PMs topping?

It looks like the precious metals may be topping for the day. Both SLV and GLD met targets I anticipated earlier this morning and the price pattern recently looks as if both are struggling, 3C also hasn't been in confirmation of the move up, so it is negatively divergent.

 Both PMs are showing long upper wicks on the candlesticks, which tells us higher prices are being rejected.

 3C failure to confirm the move higher as 3C actually trends lower.

 SLV with long upper wicks and on volume.

Another failure to confirm.

This post is earlier then I'd like to release it as I'm waiting on more timeframe confirmation, but the looks of the PMs suggest they may have topped for the day, what comes next will largely determine the mid term outlook.

For You Seafood Lovers

On 3/28 (remember that this is a fast/fluid situation and what was written a week ago is nearly prophetic a week later) I wrote this article about the effect of radiation on the Japanese economy. My best friend's brother has lved in Japan for 10 years, he's married to a Japanese woman and they have two children. They got out of Japan last week and have been spending their time in the canyons of Utah.

In any case, at the tme I wrote the article, radiation was found a mile out to sea, we know know that tha Japanese government has approved the pumping of 11,500 tons of water or if my calculations are correct, about 2.5 million gallons of radio-active water back into the ocean. While that may seem like a drop in the bucket, the raciation levels in the seawater around the plant are already at 7.5 million times the legal limit and this was from a leak alone, the reading was taken before any pumping.

This is sure to destroy the Japanese fishing culture, which is as embeded in Japan as rice. Fishing for certain species has already been halted when radioactivity was found in a local fish called a sand lance, about 3 miles offshore. Other then radioactive iodine 131, a more dangerous form was found, cesium-137 which has a half life of over 30 years. So in essence, it will be centuries before Cesium dissipates. 


Even more disturbing however is the food chain and the pelagic species that travel thousands of miles across the ocean, a path which Japan is in the middle of. I would venture to guess that radioactivity will be found in fish, reptiles and mammals (birds, turtles and whales) off the California coast within a few months and in the Atlantic sometime this year. 


Just as a quick illustration of how fast this can travel, I put a backyard pond in and filled it with Koi, Guppies, and a few other species that I bought. I'm probably 20 or more miles from the nearest large body of fresh water (the Everglades), while there may be some closer, smaller bodies of water at golf courses and such. I had a problem with Egrets and a few other water fowl frequenting my pond for breakfast, lunch and dinner. About 4 months after I put fish in my pond, I noticed 2 fish that I did not but, they were identical and small. Six months later they were the size of the Koi, it's not a species I bought, it isn't a species my local fish store sells, so it obviously came from bird droppings which contained eggs from fish they had eaten somewhere else.  


I think for that reason alone, we are already way past Chernobyl in the scale and impact of this disaster. As for the Japanese economy (being the 3rd largest, this is no small thing), the world and markets I believe will feel shockwaves and ripple effects for years to come.


The worst thing about all of this is the information has been deliberately withheld or manufactured so even these worst case scenarios are likely the tip of the iceberg. 


Here's more on the story 


Here's more on cesium-137

Another Leak in the ISM?

ISM just came in at 10:00 a.m. and missed @ 57.3 (consensus 59.5) which sent the market higher at 10 because good news is bad for the market and bad news is good for the market; this is all about QE/interest rate expectations and a bad number, theoretically, makes it harder for the Fed to hike rates if the recovery isn't seen as stable so we get the knee jerk reaction.

 Rally right at the release of the ISM

And a positive divergence that sharpened as the market was wobbly this morning suggests the number was leaked and someone was buying in anticipation of the release. It's not hard for these numbers to be leaked, any intern at a financial outlet who has the report embargoed until 10 a.m. could easily get a glimpse of the report and pass the information along to any number of sources for any number of reasons of personal gain. I never dismiss things like this, especially when you see them as often as I do.

In the report, services PMI missed, Broad Business Activity dropped hard, prices paid fell slightly (this is also god for those who don't want to see monetary tightening),  New Orders and EMPLOYMENT declined. Respondents are still worried about inflation and supply chain disruptions.

All in all, this is one report that suggests that it' too early to tighten monetary policy, which the market likes. Still, it's one report and if inflation continues to be a problem, it won't matter. This ONE report showed a slight decrease in inflation, but this is one report vs. a chain of reports that have all showed rising inflation, which would put pressure of the Fed to hike. Therefore, I'd think the effect of the knee jerk reaction won't be too serious. If anything, I would expect buying today to come from the NASDAQ's rebalancing of the NASDAQ 100's weighting of components.

So Far, So good

Yesterday I mentioned two semiconductors that looked ready to bounce a bit, INTC and BRCM as well as the entire semiconductor group (SMH).


All are up this a.m.


3C was also showing some consolidating action in USO,  so far it's on track for a consolidation.


Of course AAPL has been mentioned frequently with regard to its relative weakness against the market, now we have an idea why. This may also be why the semis are gaining some strength as AAPL's reduced weight will probably be spread out among tech company's so there will be at minimum, index rebalancing buys in certain tech names including semis.



There were also some doubt about the strength of the most recent move in SLV and GLD yesterday, those doubt persist at least on a short term basis, my mid-term analysis can be found here. (basically expect some more chop laterally in and out of that zone I depicted).

 GLD 15 min depicts weakness in the recent move up yesterday

 Very short term on the 5 min chart there's a positive divergence, I'd expect GLD to head at least to a high above yesterday's and at that point we want to watch for any change in the character of GLD

 The same longer term relative weakness at yesterday's move higher on a longer term basis.

and the same 5 min positive divergence which has already brought SLV to a new intraday high above yesterdays so we'll keep an eye on it here.

UUP, despite its strange behavior on Friday, looked like it was ready to move higher today and it has.

Now We Know

I've said many times, we can often get an idea of what smart money is doing, but why is a question that usually only gets answered after it's no longer useful. We've noticed weakness in AAPL the last week and today we find out why.

And the REASON