RIMM just got hit in AH Earnings

I believe trade is halted, the last b/a on my chart shows a little better then a 10% decline. I haven't had a chance to look at the report, it'll be interesting to see if there's contracting margins, uh-um, or rather transitory inflation.

While nowhere near as drastic as th last hour signal in GOOG before earnings, the distribution period on these stocks is getting much tighter. Several quarters ago leaks could be seen (in very obvious cases) a week or so ahead of time, now they're coming down to the wire.

Interestingly, RIMM's 5 min chart looks a lot like the market's

Note that tell-tale lateral trade today with declining 3C readings, until the highs this a.m., there was relative confirmation.

VIX/VXX

Today the VIX posted it's lowest closing price since 6/20/2007 at $14.37. The newer VXX posted it's lowest close in its 2+ year history. Remember, extremes in these two indicators have traditionally been turning points in the market with an inverse correlation, meaning an extreme dip in the VIX would correlate with a top in the market. I've used the VIX since 2000, even after it was reworked. The normal range on the VIX for a rally to reverse would be around 20-25 or so and a bottom over 35. These readings are extreme complacency. The last major signal in the VIX was April 2010 when it hit 15.5 about 2 weeks later the market dropped a little more then 16%, that was the last major correction.

Quick Market Peak

This afternoon move has the looks of short covering to it, I didn't see anything out news wise that would explain it.

 Just to double check my indicators, I'm looking at Worden's Money Stream on a daily of the DIA, I don't even have to draw in the divergence, it's pretty clear.

 Interestingly (MS isn't usually that sensitive on intraday charts) it picked up this negative divergence on a 5 min scale where the worst of it seems to be.

 3C 5 min of DIA

 The Q's daily, again, way off on MS.

 And the 3C Q's 5 min..., note the acceleration downward today.

 MoneyStream on the SPY daily, again, a really ugly leading negative daily divergence.

And the 3C SPY 5 min chart, again accelerating downward as the market moves up.

Suffice it to say, I don't trust this move much.

China's Response

I wrote, I think last night, that China would most likely voice its displeasure with Bernanke's policies and we'd probably see some sign of that in today's Treasury Auction of 7 year notes. Sure enough, the indirect bidders (i.e.-foreign countries) dropped to 39%, compared to the last auction at 49% and an average of 51.5%

I think China just spoke.

Harley Davidson

Take a look at this potential short play. This isn't a trade for someone looking for the quick play, you have to have patience with this one, but it may very well pay off.

I'm looking at the daily chart, 3C tracked the uptrend and confirmed it for nearly a year, at what is similar to a double top, it went negative, meaning distribution at the test of the highs.

 Here we see the top with a VERY well defined support zone. Look at the huge red volume when it broke down through support. It's obvious stops and shorts were all lined up right there. Right now it's corrected through time laterally and is threatening to take out intraday lows.

 For traders who want a tighter stop, this TC has tracked decent size swing moves and you can see where the stop would be. I would position size the trade to take that stop into account in case of a bounce, but this isn't where I see the trade I'd take.

This trend channel tracked the entire trend up and it's turned down, in my experience, stocks don't usually come back from a change in character like this.Th stop is only about $1 higher, but I think well worth it for a trending trade.

For Silver Bugs

I don't pretend to understand this in its entirety, I need to read it again and do some research, but it's something I feel you should know about and it's something that I need to watch for closely.

Here's the full story.

BRCM Follow Up

Yesterday I mentioned our short in BRCM and what it would take to see a bounce there as opposed to follow through selling. At the very bottom of the post, you can see what the conditions would have been. Now take a look at this chart and you'll see why we are seeing more downside today. It's not so much a trade idea as it is just a heads up on what to look for, especially on high volume days.

What we'd look for for a dead cat bounce yesterday would have been (as you can see in the linked post from yesterday above) very high volume which we saw, but it would also need to show a strong close, at least in the upper half of the trading range. As you can see, BRCM closed just off it's lows for the day. For anyone trying to trade around the position, the close would have told you the probability was going to be more follow through selling today.

SLV Update

Yesterday the FOMC statement cut our SLV pullback a little short, today it's seeing some downdraft.

 The white line is the area of resistance, it had cleared it earlier, but it's pulled back since so it's now once again resistance

 I expected a pullback a little deeper, closer to the blue line, we didn't get that, perhaps SLV is going to finish up the pullback, or more appropriately, correction. Remember, it can correct through a price pullback or laterally through time.

 The 60 min chart still looks strong for the trend in SLV

It's the 1 min chart that's been showing profit taking. This could change later today, if I see it, I'll let you know. Otherwise, it may just want to correct a bit more before starting a new leg up which requires resistance be taken out.

If you like the trade, then any pullback could be used to accumulate shares. Or you can simply wait for the confirmed close through resistance. It's a trade off between a little more profit, but an unknown wait ad some uncertainty and a little less profit, but a greater degree of certainty. Each trader has their own risk tolerance. I'm available as always if you want to email me about this or anything else.

AMZN FOLLOW UP

AMZN was an earnings trade from April 26. They were down over 6% in AH and I know we had some members book in AH, the next day AMZN is up big, strangely big. Make sure you check out the original post.

 Yesterday I had CNBC on to listen to Bernanke's Q&A and the FOMC results. I left it on in the background as I never listen to CNBC, not even once a month, but I'm well aware of the Cramer Effect. In fact, in early July 2008 I was calling for a top in the multi-year Bush-era run in oil. That same week Cramer came out and told viewers to buy the next bad DOE inventories report, he called it a "Contrarian Play", which I remember as laughable when you have millions of viewers all doing the same thing, how that's contrarian, I have no idea. Well they bought, and I got the oil top right to within a week. Of course I could never prove it, but Cramer is Wall St. Alumni from Goldman. Who's to say he's not helping his buddies exit their longs in oil by creating mass demand for them to sell into? Besides that, we all know if Cramer rec'ds something on his show, the next day that something is up. So yesterday at 3 p.m., Cramer was talking about AMZN and how their miss was no big deal just because they were spending money and that they were going for world domination, etc. At the white arrow, that's when he made his comments, the Cramer effect followed.

 Here's 3C 5 min, with the arrow at the time he made his statement about AMZN, looks a lot like that was used to sell into demand.

 Here's the post earnings move up in AMZN, by now a 15 minute chart should easily be able to confirm that move. I don't know if he talked about AMZN the night before or not, I'm guessing he did.

Here's the line in the sand to watch. If smart money wants out, they need demand to sell massive positions into, that may have happened yesterday. If AMZN crosses below this breakout level then we get the all too familiar "false breakout" and AMZN likely falls, so keep an eye on this area between $188.50 and $191, if it fails, there should be a lot of longs caught at a loss and supply will increase quickly and we know what happens when we have more supply then demand.

NASDAQ 100 Breadth

 Here's the TICK chart for the market, notice yesterday it's in line with the SPY (red line), but today the market has advanced, while the TICK chart has failed to follow.

 NASDAQ 100 % of stocks above and below their 50 bar average. This morning NAS 100 stocks above their 50 bar average has been as low as 22%, while those below has been as high as 78%.

 Note the change in character in the Advance/Decline Ratio from yesterday (white) to today (red)

New 250 bar lows has hit 14, while new 250 bar highs is around 8.

Market Update

 DIA leading negative divergence

 QQQ is inline, but I just looked at the NASDAQ 100 breadth charts, they are starting to collapse.


SPY negative divergence.

Silver

I'm using SLV as an example, but physical if you can get your hands on it is just as good.

 As previously mentioned, the area of the red line appears to be where Blythe Masters (JP Morgan ) and HSBC lost the battle to suppress silver to protect their inherited short positions from Lehman. The parabolic move up is reminiscent of short covering.

Yesterday in covering SLV, I mentioned a target based on the historical gold/silver ratio, it's nearly double. Silver is hitting blues skies now (no resistance) and no reason it shouldn't appreciate to the historical average. The pullback we saw was cut short yesterday and SLV and GLD ran, SLV to a much greater extent. This reflects the market's view that Bernanke will continue to debase the dollar and that inflation is probably more then transitory. Keeping rates between ZIRP and .25% for the foreseeable future will cause inflation to bloom. I personally believe the transitory language is an outright deception and it seems the market for the foreseeable future would agree. Bernanke's policies have not had the effect they were intended to so the mission of QE was redefined. In effect, Bernanke has boxed himself in, or created what I've been calling the Bernanke Chinese Finger Trap.

The wild card now is whether China intends on making good on its threats. It's a hard question to answer, there are few currencies liquid enough to replace their dollar denominated holdings. Does China really want to use the Euro rather then the dollar? On the other side of the coin, Congress and Bernanke haven't showed the Chinese anything that says we care about your holdings, I think Bernanke understands he's taking a gamble that the Chinese have few alternatives in the debt/currency realm and may be calling their bluff. I'm guessing the Chinese will respond with a strong signal, but won't go so far as they've threatened, however try to create the impression that they will. We'll see in upcoming auctions and what China says over the next few days. Silver and Gold are certainly part of a solution for them.

Market Update

The first chart is what yesterday's 1 min chart looked like near the close, I didn't have time to post them, but did mention them.

The second chart for each average is the 5 min chart which has been pretty consistent and pretty telling. So far what I've seen in the market yesterday looked like light commitment buying, at first I though even retail.  I watched the market during every sentence from Bernanke, you saw my posts on different industries such as housing as he talked about them in real time, but at the point it became fairly clear that QE3 wasn't in the cards, the market seemed to really gain momentum which would defy normal explanation. Perhaps the 5 min charts offer an alternative explanation of what was happening behind the scenes.

 As of yesterday's close, the DIA had the sharpest 1 min drop, a leading negative divergence.

 As of today, the 5 min 3C chart, I think it needs no explanation.

 The Q's 1 min chart

 QQQ 5 min chart

 SPY 1 min chart yesterday also saw a leading negative divergence at the end of day

And the SPY 5 min chart needs no explanation.

Q1 GDP

We've already had multiple episodes of lowering expectations for Q1 GDP, and it STILL MISSES!

What's really disturbing and most likely why Ben would rather deal with inflation is the drop from Q4,  from 3.1 to 1.8 is more then a 40% drop off. However, I'd argue that QE had no real meaningful impact on the economy. Nearly 2 trillion dollars later, who's to say we wouldn't have seen a modest, very modest down tick in unemployment? What you cannot argue with is the effect on inflation. I take Bernanke's comments about QE3 risks outweighing the potential benefits to mean pretty much exactly that, it doesn't grow jobs, the banks aren't lending and inflation is rising which is causing long term damage to margins.

This morning Initial Claims also came in with a nice kick in the pants at 429k vs expec. 395k.