LVS

LVS earnings are out after the close today, so here's a look at the charts.

 60 min chart, a short accumulation period, followed by mark up and negative divergences.

On the 15 min chart, there's that pop above resistance that failed nto a negative divergence.

My opinion is LVS won't react well to earnings.

Financials

 FAZ, leveraged 3X short on financials, note the date of this 60 min positive divergence-the 28th

 On the 30 min chart, again positive at the 28th

 The 10 min chart, the 28th

 XLF long financials, negative at the 28th

5 min chart negative as well.

The 28th keeps popping up. I have to consider the possibility of what's going on in silver as more then just a shakeout. What if leverage is being unwound? Why the 12% margin hike yesterday in silver when it was already hit hard overnight?

A Nasty Hit in Crude

USO

Even more on the Fed

Read this article that was sent to me when you have a minute

Remember yesterday I noted weakness in the home builders, it continues today, the article will explain the effect on housing.

XHB-Home Builders ETF, that' a pretty nasty drop in a broad ETF.

More on the Fed's Policy

If any of what is being rumored about the Fed's policy stance turnaround is true, and I can see that it could be considering the language about QE3, then an interest rate hike and some of the other measures being talked about would have an effect on the $USD, a bullish one.

Considering the FOMC meeting was so recent and this rumor is so far removed from the language of that meeting, they must have some data that is very scary. The Fed doesn't want to be "perceived" as wishy-washy, I can't say for sure whether they really care about being wishy-washy, but they don't want that perception.

So lets look at the dollar which I've been taking for granted lately.

 What we want to look for are things out of character. On this daily chart, the recent volume since the 28th of April has certainly been out of character  as it's 2-3x the average volume. We often see big volume at reversal points in a downtrend.

 The longer charts aren't showing much yet, but the 15 min chart is showing a positive divergence that started on the 28th, the same time volume increased.

 We see the same on the 10 min chart.

And more of the same on the 5 min chart.

This would be a major disruption in market psychology and may be a partial explanation of why we are seeing such broad weakness in energy, precious metals and commodities in general.

I've looked at several hundred charts today and I can't recall an energy stock that wasn't being beat down. This is a broad index of energy stocks and to be down 3% today, plus yesterday's weakness I mentioned, is out of character.

 The CRB commodity index has seen two of the nastiest back to back days in awhile.

GCC is another commodity index under pressure.

We know what silver looks like.

The net effect on the market would probably send a lot of traders and funds scrambling to unwind the leverage they've been using at multi-year highs. The market itself is not fond of interest rate hikes and truth be told, we all know that the Fed has been behind the market's rally through QE/POMO. If that is all coming to a crashing halt, then.... you do the math.

Small and Large Caps

Both seem to be getting hit today. I'd like to look again in a bit to see if high yield stocks are seeing any inflows, but for now, take a look at BGZ and TZA, both inverse ETFs, on small cap and large cap stocks.

Both ETFs look like they've undergone a decent size accumulation cycle, mark up would come next and that's when they'd really move. If you want exposure to either group that is broad, these are good choices, but ETFs should never be the extent of your exposure, they're a good way to get broad exposure quickly. If you enter these trades, keep in mind the market is likely to move up and play some tricks along the way, so set your stops with some room, position size so that these or any trades don't put your portfolio at significant risk. You can check out the risk management link at the top right of the site, but my general rule, depending on how many open positions you carry, is that a failed trade shouldn't do more then 2% damage to your overall portfolio value. There are caveats to that, you can se in the risk management link, but to assume that the market will head straight down from here or that these will had straight up is setting yourself up for disappointment and failed trades. Even in the ugliest of bear markets, we typically see nearly as many up days as down days, the down days are just more extreme. So take a "big picture" view and set your risk management accordingly.

Otherwise, both of these seem like they are set for a cycle moving up. Be prepared for the pullbacks though.

Here comes an intraday reversal in the maret

Think about shorts you might like to get your toes wet in, use strength to do that.

 QQQ 1 min positive

SPY 1 min positive

These have been trending down for a bit, it's natural to see a countertrend move. Also be aware that the market will usually look to sow some seeds of doubt concerning a move down and many traders are anxious to buy that line so if we see a decent move up today, tomorrow, or the next day, don't jump to conclusions. Wall Street wants to keep you guessing.

Just Got This Email

"Leesman from CNBC is indicating that the FED is talking more aggressively about raising the fed rate, stopping the reinvesting of maturing debt and that these talks are becoming much more serious in nature."


So what does that tell us? If true it would explain the market action, remember that I said it takes some time for the market to internalize FOMC policy and then to set up their chessboard. I don't think anyone bought the transitory inflation bit Bernanke was selling and if this is true, the Fed is concerned about it and Bernanke straight out lied about it.


Any way, rumors are dangerous so lets stick to what we can observe for now and just keep this in its proper perspective.

SLV request

 Traders fal for it again, "Place that stop" and the intraday support is taken out by one cent, a flood of sell-side orders comes through.

 Nothing falls straight down, so there will be various areas in which we'll see intraday and maybe daily bounces. Right now at the 22 day average, this is a reasonable area to expect the momentum on the downside to slow and maybe even reverse for a bit.

 Here's the earlier pos. divergence I mentioned as an intraday move, and the end of that. Now we have a small positive divergence, maybe a run back up to that trendline I just showed you and maybe a break above to sucker in more sheep. I try not to get too absorbed in these short term fluctuations, the bigger picture is what is important.

 Here on the 5 min there's also a small positive divergence.

 The 30 min chart is showing the trend in line so this is the more important chart to me.

 Here's the tighter trend channel, in the white box, that is the amount of rally it held, it's now broken, although this is meant to be used on the close, so it seems we have a change in character now for the recent rally, which leads us to the bigger picture.

This has held almost all of the silver rally, you can see in red where the target zone is, if that target zone is broken and stays broken, then something has gone very wrong in silver or at least in SLV. For now, this is the target I anticipate, how long it takes to get there will depend on how much money Wall Street can make playing games with support and resistance as shown in the first chart of this post.

I'd expect some counter trend moves, certainly intraday, perhaps daily as well. I wouldn't be too distracted by them unless the internal action gives good reason to be. Translation, don't get lost in the lines when looking at this too closely.

EDZ

EDZ is a leveraged short on emerging markets, it's one of the ideas I felt would be a theme for 2011 so I've been keeping tabs on it for early signs. This trade is much like the FXP trade posted earlier today.

 Like FXP, we have a small double bottom, unlike FXP, it was tested with a false breakdown yesterday, I'm a little surprised FXP didn't do the same. As you can see volume is up nicely today on the break higher.

 On the daily chart, like FXP, we have the positive divergence at the double bottom in MoneyStream and my STOCH/RSI combo is giving a bullish signal.

 Here's 3C hourly within the double bottom (not a true double bottom as those are much larger), we have accumulation at both bottoms and some distribution crating the second bottom, but the relative position were the distribution occurred was very high, so it wasn't very bearish.

 The 30 min chart confirms the same as above.

 Here the 5 min chart shows yesterday's false break and the successful signal 3C gave on that false break.

 This is today's move thus far, which is confirmed.

The one difficulty in the short term is several resistance zones very close together, a break above $19 will be very bullish. For now, there's several ways to handle the trade, you can start accumulating now or wait for resistance to be over taken and several combinations of each strategy. If you are interested in the trade and want to fit a strategy for your trading style, feel free to email me. I do like what I see developing here in EDZ.

PCLN

PCLN has been a tough trade to catch, it's been in an uptrend for 2.5 years and has been a momentum crowd favorite. This also means that it has a lot to lose. Taders have made a lot of money on PCLN and they tend to fall in love with stocks that made them a lot of money. They also tend to margin up the trade, especially when there hasn't been any signifiacant risk percieved, which makes it an ideal margin squeeze play.

You may have heard me say this before, but the difference between professional traders and amateurs is pros will take multiple shots at a position, keeping their losses small until they get the position they want. Amateurs take one shot at it, usually fail to keep their losses small and walk away from the trade forever.

 I first noticed a potential problem late yesterday in PCLN, it as chopping around and the late day trade was bearish.

 Yesterday and Friday both saw very high volume with small bodied candles, this can be an indication of bearish churning, the close yesterday was also well off the highs. For Japanese Candlestick users, this is also (as of now) a confirmed reversal pattern.

 Here's a 60 min 3C view of PCLN, there's been a negative divergence, but it picked up steam recently and has now entered a leading negative position.

As for taking a shot at the trade, it's in a fairly low risk place to take a shot at a short here. The stop is just above yesterday's highs and the short can be taken at any point, so long as we have a close below the white trendline. If the trade fails, there isn't much risk there so it's a pretty decent looking set up right now.

BIDU

 In Mi April I covered BIDU and said I wanted to get short BIDU when it breaks below the trendline in red, I'd prefer on a close as the trendline is likely to attract the kind of games we saw in the SPY yesterday and this morning, but that' up to individual traders.

 Here's the longer term negative action that took place above the trendline with a last minute new high that went very negative. Right now it's in an hourly leading negative divergence, which is strong. Again, I look at this as a longer term play, probably a bit less complicated then ADM.

Here's the STOCH/RSI bear signal.

BIDU will be able to be put in the trend channel a lot quicker then ADM, although they are two entirely different sectors and I like both. I'm pretty comfortable saying we are seeing a definitive change in character in the market.

ADM

This is a pretty darn good example of the market's games and Triangle tops that have been discussed in several names the last week or so. I know we have a couple of traders in ADM because we've emailed about ADM this weekend.

 Here's an example of a triangle top, it must proceed an uptrend of some significance. It also must be large, a few weeks doesn't cut it. I've been saying technical analysis has changed, it's being used against technicians, but you have to understand how it's changed. A Triangle top like this is expected to break out to the upside for many traders with less technical experience, they assume it's similar to a continuation pattern. Traders who have been around a little longer and are more old school, see these as potential tops. Then you have the "wait and see crowd" that will buy or short the first breakout, whether it's down or up. In my experience, these are almost always tops when proceeding an uptrend. However, more and more often we'll see a false breakout and that's exactly what we saw in ADM before a plunge, it is in reality a bull trap.  Currently, nearly two weeks of long positions are underwater.

This is what 3C looked like on the breakout, a negative divergence, although I would have bet it would have been a false breakout without even looking at 3C, only timing would have mattered (how long it stays above the triangle).

I think ADM has the long term potential to be a good trending short trade, in the short run, we have a 1 day oversold condition that could produce a bounce, which would be welcomed to short into strength. We'll also likely see volatility similar to my rant on the SPY when ADM approaches the lower triangle trendline. If you like the trade, then you have to accept this is the way it'll probably do down, but there's a reward here as well. ADM will eventually probably end up around $28, if the market cooperates, then it could be even lower. It's a bit too soon to use the trend channel yet as we need a downtrend and as of today, technically we're still in the chop, but as soon as possible, I'd put this in the trend channel and add on any strength.

FXP-Short on China

FXP has long been one of my favorite ETF trades that I've been watching for a good setup. I know several of you have picked it up recently and right now it's in an area that should be watched for a play here.

 For now, I consider FXP to be a swing trade candidate. If it were to make progress into the low to mid $30's, that may switch to a trending trade. Right now, FXP is at a resistance zone, what we want to see is a move up through $26.75-$27 with volume picking up substantially.

The daily chart shows a MoneyStream positive divergence at the recent double low and my Stoch/RSI is giving a positive signal.

Maybe set an alert on this one, it can move pretty quick when it gets into a mark up situation, but we need to see some volume.

VICL Long Trade Update

This one has done well for us, but yesterday I warned it may be approaching a solid pullback or even a reversal. I put up some stops for different traders, here's the link

As for today, depending on your risk appetite, it may be time to stop out.

 The 10/22 moving averages on a 60 min chart have been broken, this was a tight stop.

The trend channel stop will allow for a decent pullback, but many of you probably have near a 70% profit here....

Back to the Rant

Yesterday I went on a little rant about support/resistance and traders getting skunked over and over again. The chart from yesterday and the one below show you in visual format how stubborn retail traders are in not adjusting to the market. This is one of the reasons we have so much chop around tops and important and even not so important levels. If Wall Street can make money right where they are sitting without moving the market too far, they will until it dries up.

The first from the left is the huge volume that set off stops by 1 cent! I half kiddingly joked about traders buying an upside break of the trendline yesterday, they did! This morning, they were skunked for the second time, but on a weak morning move, they bought it again and are now selling those positions. So the SPY is doing nothing but going above and below $136.15 and Wall St. is making money on the spread, rebates on volume and little moves up and down. It's crazy, but if you look at these areas I've highlighted, you'll see the volume increased at each one, it's a little hard to see with the white lines.

Close enough

 PSLV 1 min positive

 SLV 1 min positive

USO 1 min positive.

Right now, this may be good for a day trade or intraday trade, I don't see much anything beyond that developing yet.