PCLN

OK, back to PCLN, this is a trade that I'm kind of excited about, just because it's been pumped up so much that traders have probably fallen in love with it. Which is kind of a neat thing to watch when margin calls come in, I'd bet that a good portion of them would meet the calls with cash AND, if PCLN kept falling and broke the level that I mentioned in the TRADE IDEA eventually we'd see a whole herd trying to squeeze through the gate at once. This is the kind of set up that sees an equity take a full fledged swan dive and the trade becomes very profitable very quickly, even though it' already at a profit.

Considering they had blowout earnings last night and it was trading at $550 in AH, today's $519.70 and volume is on the right track. Last night on their message boards, the long and strong crowd was talking about a $700 price target based on earnings.

 Here's PCLN breaking that support level on heavy volume, but don't take a victory lap just quite yet. This is a perfect place, being a bunch of traders have been shaken out, for PCLN to stage a "Hope Rally". Note that the break is there, but it's not a decisive break, just enough to hit a ton of stops.

 Here's the longer term picture in terms of the cycle and Wall Street's M.O., we get distribution which takes PCLN down a bit, it's under accumulation at lower prices and breaks out to new highs. Since then, distribution again, it fits the Wall Street reversal M.O. pretty well thus far. However, as I said, watch for the HOPE RALLY.

This 60 min trend channel has held on a closing basis and it's what I'd think to be the most appropriate stop. If you got in on the trade when it was put out, even if you're stopped out here, you're at a profit and can still take another swing at it.

I liked the trade because of the risk:reward ratio, I still like it for the same reasons.

Watching USO

In the last post on USO I mentioned it may have been a rumor ploy to pick up some shares on the cheap and I'd be watching, here' what I've seen so far, not a smoking gun, but worth mentioning.

 1 min positive divergences in 3C and RSI

 2 min positive 3C divergence

And a relative positive divergence on the 15 min chart in 3C and RSI.

PSLV Stop Adjustment

As mentioned earlier, if warranted, I'd open the stop up a bit wider on PSLV. Now you may have stopped out at the tighter stop and taken a decent little profit for the day, but if you're still in the trade, here's what I'd be using now.

 The Trend Channel on a 30 min chart, or....

The 10-bar average (yellow) on a 60 min chart. As you can see, the 10-bar held the last swing move down and PSLV is pretty much holding right there at the 10-bar 60 minute chart.

The 15 min positive divergence that I noted last night and have shown several times today hasn't changed much, in fact it looks like it's made a little more progress today.

The New Wall Street Pass Time

Spilling rumors and taking bets in the office on how many positions they can crash, just because their soul-less and view everyone who doesn't work on Wall St. as, "the others".

And for our next rumor, A hike in Oil margins and that's an easy one to believe. I could probably start a new site today and float that rumor and get a market reaction. After what happened in Silver, commodity traders are probably pretty trigger happy at the first mention of "M-A-R-G-I... SELL!!!!"

 It's pretty much smaller speculators and micro funds that get hit the hardest with margin hikes, by the volume and the decline, I'd think that' who reacted to this rumor and for another reason.

 There was no negative divergence before the drop, so I'm still guessing it's the little guys who got spooked.

The earlier stops I put out for USO I think we're right about on target as you can see where the tight stop and the stop with a bit more room would have taken you out of the trade.

Although I'm not ready to go on record and say this was a ploy to pick up shares on the cheap, I will say that it's a good possibility and I'll be watching USO to see if any of that underlying action develops.

The New Wall Street Pass Time

Spilling rumors and taking bets in the office on how many positions they can crash, just because their soul-less and view everyone who doesn't work on Wall St. as, "the others".

And for our next rumor, A hike in Oil margins and that's an easy one to believe. I could probably start a new site today and float that rumor and get a market reaction. After what happened in Silver, commodity traders are probably pretty trigger happy at the first mention of "M-A-R-G-I... SELL!!!!"

 It's pretty much smaller speculators and micro funds that get hit the hardest with margin hikes, by the volume and the decline, I'd think that' who reacted to this rumor and for another reason.

 There was no negative divergence before the drop, so I'm still guessing it's the little guys who got spooked.

The earlier stops I put out for USO I think we're right about on target as you can see where the tight stop and the stop with a bit more room would have taken you out of the trade.

Although I'm not ready to go on record and say this was a ploy to pick up shares on the cheap, I will say that it's a good possibility and I'll be watching USO to see if any of that underlying action develops.

SPY Update

I can't imagine that there won't be some selling pressure going into the close with all of the uncertainty over the weekend, who really wants to hold through that? As far a what we have right now...

 1 min positive divergence, why not pump into the close and sell off then?

 SPY 2 min, same deal

 SPY 5 min, same thing, near term upside.

 15 min chart has gone no where today. Considering how far along we are in the day, this doesn't look very bullish.

 The 30 min chart illustrating the most recent cycle up, there wasn't a huge accumulation period so timing for a downside move soon makes sense and the chart is in a leading negative divergence.

The 60 min chart showing a cycle down, and the last cycle up with a new low in 3C or a leading negative divergence.

More on Greece

I don't know whether this has any immediate market value or not (trades), but looking at the Spiegel Story,
and the follow up denials. So there's supposedly an emergency finance meeting tonight to deal with the "Greek problem" (sounds like a chapter out of Pulp Fiction as do the denials).

The French Finance Ministry can not confirm nor deny an emergency meeting, the Austrian Finance Minister dodged on the issue and just said that an E.U. break up is "unthinkable", which says nothing about the meeting. Germany, where this all started, says "there is no PLAN for Greece to leave the Union", that's what the meeting is for, to avoid that possibility, again dodges on the question of an emergency meeting tonight. The IMF... HAS NO COMMENT!

Come on already! Greece has ZERO credibility and needs to restructure their bailout. They defaulted on the terms and lied about it within 6 months of getting the bailout! They aren't happy about the deal other countries, namely Portugal  are working out and the government is having huge domestic problems.

So why not float a threat? Look what it did to the Euro

 For perspective-check out recent volume

A closer look. Remember Spiegel released the article today, but it takes time to track down sources, verify, etc so the initial threat may have been made at the white arrow -again note the volume and the second arrow is where the story broke.

Even if Greece has no intention of breaking away, which arguably may be good for them to be able to devalue their own currency. In any case, when you have no credibility, no levers, why not go for the Nuke option and float the rumor? The move down in the Euro and resulting move if it happened wouldn't be a "great for exports scenario", it would be a flight out of the Euro which would cause bank runs and all kinds of other problems for the Eurozone. Basically, every member nation would be penalized, they'd be stuck with the debt and contagion would take on a whole new meaning.

So do I think there's legs to the story, HECK YES!

Is there a trade here? Not sure quite yet, but it could be a spectacular one if the worst unfolds.

And as usual, when a major change of character takes place, you need to take notice.

 My Trend Channel isn't an auto pilot channel that you set parameters for, it takes the actual trading character and adjusts to it so when you have a break of it like we see here, something big has happened and rarely do these come back. So far the break is borderline, but this needs to be watched.

3C's relative confirmation of the trend in FXE to a major shift in a short period of time. All of this leads me to believe the story has legs.

EDZ

I finally have everything set up in SF, but both have bad data feeds on daily charts! Any way, the real time feed is fine. Check out EDZ, I was busy converting charts when the Greek threat to break away from EU broke news, EDZ reacted at the same time. Since there's been a denial, but who knows. We can't even get the Bin Laden story straight, I mean how hard is it? If 20 of my friends go to the beach, I'm pretty sure I can figure out pretty quickly what the waves looked like, despite the fog of ocean spray.

 EDZ 1 min positive

EDZ 2 min positive and that's about as far as she goes, but the rounding pattern is typical a typical accumulation pattern.

PSLV

 Here's the two stops mentioned earlier, the first would have taken you out with a decent gain, the second seems to be holding in this area.

I'm using a different version of 3C here because it's a bit faster, it's showing a positive divergence right where PSLV found some support.

Again, the scaling is a bit difficult, but the 15 min chart is still looking pretty positive. I'd like to see what PSLV looks like on another run up.

Market Update

Sorry for the blackout, I have a bad feed on TC with a bunch of ticks missing so I had to set up my layout in SF, the scaling may look a little different, but it has no bearing on the information. You can click on the charts for an expanded view.

 The DIA negative on the 1 min with a slight leading negative divergence.

 DIA 5 min showing the same.

 The QQQ with a sharp negative divergence @ the intraday highs, also a slight negative leading divergence right now.

SPY, also with a sharp negative divergence at the intraday highs and a slight leading negative divergence.

I'll be updating silver and others next.

USO Update

While USO could certainly be considered oversold as of yesterday's close, I don't like taking speculative positions based on oversold conditions, just look at silver and how much it continued to lose after entering an oversold condition.

Yesterday there were no positive divergences in USO whatsoever so there was no call on it. Here's what it looked like yesterday and after, you'll see today's charts and possible stops for anyone who may be in the trade.

 USO 1 min as of the close

 USO 5 min as of the close

 USO 10 min as of the close

 USO 15 min as of the close

 Currently the 1 min chart is inline with price, or confirmation.

 The 5 min chart has a very recent leading positive divergence which started around 10:15

 The stop here on the trend channel is tighter then PSLV being a 10 min chart

Again, for a intraday trailing stop I'm using a 10/22 bar average on a 10 min chart. If USO continues to hold up, the stop may be widened later by using a longer intraday time frame.

PSLV

Last night I posted PSLV as a possible long trade, if you bought on the open, you should be up about 5.5% more then the 4.6% SLV is up (or about 4% if it was bought on the open). I didn't list SLV and didn't consider it yesterday as there wasn't a clean signal there, PSLV was different.

Here's what PSLV looks like now

 This is a 15 min 3C chart and the one that made me decide to put the idea out there, but in all of the 3C charts that follow, you can see the positive divergence was very late day and at the bottom of the day's range.

 The 5 min chart didn't show a credible divergence until 3:40 yesterday

 The 1 min chart was more like 3:52-3:57 p.m.

 I personally don't like the environment surrounding silver and would keep a fairly tight stop. This s the 15 min trend channel which should move up fairly quickly. If the move shows some resilience, this stop may be widened later today.

For those not using a Worden product (my trend channel) then I'd use a 10/22 bar moving average on a 15 minute chart and in this case the stop would be on an intraday basis, not on the close as per usual.

Again, this stop may be widened later in the day if conditions remain bullish.

PCLN Follow Up

PCLN was posted as a possible short trade on Tuesday May 3rd. Yesterday several members asked me to look at PCLN as a possible earnings play on the short side. As strange as this may seem, my response was that I still liked the short trade, but I didn't see an earnings play setup.

Last night PCLN reported and had a blowout quarter, in after hours I saw PCLN up as high as $550.00. However, I don't think I need to elaborate about after hours indications. Smart money won't be chasing a stock higher in a comparatively illiquid market and they don't chase for the most part. So patience is required before jumping to conclusions based on extended hours trading.

This morning thus far, PCLN is down 1.14% at $528.59, well below the $550 seen last night and below the price at the time of the recent trade idea ($542.47).

We'll have to continue to show some patience and see how PCLN closes, it's certainly showing impressive relative weakness vs, the market this morning.

One of the reasons I favor the PCLN trade would certainly be the risk / reward ratio as the risk was rather low when the trade was mentioned, but also the high amount of margin that has been used in PCLN, a seemingly unstoppable train. When margin calls start to come in, PCLN is one of the contenders to see a massive leverage squeeze. So far, so good.

Banks Perfect Trading Record

One of the effects of QE and one reason I believe the Federal Reserve's monetary policy is biased toward the big banks, a glaring conflict of interests, can be found in the earnings reports of major banks. I touched on this a few days ago when I asked what the bank's earnings would look like in an environment absent Quantitative Easing and POMO. JPM today and BAC yesterday both reported perfect trading results at their trading desks for the quarter.

It seems fairly clear that the Fed's massive stimulus nearing 2 trillion dollars has done little for price stability and arguably nothing for employment, their two mandates. However, it has given the banks windfall profits from trading operations, which probably has saved several banks from falling down the Lehman Brothers chute over the last year or two.

The evidence is there right in front of us, input costs are rising, consumer costs are rising, the value of the dollar has plummeted and unemployment has barely budged nearly two trillion dollars later, but the banks have consistently posted record trading profits. I wonder what the effect on the economy would be if the Fed removed this free bonus from the banks and made them rely on traditional profit structures? I wonder if housing would be in better shape, if small businesses would be better able to borrow and hire more employees, if credit standards would be relaxed a bit allowing consumers to spend reasonably to buy cars, houses, etc?

Why these questions are hypothetical for the moment, it seems we may find out the answers before year's end if we are to take recent Fed statements at face value. The banks have had time to sock away a nice nest egg under quantitative easing. Perhaps soon the public will be able to do the same, or at least see their savings accumulated over a lifetime worth something once again.

And the other side of the coin

While the NFP number was stronger then expected, the workforce participation rate remains at 25 year lows for the 3rd consecutive month.

Another metric, the total number of persons NOT in the labor force just hit a new high, 86,248,000!

NFP Surprises to the upside

Despite all of the evidence earlier in the week, payrolls came in surprisingly stronger then expected. Of course BLS in known for their revisionist activities, so we'll have to wait a month or two before the revisions are complete.