The close

I didn't know we had so many day traders when I said to contact me if you wanted to play the end of day sell-off in the SPY. Everyone is happy,  don't know what kind of leverage their using, but the trade worked out. So, I closed the SPXU into the close.

The market has had a lot of bad news and it hasn't moved much out of what looks like a triangle which has seen some significant long term negative divergences. I usually suspect a head fake move before a reversal on a common pattern like this and it made sense with the heavy open interest in SPY $135 calls that they would be pinned today, which also means if there's to be the head fake upside move I suspect, it had to wait until after the $135 calls were pinned, $134s expired worthless as well.

So next week should be interesting. Mondays historically are the most profitable upside day of the week and the S&P closed right at support. It just seems very likely to me that there will be one last hurrah to trap bulls before the a downside reversal would take effect. So far, so good.

Remember, from economic reports to the Fed minutes there was a lot of bad news this week. The very fact that the market didn't break down this week seems to lend some credibility to the idea that they'll move the market into an upside shakeout.

USO showed good early momentum and for those who have been trading it, buying at support and selling at resistance, they've done well this week too. The 3C close on USO looked a little weak and price action definitely lost momentum as it approached the breakout area. Hopefully for those who want a shot at this trade, but haven't pulled the trigger yet, we'll see 1 more move to support, although beware that the last move before a breakout is likely to see a downside shakeout (so don't be too quick to judge price action).

Silver too saw early upside momentum and then just ran down the descending breakout trendline. I saw a lot of stocks and commodities today that ran right up to a breakout level and stopped. It was like the market just hit the pause button.

VRML Follow up

I posted this one earlier, I was looking for a pullback today which we got.

The pullback was about $.05 shy of what I was looking for, but there looks to be a good positive divergence here. If you keep the stop tight on this one and account for a possible gap in your position sizing, this looks as good as any place to take a shot at this trade, which is by volatility, of speculative nature.

And the SPY Break

Just a few posts ago we were looking at the probability of a SPY intraday break into the close.

 Here it is.

 The divergence

The measured move implies a target of about $133.70

A LOT OF TRADES ON THE BRINK-SQNM

Here' a bio that looks set for a breakout. Actually there are a lot of stocks sitting right at breakout levels, including silver and oil.

If my theory pans out, then a lot of these will breakout with a market breakout next week, probably early next week. However, I view many of these including SQNM as most likely being short term trades. It depends first if we do get the market head fake and second on how long a head fake lingers above the resistance (breakout level). If you are more of an active trader and have the ability to watch the market and make quick changes and you have good risk management, then these may be appealing quick trades.

If you are more interested in playing the bigger picture and don't have time to follow these trades during the day, you may want to just sit tight and go for the bigger opportunity.

Here's what SQNM looks like...

 A nice bull flag type pattern, consolidating along the lines as the same timeframe as the market in general. What I do like about this trade from a risk perspective is that it is close to support, and while I would allow a little room below support, all in all, the risk profile ism't bad looking and this stock can move.

 Here's recent improvement in the 15 min chart inside the flag.

 And the 10 min chart with a divergence near the lows of the day.

The 5 min chart with a positive divergence at the lows of the day.

However as I mentioned, the chances of a breakout here are dramatically increased if the theory that the SPY $135 calls are being pinned and we'll see a head fake breakout next week as op-ex is today.

That also means if that breakout, as I suspect is a head fake, most equities will fall when the market does, so you have to be on your toes.

Otherwise, I would probably sit back and wait for this bigger picture and the bigger trade to play out.

As suspected

In the last post on the SPY,  I figured it would see some end of day selling, GS is getting whacked and more so recently, this is dragging the XLF to new lows for the day and financials are influential on the S&P. I would however watch the last 15 -30 minutes very carefully, we'll see if they are maybe going to set something up for a Monday upside head fake.

 GS daily

 GS 1 min

XLF 1 min new lows.

SPY update

I'm watching this latest move to see if 3C turns down further, it ay be a short term move I'd consider playing with SPXU into the close.

Again, the theory for now is a false upside breakout after op-ex today.  If you are interested in playing a short term trade on the SPY for the and of day, keep in touch via email, otherwise this is just an insignificant move for the most part.

CORN

I love the fact we have members from all over the world and in all kinds of industries. One member works with corn and sent me an email about trouble they are having getting it planted in the eastern corn-belt due to the Mississippi flooding to the east and south as well as drought in other areas.

So in poking around real quick, there are several choices of companies that process ad distribute corn/derivatives, but there's also a fund that invests specifically in corn futures contracts, it's called CORN. Being the problem is one of a longer duration, I like the fact they are investing in contracts that are staggered into the future. You can read more about CORN at YahooFinance.

Here's some initial observations

 Here's CORN compared to the GCC commodity index, tracks pretty close.

 Taking a closer look though, which is what is important as the first trading day after the spillway was opened would have been May 16th, is the recent divergence between the two with CORN moving to new May highs while GCC doesn't follow.

3C has been pretty much inline with CORN since the 16th. The only bothersome matter at this point is that I don't see a low risk price level with a nice positive divergence. It may not come, CORN may breakout to new closing highs. So I'm going to put alerts on price for a breakout and a pullback and see if there's a good tactical entry that materializes.

USO Update

 The range in USO which I preferred to buy at the bottom of the range, is starting to take shape as a descending triangle, which historically is a bearish continuation pattern. However, the range (apex) of the triangle is tightening up significantly and if it's going to break out, it should be coming soon. I think there may be enough room/time for one more pass at support, which is the ideal place to buy USO as the risk is limited in that area.

 The hourly chart has shown multiple positive divergences at support in the range.

Notice how even a slight break below support, feeds the snowball effect (to the upside). If you are already in this trade near support, then you have a trade that doesn't appear to have much risk other then that of a gap against you on an open. If you like the trade, I might wait to see if there's one more pass at support where risk is less, but leave enough room for a false downside shakeout, which often happens before a breakout move. This morning's may have been the one as there was a descent amount of stops hit there.

VRML Trade (long)

 VRML daiy 3C positive divergence.  This s sort of a market lesson, too many technicians think that large volume spike are signs of smart money buying, like we see here. This daily positive divergence shows accumulation into lateral/falling prices at very low volume, that's why it's called accumulation. If W.S. buys big at once, they simply end up running with the retail crowd. With a position accumulated over a few months at low volume, attracting no attention, they get a good average position price. The volume spike is an attention getter that this stock is in play, it' in stage 2 mark up and smart money will be selling into that demand.

 The recent run up pulled back and accumulation was underway again into declining prices, causing today's double digit move.

 You can see it here too on the 15 min chart.

 The 5 min chart shows the final accumulation I often believe to be market makers front running a large trade they filled and getting it into position for stage 2.

The 1 min chart shows a little pullback and this stock may be bought lower. Despite the double digit move today, I like the chances here for a new high. From a risk management perspective, I'd be careful on the position size. I'm looking at this as a 1% risk trade, but other then that, I like it.

SPY Update

So far this has been pretty darn predictable, not from a typical technical analysis point of view, from that view it's been a mess, but from how the market uses technical analysis against technicians, from that point of view with op-ex today, it's been very predictable.

Yesterday I mentioned s topping formation that could be interpreted several ways, but that's semantics, the point is it was an intraday topping formation which argued against an upside breakout today, which makes perfect sense as I showed you the options chain last night.

Here's the topping formation that developed yesterday, which can be taken as a slanting head and shoulders or simply a triangle. In the case of a triangle, the dogma of technical analysis expects an upside breakout, so in reality if you watch the market, you know that the opposite will happen.

 I just measured the completed topping pattern and got a downsisde target of $133.35 and today's lows, $133.36. The break of the lower trendline set off some orders as you can see with rising volume.

 The 1 min chart showed a positive divergence at the lower trendline and we've bounced a bit from there.

I feel  little silly with all this micro analysis as the top, even with a false upside breakout, can be shorted right here. We're only talking about a few percent difference as the apex continues to tighten up which reduces the % move needed for an upside shakeout which reduces the position risk.

I still feel the most likely outcome is to see the upside breakout, but in the big picture, it' nearly semantics.

Greece To Be Set Adrift?

I can't claim any special status as an ardent believer that the Euro Project would fail, there are two camps, those who believe and those who don't. I never believed it would last, to take so many different cultures, so many different economies in various stages and make them all adhere to the dogma of a single currency, in my view violates the sovereign status of the member states. Greece may have been much better off deflating their own currency, but the EU as a whole will not do such a thing for a single member state.

As I've recently found out, it's like living in an association (which I hate), it's your home, but you have to follow the rules set forth by those in power. Greece wasn't very good at that. Within 6 months of receiving their bailout, they had already lied and covered up problems that were leading to another possible Greek default.

I remember travelling to Europe and many Europeans I perceived as being jealous of America. I was always asked sarcastically or had it mentioned to me, how the Euro was stronger then the dollar and always thought, "well that stinks for me as a tourist, but economically, your bragging about an anchor around your leg".

As has been mentioned here, regional German elections show that the German people are fed up with bailouts for the PIIGS. The Finns are as well and now Norway has stopped making payments to the Greeks.

I tend to think the Euro experiment I already past the point of no return in its current incarnation.  Member states are starting to enact border controls which is at odds with the EU ideals. They're voting against bailing out those that are falling by the way side, lest it drag them down with them as well.

I also think the EU experiment will end with a bang and not a fizzle. It's a small area, which makes it neat to travel, a few hours drive in any direction and you're in a totally different culture. However these cultural differences are starting to see a lot of pent up animosity turn into policy action.

The Greeks final swing may be to threaten, as I believe they did, to exit the EZ and stick the members with the debt. This makes the most sense and while the dreams of a unified Europe seemed beneficial, the facts that are emerging each week with news from different countries, it's always me first. Only those who benefit by the EU want it to stay together and it seems there are less and less in that camp.

Don't forget the DB trade. Long term, this is one of the banks that will be hit hard by the slow unravel of the EU.

GDX chart Request

GDX is a gold miner ETF, not gold itself. Lately the miners have been lagging the physical.

We'll take a look at the long term and the opportunity.

 Long term this price pattern is most similar to a double top, but it's certainly not textbook, The point is a run at a new high failed so we have what is likely a top in GDX.

 When  compared to GLD, it's a bit hard to see the underperformance except very recently, but GLD in red throughout this timeframe has made a series of higher highs while GDX has been rangebound. I've noticed the miners were lacking the physical for quite some time.

 This is a simple custom indicator I created to show you cumulative volume (for TC users, use the custom indicator feature and add this code: v+v1) You'll notice that volume acts appropriately for a top, with the price rallies seeing diminishing volume and the declines seeing heavier volume, this is textbook top in volume analysis.

 However on a shorter term 15 min 3C chart, there appears to be a trading range and there's a positive divergence, this is not unusual being GDX is at support so there may be a short term swing trade of a week or two here. You have to decide if it's worth it. the bigger picture is not bullish.

Using the Trend Chanel to identify a likely target, we get somewhere around $59- $60. I don't see much more upside at this point. There may be individual miners that offer a better return for a short term move.

NETL Trade Idea

 NETL is a Broadening top, every H&S top first starts out as a Broadening top, but one similarity they don't share is the need for volume confirmation. Often broadening tops have unpredictable and random volume and that's fine.  This one in NETL has already broken support and has a small breakaway gap on very large volume.

 3C daily has looked bad as well as RSI being negatively divergent.

 Here's a 1 min chart with a recent positive divergence and a try for a bounce here.

In the dogma of technical analysis, a breakaway gap that breaks below support on large volume SHOULD NOT be filled. Which means in the real world, Wall Street will likely try to fill it.  I have a trend Channel stop setting that has worked for NETL in the past well, it's a bit high, but it will move down pretty quick over the next week. While a position could be started in the area, you may want to leave some room for adding at higher prices slightly above the gap or in the area of $38.  $32 is the initial target, but in that area it will set up the right side of a larger top, I'd call this a primer top. With a break of the larger top, you could be looking at something more like $16 or at least sub $20's and with your ability to add short position profits to average up the size of the trade, it gives you the ability to pyramid the position and compound your gains.