The Miners Trade System

As of tonight, both systems are long DUST. I suspect if we get a market bounce that may change. If you are not currently in a trade on the system, you may want to wait for the next new signal.

Closing Stats

Friday we had some really good internals, there were consistent and dominant price volume relationships. Looking at today's P/V relationships, not only were they not consistent, but there wasn't a single one approaching a dominant status.

Looking at today's breadth indicators, there was certainly some improvement, but nothing worth mentioning as far as usefulness in trying to get some indication as to the market's intensions. Both were very much like the end of day 3C chats I posted, there were some slight improvements, but truthfully, not really worth mentioning as they were not strong enough to consider them as high probability in either direction.

The most significant indications are some of the longer term 3C charts which are bullish for a bounce and the strong dominant price / volume relationships of Friday.

Today started off very dull, much like trade during the summer doldrums. We saw a mid-day sell-off across all asset classes except for bonds, which ended up in most cases, being a false breakdown which ended sending most assets or at least the equity averages higher.  This apparently on news from the WSJ that Bernanke considers the Dodd/Frank legislation to be confusing and he considers the financial markets to be OVER REGULATED. From about 2 p.m. through the close, we saw a slow, steady decline into a flag-type consolidation. The consolidation itself is bullish, but probably noticeable by the black box systems which would raise the possibility of a head fake around the bullish pattern.

All in all, after Friday's price/volume relationships, today was a boring disappointment. I have little doubt the continuing drama surrounding Greece had a lot to do with today's initial excitement when prices declined to break various intraday/daily support levels. Bernanke's sudden dovish tone toward the financial industry which started late last week is giving the market, especially financials, something to sink their teeth into.

The news that the S&P rating agency downgraded Greece to CCC "outlook negative" more or less coincided with broad weakness in the market which gave rise to several false breaks that later recovered as mentioned. The market averages mostly recovered. Financials not only recovered, but went on to post new intraday highs-financials may have been the brightest spot in the market today. Energy lifted off the lows, but did not recover to earlier strength. Technology as a whole, recovered to the unchanged level. The fact that there was a recovery in many assets after a sharp break of support and a pretty nasty sell-off I suppose is one more small victory, but nothing to take a victory lap over. Commodities as a group were disappointing in their post sell-off trade, they closed negative on the day (between -.75% and -1%) and this was in a weaker dollar environment.

On the subject of FX, the Euro showed surprising strength from 1-2 p.m. and closed green for regular US trading hours, up better then .50% which is interesting given the Greek situation.

Precious metals, specifically silver and gold both traded down on the Greek news and lingered near the lows for the rest of the day. Gold showed a little better relative strength during the decline, but again hardly worth noting. I found it interesting that gold didn't catch a bid in a flight to safety trade. This further reenforces my mid-term view that gold and more acutely, silver seem to be under pressure in what seems like intervention on some level.

Bonds were the only safe-haven flight I've seen today during the noon sell-off, but they gave up all of the gains in a nearly parabolic descent from 1 p.m. on. TLT (20+ year bond ETF) was in the green on the safe haven flight, but gave up all of the gains to close at a half percent loss.  There were losses across the entire curve, with some minor relative strength in short dated issues of 1-3 years (note I said relative strength-not strength).

The top 10 sub-industry groups today with gains of 1% or more included: Textiles (apparel/clothing), Surety and Title Insurance, Confectioners (kind of odd?), Regional Mid-Atlantic Banks, Small Tools and Accessories, Toy and Hobby Stores, Sporting Goods, Recreational Goods, Electronics Stores and Office Supplies.

The top 10 worst performing sub-industry groups with losses of -1.73 to -3.95% (which are substantial losses considering these are groups of stocks) included: Radio Broadcasting, Tobacco Products, Silver, Non-Mettalic Mineral Mining, Oil & Gas Equipment and Services, Medical Practitioners, Manufactured Housing, Independent Oil and Gas, Auto Dealerships and Farm and Construction Machinery.

Currently in After Hours trade, all of the averages are trading up, above the breakout level for the consolidation flags I mentioned.

I suppose all in all, considering the trend of the last week and a half, today wasn't a disaster and it seems Bernanke is trying to lend some support to the market with 2 consecutive statements which are dovish on financial industry regulation. This should benefit the S&P the most and we see that with the SPY showing the biggest and longest positive divergence on a 1 hour chart.

I'll be back in a bit with some more after I've finished running scans and going through some charts.

Dull, to Movement and back into a Lull

I've been watching the market the last hour trying to get a feel for what the EOD trade would look like, there haven't been many signals at all, much like this morning.

DIA 1 min, a very slight positive divergence, I wouldn't otherwise point it out.

 The DIA 15 min chart looks positive and the positive divergence Friday makes sense with the Price Volume relationships from Friday

 IWM-I'd barely call this a divergence, but this is what we're looking at. The pattern in the trendlines is a bullish bull flag-type pattern.

 IWM 10 min is positive again with the P/V relation on Friday.

 QQQ 1 min shows nothing but in line, the 10 min is positive, again with Friday's P/V.

 And the SPY 1 min, again a divergence hardly worth pointing out.

However the 60 min chart is.

Looks pretty dull.

UNG Natural Gas

In our original May 24th Natural Gas long Trade (UNG gained approx. 10-12% in about 10 days), there were many fundamental reasons to believe Natural Gas may finally see a reversal to the very long downtrend as one of the few commodities that traded down during the 2009-20011 period. 

Also don't forget that crazy fractal algorithm that was released in Natural Gas after normal market hours in a very thing market, it sent UNG plunging the next day. Now there's news out that Japan and Germany may be shutting down their nuclear reactors within the next two years. Goldman Sachs has come out with a negative take on Nat. Gas, which probably means they are buying it.

All these things taken together along with the charts, make a bullish case for Natural Gas/UNG.

 The 5 day chart, long term view, UNG has lost all downside momentum and appears to be carving out a substantial base.

 Depending on where the trendline for the neckline is drawn, you can see there's significant pattern implied upside.

 The white box is where we identified the trade, the red arrow is the day after the crazy algo was run the night before.

 If you read my Trade-Guild article on breakouts/false breakouts over the weekend, you should be able to spot them at nearly every major turn. I drew in the resistance/support levels that were broken with red trendlines, the light blue arrows show the numerous false breaks that led to reversals. The red arrows are 3C negative divergences at those false breaks as is the white arrow. Note 3C daily hasn't deteriorated with the recent downside volatility.

 The 3C 5 min chart looks like accumulation has started in UNG

As does the 1 min chart.

We probably want to wait until the positive divergences hit the 15 min chart before considering a long position, but I think the Natural Gas story is far from ending and more likely just beginning.

The 3 sectors you need to move a market, Energy, Financials and Techology

It looks like we saw a concerted market wide shakeout earlier.

All 3 sectors have shown tremendous improvement very quickly.

XLE, Energy moving back above resistance

 XLF (financials) breaking out of the triangle on volume

XLK (technology) in a bearish continuation triangle, breaks down as technicians would expect and recovers to a breakout.

Another View From XLF

The earlier triangle in XLF, which is actually a bull pennant, simply saw a shake out and grew a bit bigger, technically it didn't do much if any damage to financials.

The shake out in white. The pennant is still intact.

SPY/QQQ

 The Q's held up pretty well considering-they're close to moving into a leading divergence.

The SPY is in a leading positive divergence.

Dull days....

Something Interesting in USO as Well

 USO 1 min in confirmation of price.

For new lows though, the 5 min chart really hasn't moved down much and relatively speaking, is in good position.

Perhaps we just saw a market wide shakeout?

IWM is looking interesting

 IWM 5 min

IWM 1 min

Very positive looking on the 1 min with good support on the 5 min and even some on the 10 min.

I mean Not So Good News Beyond the S&P Downgrade

Everything is getting hammered

Not just financials and energy, commodities, precious metals,  only treasuries are being spared. I have a feeling some not so good news is about to come out of Greece.

Dull days don't last for long

With XLE now breaking down, XLF looks like it won't be far behind.

FAS is still giving better signals

This negative divergence looked like it would stick to a consolidation, but since it started leading, I'm taking a small profit in FAS for now and waiting this out, it won't have positive implications for the broader market with both energy and financials breaking down.

It still remains to be seen if this is a shakeout.

Something Going On With Oil

USO just made a move below support

 USO daily

USO 5 min-stops and limit orders triggered.

There's no sign yet that this is a shakeout, although it very well could be.

I'll let you know if I see any indication of a shakeout.

With Energy on the move, if Financials....

Will just breakout, then we could see a move in the market. energy and financials are the two of the biggest sectors.

The support for a move is there, we just need to break out of that triangle consolidation

Oil on the move

And as fast as that, it happens.

 USO breakout.

USO isn't showing a lot on 3C, but the leveraged long on Crude, UCO has had a pretty nice positive 5 min divergence-it actually runs all the way to the 10 min charts.

FAS/FAZ Chart Request...

Thus far this morning, it has been a rather dull market. I've been catching up on some scans and news. Even though it's a dull market, don't let it trick you, you need to stay on your toes as dull markets often precede some crazy action and catch a lot of traders by surprise.

As for The financials, even XLF is pretty dull and not really worth commenting on. The leveraged financials, FAZ (bear) and FAS (bull) are about as interesting a chart as I've seen this morning with the excepting maybe of a bunch of stops run in UCBI which means that C&D trade should have some price level alerts on it.

 FAS (Financial Bull) with a positive divergence on the 10 am dip, now moving into a leading positive divergence. That's somewhat bullish looking.

The inverse of FAS, FAZ (Financial Bear) showed a similar negative divergence at the bounce around 10 am this morning.

Don't forget last Friday's bigger picture in Financials, these charts make sense within that context.

Friday's Closing Trade

Friday's closing trade internals gave the most interesting readings we've seen all week.

First in out 5+/-5% or more trades, the dominant theme was Close >5% on rising volume-45 stocks. In second place was Close down 5% or more on declining volume-15 stocks, so the dominant relationship was 300% greater then the second place relationship and it's a bullish relationship. In 3rd and 4th place there were a total of 15 more trades total, so the dominant theme was strong.

As for all NYSE stocks, we had another dominant theme, close down and volume up-3429 stocks. In second place (just for comparison of the dominant theme) close down and volume down at 1921. In this scenario with an 8 day down trend, the dominant theme is bullish, suggesting short term capitulation and a possible/probable short term bottom is at hand.

The Dow also had a dominant price volume relationship of close down and volume up (as I suggested we may see toward the end of the day Friday). This relationship was strong at 22 of the 30 Dow stocks. The second place relationship (for comparison purposes) was close down and volume down at 5 stocks. Again, considering the recent trend, this is a bullish relationship, suggesting a short term bottom may be in place.

The NASDAQ 100 also had a dominant relationship which was bullish, 67 stocks closing down on higher volume, compared with second place at 27 stocks.

The S&P-500 came in at 302 closing down on higher volume, vs. second place (close down / volume down) at 170 stocks. Once again, an indication of short term capitulation and a possible short term bottom i place.

Finally the Russell 2000 came in at 1146 closing down on increasing volume vs. second place (close down / volume down) at 477 stocks.

All averages showed a strong price volume relationship which is bullish.

3C also is showing some bullish behavior in the SPY...

 The 5 min 3C chart held up pretty well into the close on Friday.

 The longer term charts have been building positive divergences-here's the 15 min.

 The 30 min which is now leading

And a very strong looking 60 min chart.

These would suggest that once our bounce starts, it should be a pretty impressive bounce.


The Australian Dollar (FXA) has als shown some predictive value in the past.

Here's the FXA in green compared to the S&P-500 in red (click on the chart for an expanded view). The S&P-500 has made new lows within the white box, while the Australian dollar has held above support with much stronger relative performance.

The Miners Trading System Update

Looking at the trade system signals, system 2, the better performing of the two, is within a hair of going long NUGT. Last week system 1 went long NUGT and closed out the DUST trade.

Here's how close the system is to a crossover which I suspect will give an official entry long NUGT by tommorw.

I'm showing you this because it's that close. The official signal has not come on system 2 yet.

Here's what trade has looked like since System 1 called a Long NUGT trade for Thursday morning last week.

Trade is going lateral and choppy similar to the last long NUGT signal around the second week of May.

Tomorrow after the close we'll have our update.