Market Bounce

Sentiment seems to have at least moderated recently. As you know, after last Friday's OPEX I'm looking for a bounce early this week, today may have been the start of that bounce.

 As I've shown in the past, the Australian dollar has had some predictive value for our equity markets, often diverging and giving an early signal. In this case, the Australian dollar has held up much better then the market, a possible divergence of importance.

 Above in Green is the CBOW Volatility Index or the VIX. In white are occasions in which the VIX has advanced only to snap back and start a rally in equities (SPY in in red). The VIX has an inverse relationship with the market typically.

 Here's a closer look at that snapback in which the VIX advanced, signaling what should have been a sell-off, instead the market remained lateral and the VIX has snapped back the last 3 days, but particularly today. This is another clue that we may be very near or at the bounce I'm looking for.

Historically the 50-day moving average has been very important, especially in cases of market tops, a rally to the 50-day average in white would be an ideal area to start looking for a downside reversal move and gives us a rough target of where the bounce could lead to.

Miners Trading System Signal

System 1 which is the faster of the two, but also has more false signals, just gave a LONG NUGT signal. System 2 which has more accurate signals, but a little less timely is still long DUST but moving toward a long NUGT signal. Here's what the signal lines look like.

The green line is system 1 crossing over its signal line in red on the close. The light blue line is system 2, which has not crossed over yet, but did make a move today toward crossing over.

I leave it to you as to which signals you'd like to pursue. With the SLW charts I just posted, I had a feeling we'd see one of the systems go long the miners via NUGT.

If you decide to take system 1's signal, then you close out the  DUST long and enter NUGT long on the open tomorrow morning. If you decide to stick with the second system (which is performing better, but both systems perform very well) then there's nothing to do tomorrow, just remain long in DUST until signaled otherwise.

If you have any questions, feel free to email me.

I have to run out for about an hour and a half so I'll update market internals when I get back shortly.

Enjoy your night.

SLW Chart Request

 On the daily chart, SLW looks very much like a H&S top, possibly getting ready to make a right shoulder. While the longer perspective looks bearish hear, there appears to be a swing trade opportunity on the long side. I don't even need my custom cumulative indicator for volume to see this is typical top volume. RSI and my long setting MACD ( 26/52/3) also confirm negative divergences at the top, where the indicators should be making higher highs, they are making lower lows. Still, the point of this post is for a swing trade on the long side.

 The daily 3C chart called the top and is now in a positive divergence near the neck line support.

 The 30 min 3C chart shows the last cycle, accumulation-confirmation-distribution and decline. We would now be at stage 1 accumulation with the current positive divergence.

 The 15 min chart is in both relative and a leading positive divergence.

 The 3 day Trend Channel has held the trend in SLW very well, I'll use it as an upside target around $35.50-$36

For a swing trade, I would suggest trailing a stop, the 30 bar simple moving average on a 60 min chart has worked well, this would be my trailing stop for a long position in SLW.

Market Update

As 3C suggested, the market backed off the rally that I showed you in the last post and gave up some of those gains. I also mentioned that I feel the overall behavior today has been bullish.

 Here was the last market updates negative divergence and some downside from there.

Over all though the 15 min chart which is far more important then the 1 min chart, has shown continued upside in the leading positive divergence today-thus the overall bullish feel to the market in my opinion.

Here the SPY DID as expected and tagged the lower Bollinger band and has seen a bounce off that band since.

This is the TICK chart depicting the pullback after my previous market update and the trend being briefly broken to the upside as the BB's were hit.

Although we do have some upside % gains on the day, the market is largely range bound and accumulation/distribution often occur in range bound markets. Thus the over all feel I get from the market right now is positive.

USO Update

 On the 1 min 3C chart, USO looks a lot like the broader market.

 The 5 min chart continues to improve and USO is still considered to be in a range.

The 15 min chart is also showing more improvement.

It does seem as if USO will see upside, the only remaining question is whether it builds a larger divergence within the range or moves up in a short term bounce. Either way, it appears it has begun to find some footing as a base for a move higher.

Market Update

 DIA 1 min negative relative divergence

 QQQ 1 min negative relative divergence

 QQQ 5 min, the same as above

 SPY 1 min negative relative divergence

SPY 5 min negative relative divergence

 As I showed earlier, the SPY was likely to head to the lower Bollinger Band which moved up quite quickly.

The 60 min Trend Channel still has not been reached.

Ultimately I feel the behavior today is pretty bullish, in the short run, it appears there's still a chance for more retracement. The internals at the end of the day will tell us a lot more, but for now, I would consider some more intraday downside before the close.

USO Update

Since the last update, USO has made a small breakout move...

 USO intraday breakout move (1 min chart)

 Here's some of the strength on the 5 min chart I mentioned.

Interestingly, the 15 min chart has shown some very recent changes toward a leading positive divergence. Short term traders may want to look at a position long here with a tight stop. I would imagine if this were to be a bigger move then just an oversold bounce, USO would fall back into a lateral trading range. If it does not and continues higher from here, I would keep the stop rather tight on intraday trade.

USO Update

 Based on the internal dynamics of USO during the bearish consolidation, my opinion was that USO would break to the downside, which it did as you can see on this daily chart.

On the 5 min chart we see some very typical market price action after the initial break below support (red trendline to the left of the chart), there was a quick pop back above resistance which saw a negative divergence at the red arrow sending USO lower (again very typical behavior). Now USO seems to be working on a 5 min positive divergence. This could be a quick snap back to resistance or if it continues, it may signify the start of accumulation for a bigger move, but you should be aware of it. We'll continue to monitor the situation and look for any trades that may come of this early divergence.

EEE Follow Up (a Cats and Dogs Trade)

Despite this morning's earlier break to the downside...

 EEE recovered fairly quickly from such an intense move which seems to have triggered quite a few stops.

 Here's the consolidation triangle with the break below support with the $1.90-$1.95 area still looking like an area in which EEE may become an interesting short to perhaps intermediate term long position. I would keep price alert set on EEE.

The 30 min chart still has a bullish bias -especially on the break down out of the very commonly recognizable consolidation triangle.

I would definitely keep this trade on your watchlist if you are comfortable trading speculative positions such as EEE.

Potential SPY Targets

This is a look at some potential SPY intraday targets to the downside.

 Notice on the blue Bollinger Bands (10-min chart) of the SPY, price bounces between the lower and upper bands, this would imply a target around $127.30 depending on how fast the BB's move and how fast the average moves.

The 60 min Trend Channel is lateral which is an improvement from the downtrend it has been in. It too has a rough target of approximately $127.30 or so, again depending on how fast the TC moves up and how fast price moves. Right now, this is my best estimation of a downside intraday target for the SPY. If anything develops to suggest otherwise, I'll bring it to you ASAP.

GOLD

I'm still trying to figure out the end game for Gold, long term I see it as probably having more upside, in the intermediate term, I've been expecting a pullback which would create a buying opportunity. Since then a lot has happened, between lowering of gold margins from the COMEX, to the new "Certified Conflict Free Gold" act, to the Dodd/Frank legislation that looks like it will end retail trading of gold among many other assets like FX, etc; in OTC trading. This may have a profound effect on Hedge Funds as the legislation is simply not clear. Hedge funds are seemingly taking the most pessimistic view of the legislation in their interpretation which would force them out of OTC trading and the hefty leverage that comes along with it and apparently force them into exchange regulated vehicles such as ETFs or basically any vehicle with less then 10x leverage. Don't be surprised to see some new Gold ETFs with greater leverage then 3x to try and emerge if this legislation isn't cleared up in the hedge fund industry's favor.

For now, here's what gold /GLD is looking like.

 Today's move was met with a negative 3C divergence and GLD went lower from there.

 The 60 min chart RIGHT NOW is inline and is not giving any hints of direction for the intermediate term yet.

The daily trend channel shows price in a bear flag type pattern within the red box. If GLD moves below the lower channel line around $148, it would not be bullish for gold in the intermediate term and may move us toward the pullback scenario.

I'll keep watching for any hints.

And there it is

 QQQ 1 min 3C kept moving down even as it appeared that the bearish wedge was going to fail as The QQQ made a higher high-typical reversal behavior.

 The SPY didn't make a new high, but after breaking down it went on to test a new breakout high, then failed, again pretty typical.

For short term intraday traders you might consider the flight to safety trade in TMF 3x leveraged 20 year treasury-but I would view this as an intraday trade only with a tight trailing stop.

SPY Update

 SPY 1 min bearish ascending triangle. These patterns often retrace their base ($126.90 area)

 The 1 min 3C negative divergence.

 The 5 min 3C which started with a positive divergence and is now in line.

The hourly 3C chart which has remained positive for some time.

Pullback soon

Looking at financials, it seems we will see a small intraday pullback across the market.

FAS Financial Bull-1 min negative divergence

FAZ Financial Bear 1 min positive divergence.

The SPY/DIA are both showing small 1 min negative divergences while the QQQ is trading in line with price. I'd say we're going to see an intaday pullback.

So Far So Good

This, so far, is what we were looking for today- a higher market and perhaps the start of a bounce now that options expiration was successfully concluded pinning the most amount of people as possible.

So fas there's good underlying support from various sectors including:Energy (despite USO being down), Healthcare, Financials, Technology, Transports, Consumer Discretionary is even holding up.

This is so far, what I was hoping to see last week after OPEX. We'll see if the market can keep its footing.

EEE Follow Up

Since Friday's post on EEE, it quickly made up 5.5%.

I was looking for a breakout above $1.90 to consider looking at the trade more seriously; currently it's right in the area.

Here's the 5/15 min charts.

 EEE 5 min

 EEE 10 min

EEE 15 min

*PLEASE remember this is a speculative trade. I always prefer to reduce my risk exposure in speculative trades from about 2% of portfolio to 1% of portfolio.