Closing Stats.

Today we have a dominant Price/Volume Relationship: Close Down/ Volume Down, it was nearly double the second place relationship (of 4) which was close down and volume up.

The Dow had 28 stocks closing down (23 in the dominant P/V relationship) with only 2 closing up-KO and AXP.

The NASDAQ 100 had 72 decliners
The S&P-500 had 402 decliners
The Russell 2000 had 1461 decliners.

Ultimately, this is exactly what 3C had been showing us yesterday and throughout today.

Only 26 of the 239 MorningStar industry/sub-industry groups closed higher. The leaders were: Auto Dealerships, Gold, General Contractors, Air and Freight Delivery (remember the strength in transports today), Broadcasting/Radio, Printed Circuit Boards, Specialty Eateries, Beverages/Soft Drinks (KO), Residential Construction and Non-Metallic Mineral Mining.

The biggest losers included: Wholesale Building Materials, Electronic Stores, General Entertainment, Textiles/Footwear, Toy and Hobby Stores, Office Supplies, Research Services, Music and Video Stores, Internet Software and Services and Hospitals.

Here's a look at the SPY...

 Price Down/Volume Down is the most common price/volume relationship during a bear market. However, today's P/V relationship didn't bother me too much. Typically major reversals have high volume, so if we were to see Close Down/Volume Up, I would be worried. In the red boxes, you can see several days in which "Close Down/ Volume Up were the dominant relationships, in this case, I view it more as a pullback in which volume should contract. Also note that this occurred at the resistance level hit yesterday when I first started talking about the market being in need of  pullback.

 Remember, resistance is an area, not an exact level, and this is the area resistance is to be found.

 The 15 min negative divergence which started yesterday was a pretty sure fire signal that we would see a reversal to the downside, 3C performed well in showing distribution.

 The bigger picture remains this 60 min. chart which is still extremely bullish and has not deteriorated.

 I posted some pullback targets yesterday, but this is my revised view, this is a 50 bar moving average on a 60 min chart.

 The 10 min Bollinger Bands shows typical activity of a market bouncing between the bands. Today's decline walked the lower band which is a sign of strong downside momentum. Note my Demark based custom indicator started giving a buy signal today, I imagine it will go on a bit longer.

Here's the daily Bollinger Bands, in the red box you can see the average walking the lower band, this is strong downside momentum. In the green box, resistance was found at the median of the BBs. We also have two Demark based buy signals on the chart. The last time such signals showed up were in July of 2010 and the SPY moved up over 30%, although I'm not expecting a similar rally.

 Volume at price for the last two days, a lot of selling was done above the close from yesterday.

Volume at price for today. Once again, a lot of the sell side volume came above yesterday's close. I think it's a bit interesting considering this earlier post.... "Was the Speech Leaked?" While we may not be able to answer that conclusively, there have been events in which distribution before a damaging speech which had also been embargoed was clearly evident. So does it happen often? I don't know. Does it happen? Without a doubt, absolutely yes.

Here's the EUR/USD Pair. At the red arrow is the open of FX trade this week, at the green arrow is approximately the time of the FOMC announcement. Of course, the Euro moving down means the Dollar is generally moving up, putting pressure on equities, commodities, PMs, etc. However, I don't see this move as moving down in a parabolic spike, there should be some retracements.

The 10 min 3C chart of FXE (The Euro trust) is interesting, there was quite a strong positive divergence on 6-15 through 6-16 and then a negative divergence around the time I started calling for a pullback yesterday, and then a sharp negative divergence like the market right before Bernake's speech today (in the red box). Taken with this article,  that's a lot of assets showing the same correlation as far as 3C goes right before the speech.

Right now the idea is a pullback in to some accumulation with a bounce carrying us up to the daily 50-day moving average around $132, where we'd likely have excellent positioning for short sales to begin the next leg down, which should be more dramatic then the last leg down being QE2 will have ended.

Domestic Mutual Funds are seeing huge deleveraging/redemptions, it would actually benefit them to be able to sell in to some strength on a market bounce. In any case, liquidity is draining from the market and as I've been noting for the last few months, deleveraging is under way as investors and funds used near record leverage to ride the market up over the last 2+ years, those positions, some of which are quite large, are now being unwound-again, deleveraging in to a rally is most beneficial for institutional money.

My thoughts are we will see the pullback that actually has already started, hopefully if 3C is on track and I'm interpreting what I'm seeing correctly, we should see some strong accumulation in to the pullback, giving us a heads up to go long certain leveraged Bull ETFs

The Miners Trading System Signal

Tonight we have an actionable signal. Both systems 1 and 2 have given a long NUGT signal.

Both 1 (green) and system 2 (blue) crossed above the signal line today.

NUGT should be bought tomorrow morning on the open. The opening price, less 3% becomes your stop loss, but the position size should still reflect a trade that doesn't put more then 2% of your portfolio at risk.

To take advantage of compounding, any gains from previous trades should all be invested in this new signal. Any DUST positions should be closed on the open as well.

TICK Chart

The tick chart is a pretty good representation of sentiment during Bernanke's speech.

pretty consistent at -1000

The QE Bull hopefuls didn't hear anything about QE3 as I demonstrated in real time what the market's reaction was to Bernanke explaining why it's different now re: QE3.

Hopefully this gives us our pullback, we build a better base, break resistance in a day or two and move toward the 50-day moving average, where we'll want to look at putting on some serious short positions. So far, this is what I expected when I started talking about the need for a pullback yesterday and how the 3C charts shaped up showing a pullback was the most likely outcome.

Was the Speech Leaked?

What you don't probably realize is when you are watching CNBC and they are talking about what Bernanke might say, they actually already know what he'll say, the speech is in their hands, just under embargo. If someone decides to leak that to a friend on Wall Street, well... I'm pretty sure it's happened before.

Take a look at the charts/3C right before the speech.

 DIA 5 min

 IWM 1 min

 QQQ 5 min

SPY 1 min

From a member:

"Hi Brandt,

As soon as you posted the 3c's going to FOMC I exited my longs."

In any case, as I warned, the initial knee jerk reaction is usually the wrong one, so if the knee jerk reaction gets us to a pullback, and then we have the reversal, we could be looking at the continuation of the bounce. As I've been talking about since yesterday, the market needs a pullback to break through the next resistance level. It may all work out very nicely.

The PMs

GLD makes a marginal new breakout high above resistance today.

 And the 5 min 3C chart is negative throughout. As usual, the false breakout is an excellent timing indicator for a reversal.

 Earlier today I mentioned the bearish wedge in SLV, here's the break

And 3C went more and more negative throughout.

Confirmation

The transports have given up substantial ground

UCO Update

Thus my warning about false breakouts in oil.

It looks like JPM didn't like the talk about capital requirements

Gold

I'm not ure exactly what it was, but gold heard something it didn't like. It may be the projections for inflation.

SPY Just went negative on the day

This sell-off was in direct response to Bernanke explaining the different atmosphere that was in place when they decided on QE2 and how the economy is in a better place now comparatively. This basically was the QE3 bulls selling on Bernanke's statements.

Possible Leak of the Embargoed Speech?

We'll find out soon enough

Here we go

WATCH BERNANKE HERE 

Be Careful with USO/UCO here

UCO/USO are breaking through resistance intraday-remember, I like them longer term, but they also seem like they need a pullback and we want to be careful that this is not a false breakout.

The 5 min UCO chart is negatively divergence, which casts suspicion on the breakout move, it could be the start of a reversal.

As this applies to the rest of the market, we are in a holding pattern right now awaiting Bernanke at 2:15, but we could see similar false breakouts in the market averages that lead to a pullback-which I think would be good.

Transports

The transports are an important group as they can confirm market strength or weakness (Dow Theory) and often be a leading indicator.

Today the transports are curiously strong. FDX is up 3.6% today.

Here's the daily DJ-20 Transports average-outperforming the industrials.

Again though, that 10-min negative divergence is there too. I like the strength as an indication of th bounce having some legs, but as I've been harping, I really think a pullback would do the market some good.

I don't suppose we'll see too much movement before Bernanke speak at 2:15. I'll be watching for any signs that the embargoed speech may have been leaked.

Market Update

The FOMC statement could be the catalyst to move the market toward the pullback I've been talking about.

SPY resistance from yesterday and today

SPY 5 min negative divergence

SPY 10 min negative divergence

SPY 15 min negative divergence

The bigger picture-SPY 60 min positive divergence.

This is why I suspect the market needs a pullback, but it's not necessarily the end of the bounce-the 60 min chart is quite strong.

So far the market is moving down a bit off the morning highs.

Transitory

How many times have we heard transitory now in FOMC statements? This one sounded like they may be taking inflation a little more seriously.

There were no hints of QE 3.

Gold saw a quick spike, I think that has to do with the Fed's added statements about inflation and watching it more closely.

SLV Update

SLV 1 min negative divergence

SLV 10 min negative divergence

SLV 15 min negative divergence

SLV 30 min-largely in line, but the most recent peak is actually a small relative negative divergence

SLV is wedging which in this case is bearish.

It looks like it'll pullback soon. Watch for a false upside breakout of the wedge.

FOMC-

As always, a quick reminder, beware the FOMC knee jerk reaction, it's almost always wrong.

CAT/DE Chart Request

Both of these are in the sub-industry group "Farm and Construction Machinery". This is a group that has performed poorly and I see it every time I check Industry group rankings. Both stocks are in large tops that have broken down and since rallied with the market toward their respective resistance levels. Both stocks also reflect the need for an intermediate term pullback, much like the market has been looking, except their negative divergences are a bit worse then the overall market.

Cat daily chart/top -the red line below is the target for the top once the market breaks down.

CAT 30 min 3C chart shows a respectable positive divergence lifting CAT about 5 points.

There may be more upside with the 30 min divergence of that size, but right now the 15 min chart is negative, which suggests this should pullback. It could also be the start of distribution, which can go on awhile longer with the negative divergence growing worse into higher prices. In either case, it's close to the top's resistance zone. This may be the type of longer term perspective position that you scale in to.

Again, CAT at resistance and ADX on the 15 min chart has turned down from >40 suggesting the uptrend in this timeframe is coming to an end. If this were to be a true reversal and not just a pullback, I'd expect to see a push through resistance on a false breakout, that would be an excellent timing signal. For those thinking of trying to play a swing trade here on a pullback scenario, you might use the resistance as a stop.

DE is also in a large top, the lower trendline is the pattern implied target.

There were some attempts at accumulation that basically just sent DE laterally, they were not good divergences and never entered a leading status. To the right of the vertical line was the second round of positive divergence/accumulation sending DE higher. This 30 min chart still looks pretty strong.

However, like CAT and like the market, the 10 min chart is suggesting at least a pullback, if this is not in fact the start of real distribution. There's two possible trades, a swing trade on the pullback theory, or scaling in to a longer term position for when the market breaks down.

ADX has also turned down from 40 suggesting the short uptrend is coming to an end-DE is also at resistance.

For a longer term short, I'd like to see a failed breakout, for a swing move down for a correction (as the 30 min chart is still strong), then resistance in the area would serve as my stop.

If you have questions about either specific to your trading style, feel free to contact me. In the long term / big picture, both charts look horrible.

Iran Vows To Counter Moves By Others To Hike Oil Supply

And perhaps that's the reason USO has shaped up lately. I suppose it is pretty much common sense that Iran would take that position and it's highly doubtful that Saudi Arabia who routinely overestimates their reserves and capacity to bring them online, can do much about it. It's a whole lot easier to turn the dial down then to turn it up.

USO short term is looking range bound, but the longer term trade looks promising, of course you may want to wait to hear what the Fed has to say before committing to any large positions.

Interestingly, the longer term charts are telling us something. Take a look at USO 60 min vs the bear Crude ETF, SCO 60 min.

USO 60 min positive divergence

SCO (bear crude ETF) 60 min. negative divergence. Also note the breakout/breakdown trendlines.

USO/UCO may be an intermediate term trade worth looking into.