The Miners Trading System

Tonight, as I suspected last night, system 2 joined system 1 and gave a long NUGT signal, if you chose to take this signal, you would enter NUGT on the open tomorrow morning. The stop loss would be the opening price less 3%.

For system 1 trades, the entry was this morning and the stop loss for the trade would be $35.06.

System 1 in green, system 2 in light blue, both are above the red signal line.

Behind the Curve

I just saw this article from the Technical Take in which they warn that FXI (China 25) and EEM (Emerging Markets) are showing signs of trouble. The article can be found here.

As you can see by the charts below, Wolf on Wall Street has been warning about both FXI and EEM for quite some time. Neither ETF has done anything bullish in 8 months, other then under going tops and distribution.

 EEM had an accumulation period in late 2008/early 2009, like many equities. The last year or so it's been under distribution.

FXI, here's the same accumulation and the 2011 distribution.

FCX MOMENTUM

Copper s often a leading indicator for the market, so I thought the recent momentum intraday in FCX was interesting.

Here's the SPY

 Apparently they weren't ready to let the SPY breakout -see the neg. divergence.

However on the second attempt, volume s looking good and you rarely see bullish volume anymore.

The Q's , as I noted, TECH is in rotation, have already broke out of the base, but that probably has a lot to do with AAPL.

Pretty spectacular and if you want to move the market, AAPL is your go to stock.

SPY Update

 The SPY has shown considerable improvement intraday from a downtrend to forming an Inverse H&S type base, which is breaking out now.

 Here's a closer look at recent intraday trade. The volume for this type of base pattern is correct.

The TICK chart is also hitting highs on the day at +1000.

Judging by sector rotation, I think Tech which is already in rotation and Financials which are just entering rotation, would be the likely leaders of the bounce. You may want to consider something like FAS for a swing trade up, UPRO would also be reasonable and maybe something like TQQQ or URTY. Keep in mind these are highly leveraged ETFs, but I think they would be good choices for a short term bounce of several days to a week or so.

TLT/Treasuries Update

It was just last Wednesday, July 13th that I warned TLT/Treasury Bonds looked like they were in some short term trouble. Being treasuries are a flight to safety trade, if my theory of a market bounce this week pans out, the TLT should see more trouble.

 TLT in a major base, and the warning at the red arrow.

 Here's what TLT looked like when I posted the warning about a pullback. I rec'd TBT, a Ultrashort 3x leveraged ETF as the trade of choice on a TLT pullback. TBT is up about 5% thus far.

 Here was the problem I saw on the 30 min 3 chart, a negative divergence close to resistance.

 The 15 min chart confirms the same

Interestingly, I saw this trade as a pullback trade, but my crossover screen is now giving a short TLT signal as all 3 components are just aligning for the short signal to be given.

PNFP Follow Up

PNFP was originally listed on my June 15 list of short candidates that should be on your watchlist.

 The daly 3C chart shows accumulation during Q3 2010, distribution during Q1 2011

 The red arrow below price is when the idea was mentioned as a candidate. Note the RSI negative divergence in to the top. I prefer shorting stocks that have broken support of the top, then rallied above it and then break it a final time. These trades are more likely to trend as the volatility of a top breaking is largely over.

 Here's the 3C hourly chart showing a leading negative divergence on the bounce after the intial top break.

 If you prefer to swing trade PNFP until the top is decisively broken again (today it's very close), then  would use the daily trend channel which has been useful as a stop in recent swings. The current stop would be around $15.80.

You can also use swing trend identification. Since the trend down started, the trending candles are in white, the noise candles in red. The current candle (today) is the new signal candle, the swing downtrend would be broken if there was a candle that closed with a low higher then today's closing high.

I would prefer a solid break of support on heavy volume, and a few percent below support. I feel that scenario would be the best situation / setup for a trending move down.

GLD Update

GLD continues to have a negative tone to today's trade.

 The 15 min chart is nearly making new lows.

 The 5 min hart is in a leading negative divergence on the breakout from the "bullish" consolidation pattern. I emphasize "bullish" as these are often head fake setups. The more obvious the pattern is to retail technical traders, the more likely it will be manipulated or used against them by the Wall Street trading firms, especially HFT algo firms.

 The 2 min chart is in a leading negative divergence when t should be confirming price in a strong trend.

 And the hourly chart which shows our accumulation period of roughly 4 days, is now at it's worst 10 days in to the uptrend, which is roughly about the period of time I would expect for distribution of a 4-day accumulation period.

Most ominously, Money Stream is negative on the daly hart. Money Stream rarely gives signals, but when it does, they should not be ignored. The depth of the divergence seen above suggests to me that my original theory that GLD would pullback to its long term median price at the 150 day moving average is still very much alive and well as a strong possibility. Should this occur, we may very well have a 1 or 2 time a year, excellent buying opportunity that has shown to be reliable.

DUST / NUGT/ GDX - Update

I'm still getting a lot of emails about DUST, Friday system 1 triggered a long in NUGT today, but remember system 1 is the faster system and prone to more false moves.
So lets take a look at the source, GDX, which would be similar to NUGT except without the leverage.

Remember, if you went long NUGT today, the stop-loss is the opening price less 3%.

 Here's the daily GDX chart, there has been good accumulation and a confirmed uptrend, but the daily chart won't respond to changes as quickly as intraday charts. Overall, for the intermediate / long term trend, I remain bullish on gold miners, but that doesn't mean we won't see a pullback as GDX is extended here.

 The hourly chart s showing a negative divergence with distribution starting around July 5th. Remember, a large accumulated position takes time to distribute and it's always in to higher prices.

 The 15 min hart confirms the 60 min chart above with a negative divergence.

 The 10 min chart shows the same.

 Here's the 5 min chart going in to a leading negative divergence today.

 Interestingly, there was a lot of buy side volume today, but it didn't take prices any higher. RSI is negatively divergent as GDX forms a consolidation pattern. As of now, the consolidation pattern has failed with a downside break. I would keep an eye on this pattern for any potential upside reversals or further downside momentum, it could be a tipping point.

The 50-bar 60 min moving average has defined the trend fairly well, a break below this moving average would likely usher in a correction; it would also break a major daily support level.

CSE is Back-Trade Idea (Short)

CSE was a long trade back on October 26, 2010. The pattern was a bull flag and the market was still in bullish territory. Just for a mental note, bullish patterns like a bull flag are infinitely more successful when the market is in a bull trend, the bullish patterns become very unreliable when the market is topping or bearish, statistically speaking.

 Here's the trade idea at the white arrow.

If you used my Trend Channel as a stop, then you netted a 35+% gain before t stopped out at the red arrow. Note ADX turned down from a very high reading of 72 indicating the strength of the trend was now fading, only days later the Trend Channel stopped out the trade.

Now CSE is back on the radar, but as a bearish trade.

 Here we have two potential necklines for the top, note volume in the area.

 Both support lines are now broken, but note the volatility dance that is so often seen when support is first broken. Now that CSE is beyond the volatility dance, t makes for a better trending trade prospect and I prefer trending trades above volatility and chop.

 I really like to see the daily 3C chart confirm an uptrend as we see here at the green arrow (3C makes higher highs with price), it lends more credibility to a change like the negative divergence seen at the top. The daily chart remans negative and confirming the downtrend.

 This s the volatility zone between two support levels. Note the hourly 3C chart caught each attempt to break above resistance and identified both moves as head fakes or false breakout. The white arrows simply show accumulation getting ready for the head fake moves up, Wall Street will trade swings too, especially market makers and specialists.

 The 15 min chart can't show as much history, but confirms the negative divergence on the last false breakout and is currently confirming the downtrend.

 Here the 1 min chart is showing a positive leading divergence, note the downside momentum earlier today and how it faded to a lateral trend once the positive 1 min divergence began. This fits well with my theory that the market will bounce a bit before the next leg lower, which also allows us to get better positioning with less risk on trades like this that may bounce. The overall character of 3C s negative/bearish, the 1 min chart is not significant regarding the primary trend, it's just showing us what a counter trend move might look like which again is an opportunity.

Using the Trend Channel to define the long term trend, the stop out region or area we may expect a bounce to start to deteriorate would be around $6.50. If Wall Street games CSE, they may take it a bit higher then the last reaction high, still in the $6.50 area. I would view this as a longer term trending trade and would allow for a stop in that $6.50 area. You may do well to show some patience and see if you can't get better positioning on the entry. You can always phase in to the trade as well. My initial trending target is in the $4 area, if the market falls apart as I suspect it will, then these pattern implied targets in a bear market are often on the conservative side.

Market Update

This update s rather late, but as I mentioned to some subscribers asking for an update, "I've been waiting for confirmation of my suspicions" and now I have pretty good confirmation.

This post from Friday is crucial to my theory, "What Can We Expect After Op-Ex Today?" 
The post is a bit long and requires some attention to understand it, but in essence, the positive divergences in the market led me to believe that we may see upside after OP-EX Friday so Wall Street can trap longs and set up shorts. You may recall I warned that the Monday after May's Op-Ex Friday was a down day and then the market went on to bounce for 6 days before resuming the downtrend. The point of the lower open on Monday was to accumulate a position of longs for the bounce, which would be sold into the bounce and a net short position would then be in effect, next the market dropped. Mark Twain says history doesn't repeat, but it rhythms so I'm not saying that the May model will play out the same way now, but the general idea seems sound.

 Here's the SPY today on a 1 min chart, the accumulation that would be needed for the theory to pan out is well under way.

 The 5 min chart is now in a leading positive divergence.

 The 10 min chart's strength is what made me think we'd see a theory similar to what I proposed last week.

 The 15 min chart's strength also was part of what made me think this was a possibility.

 The 30 min chart was barely showing a positive divergence earlier, it's improved significantly in a very short period of time, suggesting that the accumulation on today's dip is quite heavy.

As for the bigger picture, the most important of these charts, the 60 min remans locked in a negative stance, this is what makes me think any bounce in the days to come, would resolve to the downside.

This is my working theory at this point, if there are changes, you'll be the first to know.

GLD Follow Up

It was just 45 minutes ago that I warned about GLD's rather parabolic move. You know this recent trend up has not sat well with me. Here's what I'm seeing now in GLD.

 Here was today's intraday parabolic move that I warned about, parabolic moves always catch my attention and often are not as bullish as they appear.

 This ascending (bullish) triangle is a consolidation/continuation pattern, the implication is more upside and traders (I know because when I first got started in following the rules of Technical Analysis I reacted the same way) will often buy in to the bullish pattern before a breakout as it limits the risk and gives them  more potential upside. It is also a good set up for Wall Street to pull a head fake. Note the Volume on the breakout.

 Here's the 3C charts on today's breakout.

 More confirmation of the negative character on the 5 min 3 chart.

Most importantly, the divergence is showing up on the 60 min chart. I would watch GLD very carefully for a break below $155, a break below the area will put traders who bought the breakout (and there was significant buy side volume) at a loss, which of course could create the snowball effect.