Internals

Tonight we have a Dominant Price/Volume Relationship in 4/5 indices including the NYSE Composite, the Dow-30, The Russell 2000 and the S&P-500. Only the NASDAQ 100 was missing a DOMINANT P/V relationship.

The dominant relationship was Close Down and Volume Up. This relationship is difficult to define in the current trend, it would normally be associated with downside capitulation after an extended move down and would indicate a reversal to the upside. We only have 2 days down so I'm not sure it's an important indication, however, considering that we are looking for upside in the DIA and SPY and considering the earlier posts today which indicated the NASDAQ may be coming out of  leadership status (and the NASDAQ 100 was the only average that lacked the relationship), this may indeed be a short term signal indicting an upside reversal.

Supporting evidence may be found in today's top performing sub-industry groups, the top performer was Farm and Construction Machinery, which would include an important Dow-30 component, CAT. Personal Computers were also in the top 5 performing groups, which would include Dow Component Hewlett Packard and by extension, IBM, Microsoft, Intel. Home Improvement stores were also in the top 20 (of 239 ) which would include Dow component, Home Depot.

Looking at today's worst performing groups, NASDAQ related groups were among the top 10, including: Printed Circuit Boards, Semi Conductors, Networking and Communication Devices, Data Storage Devices and Specialized Semi-Conductors.

Other hints included the closing 1 min divergences among the major averages. Note how much stronger the closng 1 min positive divergences were among the SPY and DIA as compared to the QQQ.

 DIA 2 hour divergence/leading positive divergence

 QQQ 1 hour divergence

2 hour divergence/leading positive divergence.

None of these bits of information say much by themselves, but when you consider this was the thematic finding of the updates today and you put this all together, it seems that my theory that the DIA and SPY will play catch-up while the NASDAQ steps back from leadership, should be taken more seriously.

Once again we have a counterintuitive situation in which we are looking for strength in the SPY/DIA to lead us toward a downside reversal.

That's the nature of the market and following the underlying market action rather then what appears on the charts.

The Miners Trading System

No changes for tonight, both system 1 and system 2 remain locked in a long NUGT signal.

System 1 in green/ system 2 in light blue, the red line s the signal line for crossovers.

Both systems are still long with a system 1 stop-loss at $35.06 and a system 2 stop-loss at $35.66.

System 1 is at a .5% loss/ system 2 is at a 2.2% loss.

DUST continues to accumulate and is showing STRONG positive divergences.

 DUST hourly 3C chart is a VERY strong leading positive divergence on a very important timeframe.

The 15 min 3C DUST leading divergence is one of the craziest things I've seen, it is nearly vertical and continues to add each day on another important timeframe.

On another related subject, because the miners trading system takes into account the price of oil when giving signals, it's difficult to believe we can have this kind of accumulation in DUST and not expect to see a move down in USO soon.

NFLX Short Trade Idea Follow Up

I posted NFLX as a short trade idea on 7/17 and 7/18 with a stop in the $290-$295 area. The stock never bounced higher then $287 on a closing basis since the posts were presented.

NFLX reported tonight and came in with a big miss. In both posts I mentioned I thought NFLX would become an excellent trending trade once the top was broken, tonight the top is broken with NFLX currently trading at $253.50 or about 10% lower then an entry around the time I posted the NFLX short idea.

 Here's the daly chart with a bad 3C divergence.

The 15 min chart pinpointed the top.

If you are in this trade, contact me about a stop/trade management. If not, 'm sure we'll have plenty of chances to get a position opened.

ATRN _POPS

ATRN was a long trade from June 1st.

The white arrow is the trade idea date, the Trend Channel held this trade through today.

URRE Long Trade Idea Follow Up

When I was asked by several members whether URRE would be a good play for the market bounce, my answer was no, however, while I felt URRE was more likely to pullback then participate, as it has, I also felt that URRE would be under accumulation at some point during that pullback, we are at that point.

 URRE coming out of a bullish descending wedge and forming a lateral base. I feel URRE has great long term prospects as a long trade (buy).

 Here's some aspects of the pullback on a 10 min 3C chart and as I assumed, URRE s being accumulated through the pullback.

The 5 min chart shows the same. While I don't think a reversal is imminent, I would consider getting my toes wet in this long position that I feel has the ability to be a counter trend trade when the market falls.

There are many fundamental reasons why URRE makes for a good long trade besides the technical charts.

Further indications supporting the SPY/DIA

 Here's a broad based afternoon pullback today.

 Note the 3 positive divergences in the DIA, 2 relative divergences and a leading upside.

 No such support in the IWM

 And scarcely a bit more in the Q's, but nowhere near the same as the DIA or SPY.

Here the SPY has the same 3 positive divergences, I didn't draw in the first relative divergence from 2 p.m. to the lows, there's also a second at the test of the lows between 3:10 and 3:30 and a leading positive.

If you are using ETFs to trade short term moves, you might move out of the QQQ longs and into something like UDOW or UPRO, perhaps even FAZ. These are very short term trades, intraday to a day, maybe 2.

USO still on edge

The triangle and Bollinger Bands earlier both supported a directional breakout in USO, so far it's still pretty indecisive, it didn't get far with the upside move and now is sitting on a support trendline. Note the volume spike, this hints that if the support line USO is currently sitting on is broken, volume will surge. 3C showed a slight 1 min positive divergence at 3:28.

Why I feel a continued bounce will favor the SPY/DIA

Lately, over the last year or so, one of the most important concepts giving us a high probability reversal has been that of the false breakout/breakdown. The reasons for this are many, but to name a few, 1) they provide extra trading profits for Wall Street as traders who buy the false breakouts are not only buying at a high price which when the breakout fails will cause them to sell and add more momentum to the downside break, but 2) they are also allowing Wall Street to accumulate a short position right out in the open at high volume (usually Wall Street is quiet about accumulation and distribution so they aren't front run by traders and other firms). However when buyers buy on a breakout, there's usually good volume, Wall Street is on the other side of the trade, meaning they can sell short on heavy volume and not raise suspicions. The false move is still one of our best timing indications.

Here's why I feel continued upside over the next few days will tend to favor the Dow and S&P (DIA/SPY)

 First, sector rotation today favors the Dow especially, but also the S&P and is fading n the Q's Note Tech is sliding, but the important groups for the Dow are gaining, Energy, Basic Materials and more then anything, Industrials. As for the S&P-fnancials have about 22% weight and are important for the SPY as well as energy.

 The SPY has two prospective breakout points at each of the trendlines, those breakouts haven't happened, but would be an excellent timing indicator so long as 3C counts them as false breakouts which would be highly likely.

 The DIA is within range of a false breakout, but hasn't made it yet. This would be an excellent signal, especially if all3 majors ht FB's at the same time roughly.

 The Q's can come out of rotation a bit as they HAVE made the breakout. The Q's would likely see further buying if the SPY/DIA made advances just because the market tends to move together, albeit at different rates of change.

 Furthermore, the DIA produced a positive divergence on the open today.

 However, don't let short term charts fool you, the hourly chart is solidly negative, this is why I try to distinguish between a tactical move and a more important strategic move, the strategic outlook for the DIA (and the broad market for that matter) is VERY poor.

 Note Q's did make a breakout, note there was no positive divergence this morning.

 The SPY did, like the DIA, post a 10 min positive divergence on the open. This leads me to believe more attention in further upside, will be focussed on the DIA/SPY.

 Again, the strategic outlook for the SPY is VERY poor.

Here's another strategic outlook of the SPY, once again, VERY poor.

USO Resolution Starting?

Not much volume on the breakout, we'll see where this takes us.

Tech/Q's looking tired.

 Tech Sector with the decline staring around 1 p.m.

 XLK -Technology ETF is in a negative 1 min divergence.

 Note the XLK 5 min divergence around 1 p.m.

 The 15 min chart also s looking tired.

 Note the divergence in AAPL around 1 p.m., it may make 1 more push to new intraday highs before receding.

 QQQ 1 min went negative near 1 p.m.

 QQQ 5 min also near 1 p.m.

The 15 min chart isn't in good shape.

Sector rotation is still favoring the Dow-30/DIA and actually getting stronger; led by Energy, Industrials and Basic Materials.

GLD Update

GLD retraced 62% of today's move from Friday's close to today's high, it's currently at about a 40% retrace and looks as f it wants to move higher intraday.

We have another triangle with some slightly bullish recent 3C readings, this may turn out to be a head fake, but it does appear that it wants to make a move higher into the close.

The Many Possibilities of USO

USO has been a tricky one lately, generally my opinion has been that t would break down, accumulate and then break out of the bull flag for real, thus my short term bearish, intermediate term bullish stance.

We may be reaching a decision point in this ongoing drama and any stock that breaks out and then sits on the breakout level for 3 days is a questionable drama.

 The hourly chart is bullish for USO, thus my intermediate term stance.

 The 10 min chart has been negative almost since the day it broke out of the bull flag and the trendline you see is the top of the bull flag, normally on such a breakout, you'd expect to see follow through buying sending USO higher, instead it has just sat there with the trendline acting as support, but making no progress. I will note there is some slight progress today in the 10 min chart, even though it remains in a leading negative stance.

 Today USO has started a triangle, which would generally be interpreted as bullish, it also suggests a directional move breaking this stalemate, volume is perfect for the price formation.

 Note also how the Bollinger Bands have tightened up, also suggestive of a directional breakout coming shortly.

The 5 min chart remains bullish.

I think we are getting close to a resolution. If we get a breakout that is solid and 3C improves, then I see no reason USO shouldn't continue higher. The other prospect and the one I have felt is more probable is a breakout of the triangle today that fails and sends USO back into the flag, where it is accumulated and then makes a proper breakout with some volume and 3C support. Either way, I think we are finally nearing a resolution. In addition, either way, I still remain bullish on USO's intermediate term prospects.

Last Night's Futures

This from the WSJ 15 hours ago, "Dow Jones Industrial Average futures were down 114 points in screen trade."


From Zawya.com 11 hours ago "Dow Jones Industrial Average futures were last down 131 points in screen trade. "


From the Economic Times 11 hours ago, "Futures for the Standard & Poor's 500-stock index were down about 1 percent. "


From Market Watch, 12 hours ago, " Dow Jones Industrial Average futures DJ1U -0.71% were down 122 points at 12,499 and S&P 500 futuresSP1U -0.82% were down 12.80 at 1,328.20 points. "


From Futures Magazine 12 hours ago, "markets Sunday night with the S&P 500 Emini contract sinking as much as 18.75 points"


From Zero Hedge Last night " And The Opening ES Print Is...

1331.75

Sorry, Timmy, Boehner, and Obama. No apocalypse. Better luck next time.

Update: 1326...

Maybe we spoke too soon.

Update: 1322..."

As you can see, the futures were manipulated last night, causing the bears to short the market on the open, the recovery through the morning puts them at a loss, when they start to cover, we get a short squeeze and maybe enough momentum to get to the breakout levels I've been anticipating since last week. The Q's already made it.

Here's the updated Sector Rotation, which is favorable to the DOW-30.

The most important change for the Dow would be Industrials in purple, Energy s also helpful, but there's a major change in industrials. Tech remans strong supporting the NASDAQ-100

The point is, the sheeple following the futures were deceived. This isn't to change any views on the health of the market, we talk about tactical (short term) and strategic (long term), this was a tactical play to effect a strategic outcome. Remember, nearly all reversals we see (in this case we are looking for the downside reversal) are preceded by a false breakout, The Q's are there, the S&P is close, the Dow is close.

Market Update

I want to get ths out, then I'll follow up wth the rest of the post. Last night in a thin market, Futures were anhilated, implying a market about to fall off a cliff, it was a total farce and similar to what Cramer talks about in the video I posted. I'll follow up showing some of the futures from last night and how they were used to absolutely slaughter the sheeple.

Here's the SPY now.

 Here's a 5 min positive divergence on the open, it's no wonder the market moved up to fill the gap, remember I showed hints of accumulation in the Q's and DIA at EOD trade Friday, it seems a bigger plan was already in place.

 Here's  a 3C 10 min relative divergence on the open this morning, meaning locals bought the gap down and have been riding it up in a mini short squeeze from last night's horrible futures.

 The 30 min chart is still very negative and I view this as a short term tactic on the upside, as you recall last week I was expecting the DIA and QQQ to breakout before we saw a reversal; the Q's managed it, now sectors important to the Dow which were out of rotation late last week are suddenly in rotation today.

 The 15 min chart is clearly negative, thus the shorter term positive divergences are tactics, not strategy, the market is still in a dangerous spot, but the game must be played and the game is almost always a head fake breakout before a reversal.

 Here are two possible breakout points for the SPY, but I think the DOW is the bigger issue.

Here's the DIA and the breakout point, about 120 points or so away, still very doable.

Watch for the second part of this post.