A Controversial Call

I remember this chart was showing daily accumulation and it was for awhile.  I was trading full time back then and remember the environment, every time the market threatened new lows, the Plunge Protection Team would step in (aka The Fed), but still, no one was sure what they were capable of and we had just gone through the nastiest decline is 8 years.

 Daily accumulation for nearly 4 months, something big was up.

That period was in the white box, if you bought and simply held (not trading any of the counter trend moves), you made around 75% over the next year holding 1 simple, non-leveraged ETF. This gives you some idea of what Wall Street knew.

 This was another tough call, this was toward the end of QE1, most people thought it would be quickly followed by QE2. By the time the divergence was evident, you might have missed 2% of upside, although I believe intraday timeframe helped nail the reversal.

However, you would have had the chance to make a lot of money of the following 16% decline or at least saved money.


This was another controversial call. The dollar had been trending lower for 10 months, there was nothing on the horizon that even remotely suggested strong fundamentals for a rally in the dollar.

Yet 3C showed a lot of accumulation, intraday time frames helped to narrow down the best entry, but still no one believed the dollar was capable of rallying. A 19% move in the snail-like Dollar Index, about a month later, the Fed announced a strong dollar policy. Obviously Wall Street knew ahead of time.


This next one was one of the most controversial calls of all. After a 6+ year uptrend in oil that seemed unstoppable (if you think the gold bulls have a strong opinion, you should have seen the oil bulls back then), 3C showed multiple divergences showing a reversal was coming. That same week Cramer told his viewers to buy oil on the next bad inventory report, they bought-at the top!

The next 8 months saw a 80+% decline.

There have been many times when my faith was tested in 3C against what seemed to be impossible odds, yet each time it came through, it just took some patience and faith.

Ironic

It's a strange thing to have gone through 2011 warning that this market is a house of cards, while everyone else was talking about buying the dip, and then being (thus far) on the wrong side of the market when it busts loose. We do have our short positions from the last month and they are doing well, but 3C has been indicating accumulation that what would produce a major rally. 


The market has hyped a lot of concern over the BLS number due out tomorrow morning at 8:30, more so then I've ever seen and my guess is that the market has been aggressively discounting a bad print( (t least on the surface). Tops are always volatile and toward the end, they get to be the most volatile (that doesn't mean straight down, it can mean huge swings in both directions). I've rarely seen a 30/60 min divergence fail, understand the divergence shows underlying market activity that contradicts price, in other words, we can see what they are doing, but not know why and timing can be difficult, usually a break of an important support or resistance level s our best timing as I've explained before. Well we have a major break and we still have VERY strong divergences. At this point, I can envision only 3 scenarios. If the BLS data is not as bad as feared or discounted, we could see a major rally, in my opinion, the last; remember, volatility is greatest at the end of the trend and if this is the case, then record margin levels would produce a snap back rally that would be neck breaking. Still, we have a house of cards and at the right moment, it would be time to back up the truck on the shorts. The second scenario which I've only seen once before is the market, which controls the market cycles in the short term (meaning weeks to a month)  lost control (this happened during the Lehman crisis), but in those cases the divergences fade pretty fast as they realign their positions. The futures for the Dow were up 66 points last night before the Bank of Japan intervened in the currency markets to drive the Yen lower, which drives the dollar higher, which puts sell side pressure on the market. However, they've been talking about the BOJ intervention for quite some time now and as the market slid further today, there was not a corresponding move up in the dollar, I think that had more to do with the BLS. Also recall 3C has been showing strong accumulation of the dollar so either the BOJ intervention was known about or there may perhaps be a decline we haven't seen yet as I do not think the accumulation phase in the dollar is done yet. The 3rd scenario is something that was mentioned yesterday...


""Former top Fed official Donald Kohn tells WSJ's Jon Hilsenrath he expects the Fed to give "very serious consideration" to a new round of bond purchases if it determines after the Aug. 9 FOMC meeting that the recovery is really losing steam and if inflation is coming down"


Well inflation is down, at least the commodity inflation that was effecting manufacturing. The commodity indices are down 16%, excluding gold and silver, raw materials are down even more.


This meeting is on Tuesday and recall the Fed called in the major banks last Friday under the guise of the debt ceiling. Maybe that's not what was being discussed?  It's been widely speculated that Bernanke would need to see an ugly market before he could justify operation twist or some other form of QE3. While the downside has been nasty, the potential upside from Bernanke making some sort of announcement on Tuesday would make the downside pale in comparison. We saw a similar plunge in terms of % move after the end of QE1 during the May-June period of 2010 when the market lost about 12%. I'll say this with no caveats, the market since March 2009 has been a Federal Reserve engineered rally. The economic data has gone down hill as the rally went higher. Stocks didn't stand a chance on their own and the economy hasn't improved to justify the price levels we are at even now. 


Those are the 3 remaining scenarios that I see and scenario 1 and 3 would prove to you definitively what I've been saying and showing people for years, the market is rigged, controlled by the Fed, the White House and Wall Street, emphasis added to controlled. There is no more price discovery, just a "Boys Club" scheme. Most of you are here because you've seen how well 3C works, I'll tell you that 3C would not work without Wall Street having inside information. Just recently 3C called the June short covering rally, that too was about 2-3 weeks of accumulation. The top was called, even on a false breakout which was identified, earnings have been called, one quarter we had 19 of 21 earnings picks work out; a 95% success percentage. This is all based on inside information and Wall Street working behind the scenes, that's what 3C shows us.


So we should find out shortly whether one of the three scenarios come to pass.


If it is the much dreaded scenario two, then it's plan B time. As I have been saying, when the second shoe drops, we will see a decline worse then the 2008 decline and probably enter the first ever secular bear market in equities. So there's plenty of opportunity.


To give you an idea...

 If we look at the 2008 decline and this one will be worse, you can see we have a long way to go on the downside, but no market falls straight down.


Here's the crash of 1929

The first leg declined about 46% followed by a nearly 6 month rally adding 46%. The total move was about -88%, but there were 6 bear market rallies, each one an opportunity to make money; there's a bus every hour, you're not going to miss anything.


So next up-the BLS.

FSIN Trade Management

Here's the FSIN Trade on 7/19 @ $7.50

The trade is not at a 41% profit.

 Entry date

I'd be using a tighter stop right now considering the profit in the trade. This is a 50-bar average on a 30 min chart, you can widen it out to 1 60 min chart, but if I did that, I'd consider taking some profit off the table.

MCD Trade management

MCD was a short from this post on 7/22

 This is the day of the short...

Here's the updated stop on the Trend Channel-around $85.50

Weekly Options

Is it just me or do the premiums for the weekly SPY  calls seem hefty?

Risk Management

Remember, tomorrow is a huge event with the BLS coming in for last month. There's been a lot of nervousness around this report, in fact I'd guess that a lot of the downside this week has been discounting a bad report. It could also be a catalyst should it beat the whisper number.

Right now is your last chance to get your risk management up to speed, make sure your position sizes are reasonable.

Trade Idea PJC (long)

More then anything, I like the price action in this one.

 For a financial, it's held support well.

 The hourly chart also testing and holding support

The 5 min chart looks like it's building some tension to move to the upside.

Trade Idea-ROYL (long)

Royl is just breaking support today, which is often a sign of a reversal.

 The last run had a lot of accumulation, but even this time the daily chart has several months of positive daily divergence.

 This was the day before the last run up of 272%, it was an ugly day and just broke support as well.

 The 10 min chart...

The 1 min chart.

Of course this is a speculative trade and risk management should reflect that. I'd consider a stop below today's lows.

Trade Idea DM (long)

 DM is a good example of the 4 stages of a complete cycle, 1) accumulation 2) mark-up 3) distribution 4) decline. Right now, DM has undergone stage 1 and is within a percent or two of stage 2 mark-up where the bulk of the money is made in the cycle.

This is a daily chart, so despite today's nice gan, there appears to be a lot of support for an extended move. You may want to consider it here or on a breakout through the trendline. If you wait for the breakout, I would set alerts so you are right on it. The trade looks very good.

TLT

TLT-Treasuries, the safe haven trade of choice s also giving some signals.

Negative at the highs today

Market Update

It looks like the averages are going to give it another go from here.

 DIA

 IWM

QQQ

They are getting some support from the NYSE TICK Index

Trade Management-SRS

SRS was a long pick from July 27th @ $13.77, it's now at a gain of  19+% in 6 days. Ultimately my target for SRS is much higher, but I want to revisit the stop as I know some of you are swing trading it.

 Here's out entry on 7/27

 This is the original proposed stop using my Trend Channel on a 60 min chart, since there has been no close below the Trend Channel, it has held the entire trend thus far and the updated stop is in the area of $15.75-$16.00 currently.

In fact this tighter Trend Channel stop has also held the trend, this stop f you want something tighter is currently at the $16.00-$16.25 level.

Ultimately my target for SRS s around $60, with a consolidation area around $30.

Price has moved up too fast to use the long term trend channel, although on the first pullback, we should be able to switch over to the longer term stop for those of you who have a trend focus.

Silver Getting Crushed... Time for ZSL?

 SLV 1 min, negative right off the open

 Same with the 5 mn

 As well as the 15 min

 This bear pennant may offer some brief upside, if so, I would consider a position in ZSL. As we have seen in the past, when they decide to crush a silver rally, they don't stop until they've won.

ZSL 5 min

TLT-Another Safe Haven Play

TLT (20+year treasury) is another safe haven trade, it broke some resistance recently with TSV and 3C negative divergences, possibility for a head fake here. Volume was large and churning at the highs today.

VIX Update

The VIX is pulling back from earlier new highs, in red is the SPY, you an see what happened as the VIX did something similar in June, the market went on to rally from there.

GLD Down on the day

 Here's the long term daly chart of GLD that has suggested trouble ahead for GLD.

The 15 min chart continues leading, GLD down over .60% on the day thus far.

SPY Update

The SPY looks like it is going to test yesterday's lows. It looks like there's some support for that test.

 SPY and yesterday's lows, this will be an important level.

 1 min

10 min

short term signals.

VIX Indicatons

 The VIX rising to a new high like today, and then retreating would be bullish for the market short term.

 Since I can't use 3C intraday on the VIX, I'm using ROC to define the negative divergence the VIX just put in. There's now a leading component as well.

RSI hourly is also negative.

I'd keep an eye on VIX action as well as GLD and FXF.

GLD Trade is interesting

GLD is a safe haven trade, this is the second day n a row in which it has made new highs, just to give it all back, it's now trading close to flat on the day.

In addition, the 15 min negative divergence has added a huge leading negative component today.

This s strange action in GLD. I would expect an intraday bounce here close to the unchanged mark.

PNFP Trade management

PNFP triggered July 21 @ $16.01 


PNFP is approaching a 9% gain.

 Original Entry

I still expect a first target of $12 and additional losses after a bounce in the area, but I prefer keeping a trailing stop on the trade, right now I'd use a 50-bar avg. on a 60 min chart.

HBI Trade management

HBI was a short idea from July 22nd at $31.13 the trade is now over a 10% gain.

The entry...

Here's the updated stop.

SLV Hit as Well

 SLV 1 mn

 SLV 5 min

SLV 15 min

I would think SLV may be discounting another vicious round of margin hikes, but the drop n GLD, a safe haven trade may be indicating something else, perhaps a shift on capitulation?