Dow

There's a lot of volume, much of it green and not much downside movement in to the close...

Trade Idea-CDTI (long)

 Decline on low volume

 Good timeframe alignement- 60 min

 15 min

 10 min

5 min

Add VXX to that list

VXX is an instrument used to trade volatility, it has an inverse correlation with the market.

This is the first leading negative divergence in VXX since this downside rout began, and it formed in a single day.

Safe Haven Unwind?

 Swiss Franc

TLT-20+ year Treasury

Perhaps add GLD to the list?

SPY Update

And now the SPY looks to want to resolve its wedge to the upside, some members made some short term leveraged trades on intraday capitulation in the SPY off the wedge pattern.

There's the false break we have come to expect, with intraday capitulation, a break of $115 SPY will be a break out of the descending wedge, and as with GLD and as usual, the implied directionality of the pattern is once again manipulated by Wall Street HFTs. Technician's just don't adjust.

Let me quickly address a question a member sent me. The member asked why I've been so bearish on the market for so long, but now it seems I'm bullish. As I've mentioned before, there's tactical outlooks (short term) and strategic (long term). I don't think you'll find a bigger bear then me on the market, how could I be bullish with a daily 3C chart that looks like this...

This daily chart showed QE2 for exactly what it was (A house of cards) and looks worse then 2008.

However, the short term charts, suggest a tactical move up. Ultimately t just sets up a bigger house of cards. So as for the market, I've called this rally since 2009 a bear market rally, but unlike past bear market rallies, it has been bought and paid for by the Federal Reserve, rather then being an organic rally, which makes the house of cards that much worse.

However, even our worst bear market from the 1929 crash had at least 5 major bear market rallies, some that lasted the better part of a year. So it's just a matter of tactical vs. strategic.

Tomorrow has a good chance of being a short term game changer with the Fed policy announcement.

GLD Update

 GLD wedge w/ an RSI negative divergence

A well as a 3C negative divergence.

Be Careful With GLD

I just talked to a member about GLD and problems that margin calls could create for GLD, the real ticking time bomb for GLD potentially is John Paulson's fund, his top 5 holdings include/included: BAC, C, AU, APC and GLD! It seems as if he has taken huge losses and likely closed the entire BAC position, the C position I believe is still very much alive. Here's C today.

C is another short we have looked at and is down over 45% from the Jan/2011 highs. BAC he took a bigger bath on which is down about 56% from the January highs, even if he managed to offload most of the position or all of it, he still took a 40+% loss on it. Cramer Called BAC a "Screaming Buy" in early January, almost as bad as his buy Lehman call. THIS IS WHY I DON'T TRUST CNBC. Cramer's allegiance is to his Wall Street buddies and his call created the last rally in BAC before it topped and sold off, giving some Wall Street firms a chance to sell into the rally. Paulson's AU position is down 14% for the year and APC is about break-even. Should Paulson's fund need to raise cash/liquidity, which it likely will with redemptions, his only way of doing so in his profitable GLD position.

I've been warning about GLD for several months, here's why..

 The GLD daly chart, which has been spot on, even calling the recent rally, is in bad position.

As is the hourly chart. These are warnings over the underlying action in GLD, it doesn't mean you can't trade them long, but you should be aware, have good risk management, a trailing stop and understand that there appears to be something under the surface brewing.

If Paulson liquidates his GLD holding's, GLD could be in for a nasty fall.

GLD/SPY

Keep an eye on GLD, it's pretty much doing what I'd expect out of the wedge, which is bearish.

Interestingly, the SPY and others have formed the inverse with a bullish descending wedge, my expectation there would be the opposite of GLD with a break to the downside, which has occurred.

BAC-Warning from October

We get signals of all kinds of duration, but the arguement made here at WOWS on October 20, 2010 said the following about BAC,

"Just last week I told you that the Fed seems to be intent on buying MBS, Pimco went on margin, buying MBS. Today the headline came out that the New York Federal Reserve, Blackrock and Pimco (among others) are all said to be looking to force BOFA to repurchase bad loans packaged into MBS. This would explain quite a bit, including Pimco's margin buying of MBS. This could be anywhere from $45 billion dollars to hundreds of billions of dollars, this could take BOFA down. The argument is Countrywide Financial didn't live up to their obligation as the servicer of the loans. In the end, it'll come down to repurchase demands and/or lawsuits.

The gist is there's a consortium of interests on the verge of suing BAC to buy back Billions of dollars in mortgages. The interesting thing is that BAC owns 34% of BlackRock and ironically BlackRock owns the biggest chunk of BAC, 5.35%-what a conundrum! Also an apparent conflict of interest, but Wall Street will eat their own young so that will be interesting to watch as it unfolds. The Proverbial Second Shoe? And it's second verse same as the first-MBS (MortgageBacked Securities)- back to where it all started."

AIG just files suit against BAC, the options for BAC, spin off the Countrywide devision and let it become a ward of the Fed or BANKRUPTCY-AND APPROPRIATE NAME IN THIS CASE.

BAC credit default swaps just hit 260 basis points on a share price of $6.89 (-15.67% today alone).

And thus one of my favorite shorts may end up in bankruptcy court.

GLD Update

I'm expecting a possible spke move up, followed by somme intraday downside in GLD, whether it exhibits the same behaviour as late last week in which it gave up gains, I don't know.

 A bearish ascending wedge, I'd expect a head fake move up before a move lower intraday.

 3C 1 min

3C 5 min-both showing negative divergences.

SLV looks like an intraday sell-off is coming, but mid term, beyond intraday, it looks transitional.

Market Update

As per the last update, what I expected to see happened exactly.

 DIA 1 min

 IWM 1 min

 IWM 2 min

 IWM 5 min

 QQQ 1 min

 QQQ 5 min

 SPY 1 min

SPY 5 min

I expected a test of the lows and a stronger 1 min divergence to build, this has transferred to the 5 min charts, we'll see what the market can do from here.

European Hedge Funds Buyers?

Last night I read that most of the European selling was retail and there was a rumor that institutions were buying up shares, perhaps in anticipation of the Fed announcement tomorrow as I speculated Friday.

Now two members have emailed me the same, one has a friend in Europe working at a hedge fund and he confirmed they are buying and will continue to buy any more weakness. The other member didn't post his source.

What is still most intriguing to me is the Friday 7/29 meeting between the Fed and the Primary Dealers (Major Investment Banks).

Here's the date of the meeting... Still no one knows exactly what was said there.

DM FOLLOW UP

DM was a long idea from 8/4 , it looks very interesting at these levels as it hold up well.

 DM daily chart

 DM Daily 3C chart

DM 5 mn chart. At these levels, the risk on the position is less.

Obama to speak in 2 hours

I should have added this to the last post.

From a 3C view, it would be better for the averages to retest either the intraday low or the recent low at the divergence and post a bigger divergence, indicating some sort of bottoming action.

Something going on

First there are the recent positive divergences.

 DIA

 IWM

 QQQ

SPY

Secondly, compared to recent down days, and the % loss, the TICK chart looks much better then I would expect, almost as if the PPT is working in the market.

Greece Bans All short Selling for 2 Months

Swiss Franc/FXF

The safe haven trade in the FXF is showing some early signs of weakness.

NYSE Rule 48 Invoked

Here's a link about Rule 48  Rule 48 is usually used to smooth out the open. Thus far the market is showing some early resilience despite a spate of continuing S&P downgrades this a.m.

This sums it up

When looking at the long term daily 3C chart, it looks unexplainably horrible as you have seen.

This story sums up exactly the reasons why and why I'm a believer in a true secular bear market.