Daily Wrap

Today was an interesting day from a 3C perspective, usually we see markets moving together and 3C readings are similar, but from the sector rotation chart I put up, it was clear that Tech was dominating the day. Tech also as well as the QQQ's were showing the heaviest distribution since the cycle up started.

This was an interesting thing to watch in 3C, it shows what I often talk about, Wall Street using strength to distribute into. They need the demand to distribute positions as large as they are trading and today Tech gave it to them.

It was unique to see this, but it's also somewhat unique to have only 2 of 10 sectors dominate the market (Industrials and Tech), so I/we got to see something a bit new and it gives us some insight into the highest probabilities for tomorrow.

 The QQQ15 min chart in heavy distribution, most of it coming today.

 Looking at a sort of MACD for 3C, you can see this was some of the heaviest distribution in the Q's since this consolidation started.

 In Contrast, the financial heavy S&P-500/SPY isn't nearly as far along in to distribution as the QQQ.

 The SPY's 3C depth readings are still pretty much what I would expect.

 XLF-Financials showing they haven't seen serious distribution yet.

 And the 3C depth is still quite shallow.

 XLK-Technology shows heavy distribution of Wall Street's long position and again, most of it coming today.

The 3C depth for Tech is pretty much near new lows, so I'm very happy with the call today to let go of long positions in Tech.

I believe from what the charts show, financials will come in to rotation tomorrow and we'll see them distributed as Tech was today, that should just about wrap up this move up.

I'm still expecting one more move down, possibly breaking the August low, so we should have a good chance to get short for this move. My model portfolio's return for September is 60.96%, in a choppy market, so this strategy is clearly working well, using leveraged ETFs as 3C times the reversals.

It appears the SPY will be pinned around $120 Friday, so we may have some opportunities to go short as early as tomorrow in certain sectors. Now that the Q's 15 min chart has turned, we are nearing the end of this cycle, which I said before it started on Friday and at the lows of Monday, would be a short cycle of several days, then a day or two for the reversal, so the amount of accumulation we saw was predictive in the length of the cycle rally.

At this point, I still think we will get a longer lasting and more severe short squeeze rally, but I do think the market will put n new lows before that happens.

I was reading a website tonight that was upset that credit was showing a deteriorating economic situation, but the markets weren't reflecting credit. This is where I think to myself, "It's because you don't understand that Wall Street sets up and Controls the game" 3C shows us this and doing 60% in 2 weeks in a portfolio with no options that I scarcely have time to trade, is a pretty good testament to that fact.

Those who don't understand the markets are always looking for a reason it did or didn't do something, not understanding that this was all mapped out way in advance and those that do know, make sure they tell you something as to why the markets did what they did, they sure aren't going to come out and tell you how the markets really work.

The fact is, the markets are rigged, they are crooked, they are full of leaked information and insider trading as well as front running. Nearly everything you see is a deception of some kind. If we get that big upside rally I think we will get, the daily bear flag on the charts that has sent short interest to nearly 3 year highs, will burn heaps of short sellers. And that's what the market is, no different then a slaughter house production line.

In short, look for Financials to step up tomorrow. BAC may be one trade worth considering for those of you who can day trade.

RIMM - An Earnings Play?

Tomorrow after the close, RIMM reports. As you know, sometimes we catch leaks with 3C, not how their earnings will be, but what the reaction in price will be as they can often be two different things entirely.

A member and I have been watching RIMM and we will watch tomorrow for a possible earnings play (long). So far here are some of the charts that seem like RIMM s being accumulated for an event while TECH was largely distributed today.

RIMM 5 min under accumulation in a flat range.

A big triangle under accumulation on a 15 min chart.

If this keeps up tomorrow, then RIMM may very well be an earnings trade.

Financials Turn Tomorrow?

I'm happy with the Call to take profits/partial profits in tech today, I think maybe we see financials tomorrow as the last post with the Q's vs the SPY seems to show (the Q's being Tech heavy and the SPY being financial heavy).

 The Euro lost momentum which means the dollar strengthened and that is taking some wind out of the sails of the market, so our exit in Tech was pretty well timed.

The SPY losing ground to a stronger dollar.

 The 15 min FXE hart looks strong enough to go another day and let financials rotate in.

As you can see, Tech is already rotating out and Financials are starting to rotate in.

Tomorrow we will likely end up taking profits in the SPY based ETFs as well as financials and get ready to position ourselves for the next leg.

The Reason I'm Locking in TECH profits

 QQQ 1 min -negatively divergent

 QQQ 10 min peeling away from price

QQQ 15 min negatively divergent

 SPY 1 min in line

 SPY 10 min in line

SPY 15 mn just starting to go negative.

We know TECH was the sector in rotation, we know Wall Street accumulated and the Q's are showing us where they are taking the bulk of their profits today, remember, they distribute in to strength. I'm guessing tomorrow it will be the SPY's turn and financials.

Position Management

I'm taking another 25% off the table in TECG and TECH related positions, such as the QQQ. Tech has been hot today and 3C is showing distribution in to higher prices. Maybe Financials will rotate tomorrow, but for today, it's tech, so I'm going to take another 25% in TECH ETFS leaving me with 25% of my original position in TECH.

We are already past the pin point in the QQQ.

Options Expiration

Here's part of the chain...

$120 seems to be the pin, this makes sense with the amount of accumulation we saw on this move, so we are probably going to be wrapping up positions tomorrow and getting ready to reposition.

Market Update...

Unless Op-ex is in play, I'm starting to wonder why at this point, a dip to trap short would be needed. It's been a tricky market today with the Euro getting support from the Merkel, Sarkozy, G-Pap joint statement refuting claims of Greece's imminent departure from the EU, not to mention the Chinese saying they are going to be investing in Europe today.

 Here's the FXE which wasn't looking very good earlier, then the joint statement lent support, but it's still looking like it wants to slip.

 The DIA went from negative to crawling back to in line with a slight negative recently.

 The IWM 1 min has been in a running negative with the Q's

 Here are the Q's in a running negative, meaning this is distribution, remember the long position Wall Street acquired has to be sold into demand to keep prices up, look at tech today.

 This is semi conductors, up 2.55%-distribution in to demand.

 And the SOX up 2.59%-Wall Street was in the Green yesterday by a wide margin, this is the cherry on the top.

And some slight negative action in the SPY which also clawed back o in line status. I suspect we'll see some running negatives divergence on the 1 min hart here as soon as financials rotate.

All in all, it's still good for the long we accumulated on 9/12. The picture of sector rotation I showed earlier is why I use broad coverage rather then specific sectors when we have these types of bounces and the leveraged ETFs are a good choice in this situation.

Going to take another 25% off the table

I'm going to take another 25% off the table here. I may add the shares back on weakness with underlying 3C strength.

Sector Performance

Here's today's Sector performance, Tech has been strong all day, Industrials have picked up, just about everything else looks pretty weak, especially financials.

 Industrials are still holding up pretty well intraday.

Tech is starting to show underlying weakness.

TLT-Treasuries

TLT is the safe haven trade when the market is in trouble, interestingly, they just saw some heavy buying on volume.

The Wall Street Playbook

Members who have been here awhile have seen this happen time after time...

We see a bearish ascending wedge, technical traders are taught to go short the wedge near the apex, if it fails before the apex, then it is considered even stronger as we saw briefly at the red arrow. A wedge that breaks out above the apex is considered a failed pattern, so not only are the early shorts knocked out, but they tend to switch their position to long on a failed price pattern, then the market heads lower and takes them out again. It's one of many variations of the head fake and Wall Street makes all kinds of money on it, from the bid/ask spread to volume rebates, to the fact that each stopped out side of the trade, propels the next part of the trade. For example, the early shorts covering helps the Apex breakout, the failure of the apex breakout which has the longs selling at a loss, gives more momentum to the move down. It's win-win for Wall Street.

A positive indication

One thing that is happening today which tends to suggest we will get more upside out of this current leg up (I sold 25% of my longs yesterday and continue to hold the rest) is the improvement on the 5 min charts, this effectively lengthens the duration of the bounce.

 The DIA is now in line with the price trend.

 The Q's have gained ground today on the 5 min charts.

So has the SPY.

This is good for our long positions, despite whatever may happen intraday.

My Current Thinking

Actually not much has changed since yesterday in my thinking, but here it is.

With the massive short interest already known to be n the market at 2+ year record levels, there's plenty of opportunity for a short squeeze, I don't think we'll see the real short squeeze that will drive out most shorts until we finish this up cycle (maybe a day or two) and then have 1 more down cycle, probably breaking below the daily flag pattern, maybe even setting a new low. As far as right now, as I said yesterday, the shorts need confidence to jump in, although they are already n at record numbers. A move below the flag from Monday would do it, then shoot the market up in a short squeeze. I think that would be the end of this current leg up.

Market Update...

 As I said, I didn't see this move up as bullish, DIA 1 min s now negative and should reverse down soon. If you are a nimble day trader, an inverse market ETF (leveraged) could be used to make a quick buck .

 QQQ 1 min is negative

And the SPY with the ascending wedge is negative also. I would think we'll at least retrace the base of the wedge and maybe a bit lower as the base is about the same level as the bull flag from yesterday.

Current intraday bounce.

I do not view this as bullish behavior. It looks like a small bear flag or ascending wedge. I believe it will break lower.

Indications...

 As far as yesterday's line of thought at 3 p.m. went, I was considering a move down today below the bull flag to entice shorts to enter and be trapped in a squeeze, is this morning's dip enough on big volume? I tend to think not. The market is about emotion and that's why we see such extreme swings in the market.

 This is the FXE (Euro ETF) and this is a leading positive divergence with a negative relative divergence inside it, this is what gave rise to my theory of weakness today to set a bear trap.

 The FXE 10 mn chart is also leading positive

So is the 15 min chart. This would be considered an equity positive environment  should the Euro rally as some indications are showing us, which is part of yesterday's short squeeze set up thesis.

Market Update...

 DIA 1 min with a positive divergence, but now it can't stay in line, suggesting a consolidation or further downside, maybe to our bull flag of yesterday for the reasons I described in the last post.

 Same thing with the QQQ

 And the SPY 1 min

Here's the SPY 5 min showing distribution as I would expect, I don't think it's heavy enough yet to think they are done, this is one reason I anticipate at least one more short squeeze in this move and to set up the shorts, they'll need confidence to re-enter the market.

As a side note:

NYSE Short Interest Increases to the highest since July 2009

Post From Yesterday

Thus far this morning, I keep thinking about yesterday's 3 p.m. post especially these charts (which appear as posted yesterday with yesterday's comments):

  The 5 min chart is leading, also positive for equities, but notice a slight negative divergence inside the box.

  There's a 5 min positive divergence in TLT, suggesting there may be a long head fake tomorrow.

UUP/$USD has a 1 min positive divergence, suggesting we may see a bull head fake tomorrow.


Later I thought, "maybe it will happen by the close?, but we shot higher. So perhaps this is a head fake, the one I had expected for today.


As for the reason, I wrote this in a post yesterday at 3:48


"The longs are NOT important to Wall Street, it's not like, "we're all long, lets get those shorts!", it's more like "YOU ARE ALL SHEEP TO BE SENT TO THE SLAUGHTER".

So right now, what longs think about the markets has ZERO importance to Wall Street, to sell their accumulated position, they need to dazzle the shorts, get the shorts confidence in the market falling back up, draw them in and then trp them with a gap up or a big move up. Then and only then, do they have the supply of buy side they need to distribute their long holdings from yesterday/Friday."

I'll be updating the market shortly.