TLT-The Winner of Op. TWIST Ends with a little suprise

If you read the Operation Twist post, 3C correctly identified what no one really expected, that the short end would be sold-that was a given, but that the very long end would be bought, that was a surprise. Most consensus views had been that Bernanke would engage in Op. Twist, but he'd focus on the 10 year, which is the basis underpinning most consumer loans including mortgages, I'm sure somebody said it, but I don't recall hearing it, he instead chose to focus most firepower on the very long end -20-30 years T's. 3C didn't predict this, it picked it up from what smart money already had done in buying and accumulating the 20+ T's. Being expectations which are managed by Wall Street and spewed out by the media were focussed on the 10 year, this is pretty much one of those events that we see every so often that shows how corrupt our financial institutions are. Most people would rather think it was a lucky signal then to face the facts about Wall Street, including the Fed. However those of you who have been here the longest have seen stuff like this more then once.

So we have those positive market divergences to deal with and see how they play out. We also saw a little profit taking in TLT today...

 TLT 20+ year T-Bond rally on the FOMC statement

Check out the quick accumulation right before, I'm guessing those who weren't in on the bigger play got a heads up from someone at a network with the embargoed statement. And here we have some late day distribution, interesting considering TLT trades inversely to the market and the market saw some nice late day accumulation.

Correlations

I've been talking a lot recently about correlations coming unhinged, I meant to point this out earlier, but was too busy.

The EUR/$USD

 The market has been tracking the EUR pretty well as there's an inverse correlation between the $USD and stocks. Look at this huge move in the EUR earlier.

Here's the SPY in Green and FXE-Euro ETF in red, no correlation whatsoever. This also happened to be the time we had a flat trading range and a positive short term divergence on the SPY and other market ETFs. If I had to guess, today was an accumulation day, clearly the market knew what to expect out of the Fed when you look back at my 12:45 Treasury post. So I'm guessing we may see a gap up in the a.m or some strength build in the market at some point tomorrow, this may be our re-entry on the short side, at least for a new low.

Both the DIA and SPY held a positive 1 min divergence into the close.

 DIA 1 min

SPY 1 min.

My guess is Wall Street is planning a little surprise for shorts tomorrow, however, that doesn't mean go long, we are just looking for a high probability, low risk entry.

I've heard from a lot of you and you stuck with some very hard trades this week so far and made some good $$$, I'm glad to hear you didn't give in to emotion.

Another Example-SDOW

SDOW was another of our longs, here the 15 min hart suggests new lows...

 This is a very strong 15 min chart with good accumulation suggesting we'll see those new lows.

 However, once again the 1 min chart is not confirming the uptrend.

When looking at the DIA 1 min chart, we see further positive divergences as it moves lower, so I don't want to be caught in a fast reversal trap here. We'll see if we get a bounce with the right negative divergences in the DIA, SPY, etc and re-establish there.

Our Positions

Or former positions... I'm looking at some of the inverse ETFs we used and seeing some interesting things-I have a lot more to look at. You know my feeling going into this was that we'd be making a new low before we head higher-I mean much higher, and that is still likely the case, but now it's a matter of getting in at the right spot for a high probability/low risk trade.

Here's the SPXU -ProShares UltraPro Short S&P-500

 1 min 3C is not keeping up with price, it should be able to easily confirm the trend at 1 min.

 We also have non-confirmation at 5 min.

 a slight negative divergence at 10 min

However, the 15 min is still very strong and this is why I think we will likely see a new low.

However, given some of the strength seen in 3C in the market averages, I'm looking for a pullback hopefully that we can enter like we did on Monday from Friday's postion-remember we sold at the market lows and re-established our longs in the inverse ETFs like SPXU.

I'll update you on any good looking opportunities as they arise.

Market Update

I wanted to get the word out on portfolio action quickly, now I'll show you why.

First of all, if you traded with us, you should have done very well on this short position, I'd rather lock in that profit on the bit of market weakness until the divergences get resolved, even if that means leaving some on the table-Bulls make money, bears make money, PIGS GET SLAUGHTERED. So I hope that was a profitable trade for you as well.

Here are a few charts of the SPY and DIA, I'm not doing a full update because I want to get back to looking at the market and seeing which way this is going, it just takes too long to capture and upload all the charts.

 The DIA 1 min which has been positive most of the day, it was even more positive at the dip after the FOMC.

 The 5 min shows some brief weakness, but all in all, still positive.

 The 10 min is even more positive at the market weakness.

 And while the 15 is still leading negative, it is showing signs of going positive -very early signs that may or may not hold. Clearly we are in some transitional area, of what length and direction, that's what I'm working on.

 SPY 1 min was leading positive, even more so at the market dip.

 The 5 min is like the DIA 5 min.

 10 min is positive at the dip in prices.

And the 15 min has gone from confirmation to a relative positive divergence, even though it is still leading negative.

I'm looking right now for the next trade and will let you know as soon as we have a high probability trade. For now, I'm VERY HAPPY with 3C's performance and the lat short trade profits.

ACTON on Portfolio

I'm selling the rest of the short position for now, until these divergences settle. Some are getting stronger.

My Head is Still Spinning!

If you went with market consensus, the focus was going to be the 10 year, barely anyone thought 20-30 year and that's what 3C called, that's no accident.

As for the market, I'm not making any moves yet until these divergences stabilize, it's too early to tell.

UNREAL!!!!

Tell me that the FOMC wasn't leaked!

Remember my treasury post at 12:45?

Even though most people thought Operation Twist would focus on the 10 year, 29%, the biggest slice, will focus on 20+ year treasuries and they are selling the 1-3 year.

Look at the charts from a couple of hours ago...

 SHY 1-3 year 15 min chart under long term distribution.

TLT 15 min 20 year and longer, showing long term confirmation of the uptrend.

Here's what I said, "If Twist happens, my guess would be it targets longer duration treasuries." that was posted right below the TLT chart above.


3C called Operation Twist Perfectly!!! Why, Because there are LEAKS AND INSIDE INFORMATION COMING OUT OF THE FED!!!! 


Did anyone else catch this?

$USD

This is the $USD via UUP

 UUP 1 min positive

 UUP 5 min very positive

 UUP 10 min positive

UUP 15 min positive.

A stronger dollar means a weaker market. This seems to fit with an initial knee jerk higher, then if the dollar moves up as implied here, the market will move down and that will be it for any possible knee jerk move up.

I'm signing off now until the Fed announcement.

Operation Knee Jerk

Here re the SPY charts

 1 min positive leading in a flat trading range-typical accumulation spot

 5 min leading negative, but shown some improvement.

 10 min leading negative but shown some improvement.

15 min negative leading-no improvement.

It seems the market is set up to move higher, I'm guessing, as usual it is a knee jerk reaction and we are probably in for new lows looking at the 15 min chart, it could have gone positive today if the accumulation was strong enough but it didn't.

I'll be looking for any weakness "if" we do get a knee jerk initial reaction higher, if that goes negative, I will add my shorts that I closed.

Portfolio Action

Just so my thinking is clear to you, most of entered short at much better levels, taking 1/2 off the table now locks in those profits. If the worst happened and the market just rallied from here, I can close my other half at cost and still have a profitable trade. If on the other hand we just get a knee jerk reaction higher, I can re-short upon the first negative divergences in the knee jerk rally. If we move straight down, I still have short positions to profit from. It's almost a no lose scenario.

That all being said, it looks to me the most likely path is a knee jerk move up followed by new lows that are accumulated, followed by a decent upside rally that may be trending. That has been my take and remains my take.

Now, in 30 minutes I have to do something I hate, turn on CNBC.

Market Update and ACTION

 DIA 1

 IWM 1

 QQQ 1

SPY 1

With the flat trading range and the 1 min and 5 min accumulation, I think we are at least going to see some knee jerk upside, I don't think we have time left to rally on these divergences to fulfill them. So I'm going to take 1/2 off the table and close half the shorts, even if they reach my entry point, I can close the other half and still be profitable.

This is a safe then sorry move. I still think the 15 min charts which have not gone positive, tell us we will see further downside, but I can always reposition if we do get a move up upon any negative divergences. Otherwise if we head straight down, I still have half my position.

That will be the action I will take.

Market Update

The 1-5 min charts for all the averages are still positive, this has me thinking there will possibly be a knee jerk response that is positive. The 15 min harts have gained no ground, remember what I said about knee jerk FOMC reactions, they are rarely correct. Unless we see a rally before 2:15, this is my thinking as of now.

Operation Twist

Now that you know most people are not expecting QE3, but Operation Twist (can't you just hear Chubby Checker?) , lets take a look at some treasuries, this is more for a learning experiment then anything after we see what the Fed does as far as I'm concerned.

 IEF 1 min 7-10 year where some buying is expected, a negative divergence

 IEF 5 min, slight 2 day accumulation and a negative divergence in to a parabolic rise.

 IEF 10 min, positive divergence and in line, as if the selling started today, or distribution rather.

 IEF 15 min

 IEF zoomed out 15 min seems to have a negative divergence

 IEI 3-7 year 15 min, was in line, now negative in to the rise.

 SHY 15 min 1-3 year where Fed selling is expected, negative divergence

 TLH 10-20 year 15 min with a negative divergence.

TLT 20+ year 15 min chart-in line. If Twist happens, my guess would be it targets longer duration treasuries.

I said I would not get in to it

There are plenty of opinions as to what the Fed does today, here's a summary.

Market Update

 DIA 1 min positive and leading positive divergence

 DIA 5 min leading negative

 DIA 10 min leading negative

 DIA 15 min leading negative

  IWM 1 min positive and leading positive divergence

 IWM 5 min positive divergence

 IWM 10 min leading negative

 IWM 15 min leading negative

  QQQ 1 min positive and leading positive divergence

 QQQ 5 min positive divergence

 QQQ 10 min, slightly positive, but within a more powerful leading negative divergence

 QQQ 15 min leading negative

  SPY 1 min positive and leading positive divergence

 SPY 5 min is in line

 SPY 10 min leading negative

SPY 15 min leading negative

Since the longer term timeframes are still negative, what I would like to see happen is for the market to move up soon on this short term positive divergence, I would prefer that the market not stay in a range and continue accumulating, although I can't say that it would be to the detriment of the longer term outlook, I don't see anything helpful about it.