ES

As you know, 3C and futures is a new feature just added so there's going to be a bit of a learning curve as you know 3C is complicated as it contradicts price and shows the underlying accumulation and distribution, but what better market then ES to see what the big guys are doing that is moving the market. So here's a look.

First off, US futures are more or less flat, between +.03% to +.16% , futures in Asia are higher and futures for Europe right now are flying for the most part (the range is .05%- +4.39 with an average around 1.5 to 2%),  the fact the US is lagging so bad is interesting.

different timeframes represent different trends, there can be an intraday downtrend within a stronger daily trend within a weekly and monthly trend, each can be different, I'm looking at the near term. Remember Black chart backgrounds are market hours, grey are non US market hours, traded 24 hours a day during the trading week.

This is a series of 1 min charts from Tuesday night, I can't fit the entire thing on 1 chart so there are 2 starting from the close on Tuesday of the regular market right up t the open of Wednesday a.m. I didn't include Wednesday regular trading hours because there was nothing to see, just in line trade.

 So here's the close of the market Tuesday to the lest and ES trading from 4 pm on. There are several accumulation zones in white.

 Here's the next chart, which would be a continuation and the black is Wednesday's open. More accumulation and as you an see, ES moved higher off those accumulation zones, lifting the regular hours trade today.

 This is tonight so far on a 1  min, first distribution into a rising ES market, remember very small moves here are worth a lot of money, there was some accumulation in to the lows and a brief pop in the green box, a new low and more distribution as prices rise off the low. I'm not staying awake all night to see how this plays out, but I'll show you tomorrow.

This 5 min chart shows ES pre-Tuesday regular hours, then Tuesday in black, then Tuesday night Wed. morning in grey and Wednesday regular hours in black and a bit of Wednesday night in grey at the far right. Tuesday we see ES distribution through the day, this was noted in 3C during market hours, ES prices fell at the close Tuesday and beyond at the 1st orange arrow. Then accumulation of the lows at the white arrow, the green arrow shows ES futures moving higher in price. Then Today/Wed. in black where ES is under distribution again and a significant fall at the orange arrow at the end of the trading day today-this is a huge move for an ES contract. Remember, they trade 50x the value of the S&P-500 and well over a billion contracts a day. So the distribution in ES during regular market hours was heavy. So far in the post market trade at the far right (grey) we have a pretty flat futures market, note 3C moving down and making new lows for this chart. Also remember what I said about US futures vs. European, a huge difference.

GOOG reports tomorrow a.m., that will drive initial morning trade I'm sure, after that, we'll have to see what happens, but you know my opinion, summed up as a "Head fake"-we saw two today, there's a bigger one just a few points below us. Should be interesting. The model portfolio is holding all inverse ETFs -positioned short.

Hang in there with me on this ES stuff, I'll try to make the harts easier to understand, you can always click on them for an expanded view.

Today's ES Action

This goes under the heading, "Furthermore".

3C 5 min on ES (Black is market hours) there was a clear 3C negative divergence in E-minis today as you can see in some detail.

The 15 min chart doesn't have as much detail, but also shows a negative divergence during market hours on ES. Wall Street knew where this market was going today long before any stories came out at 3 p.m.-that's distribution in to strength.

The NEED to Know, That Which is NOT Worth Knowing

One VERY popular financial news website, which I won't name, but will say, they are independent, anonymous and getting about as much traffic as the Street.com had this to say about "WHY" the market sold off today.

"It was about an hour before the market close, which means it was time for the latest FT rumor. Only this time, unlike the 3 or so times before, the bazooka was not only a dud, it caused the inverse reaction of that intended, and led to a broad market selloff. The reason: according to the FT (and certainly take this with a salt shaker if previous experience is any indication) is that European banks have balked at the prospect of recapitalizing at current levels ("Why should we raise capital at these [depressed share price] levels?” said one eurozone bank boss. "


People don't understand the market, they get worked up on small moves and generally can't see the bigger picture. Because they don't understand how the market works, they constantly are looking for the answer as to "Why the market did what it did today". Wall Street has spent decades brainwashing your parents and their parents and now with the 24 hour news cycle and websites everywhere, it's even easier for them to get their propaganda out.


For instance, take the quote from the un-named website above that states the market fell apart at 3 pm-ish due to a European banking story.

The market did fall apart, first around 2:30 when it couldn't hold the breakout (SPY $122) which as mentioned, creates the snowball effect that took prices down to intraday support, those broke and several tests of that support failed to gain any traction, we saw another head fake snowball sell-off at 3:45, one 30 minutes before the story, one 45 minutes after, but both have clear roots in price action.


Being this is a European story, lets look at the Euro.

At 3 p.m. marked in green, the Euro rallied a tiny bit, there was some selling in to 4 p.m. (marked in red), but not much. So the American markets sold off because of a European story, but the Euro rallied? None of it makes any sense and that's what media is counting on, that you'll take their "expert" opinion to be the gospel. 


The market did what it did for reasons we chronicled all day long, before and after this story. Granted the story probably won't help sentiment, but it wasn't the cause of a "Broad market sell-off". We talked about this possibility-even probability last night!


This was the same website that presented the FOMC minutes as being biased toward QE3, which when the minutes were read, showed a more balanced view, but they have been saying QE3 is imminent every time the "FAD" meets ever since QE2 ended.


Remember the Cramer video I showed you and remember, it's your money, it's your responsibility, don't assume these people know more about the market then you do or then you can with a little research and constant observations.


That being said, after the ERSTE announcement yesterday and now this, we may very well see some real weakness in the Euro. Remember my USO post from earlier today.  

Price Patterns Predict-continued

About 1 pm today I showed you this chart in the "Patterns Predict" post.

So what we have above is an ascending triangle, which if you study technical analysis, you'll know that it is a bullish continuation pattern. However, we are not the only ones who have studied technical analysis, Wall Street knows exactly what this pattern is, what it represents, what buyers think and do when they see it and Wall Street has the book on all orders placed, which is why all of my orders are mental until I execute them, meaning no limit order/stops of any kind. I'm not showing them what I intend to do, but a lot of people do exactly that. A breakout from the triangle is confirmation of the pattern and I'm sure limit orders were set for the breakout above resistance.


If I'm Wall Street, this is easier then taking candy from a baby.


Here's the breakout from a later post...

Note the strong candle on the breakout and volume increasing, this is either limit orders being triggered and/or the herd all buying what they see as a continuation of the uptrend after a brief consolidation. You know from past experience, we could find examples like this every day, Wall Street has adapted to T.A., but technicians have not adapted to Wall Street. The green arrow is the breakout and I mentioned some resistance formed at the red arrow on a candle with a long upper wick, which created resistance as higher prices were knocked down on some volume.


Fast Forward....

This is the SPY 1 min chart through the close. The white box is the breakout above, the yellow box is the $122 level I mentioned as a likely head fake breakout area and the orange box is stealing candy from the baby.  Remember I said that price usually lingers around a broken support level and that went on with several unsuccessful tests of resistance from 3 p.m. until the last test around 3:45. See the big red volume after that? That's the buyers of both breakouts selling at a loss, which of course creates a snowball effect and this is why we look for head fakes or false breakouts as one of the last events to occur before a downside reversal. 


As mentioned last night, even though last night the environment was VERY bearish, 


"No victory laps yet.
The final nail in the coffin would be an upside head fake, whether the market can muster it or not, ????
It's not needed, but it happens about 85% of the time just before a reversal."

So as of the close, we have a couple of head fakes that played out on an intraday basis-the ascending wedge and the SPY $122 breakout, both did what they were meant to do. The bigger head fake and the one that I said last night and will say again tonight, is at the trading range for the week.

We can look at that range two ways...

 Tuesday's range (between SPY $118.75 and $120) in which a break of $118.75 would be the catalyst.

Or, Monday/Tuesday's range (between $118.00-$120) with a break below $118 being the catalyst. Even though we saw a head fake or two today, and as you know from last night's final post, a head fake above that trading range is really ideal; there will still be a lot of longs in the mix still that won't start seeing the kind of losses that create that snowball momentum that kicks off any decent reversal until $118 is broken-then you'll likely see  bigger version of today's late day activity and volume.

 Right now in After Hours the SPY is down to $120.38 near the top of the range, once that starts cracking up, the snowball effect can come pretty quickly. So whether it's an Ascending Triangle, a Rectangle consolidation, which I would call Mon/Tues. range, or any number of other price patterns, be careful in what you chase. Things are rarely what they seem.

GOOG Earnings

They report tomorrow a.m.

Let's take a quick look as it has consequences...

 GOOG 1 min leading negative divergence

 GOOG 2 min leading negative divergence

 A bad 5 min leading negative divergence

 10 min relative negative divergence

 15 min leading negative

 30 min-long term negative divergence

60 min another long term relative negative/leading negative.

I'm not making an earnings call here because I have not had enough time to throughly look at these charts, but they are pretty close to AA's last night. I wouldn't be a buyer.

SPY Situation

From last night's post.....

 "No victory laps yet.
The final nail in the coffin would be an upside head fake, whether the market can muster it or not, ????
It's not needed, but it happens about 85% of the time just before a reversal."

So we have several potential head fake areas, 1 would certainly be the break of the trading range over from this week, another is the bottom trendline, which was an ascending triangle and I mentioned $122 as another level which is the top trend line. The yellow boxes are the breakout areas and where they failed, that's the point of a head fake. The orange box is from my last post, there's a test of resistance and price is lingering around that trendline which is pretty normal.

We are actually getting 1 more test right now, as far as the minutes go, remember anything FOMC produces an initial knee jerk reaction, it didn't hold because there really wasn't anything there that wasn't already obvious.

If we had enough time today, I suspect we'd see a solid break. We'll see about that.

I'm going to look and post some other charts.

Remember Patterns Predict

Lets see if this is the 85%'er

The red trend line is the top of the ascending triangle intraday which is a bullish continuation pattern, $122 was also a target mentioned, both were hit. Check the volume on the rallies and declines. Also for those using conventional indicators, RSI gave a signal at the 2 yellow arrows, no higher high in RSI.

That support/resistance zone will usually attract prices for awhile until it give way, keep an eye on volume, it's key here.

Pieces-AA

Just putting pieces together... After a 5+% drop in AA last night, it got a pass to board the bus with the rest of the market this a.m.

 Here's the 1 min, very negative yesterday and this morning's hall pass at the white arrow, since 2 p.m., not great.

 The 2 min, also shows the exact same as above.

And the 5 min doesn't show the hall pass on the open, but it does show some activity falling off since 2

QQQ an early tell?

You know the media gets these releases before 2 p.m. right? They are embargoed, but I have long suspected that they leak them so Wall Street will know what to do ahead of time. The 5 min QQQ started down an ugly path before 2 p.m.

Next we'll look at AA, which got a hall pass today and see what's up there.

SPY $122

Remember that from earlier?

Just Looking at Volume

Since the 2 p.m. release, remember, anything "FAD" related almost always has a knee jerk reaction.

Since the 2 p.m. release a move up on falling volume and a couple of declines on heavier volume. So we chop around for a bit until the verdict is settled, but always beware of that knee jerk reaction.

FED Minutes

I also should have put out my typical warning that there's always a knee jerk reaction to the FAD.

As far as the minutes, people see what they want. One site that has been predicting QE3 the entire year of course put out headlines about QE3 and put their spin to support what they have been saying is going to happen at every meeting so fr this year, but hasn't.

What the minutes said, read for yourself.

Here's what the QE3 crowd latched onto:

• SOME FED OFFICIALS SOUGHT TO RETAIN OPTION OF QE3, MINUTES SAY
• SOME FED OFFICIALS SAW QE3 AS 'MORE POTENT TOOL' TO SPUR GROWTH.
• TWO FOMC MEMBERS FAVORED `STRONGER POLICY ACTION' LAST MONTH

Here's some more balance (personally I don't find the minutes very enlightening at all):

“A number of participants saw large-scale asset purchases as potentially a more potent tool that should be retained as an option in the event that further policy action to support a stronger economic recovery was warranted,” 


Not a new revelation...


"Additional asset purchases would constitute a third round of so-called quantitative easing after the Fed bought $2.3 trillion in housing and government debt in two rounds from December 2008 to June 2011. Some officials said expanding the Fed’s balance sheet further “would be more likely to raise inflation and inflation expectations than to stimulate economic activity and argued that such tools should be reserved for circumstances in which the risk of deflation was elevated,” 


So like I said, people see what they want, but there's the balance that the site quoted above who obviously has a reputational dog in the fight, didn't provide.


All in all, nothing new. 

Killing Time

It seems like the market is just killing time until the 2 p.m. release of the FOMC minutes.

Since this pattern and this post "Patterns Predict" in which the ascending triangle was described as "way too obvious"

Here's what happened as you could have guessed, it's always what happens next with obvious patterns.

You can se volume picked up because this was being watched and became too predictable, at least make the volume rebate money while they have nothing better to do. There's another volume spike that has a long upper wick on the candle forming resistance, higher prices were rejected right there, that's why you see the little "mini-churning" episode.

 And now is the what comes next part of patterns predict...

That's the area to watch for a break and keep an eye on volume. We have about 5 mins until the minutes are released, we should see something a little more exiting then grass growing then.

Almost Forgot About This-Almost....

Price Patterns Predict

Just not how the books teach us.

This is becoming a clear theme and the NYSE TICK chart  looks like it could break this resistance level soon, it's now become way too obvious.

A Big Fat Duh?

That's what I deserve! I don't know why I didn't post the most obvious of all head fakes.

Right?

OK, I'm going to sit in the corner with my dunce cap for a bit.

Currency Anamoly

I pointed one of these out yesterday in the market, today there's one in USO.

 USO (green) vs FXE/Euro (red) 15 min chart

Here's the same on a 30 min chart.

USO is relatively flat and actually heading down a bit right now, The Euro went on to make a higher high, which means the dollar is lower. Being crude is priced in $USD, the price of crude should have adjusted upward for the decreased value of the dollar, but it didn't.

Really, keep an eye on USO, there may be an opportunity there.

Long USO? Be Careful

Be careful, at least until tomorrow before the Inventories report, another report we often find hidden signals in. This looks more to be FX related though, which has other market implications.

 USO 1 min taking a swan dive

 USO 2 min leading negative

 USO 5 min leading negative

 USO 10 min relative negative

 USO 30 min leading and relative negative

 USO 60 min leading negative

 SCO Ultra Short Crude-leading positive 1 min

 Leading positive 10 min

Starting to lead positive 15 min...

Act accordingly.

Early Market Update

 DIA 1 min no confirmation, relatively in line though.

 IWM 1 min-you already saw these charts, but the long view of the 1 min

 IWM closer view of the 1 min, looks like it wants to move lower soon, but wait for the end of the post.

 QQQ 1 min long view.

QQQ 1 min tighter view-similar to the IWM in leading negative. There is some decent red volume in the area as well.

 SPY 1 long view

 SPY 1 close up today, also leading lower.

 Above would be an ideal target for a head fake-a defined resistance level at SPY $122.

However even out of the range works, the red is the 1 day range, the yellow is the 2 day range, this is the idea of a head fake.

I'll keep you posted on whether $122 looks likely.