Apologies in advance, I was really rushing to try to get this out before the close and I had an earlier chart request for FAZ and FAS and since FAZ is the inverse ETF of XLF (leveraged) and FAS is the leveraged long of XLF, well I like to compare and see if there are similarities. So you don't get burnt out looking at all the charts and lines, I'll put a summary below each.
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Don't miss the next 2 posts, they may make or save you a lot of money.
First FAS (Financials leveraged long):
Short term FAS did nothing today after the gap this a.m., it didn't add at all on the weakness in the dollar/strength in the Euro, so much like the market which had a double top pattern intraday, the fact 3C led lower suggests FAS was under distribution.
We have seen the same distribution over the last several days intraday and the 2 min chart hit a new low for the week while prices are near a new high. If that sounds counter-intuitive, it isn't. Pretend you are a fund manager with a 100,000 share position. You can't sell blocks of 10k without the HFTs sniffing you out, to them you are what's called an "Iceberg", meaning they see the tip of the iceberg on the 10k block, they know there's a lot more that is not seen and they will move prices against your position, so you have to sell in smaller blocks and despite what most traders think (they see big volume on a big drop and think its smart money selling) you want to sell in to higher prices so you never let out too much supply at any one transaction, you sell in to demand.
The longer view of the same chart shows an increase in the rate 3C has fallen, with no reason to support the market, retail trade isn't moving anything nor is short covering as we are at multi-year lows in short interest, so the only thing moving 3C is distribution.
The strong divergence in the 2 min chart has bled over to the 5 min. Right off the gap up this a.m. 3C was negative, it pinned FAS the rest of the day as there were no institutional buyers, only sellers.
The 15 min chart looks confusing, the only thing that really matters right now is 3C hasn't moved above November levels. There was enough accumulation to make the cycle worthwhile back in early November. You saw what confirmation looks like in URRE, not present here. Nice day in URRE too, nearly up 19%.
The 30 min chart is not as detailed, it's more of the general trend, but a divergence on this timeframe is serious. Again, 3C hasn't moved above the November levels, it is considered leading negative.
Very long term, the daily chart shows FAS rolling over, it shows accumulation and now a negative divergence. Daily chart divergences almost never fail.
XLF-Fnancials
The 5 min chart is showing the same thing as FAS, that's good. XLF also went nowhere today. I can almost guarantee what the dominant Price/Volume relationship will be today and it won't be good.
Anytime a 15 min chart shows a divergence in 1 day, it's pretty serious. It usually takes a lot of underlying action to move a 15 min chart that quickly.
Longer term, you can check on past divergences to verify that 3C is working, that's really the only reason I notate them. The trend in the 15 min chart over the last month ha not been good.
The 30 min hart alled the October highs as they were under distribution, the November bounce highs (this is a god example of distribution length being commensurate with the trend or amount of shares accumulated, October was a big rally, therefore it takes longer to distribute the shares, November was a bounce it took much less time). The leading negative divergence in the red box isn't the worst on this chart, the relative price levels between today and in late October and the 3C trend since is the biggest problem for XLF.
The daily chart shows some distribution at the 2011 top, then confirmation in green then accumulation for the October rally and now a strong negative divergence. My overall feeling is that we are not talking about a 10 or 15% move down, it seems like the market is being prepped for something much more serious.
FAZ-Financial Short or inverse ETF. This should look roughly the opposite of the signals in FAS and XLF.
Today FAZ was flat, but that's a function of the ETF's correlation. The 1 min chart was positive which is the opposite of FAS.
The 5 min chart is very positive, compare it to the 5 min FAS/XLF chart. What the 3 charts tell you is there's confirmation.
The 15 min. FAZ looks almost the mirror opposite of the 15 min XLF or FAS, again, more confirmation.
The FAZ 30 min chart is nearly the mirror opposite of both FAS and XLF.
Although these ETF's are meant to show the same price levels depending on their leverage and whether they are long or short, however, the underlying demand for each is very different, they'll never show a correlation in volume like they do in price and therefore, they are useful in confirming each other. When you consider how many timeframes are confirming each other and that they are in 3 different assets, the probabilities go way up.
Don't miss the next two posts, they may make or save you a lot of money.
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