EOD Risk Asset Update

I was hoping to see one thing happen today in the Risk Asset Layout and it wasn't huge, but it happened.

CONTEXT for ES has started to deteriorate in to the close.

 Commodities have come unglued from the SPX, I still think this may be based on fears of weak Chinese data, we'll find out overnight. The closing candle for DJP is a bearish engulfing candle, a typical reversal candle.

 High Yield Credit has stayed negative through the day.

 Yields have stayed negative through the day.

As you might recall, High Yield Corporate Credit had made a move to a new high, I was hoping this would not hold in to the close, it did not.

What is happening here is we are seeing the risk layout indicators start to diverge negatively, actually they have been, but we are seeing more consistiency in that negative divergence.

Pulled the Trigger on FB

I went with 25% of normal position size, August $21 Calls

Thinking of adding 25% position in FB calls

This is most likely for a very short term trade, around 1 p.m. today the FB charts started looking better, they looks almost as if they want to pop quickly. I'll be looking to add 1/2 of a spec position or 25% of normal in FB calls

 1 min after 1 pm started holding its own

 2 min making new highs as the day goes by

 3 min is seeing the migration, it looks like something is going on here.

And 5 min is moving to new highs on the day as well.

Went with BIDU Aug $120 Puts

I'm opening this position cautiously because of the overall market conditions and event risk with two Central banks this week, however I'm also opening it because of the disposition of the longer term charts.

 1 min

 2 min

 3 min

 5 min

Overall-60 min

Went with BIDU Aug $120 Puts

Opening Small BIDU Aug Put

This position will be about 25% of a normal position which is about half of a speculative position, I'm leaving room in case we get some higher prices and I want to add, in which case I'd probably add another 25% to bring the PUT position to a speculative position size.

I'm looking at August $125 or so, I'll confirm and post charts momentarily.

Full SPY Update

 SPY 1 min from earlier this afternoon-positive divergence.

 The 2 min chart is still un-affected for the most part.

 The 3 min chart still has that positive trend that started yesterday, it's unclear whether this will be knocked out by shorter term negative divergence migration.

 The 5 min chart remains in a very negative position

 Today, like yesterday, the 15 min chart has seen some strong negative damage

The 60 min overall is also not in a good place.

I still think the SPX HAS to make a strong head fake move of some sort above this range.

AAPL Update

AAPL technically hasn't done anything today, despite the move up, it's still inside the bull flag.

 AAPL 1 min

 AAPL 2 min leading negative divergence.

 AAPL 3 min

 AAPL 5 min

AAPL 15 min.

There is pretty good confirmation among the different timeframes, the 15 min chart is now just starting to see the effects of migration of the negative divergences of the lower timeframes.

All the short term chart are now going negtive

GLD Interesting Volume

 Here's some unusual volume in GLD, I would guess there may be some Central Bank news that may have come out.

It may be a technical move as well as you can see..

GLD

In this update I'll show you the longer term view of GLD that I have mentioned many times, but haven't featured as I have not felt it was a trade that was upon us yet.

 The 1 min chart seems to show a minor leading positive divergence today, it seems very minor, in fact, taking a closer look at intraday trade only for the 1 min GLD chart below...

 This looks like one of those charts that I warned about in the last post, "Don't try to torture a signal out of the indicator". there clearly isn't a strong signal here so I'm not too interested in the first chart right now.

 The 2 min chart's trend shows a clear signal, a leading negative position in GLD, it's not a long timeframe or exceptionally important, but fits with the price trend we are looking at.

 The 3 min chart is in a larger relative negative divergence from the 19th and a leading negative divergence, I have felt GLD would most likely pullback toward the range it has been in the last couple of months, I DO NOT think GLD is a great short here on a pullback move, although if you are very nimble and use some leverage, it could work, it's just not with the probabilities.

 The 5 min chart also is in a leading negative position, now we have several charts telling us the same thing, this is what builds probabilities.

 Lately we have had very fast and very strong 1-day signals in the GLD 30 and 60 min charts, this is VERY rare, but since they have been there and have been successful, it's worth a look. The 30 min above shows a positive divergence sending GLD higher and a negative and leading negative divergence currently.

 The 60 min chart shows the 1 day leading positive divergence to the far left that sent GLD up for it's biggest 1 day upside gain since 2009, that move was sold in to and we had traded GLD 4 or 5 times from the short side as the 60 min remained negative, then GLD started showing more positive character and we got off at least 1 long trade that went well, the 60 min right now looks to have a leading negative divergence as well as an overall leading negative position.

This is why I feel GLD will likely pullback, that also should tell s something about near term sentiment with regard to immediate QE3 this week.

However, looking at the daily chart, it does appear that the market feels QE3 will come at some point as it appears GLD is building a larger base for a bull move in the future.

 Notice this chart covers years and went negative right where we called for an intermediate downtrend and got one, now action has a much more positive tone to it.

As for a near term pullback-FIRST EXPECT A LOT OF VOLATILITY WITH ANY F_O_M_C ANNOUNCEMENT, as I always warn, the initial knee jerk reaction is almost always reversed. I'm thinking GLD would need to pullback below the apex of the diamond, perhaps even a head fake move below the horizontal support. One day at a time though and we'll see what develops.

ES Update-GLD Coming

Here's a quick look at ES intraday, I'll be updating GLD next as it is a sentiment indicator for QE from the F_E_D.

The earlier ES positive divergence; you see? This is the kind of clear signal that we often can only get when we have some movement in the market. For those using 3C, don't try to torture a signal out of the indicator, it should standout like this does without looking at it closely. Institutional money isn't ALWAYS active in every stock you look at when you look at it, these kinds of clear divergences are where you find high probability signals and trades.

Volume is surprisingly small thus far.

Average trade size was small in ES yesterday also, that kind of fits my feelings that institutional money is acting cautiously in front of two Central Bank meetings.

Member Question

I thought I'd share this with you, the question was "Is FAZ (3x short financials) also a quick sell?"

When I opened the FAZ position it was in equities, not options. I have a very low tolerance for pullbacks and counter-trend moves in options, I'd rather take the profit and re-enter on a better looking signal.

Equity positions for me are different, even though FAZ is leveraged, I am more willing to ride out the bumps.

I intend to hold FAZ for now in the equities model portfolio, here's what I see that I like.

 After the negative divergence around the 24th, FAZ remained in a leading positive position as you can see above. (2 min chart trend)

 That also migrated to the 5 min chart, this isn't a "usual" divergence, but a less often seen type and the fact it is on at least two charts tends to give it more validity.

 The 10 min chart which is shorter in bars because I have to grab this timeframe from Telechart instead of SF, has a leading positive divergence that is ABOVE the recent highs or where 3C was at the recent highs, it built in very quickly.

And finally remember yesterday the talk about large, sudden moves on the 15 min charts? Here's a large, sudden leading positive divergence on FAZ's 15 min chart. Overall I like the position, I am pretty happy with the entry, I don't have significant proof that goes against the trend expectations so I'm sticking with the position.

This is meant for a shorter term trade, maybe a week or so.

Market Update

I'm actually glad to see some movement in the market, when there's movement it is easier to see who is doing what, when it's just flat chop signals are more difficult. I really need to be watching charts as we get some movement as I'm looking for clues, hints, pieces of the puzzle, but I wanted to at least take the time to show you what I saw and where we stand.

At 1:14 I published the move down looked like a shakeout move and we should see some upside in the market, so far this is on an intraday basis and being we didn't get the gap up that I was hoping for, we can still get a bearish candle on a move higher that fail to hold in to the close.

This is where I warned that there was upside coming based on short term 3C charts.

 DIA 1 min didn't sound alarm bells, but there is a positive divergence in to the shakeout of the stops we saw earlier. This is good reason to 1) Keep stops mental and 2) Never place them at obvious places-that was a VERY obvious place.

 The afternoon strength we saw yesterday in the market which later dies off, seems to have picked up on that shakeout, it makes some sense, they just grabbed a bunch of shares on the cheap, they need to push prices up to flip them.

 The DIA 3 min trend shows some of that action from yesterday and today, but in an overall leading negative position, multiple divergences of this kind are like winning the battle, but losing the war.

DIA 15 min, you've heard me say it often, "When in doubt, go to the longer term charts". The only thing I'm really on the lookout for is whether there has been an about face in Wall Street's position or there will be one.

I try to update you on the fundamentals of the news, I'm not trying to bore you with news, but understanding that the ECB has not been active in the bond buying market for 5 months or so and this week they may make the decision to re-activate their bond buying mechanism is big news, it's a big policy change, it also shows how much trouble Spain and therefore the rest of Europe is actually in. The relationship between the ECB and Germany has changed dramatically, these are the kinds of news stories I try to bring you so you understand how the fundamentals are either "Normal" or "Something to take note of".

 ES and the SPY 1 min charts are what set off alarm bells for an intraday move higher, the reason I say intraday is this is a 1 min positive divergence, it doesn't as of now, show anything that is much stronger than an intraday move, it's not the kind of divergence by itself that could move the market for a week.

 The 2 min chart doesn't seem to show much migration from the 1 min chart, just a small relative positive divergence thus far, 3C also seems to show both declines at the negative divergences pretty clearly.

 The longer term 2 min chart's trend, look how flat price is! Wall Street will never let that stand without head faking it and manipulating it, to expect a clean reversal down is to have not traded since 1996 and just come back in to the market, that is why I was hoping and looking for a gap up today, something to break up this flat range and send us in a direction.

The trend of the 5 min chart would also suggest that after the noise of the shakeout earlier and whatever this might turn in to, the probabilities are still for a bigger move down.

I'm going to observe, anything I find I will bring you, especially opportunities.