QQQ/IWM Update

Since these have been the leading averages with regard to underlying trade, I thought we'd look at them.

 IWM 2 min showing the earlier underlying strength from last week mentioned many times and that strength falling apart in to higher prices off that positive divergence in white.

 The next timeframe, 3 min shows the same area of strength, although this is very minor strength as the timeframe and the length of the cycle are both very small, also we see the same deterioration in to higher prices.

 IWM 5 min with a relative positive divergence last week at the lows and a relative negative divergence in to today's highs. This is the chart I want to see deteriorate the most.

 QQQ

 QQQ relative positive divergence from last week as mentioned since last week and price lifting off those lows in to a deepening leading negative divergence.

 However on an intraday basis of today only, we see the negative divergence I reported earlier and said it was likely to cause at least a "consolidation". If you look at the linked post from earlier today, it was posted at 2:05 p.m., note the QQQ did consolidate the rest of the day since then.

 I believe that underlying trade in AAPL is apparent to smart money and thus the QQQ looks the way it does. AAPL has a 1 min leading positive divergence, this is a short term divergence, a pretty good timing indicator and AAPL just broke below support of the triangle which is larger today due to continued consolidation.

Take a look...

This is what I'd say is almost certainly an example of  head fake move on a 1 minute timeframe, as I always remind, "Head fake moves occur on every timeframe before significant reversals", usually th head fake move is the last thing to occur before the reversal and "significant reversal" is obviously relative to the timeframe being viewed.

I backed the chart up a bit, it is clear that traders were watching the same triangle I drew, it is the most well-known technical pattern and very misunderstood, it makes for an excellent pattern for Wall St. to manipulate technical traders. BIDU's largest reversal came out of two such triangles, almost the same situation AAPL is in now. The reason I backed up the chart is so the volume is not skewed by closing volume, I want you to see how many stops were triggered as AAPL broke below the triangle and then below the late day intraday low which was being used as the next stop level. One of the reasons head fake moves or shakeouts like this occur is the "snow-ball" effect.

To the detriment of technical traders, Technical Analysis dogma teaches that if you are long a bullish triangle like AAPL and it fails as we saw late today, you should reverse you position and go short. While I doubt too many AAPL longs (who love the stock) went short, the idea stops out the trader on the long stop and when the trade reverses to the upside, stops out the trader on the short side; this covering in addition to new longs entering the market on a move up in AAPL creates upside momentum and smart money barely has to do anything. The exact opposite principle can be sen in BIDU's recent breakout above resistance which failed, as a result, BIDU's snow-ball effect moved the stock down well over 14% in 5 days. This also gives market makers, HFT algos and other short term institutional traders supply to buy AAPL in size on the cheap and no one suspects anything as someone has to take the other side of the trade, it raises no suspicion.

I am absolutely bearish AAPL and look forward to adding to Friday's partial put position on AAPL short term price strength, I ENTERED THE CALL POSITION AS AN EXAMPLE TRADE ONLY TO SHOW YOU THAT MONEY CAN BE MADE ANYTIME USING THE MARKET UPDATES, YOU DON'T HAVE TO WAIT FOR A MODEL PORTFOLIO TRADE.  

 Here's AAPL as of the close, it reversed the downside momentum after the stopped out shares could be accumulated by short term traders, there's always some meat on the bone if you are comfortable taking such trades. As I firmly believe, the market is always offering something if you use the right tools to take it; let the market tell you the tool. A straight long position in AAPL wouldn't make the trade worthwhile, but an out of the money call does make it potentially very worthwhile.

Another concept, on a 15 minute chart AAPL puts in a bullish candle on volume, these are excellent trend reversal signals, THERE IS NO MEASURED OR ASSUMED MEASUREMENT FOR THE REVERSAL BASED IN THE SIGNAL ALONE, it could be a few bars, a few days or a major or very minor reversal.

QQQ cont...

 QQQ 2 min shows the positive divergence from last Wed/Thursday and even Friday as 3C intraday went leading positive in to the price lows, as QQQ has moved up the divergence has gone leading negative, making a new at least 7 day leading low. This is exactly what I want to see.

 QQQ 3 min Wed/Thursday leading positive intraday accumulation, current leading negative divergence in to a move off the lows.

Remember that those are short term/intraday signals, the trend as can be seen here is more important to the bigger picture we are trying to capture, clearly the QQQ 2 min trend is leading negative, it all depends on what kind of trader you are as to what signals will be most meaningful; I'm happiest in a longer term trending trade, but I saw an opportunity in AAPL on a short term long trade and took it as an example that bearish and bullish are relative to the trade and also as mentioned to show you that almost any update can be traded so long as the right tool for the trade is used. Finally the long AAPL Calls (for a short term trade) WERE NOT CHASED ON AN UPSIDE MOVE, I LET THE TRADE COME TO ME AND ENTERED AT A LOWER RISK LEVEL.

More to come...