Manipulation

I can't think of a better name for this post because from what I have gathered we are not only in the middle of manipulation in the form of a shakeout, say AAPL...

 AAPL broke below the daily H&S pattern (red arrow), that's where the shorts would enter as it provides confirmation, but the next day AAPL put in a bullish hammer reversal candle as well as support and for 8 days now there hasn't been 1 follow through day or move below that hammer.

We're looking for a volatility shakeout of the shorts at the orange arrow, but that was halted right there, I now it's a key short set-up and the next day down would be the confirmation, but after that there was no reason not to bust through the neckline and start the shakeout.

This 30 min AAPL chart shows a positive divergence strong enough to lift us from the lows and a leading positive position strong enough to finish the shakeout, yet we flop around in the range.

Today after seeing downside, but NOTHING that would alter AAPL's technical position (essentially a noise day), we see a 3 min positive divergence start to lead, that means the downside in AAPL was almost certainly accumulated today and it may be for the volatility shakeout above the neckline which I think we see either way, but it also very well could be this...

This is probably not based on the most up to date options information, but a pin of AAPL somewhere around $640-$650 looks like it would cause the most damage and cause the most options to expire worthless, seeing as it is mainly Wall Street that writes options, collects the premiums and then seemingly works hard to pin the asset so they can keep the most amount of premium, I can understand why nothing technically significant has happened in AAPL in about 8 days.

I calculated that on YahooFinance data using open interest and strikes, but the best way is to use cash value and according to a website that calculates this for you (again probably not using the most up to date option information, but close enough, this is max pain...

That would be $640, that may explain why we see a positive divergence on a shorter timeframe when AAPL closed at $632.61

I'm guessing that we'll see that shakeout as op-ex Friday passes tomorrow.

How about XLF as it looked very much to me like we'd see Financials rotate out tomorrow and tech in?

XLF closed at $16.33, so far max pain is at $16.

Lets see what would happen...

We saw the move below XLF's triangle and called it a head fake and that XLF would move higher before it really moves lower. If you look at max pain at $16, it puts price right at the apex, essentially right at the place in which anyone buying puts or calls would have NO OPINION on which way Financials move from here. It would also be about a 2% drop, that would be a 6% gain for FAZ (here's hoping) in a day.

 The XLF short term 1 min chart went from positive sending XLF higher to quite negative suggesting XLF moves lower in the very near term, like tomorrow!

The longer term 30 min chart isn't that bullish, but it is in line which means XLF could do what we expect and move higher from here before it makes a real leg down lower.

As far as manipulation goes, that would not only be manipulating the shakeout to the upside we have been looking for , best exemplified by AAPL, but also manipulation of the pin on options expiration.

Like I always say, even if the market is quiet, there always up to something.

Many of you may recall my posts this week showing negative divergences in the 5-10 min timeframe and prices moving sideways, I talked about consolidations and how they could move through time (sideways) or through a pullback and remarked that I had never seen such strong divergences only cause a lateral consolidation, well it seems the reason is pretty simple, options expiration pin.

Last months op-ex pin saw the market or the SPX move about .50% the entire op-ex week, essentially it was pinned all week. We have seen similar behavior this week.

As for Tech, which I said I thought would move in to rotation with financials moving out, XLK's max pain is $31, it closed at $29.98 today, so we'd expect to see a positive divergence...

And there it is, I thought XLK fell apart as it closed the gap, but it was really GOOG, in any case it looked to have been headed down either way with an intraday negative divergence in place, during the afternoon we see a positive divergence, but perhaps more important than the divergence in XLK/Tech is the one in AAPL as that should lift Tech.

As for the QQQ, keeping in mind this isn't the latest and best options data, it's from YahooFinance, this 3 min end of day positive leading divergence in the QQQ as well as that of the divergences in Tech would suggest for the op-ex pin the Q's would have to move higher.

 And max pain ? $68, we closed at $67.32.

Most interestingly to me was this chart below and the same type of chart can be found in nearly all of the averages...

A 10 min leading negative divergence caused a consolidation, but not a pullback. There's nothing wrong with that as far as 3C is concerned, it's just not usual, but that divergence held the QQQ in this range for 2.5 days and when it fell out, we have the short term positive that looks like it will send it right back up toward the $68 area.

Interestingly, with the data on Financials from my market hours analysis and from the data above, since the SPX carries a lot of weight in Financials, you might think max pain for the SPY is lower than where we closed today-again that rotation of one group or average closing one way and another closing the other way.

The SPY closed at $145.87, max pain for the SPY as of tonight is $145.

Since the positive divergence sending the SPY higher and toward the level Max-Pain figures is the area, we have seen that negative divergence (here a 3 min chart) that has kept the sPY consolidating sideways and losing some ground today after a failed attempt to breakout earlier in the day.

Still, as far as the continuation of the upside shakeout, the SPY 30 min chart like the others, says it is certainly possible, in fact likely.

SPY 30 min in a slightly leading positive position still has room for more upside as we have been expecting.

So if tonight's numbers are correct from MaxPain or close to it, they confirm what 3C ha been saying not only about the averages, but industry groups, the different trends we have expected and all kinds of interesting stuff such as the lateral consolidations. I for one am excited to see what happens tomorrow.

As for plans, I'll still listen to 3C and the message of the market, but I'm guessing that short term trades for the pullback will be closed, I may look to enter some new longs for the shakeout move we have been expecting and that started this week, other than that, not much has changed in the outlook.