Futures are Ugly-Confirmation is VERY HIGH

After what was apparently a weekly op-ex pin (the AAPL pin of $.02 CENTS) was ridiculous, but that's all it takes for those weeklies to comeback as (WORTHLESS). The pins in the averages weren't far behind in the "OBVIOUS" category, but AAPL was the clear winer as it trades option contracts in $5.00 intervals and came in TWO cents short. The SPY was pinned by 5 cents, the QQQ by 18 cents, the IWM by 11 cents and the DIA by 10 cents, a little on the obvious side as these op-ex Friday's are turning in to a joke.

Over the weekend "The Arab Spring" is seeing the other side of the coin we predicted when it was happening with Egyptian protestors making a stand against a new ruler trying to claim Pharaoh-like powers and in Tunisia where it all started, the riot police are clashing with protestors.

Early Futures pricing looked a bit optimistic on HSBC's Chinese PMI coming in at the best reading in 14 months, although the 3C charts weren't so optimistic as they had not been last week and Friday. Optimism seems to have faded along the lines 3C was pointing to as opening trade for futures and FX got underway today. Perhaps the better Chinese numbers make the chances of stimulus less likely (the market loves stimulus as it creates new money to slosh around in the market) so it remains to be seen whether Chinese "good news" is taken as good news or is taken as bad news as it further reduces the chances of the PBoC pumping cash in to the system.

We have a boatload of PMI data coming out or already out, what's out right now is pretty close to mixed with a bit of an edge going to the "beat" or at least better than previous (I'm not sure what consensus was), but the futures are not as optimistic as they were earlier, for example... ES (S&P Futures)

Although we still have a long overnight session, 3C was not optimistic on opening ES trade with a negative 1 min divergence that ES seems to be following lower now after initial price strength.

NASDAQ futures are similar.

NQ 1 min early opening trade.

FX (EURO/USD and AUD/USD-as the $AUD is one of my favorite leading indicators among currencies) opened like this...

 The EUR/USD opened a bit lower and went higher above the $1.30 mark, but again underlying trade doesn't look as optimistic as you will see and as has been the recent trend.

 The $AUD lost some serious ground as FX trade opened this week.

A longer term view of the $AUD which tends to lead equities is not good.

Here's the EUR/USD underlying trade in several timeframes...

 Here's the 1 min EUR/USD pair with a slight positive divergence late Friday and a negative divergence early this week as trade starts in FX.

 The 5 min EUR/USD is showing several negative divergences in to higher prices, no positive divergences.

 This is the Euro Futures (not the EUR/USD pair, just the Euro futures) 1 min with a nasty negative divergence on opening trade and the Euro starting to respond with lower prices after what may have been a run for stops, it remains to be seen as this is still early in the overnight session.


 Early or not in the overnight session, the 5 min Euro futures shows a leading negative divergence stretching through most of the later half of last week and in to the opening trade this week.

 The more important longer timeframes like the 15 min Euro show negative divergences above $1.30 as the Euro was rejected earlier and sent lower with an even worse leading negative divergence now.

 The Euro 30 min is also in leading negative position

 And most importantly, the 4 hour Euro futures after having seen accumulation in July (white) are seeing a bad leading negative divergence and this is a long timeframe, meaning it is representative of the heaviest flow of funds.

 The US Dollar Futures on a 15 min scale went from a negative at a pop above resistance (head fake or failed breakout) with a positive divergence in to the recent lows and this week's early trade. Remember a strong dollar is bad for the market and most commodities, really most risk assets.


 The Us Dollar 30 min chart shows several positive divergences and what looks like a period of accumulation in to lower prices, at least the last two (probably 3 ) positives all look like they are part of the same cycle.

 The USD 60 min shows a negative divergence sending it lower and a large leading positive divergence now, this also being a longer term chart is indicative of heavier flow of funds.

 This leading positive $USD DAILY chart may very well be a longer cycle that is not on deck as a trade yet, or it may be part of what will be a VERY nasty move lower in the market before it can put in a serious leg higher.

Stock Indicies Futures-S&P E-mini (ES)

 The 1 min chart with the start of opening trade and ES making another lower low (not seen here) with a leading negative divergence in 3C.

 The ES 5 min chart  with a damning, really nasty 5 min negative leading divergence, this is really ugly.

 ES 15 min leading negative

 ES 30 min from a relative negative to a leading negative

 The ES 60 min chart is the really scary one (and the 5 min is really ugly) with a mid November positive divergence at the lows and a leading negative divergence currently.

The most damning evidence here may just be the confirmation among so many timeframes and confirmed in EUR/USD , Euro and Dollar Futures, ALL SAY THE SAME THING.

NASDAQ 100 e-mini Futures (NQ)

 

1 min NQ leading negative on the 1 min on the open this week

 NQ 5 min with a huge relative negative divergence

 NQ 15 min are turning leading negative in a couple u of recent places as well as longer term, $NQ prices are also heading lower as I type this.

 The NQ 30 min leading negative is really ugly-this is much like the ES charts.

The 60 min NQ leading negative divergence rounds out the confirmation after having seen confirmation on the downtrend and a slight positive divergence in mid-November, this is the most serious divergence in a month, probably longer, but I don't have that much history.

I feel very comfortable with Friday short positioning and Puts, the weight of the evidence is quite ugly and very strong, those relying on price only are very likely to get a quick and very sharp downside surprise.

 Remember the basic plan based on multiple timeframe analysis is what is looking to be a worse and worse move to the downside, it appears at some point in that move we will see accumulation of the decline and then a longer move to the upside setting up a final short set up in to higher prices so if I were to put out a trend table, not based on the typical trend tables of classifying current price trends, but the implied price trends from multiple timeframe 3C analysis it would look something like this...

Short term trend: (could be a week to several weeks-price targets become more apparent as underlying trade shifts)- DOWN

Intermediate Trend: (UP)

Long Term Primary Trend: Down

Of course as any new developments become apparent we will shift our outlook according to the probabilities, but our intent is to be in front of the trend, not to chase it. My playbook would be shorter term short trades, selling some profitable longs or partial sales of them, wait for positive divergences to form within a pullback/downside move and start adding to or establishing longer term long positions and finally as we see distribution in to that move up, setting up CORE short positions for a serious, longer primary trend down.

Of course in between these trends we will surely see smaller volatility waves that should be tradable as well, we'll deal with those as they become apparent.

Have a great & profitable week ahead!