Speaking of head fakes

Was that Euro ascending triangle an easy call or what?

 Euro currently taking a dip, $1.30 coming up fast.

Here's that ascending triangle (bullish); turns out it was way too obvious, we called this head fake before it happened. In green, the breakout, the tactic is to sucker in the longs and then dump the Euro trapping longs, it's like a bull trap.

This is why technical analysis is so dangerous unless you know what to look for, then it becomes predictable.

End of day nosedives in financials

 C 2 min leading negative

 C 5 min leading negative

 JPM 2 min leading negative

 JPM 5 min

 JEF with nearly 2 weeks of inside days

 The tweezer top at red is strong resistance, after that gap resistance

 JEF negative on the open, even worse on the close

Here's a nice head fake at the yellow arrow, look at 3C when the breakout tried to ocur.

Copper, Silver and Gold

After last week's very slow rate of signals in 3C, is exciting to get some action back in the market. What must be said is that for the last week or two the market has been dominated by EUR/USD correlations so many of the move we have seen are simple legacy arbitrage and not improvement in underlying conditions. Of course GLD, SLV and Copper all benefit from a weaker dollar and the Euro is a decent proxy (in an inverse correlation kind of way).

So the dollar weakness/Euro strength is naturally going to move metal and energy/oil up just from a correlation standpoint, it doesn't necessarily mean there's anything more then that going on so good FX analysis is crucial right now.

Here are the metals today

 First FCX/opper, we have a very obvious triangle in place, that makes for fertile false breakout breeding ground. The question is whether this was a false breakout or not. Based on the main catalyst which I am bearish on, the Euro, I would lean toward a head fake here as the triangle is too obvious for Wall Street not to use it. Volume sure doesn't look like a strong breakout in FCX, but rather a correlation move that momentum chasers pled in to.

 Here's the correlation between FCX and the Euro (in red), a little bump in the Euro leads to that kind of move? Fishy. I'm more interested in the dislocation between the two which would suggest FCX is over-valued and a head fake is 80-85% of the time, the last thing we see before a reversal for a number of reasons that you all are probably very well aware of.

 Intraday the 1 min chart tells me 2 things, 1) it looks like there was a ton of distribution into today's move and 2) in the white area there is NO positive divergence which we would almost certainly see on a planned cycle move or larger bullish sentiment toward FCX/Copper. This suggests to me a Euro based move with momentum monkeys chasing it, providing Wall Street demand to sell in to.

 Look at the leading negative divergence on the 2 min today, that looks like very strong distribution, so keep your eye on FCX for a move below the apex as a potential short trade.

 The 5 min chart from left to right, in green we have 3C confirmation of the move down, then a negative divergence with a head fake breakout move at the yellow arrow which as usual, leads to some sharp/quick downside.  Then another negative divergence/distribution in to the 23rd sending FCX lower. The 28/29 of Dec. saw some accumulation, but we knew the Euro would be bouncing , thus the reason the trades last week were hit and run. In the red box, that is the worst kind of divergence possible, a leading negative divergence and the 5 min chart carries some weight, so al 3 timeframes for today lean toward heavy distribution in to a move that just so happens to be a probable false breakout of a triangle, which technical traders would chase 9 times out of 10.

 As for longer term analysis, until I see better signals I'm not making any trade calls on gold miners, but today did have a leading negative divergence that got worse as price went higher, classic Wall Street sell in to strength.

 Here is GLD and the Euro correlation, for months now I've been suspicious of gold, thinking we have either hit a bubble or an intermediate top. The triangle (this large) is usually a top. In the white box, look what happens when the price is manipulated away from the correlation.

 Here's the 200-day providing resistance

 And the long term support of the 150 day failed for the first time in 3 years recently.

 Here's that break of the 150 and on a break away gap no less.

 GLD 15 min saw some accumulation in white and distribution in red.

 However look at the short term 2 min hart's distribution today, someone seems to think the Euro is not going to break through resistance I pointed out earlier today.

 Silver shows a few accumulation zones and while I'm not endorsing a SLV trade, I will say it acts better then GLD right now.

However after some accumulation (white) and confirmation today (green), SLV saw the same distribution late day that I suspect is all FX related.

If nothing else, FCX may provide a decent trade. GLD would be next on my list, I'll sit out SLV for the time being.

More to come in a bit

More Bad News For BAC

As you know, I established another short term trade in BAC (Jan. $6 Puts) in the Options Model Portfolio after making 30% last week on the same trade in a day. Today I didn't get the move I wanted (so far +3.73%) so I've held the position overnight.

Here's the bad news from Bloomberg...

MBIA Wins Judgment Ruling Against Countrywide

We all know who swallowed up Countrywide-BAC

Bank of America Corp. (BAC) lost a court fight against MBIA Inc. (MBI)over the hurdles the bond insurer will have to clear in a lawsuit seeking to force the bank to buy back faulty home loans made by its Countrywide Financial unit.

MBIA, which says it was duped into guaranteeing payment on Countrywide mortgage bonds, need only show the lender made misrepresentations about the loans backing the bonds, instead of having to prove they caused the losses the insurer is seeking to recover, New York state Judge Eileen Bransten said in a decision.

The ruling is among legal disputes with bond insurers and investors that “could significantly impact” the potential costs from loans made before the collapse of the U.S. housing market in 2008, Bank of America said in a regulatory filing in August.

So far we haven't seen a huge move in BAC, but 30 million MBIA shorts aren't sleeping well tonight.

Can you guess when the ruling came down? As you can see in AH (the 2 blue hash marks near the price scale) have MBI seeing additional gains.

Here's the BAC response...

I like the volume on the day and the last 10 minutes clearly gave up the hopium gains that MBIA would lose this battle.

This should have larger effects on BAC as far as precedent as they have lost multiple appeals. I wonder how Warren Buffet is feeling toward Obama since that faux-meeting in which Warren was advising Obama on the economy only to buy $5 billion in BAC the next day...uh, political favor gone wrong? And don't forget BAC's attitude at the time, "It's nice to have the cash, but we really don't need it", that is until they do, which they did and since have made plans to rase more cash.

For those of you who have been following my perspective on BAC over the last several months, the key event was BAC breaking $5.00 and returning a negative -60% on the year. BAC being one of most hedge fund top 5 holdings was bound to see strength in to the year end as funds like Paulson's Advantage Plus had a horrible year precisely because BAC was a top 5 holding. My logic has been ever since BAC broke the $5 line in the sand, the market would work hard to lift BAC in to year end to distribute/sell as much BAC as they could without crashing prices so when they issue 2012 Q1 prospectuses, they don't look as inept as they really were. Since BAC has played out exactly as expected since the break of $5.00, I think chances are good that the rest of my theory materializes and BAC one again heads below $5.00 and probably for the foreseeable future.

Here's the near term 3C event since the break of $5

The break saw a positive divergence, in my opinion this WAS NOT accumulation (it's too short for any real shares to be accumulated so this was not a cycle), but rather support to keep BAC from spiraling down and give funds a chance to sell in to some strength before the close of 2011. We saw distribution near $5.60 and 3C is leading negative right now in that same area. That's one nasty looking gap below today's prices.

URRE CHANGES

URRE is showing a couple of notable changes in character.

 First the downside momentum seems to be morphing in to what may be a rounding bottom. Last Friday we saw a small bodied star candle on heaver volume, this is typical at reversal areas, call it micro capitulation. Today URRE gained over 8% on increasing volume, this is the kind of increase I like to see,  a huge green volume spike at this point would make me suspicious of churning activity.

 The 5 min chart carved out a clear positive divergence that led to today's move, Friday's star also saw lows that broke below recent lows (probable downside-bullish head fake). If you look at the accumulation period on the 5 min chart, it gains traction around the 23rd of December, meaning that the average accumulated position would be somewhere around $.75. A move today of 8% to $.78 wouldn't be worth running a cycle and besides that, the 1 min chart confirmed today, no distribution evident in today's move up. I would think URRE would just be getting ready to enter the mark up period, so there presumably would be some decent upside before the distribution phase even began.

 Over all, the 15 min chart which is much more important shows an even wider accumulation range from  $.82-$.72 so if we simply average that for a rough estimate, we can assume that the accumulated position would be around $.77, meaning today's move is barely out of the accumulation range and not even in the mark up phase yet.

Even more interesting is the daily hart, now that we are getting alignment in multiple timeframes, the daily hart's leading position becomes important. I'm split as to whether this is a separate accumulation cycle or whether this is part of a larger cycle that started back in October when URRE rallied over 150%. I'm leaning toward a longer cycle in which the rally had to be killed to send URRE back to lows that were worth buying, so this may indeed be one larger cycle, which would have much more bullish implications.

We also have a daily/hourly buy signal on my custom DM indicator.

 Note the last time we had a daily buy signal, we got the 150+% rally.

The hourly signal landed just about where the head fake on Friday would have occurred.

The 15 min MoneyStream also likes URRE hear gong first positive and then leading positive, it is VERY rare to see MS signals in the first place, but even more so on lower priced stocks and especially on intraday charts. It should be noted that 3C and MS do the same thing, look for accumulation and distribution, however they are coded totally differently so for them to arrive at the same signal is noteworthy.

Lets see if we get some follow through tomorrow, that would be a good sign.

NYSE TICK Continues to deteriorate

Early today the TICK was in bullish territory largely holding above-250 and hanging around the +1000 level, since it has been pretty volatile, but the uptrend from 1-3 p.m. is clearly broken and we are hitting some -1250 spikes, a big change from earlier today.

XLE/Energy

Energy got two boosts today 1) the Iranian escalation and 2) the Euro moving up (meaning the $USD moving down as most energy and crude are priced in $USD). However, XLE is looking a bit frothy here.

 XLE on the 1 min scale was the only 3C chart to confirm the move up albeit briefly before going negative and seeing some price downdraft. The Euro came to the rescue later with that seeming false breakout, but since, 3C is more negative now.

 The 2 min chart confirms the above chart.

 As does the 5 min.

 ERY, the inverse leveraged ETF on energy (short) is showing some near term strength as it tests the lows with a leading positive divergence.

The 5 min chart confirms. I'd keep an eye on this one, there may be a quick hit and run trade setting up

VIX

Here's an update of the VIX which over the last few months has sent the market lower when it has been below 25.

 The daily VIX and my Custom Demark inspired indicator with a wide daily buy signal, remember the VIX moves inversely to the market so a move up in the VIX would have an inverse correlation and send the market lower.

 The hourly Bollinger Bands are telegraphing a highly directional move coming, we must always watch for the head fake, but I doubt too many traders are watching this which lessens the chance of a head fake.

The daily 3C data (only daily data for the VIX) is showing a positive divergence, suggesting the VIX move up on a larger scale.

Euro breaks below the APEX, likely head fake move

 Here's the breakout and we were looking for a move below the apex to signal a likely false breakout, there it is.

The SPY which was holding better then the other averages on the 1 min 3C chart is now negatively divergent.

AMZN Worth the Wait...

As you know, AMZN has been on the short ideas watchlist and there have been some moments in which I've really wanted to short AMZN, but have refrained waiting for the trade to come to us, it is starting to do that.

 The AMZN long term Linear Regression Channel

 A pretty clear top in AMZN.

 A bearish breakaway gap in AMZN, the market has been diligent about filling gaps, this break away gap left open is a bad sign for AMZN

 Worst of all, a sharp leading negative divergence on the daily chart, this is about as bad as it gets.

 AMZN short term has a positive divergence and given it just broke support, it needed this bounce above support as we talked about last night in the market's recent behavior in these situations.

 However, even as it bounces, the short term 3C shows even the bounce is seeing distribution as we would like to see.

The daily Trend Channel has held the entire downtrend since the highs of the top formation. I would guess it will not bounce above the upper trend channel, that may be an area worth taking a closer look at AMZN.