PEIX Cont...

PEIX, since the trade idea is up over 31% and 27+% on the day and looks to be putting in a strong close.

IF it closes at the top of its range like it looks right now, then there's a very good chance of follow through next week. It's also rallying hard on a mixed market, another sign of strength. I still stick to my rule of taking at least partial profits on a double digit percent gain in a day, but I like the chances for PEIX to put in another nice run.

Put AIG on the Watchlist

We're going to be looking at some earning's plays this weekend, I can tell you that.

Take a look at AIG

 AIG gapped on earnings and gave up 6+% on guidance today, just like one of our short candidates, AMAT...

 AMAT did the same thing, a little more extreme though and they both showed that there was funny business before earnings.

 3C is acting quite normally on the AIG 5 min chart, following price as it normally should, until about a week before earnings, it then broke character and went leading negative.

 The 30 min chart shows some accumulation areas, and then a large distribution area in to earnings.

The exact same on the 60 min chart.

So I'd have AIG on a watchlist and we'l see if there's a decent tactical entry as I suspect it will act like AMAT and I don't think AMAT has even really started yet.

The Earlier GLD PUT Profit

Earlier I posted about trying the GLD put, it's already at a 4.41% profit in a couple of hours, that same profit would have taken 29 days to make in the S&P.

Volality Trades...

I've been updating the VXX for some members trading VIX options and doing very well, so there's another trade you may not have considered, the moves that can be captured with options are quite big and quite fast.

Here's your update on the VXX, which has been (in recent updates) looking like it was going to take off.

 Just to give you an idea of the leading positive divergence today, it's already larger then anything this month and probably further back. Also note the relative positive divergence (white arrow), the idea here is price is around the same level, but 3C is much higher showing stronger accumulation at this level then at the last, which rallied well.

 The 5 min chart is already seeing that leading strength bleed in to it.

And again on a relative basis, the 30 min chart which would be much stronger accumulation then a 2 min chart, shows a large relative leading positive divergence, which is also what we see in the daily VIX chart. Remember the VIX/VXX move inversely to the market, so strength is both, is a negative for the market and confirms the readings in the market averages, although they are the mirror opposite.

GLD as a Safe Haven?

We've seen GLD move with the market and against it as a safe haven trade, I have been wondering what correlation it would chose.

Thus far, it looks like it is not being used as a safe haven trade.

Downside Picks Up

 The DIA is showing a large burst of volume, I'm not quite sure what it correlates to, it doesn't appear to be the intraday lows as they were already broken before the next bar where volume picked up and I'm still not sure what the 1 p.m. catalyst was.

 IWM

 The Q's held longer and tested the 1 pm area before breaking downward

 The SPY volume is essentially the same argument as the DIA, but a better case could be made for the SPY.

 Around 1 pm Energy failed a test of resistance, but the timing isn't quite right, I suspect this is more an effect of whatever the catalyst was.

Around that time the Euro broke, but initially not so badly, so again I suspect this is more effect then cause.

Quick Market Update

 There's been a longer term relative divergence in the SPY (zoomed out it's much worse), but I think there was something else and the leading divergence is just on the market decline.

 The longer charts show that there's been underlying distribution pressure and seem to pinpoint the 1 pm area more acutely (2 min).

 For instance this 5 min, the first relative negative divergence today slowed momentum and sent the SPY lateral, the second was stronger and at the 1 p.m. area. The fact the 5 min chart is leading negative would suggest this is pretty strong distribution.

And this is the overall pressure I mentioned above on a 15 min chart. Again, 1 p.m. was the breaking point on all of these.

PEIX-Finally

PEIX has been mentioned so many times over the last 2 months I can't count them all, January 30th  (at $1.06) was the last date it was brought up as a trade idea and not much had changed since then to change the trade idea, it was just a matter of patience.

Today...

This is a large triangle base so I'd hope to see more follow through, the trade from Jan 30th is up 25% and 21% today alone.

 PEIX is a perfect example of how technical patterns have changed and I've touched on these descending (bullish) wedges often. They use to break out right at the apex, they don't do that anymore, usually there's a false breakout and then a period of lateral base building; SRS is in a similar situation now.

 The last couple of days show the middle men stocking up for the run on a leading positive divergence and thus far we have good confirmation, although my general rule of thumb for stocks like this (low priced) is to take at least some profits on any double digit 1 day move. I would like to keep a trailing stop on this as well because the last run was over 400%.

 Here's accumulation on a 30 min chart, the first zone produced the 400+% run, the second zone is the pattern we just broke out of today.

Here is that pattern and here's the trade idea at the green arrow.

There are a wide range of choices for trade management and stops, so if you are in the trade, just email me.

Some Market Internals

At last count, 20 of the 30 Dow components are under-performing the Dow, 15 of them are in the red.

Here are a few of the worst overall looking components...

Financials are underperforming and in the red

And the market overall as I have been pointing out the last several days this week, has been underperforming the Euro, it's beyond a 1 day anomaly.

SPX vs Euro which is worth noting as it is a definitive change in character for the market. The Euro has a 2.5% change on the week which is the largest in quite some time, while the SPX as of now has a .36% gain on the week.

Home Builders are under-performers on the January upward revision from 307k to 324 with today's data coming in at 321k on wide ranging consensus of 310k-355k. We'll see what effect that has on SRS.

As of 12:30, volume has been lower then average for the NYSE and NASDAQ (NYSE 235 mln vs. avg of 302 mln; NASDAQ 741 mln vs. avg. of 777 mln).


Advancing issues vs declining issues has been blah, especially on the NASDAQ (NYSE 1852/1056, NASDAQ advancers/decliners 1253/1174)


Relative strength has been in Copper, Steel and Coal with relative weakness in Nat Gas, Junior Gold miners and clean energy. As mentioned above, Financials have been under-performing with Tech and Energy out-performing.


About an hour ago Greece issued their formal invitation for the debt swap, bond holders have 10 days to decide. If you want to see the formal invitation and details (which I'll look at later), click this link all I've seen for sure is in headlines that they raised the minimum acceptance threshold from 66% to 75%.

Energy's performance is stoking inflationary fears, you see it at the gas pumps, but especially in China where they just cut the Reserve Requirement Ratio for banks last Friday, they are now essentially fighting a two front war, they needed to cut because of the housing bubble, but the cut adds to inflationary pressures.

Treasuries...

 Just to demonstrate the inverse correlation, here's TLT the 20+ year Treasury ETF in green vs the SP-500 in red. An inverse correlation should be clear. Typically treasuries are sold during a market rally and equities are bought, when there's fear about the market, Treasuries are seen as a safe haven trade. With the yields right now being so low, they certainly aren't chasing beta in buying treasuries.

 This is something you don't see often, this is an intraday chart of TLT (green) vs the SPX, they are moving pretty much together and at a similar percentage gain, almost exact at the time of this screen capture.

 When I say look for the little things, this would be an example. Last week and early this week I pointed out a small trend of bidding treasuries up in to the close (which is also when the locals do the majority of their trading), it was a subtle sign, but worth noting and 3 days later, reversed the short term down trend in TLT. Why buy treasuries with the yields so low? It seems like a flight to safety.


 This 15 min chart shows the recent positive divergence that turned TLT up this week.

 This 30 min chart suggests something has been brewing in treasuries for a lot longer then the price chart alone would suggest.

And most interestingly, TLT went negative back in Q3 of 2011 and started topping and rolling over, only to see the underlying trade completely reverse in November/December.

I'm not pointing out a trade in TLT, I'm pointing out market action that is strange and worth noting when analyzing the market.

CHT Trade Candidate

This one should definitely be on your watchlist. This isn't a Chinese company, but a Taiwan Telecom.

 This is a 5-day chart and clearly shows the 4 stages as it now moves in to the early stages of decline; there's plenty of downside here. Based on the price pattern alone, $18 would be a fair target although it could certainly overshoot that.

 There are two trend lines that are clear, the first, has recently been broken on huge volume; that back of the stock is broken. What we want to watch for now is a low risk entry. Stocks DO NOT need volume confirmation to fall, the large volume just makes it that much more bearish, but it also suggests that there's a high probability of a bounce and that adds to the high probability of a bounce based on the fact that we almost always see them when a major support level is broken. It's that bounce that we want to look for and consider shorting in to short term strength. That gap area around $31.50 would be an enticing target. Make sure you set price alerts.

To hold a long term trend, the 5-day Trend Channel would be my choice, if CHT can bounce to the $31.50 area, that puts the stop at a very reasonable risk:reward area.

Don't miss out on this opportunity, make sure to put it on a watchlist.

The GLD Analysis

As promised, in case you are looking at GLD, here are the links explaining the idea step by step.

The first link was from Tuesday addressing the Macro picture in GLD and included this chart (along with many others)...

The analysis below this chart was as follows,

" Here's a close view of the Apex of the triangle and rally off the lows that broke support right to the apex. A trading range has been established, this is a set up for T.A. traders, a breakout from the range is supposed to be bought, but look at the first break to a new high around early Feb. The breakout volume was low, the failure to hold it was on increased volume, longs were stopped out. Now we have another possible breakout of the range and again volume is low. To entice longs to buy this breakout, it will have to make a new high and surpass the former breakout to remove any lingering doubts."


This is a follow up post the next day


This is post Breakout Analysis the same day


This is from early yesterday as 3C started turning negative as I had hoped to see...


This is the $10 spot gold drop in 10 minutes yesterday and the 3C warnings before it happened


And This is the strange SLV signal before that quick drop yesterday


With today's posts, that should bring you up to date from where we started to where we are now.

GLD Trade

As a matter of fact, I'm going to try buying a few March $173 Puts in the Options MP. I kind of like the idea of a stop being close by and then may consider adding on a break of $171.00

GLD Update

This Trade Idea has been all week in the making starting with the idea that GLD needed to breakout above the 2/2 and 2/21 resistance level, which is what it did (I'll go back and find the links later). The move was suspect (this has to do with the longer term GLD analysis-again I'll find the link later) and the idea was that this may very well be a head fake/ shakeout move. Since the breakout that I said needed to happen to sucker in longs, there has been no follow through. The next step was to see if there was 3C deterioration which has been picking up. Thus far GLD is moving closer to our theory and a nice potential trade.

 Here's the daily chart with the breakout I talked about that needed to occur for a head fake move, there has been no follow through strength since then.

 Today GLD is moving down despite dollar weakness (shown in red)

While I'll cover SLV in another post, this chart yesterday gave a deep negative warning signal before both PM's saw a fast 10 min. drop

SLV leading strongly negative before yesterday's sharp move in both metals.

 Here's the GLD 2 min chart. deteriorating right at the top as the theory went.

 That weakness has made its way to the 5 min above and 15 min below, which is what we wanted to see for a potential trade set up.

Now we just need a little more price confirmation and we'll likely have at least a nice swing trade and maybe then some.

Early Trade Mixed

The market's are rather dull this morning and mixed despite a strong move in the Euro...

This however is a trait commonly seen after a strong price / volume relationship like we saw yesterday. When Price Up/Volume Down is dominant, the next day or the next couple of days tend to underperform, almost as if it were an oversold indication which in a way it is.