Daily Wrap

I would be remiss not to mention the Dow finally closed over $13k

 Dow closes up + .18% and above $13k

Here's the Maginot line, note volume still hasn't picked up on a break above $13k and looked like it may give it up toward the close as volume picked up considerably.

As you know we started off the day some Horrible, Bad and then Good economic news (Durable Goods, Case-Shiller and Consumer Confidence). Also the ECB's LTRO commenced today with results to be announced tomorrow so everyone knows which banks that took funds will be sold off. The LTRO also will not be accepting "selectively defaulted Greek Bonds" as announced by the ECB.

Around 10 a.m. news broke that Ireland will call for a referendum on the EU Fiscal Compact (letting the people vote-never a good idea in the EU and never one that gets too far) this sent the Euro briefly plummeting early in the session. If the referendum fails, that would make Ireland ineligible for ESM funded bailouts should they need another as Greece needed another and another and will eventually need another.

We saw a 1 minute positive divergence around 9:45 followed by strong Consumer Confidence at 10 a.m. sending the market higher (which now-a-days means .03%).

Some news about Israel and the possibility of a surprise pre-emptive attack as well as Iran announcing they'd be accepting payment for oil in gold (moving away from the $USD) had no effect on oil (unlike very recently and much like the last several months). However the talk of the use of the Strategic Petroleum Reserve may have had some effect on crude, it's hard to tell with so many months of it not reacting to geo-political news and then suddenly "seemingly" doing so. If anything, I would think talk of opening up the reserves would be taken as a hint an attack or Iran is in the works.

Lets get to the charts...

Commodities vs the SPX

 Commodities were in line with the 1 p.m. market decline, the end of day push saw brief involvement and then they backed off. We'll look at this in closer detail.

High Yield Credit

 High Yield Credit was leading the market early (white) and then led the selling around 1 p.m., again it led the late afternoon bounce, but failed to participate for very long.

 On a longer term basis, HY Credit still hasn't made a higher high in over 3 weeks and is in fact moving the other way, down about 3% while the SPX is up about 3% for the same time frame. I post this because of Credit's leading qualities as can be seen on the intraday chart.

Yields are also a leading indicator

 Yields have been on the decline as you can see, they did not confirm at all today and in fact went the other way, longer term the divergence is huge.

High Yield Corporate Credit

 HYG was in sync with the market most of the day until the closing bounce, while the market's moved up HYG sold off.

As far as Sector performance, Financials started rotating out toward the end of the day, that may be part of the reason for the 1 p.m. decline. Healthcare and Staples both came in to rotation, Energy, Basic Materials and Industrials were all on the way out. Tech and Discretionary held their ground.

 As you can see, the Euro/USD correlation had nothing to do with the mid-day selling.

 Financials do seem to be part of the cause, you can see XLF's momentum vs the SPX was on the decline before the broad market, financials also failed to participate at the end of day bounce.

 Here's XLF intraday, note the noon negative divergence, end of day there was a small divergence and then just confirmation, but overall under-performance.

 Longer term, XLF seems to be seeing more downside 3C momentum.

 Long term you can see confirmation in green and then a negative divergence, the white arrows show the direction of financials, the 3C divergence has definitely sent XLF lateral. It is also leading negative here.

XLE/Energy

 XLE was also on the decline around noon before the broad market, energy totally failed to participate in the end of day bounce.

 XLE 5 min

 XLE is also showing increased negative 3C momentum, you can see this in the performance of XLE as well. Again, leading negative.

 XLE 30 min. So it seems clear that Financials and Energy started falling apart late morning in to noon which weighed on the broader market.

Tech...

 Tech's price performance wasn't bad and lent probably the only support to the market today, however the underlying action is falling apart, especially at the end of day which is interesting. Selling in to some strength?

 The 15 min chart is deteriorating, Tech has been the last hold out , Energy and Financials look further into the mess the Tech, but Tech is heading that way.

Speaking of which, you can summarize Tech as AAPL which I mentioned today.

 As I mentioned, the short term underlying action looks like AAPL is going to see downside shortly.

 AAPL 5 min

AAPL, it seems to me something changed on the 15th, I would say the short term at least has had its back broken, we'll see shortly.

As for Price Volume Relationships...

The Dow's dominant P/V was the most bearish, Price Up/Volume Down. One Third of the Dow was down on the day.

The NASDAQ on the other hand had the most bullish P/V relationship, Price Up/ Volume Up

The Russell had co-domiannce, both price down, with volume up and volume down with a majority of stocks closing red.

The S&P had no dominant relationship today.

As for Treasuries...

 We have a downside reversal candlestick pattern the last 2 days, a doji star followed by a bearish engulfing candle, this looks like a pullback and 3C seems to confirm it.

 Here is the action of note in Treasuries, last week or thereabout, we started noticing treasuries rallying in to the close, even though they were in a short term down trend, that little change in character turned treasuries up and strangely, they defied their inverse correlation with the market as you can see the SPX in white this week.

 Long term, something changed in the sentiment for treasuries, they were in a negative divergence, heading down and then all of the sudden started seeing a persistent positive divergence.

Here on the 15 min chart you can see accumulation sending TLT higher and a negative divergence that fits with the candlestick reversal above, so I'm looking for a pullback in treasuries, unless some event causes a flight to safety.

We do have the LTRO announcement tomorrow, I expect some kind of knee-jerk reaction, although I don't have a clue as to what it will be. I do have a feeling it will be short lived and it will be interesting to see if the ECB adds anything to what they have already said, part of which is that this is likely the last LTRO. I would guess that will be the major EU event tomorrow.

We have 4th qtr. GDP at 8:30 in the US, that could be a mover, also Chicago PMI at 9:45 (potential for some real volatility combined with Europe), Fisher speaks at 9:30, Bernak-a-cide at 10 a.m. and Plossser at 12. We also have the EIA Petroleum report at 10:30 (that could be interesting) and the Beige Book at 2 p.m. so tomorrow we have quite a few catalyst events so I suspect volatility. I'm especially going to be looking for our normal Wednesday USO trade, there may be enough stuff going on to get a quick trade off there. Also I'll be highlighting some more trades and looking at earnings as we didn't have a call today.

USO Update/Channel Busters

I've probably mentioned the concept of channel busters enough that you are familiar with it. Several of you are using a swing trade template I made for StockFinder, I would think about scanning for channel busters as they tend to make reliable swing trades. If you're interested, I can probably write and share the code for a channel buster scan. USO has moved about 3% the last 3 days, which is huge for this market, but if you used a leveraged ETF or options, this would already be a nice little trade. There's still the case of the longer term outlook for USO, but again we'll cross that bridge as we get the evidence.

Back to Channel Busters for a moment... I first heard of these in a book by Don Worden, you probably have heard his name, you probably didn't know that he created much of the charting software and technical indicators Wall Street used in the 70's-80's and perhaps even today. When I first read his books, I was almost angry, here's the guy who invented Telechart and everything that has came form that and he was basically challenging the Edwards/McGee philosophy (conventional technical analysis) which I thought was strange from someone who invented charting software that everyone used for conventional analysis.

I remember the 3 reasons he liked Channel Busters, in fact they were a favorite pattern: 1)Reliable 2) Low risk 3) You are shorting strength/buying weakness (two things that human emotion doesn't like to do, more so the former then the latter).

The beauty and the hard part of Channel Busters- For a channel break to occur, a stock (in the case of USO) has to have some good upside momentum in place, the beauty is this can create an overbought situation, the hard part is that you are shorting a breakout in what has been a strong trend, not everyone can do that psychologically. Or for downtrends, the opposite is true, it isn't easy buying a stock that has broken down below an extended downtrend. Just to make it harder, the news and sentiment will almost always run counter to your trade so you have to be a bit of an independent thinker, but if you give it some thought, these trades that appear to be the most risky are often actually the least risky. In any case, a lot more can be said about these trade set ups, let me just give one final thought. For all the reasons this trade works, then it should work even better when you look for them on a 5-day chart, the stock will be that much more overbought/oversold and the sentiment in the trend will be that much stronger which actually plays in to your hands considering the majority are wrong.

Here are the USO updated charts

 Today volume picked up as USO broke below yesterday afternoon's support.

 Here's a little longer view

 And the daily channel itself. Note volume and price.

 The 5 min chart negative at the channel breakout

Today's intraday trade suggests USO may get a little bounce tomorrow, it is not uncommon for these trades to revisit the channel.

GLD Update

I have doubts about GLD holding today's move or this being something technically (bullish) significant, I have some doubts about SLV too, but GLD more so.

 GLD has had all day to confirm with a 3C higher high, no such move

 The 2 min chart looks like this move has been sold/distributed all day

The same can be seen on the 1 min chart, especially in to the afternoon bear flag-like move. To the left you can see the accumulation sending GLD higher, it wasn't that big and on a 1 min chart.

Markt Update

 DIA 15 min leading negative, this shows a lot of downside momentum in about a day and a half, these 15 min charts don't usually move that quickly unless there's something pretty strong going on in the underlying trade.

 Although the 5 min (and the other timeframes as well) trend has been negative, there's more momentum yesterday and today . I'm going to try to find the advancers/decliners as we have seen it steadily deteriorate from strong to modestly strong to neutral to negative last night.

 The 2 min chart does show a late day positive divergence and we are bouncing from that, but in rock, paper, scissors, the 2 min chart is paper and the 5 min chart is scissors, the 15 min chart is even more relevant and if you recall what the full Dow update looked like, the 30, 60 and daily are the strongest in that order (daily is the strongest signal). So seeing a late day bounce compared to the charts above is more or less noise as far as I'm concerned.

 The 1 min chart confirming the late day bounce, but it is also not making higher highs, so it may deteriorate and head lower before the close.

 The IWM 15 min chart has been trending down and the IWM has done practically nothing for weeks, today's momentum to the downside is sharper then the negative trend we have seen that has kept the IWM at a -1% loss over the last 17 days or over 3 trading weeks.

 The 5 min chart has been trending down as well, but it is sharper today.

 The QQQ 15 min chart has seen a very sharp leading negative divergence the last day or so.

 The same applies for the 5 min.

 QQQ 2 min

 The QQQ 1 min positive divergence this afternoon and the bounce.

 SPY 5 min is also seeing increased downside momentum

 Here's the bounce on the 2 min chart, thus far it is inline.

And the 1 min chart, which looks a little better then in line. This also had a stronger positive 1 min divergence.

The NYSE TICK chart hasn't trended much, however this afternoon it has seen some -1250 readings which are quite bearish, this is calculated by advancing issues each tick less declining issues.