Long day....

Well I just got home about 30 minutes ago from  5+ hour meeting with a hedge fund manger at his office, what an incredible set up! What a great meeting!

I think this will be good for my analysis. I'll share more details as well as look at the market (as I had to get ready to leave right after the market close), I'll also be answering emails as I was not able to check my email during the meeting.

I'm going to have dinner real quick and get to my nightly routine.

Talk to you soon

EOD Market Update

 DIA 1 min with a little distribution, may be a consolidation area to form.

 DIA 2 min still in line

 ES is showing a little negative divergence, but this can change a lot overnight.

 1 min IWM profit taking or consolidation, not a biggie thus far.

 2 min is still positive

The Q's are in line.

 The SPY 1 and 2 min remain leading positive.

I think we are still on track. I need to look at Credit and some other things, but that will be in tonight's update.

WMT Trade Idea Follow Up

WMT was a trade idea (short) from last Friday, it is doing what I hoped it would do and even if you are not interested in the trade, there's some things to be learned that can be applied elsewhere.

Obviously WMT has a low Beta of .45, meaning if the S&P moves 1%, WMT is expected to move .45% over a 5 year average. For this reason, I prefer an options trade to get extra leverage on WMT, but remember the key word is "trade" not a hold until expiration.

Here's the link to Friday's idea

And here's what I said that is key to the trade...

"WMT broke clean from a solid uptrend on heavy volume and has since formed a bear flag. The obvious trade is a cross down below the bear flag, however as we have seen over and over, obvious patterns like this often get shaken out on a head fake move first. Be on the look out for a move above the top trendline of the flag, it may be a high probability/ low risk entry. Otherwise you can wait for a cross below the bear flag. A head fake move could all happen in one day so I would set some alerts fro a cross above and another alert for a cross below. If you don't have an alert system that is real time, email me."

 Here's the bear flag which created a break away gap, this gap is VERY bearish and I seriously doubt it gets filled. Today WMT is doing exactly what I said on Friday which is the exact opposite of what Technical Analysis books will teach you. Shorts already would have piled into WMT on the bear flag expecting a break down, this is such an obvious pattern and such a classic, the fact it is being shaken our now is no surprise at all. It is still bearish and this works to our advantage, but first they are going to knock the short out and take their positions.

 The 30 min chart shows the distribution and break down of WMT, it is ugly and in trouble. The Green box shows WMT is just in line, it is not seeing bullish accumulation on a 30 min chart.

 The 5 min chart showed some accumulation (this would be much smaller then on a 30 min chart, it started the bear flag bounce, but we are already seeing smart money sell in to the breakout as shorts cover (this could also be short selling).

 As usual, the shorter charts show more detail, the 2 min is showing a lot of distribution on the breakout move so as retail shorts cover on what they believe is a blown bar flag (TA even teaches them to go long on a failed patter), smart money is taking the other side of the trade and using the retail covering (buying) to sell short in to.

 Look how bad the 1 min chart is, it's moving in the opposite direction so you know this is a head fake breakout from the bear flag.

We can either watch 3C on any further price gains and look for a spot to enter above the bear flag, or you can wait for a break back below the bear flag's resistance upper trendline or even below the lower flag support trendline. In this situation, if your account permits it, I would prefer a phased in entry, maybe 25% to 1/3r above the bear flag upon seeing a likely market reversal, maybe another 25% below the upper flag trend line and the remaining 50% or remaining 1.3 on the break below the lower trendline. We want to add as the trade works in our favor.

This is exactly what I was hoping to see, this gives us an excellent, high probability trade with lower risk and the head fake will likely add fuel to the downside move.

Keep an eye on HGSI

Earlier I posted on HGSI and today's move having a high probability of a downside shakeout, this is one that I like as a long for at least a swing trade and the longer term pattern is developing well too.

If we get the upside head fake move in the market with AAPL (most likely), there's a good chance we will see a powerful move up, that is the role of a head fake move, to be convincing, so if you are VERY nimble, there's probably some gains to be made, you could use ETF's of the market averages or leveraged ETFs such as UPRO, TQQQ, UDOW or URTY, I think you only need pick one or if you go with all, treat them as 1 trade for risk management purposes, but even with the possibility of a sharp move up, it is sort of like picking up change in front of a steam roller so I would only do this if you are very nimble and can get out of the way quickly and don't expect this to be more then what it is.

HGSI I like for other reasons.

 We have a nice rounding intraday bottom with volume confirming.

 As I suggested earlier, a move today in HGSI below support triggered a lot of stops allowing the pros to accumulate, the 1 min chart shows a strong positive leading divergence.

 As does the 2 min

 Look at the 5 min!!!!

And even on the 15 min in a 1 day move which is rare.

I would set an alert for HGSI crossing the $7.50-$7.55 area and that's where I would want to be long, you can always have a stop a little below, maybe $7.40, depending on your risk tolerance, I always favor wider initial stops even if it means taking on fewer shares.

Basically, what we may have here is a bullish head fake move in HGSI today. Set those alerts!

And here comes the move

This is what I have been showing you all day on the 3C intraday 1-5 min chart, accumulation for a move higher.

 The DIA breaking the 50-day 5 min moving average, remember this trick because you can use it to your advantage. Traders refuse to adjust to the market which now uses technical analysis against them. This 50-bar m.a. on a 5 min chart has been in use for over a decade as a day trader favorite, so often we can use this against other traders as Wall Street occasionally uses it against T.A. traders. Wall Street has adjusted to technical analysis, technical traders have not adjusted to Wall Street, that is why things like the head fake which we saw a mini version of in AAPL today or in GLD last week that took out a month of longs in 1 day, work, because technical traders are predictable making Wall Street somewhat predictable in the ways they will use TA against retail. Also remember this other trick, within a down trend, we get a bullish candle stick pattern on huge volume, it's almost always a reversal signal. On this 5 min chart, the "Tweezer Bottom and huge volume are quite clear in the white box with support at the red trendline.

 The earlier large volume skews volume recently, but as you can see, it's increased as price moves above the 50 bar 5 min average. We see another increase as resistance is broken 2x.

 The SPY volume increase on a move above the 50 bar 5 min moving average.

The NYSE Tick Index appears to be trend-less today, but note there are a lot more moves below -1000 then above +1000 (The NYSE Tick Index is all NYSE advancing stocks per tick on the timeframe -here 1 min- less the declining issues).

Note the biggest move down after 2 p.m. was -1360 and seems to have acted as a washout for the market to move higher, kind of like short term capitulation.

ES Update

ES is confirming the mild strength in the market averages that I believe is tied to a upside false breakout move that will be our trigger for a downside market reversal-I know there are a lot of seeming contradictions in all of that, but AAPL's intraday head fake which was small chows you what the purpose of a head fake move is and a larger head fake move will have more dire consequences and give the market the extra fuel it needs to push the market lower. The GLD head fake too out over a month of longs in 1 day!

These are just ES 1 min charts, later in tonight' wrap I'll show you the more important longer term charts for ES.

 As the market opened at 9:30 (ES or S&P E-mini futures trade 24 hours a day during the trading week) where the chart is a darker background shade, 3C was very negative on the open and sent the market lower, since there have been some minor positive divergences just as we saw in the market averages in the last "Market Update" so we have confirmation in ES too.

This is a closer view of today's intraday ES trade and you can see 2 relative positive divergences and 1 leading, this should lead the market and ES higher, probably in to the close and help set up the head fake breakout move we are looking for which should signal the real reversal in the market. Yes, we are looking for what appears to be strength in price to signal a break down in the market!

Market / AAPL Update

As AAPL seems to be the trigger to months worth of analysis, I'll be updating AAPL as well in the market update.

AAPL

 Friday's AAPL analysis and last night's both had me perplexed on one issue, here's last night's post and that issue was the Bollinger Band being so tight, it looked like a directional move was imminent which it was as we saw today, but the event that I would think would be most likely to cause a head fake would be going in to or on the day of AAPL's I-pad 3 launch on Wednesday. I couldn't quite figure out how the tight Bollinger Bands would allow AAPL to wait on a breakout until mid-week...


"as I stated in Friday's AAPL post linked above, I'd estimate that reversals are preceded by head fake moves about 80% of the time. AAPL being the most scrutinized stock and the most influential stock in the market, I theorized on Friday is going to give us a head fake breakout. "


"A couple of interesting events we have this week, Apple unveils the Ipad 3 on Wednesday, although the Bollinger bands are so tight, I don't think the breakout will wait for Wednesday."


As you can see below, it didn't... 

 In the yellow box we have an intraday head fake breakout in AAPL which led AAPL lower very quickly, this is the event that I suspect may be the timing cue for the market, but on a daily breakout, not intraday. Interestingly though, the bullish looking triangle (consolidation / continuation pattern) would likely have AAPL longs buying the triangle itself, not to mention the breakout earlier today. The failure of that breakout would have shaken out quite a few of those longs as we saw in AAPL's intraday volume today which would give Wall Street an easy way to accumulate in the wide open at better prices for an eventual real daily head fake breakout move. I say they could accumulate in the wide open because they generally do it quietly, but someone has to take the other side of the trade and with that volume, no one would suspect that the pros would be accumulating, they'd just expect that it was someone taking the other side of the trade and not really pay it any attention. The 1 min chart i in line (green box).


 Here's the 5 min chart which suggested AAPL was getting ready to break down with a relative negative divergence at the red arrow and a leading negative (more powerful) at the red box, it was the white small positive divergence that suggested accumulation for a head fake move. While this move today "could" be the head fake move I was looking for, I would suspect it would be bigger and on a closing basis. The Bollinger Band Squeeze and the action today now seems to fit the question that was bothering me last night.

 The AAPL 15 min chart shows confirmation in this time frame and then a sharp leading negative divergence as AAPL went lateral, lateral trade is quiet trade and this is where we most often see accumulation and distribution.

 The 30 min chart and the bigger picture in AAPL, the 15th I believe will be looked back upon as the day that AAPL's trend or its back was really broken, as I said last week, you can cut the head off a snake, but it can still appear alive and move around for quite some time, even though the event that ended its life had already occurred. Note how negative the 30 min chart has been since the 15th with a leading negative divergence. This negative stance does not rule out the snake still moving and short term divergences can still produce the head fake and you got a glimpse today of what even a small head fake move can do to a stock rather quickly in AAPL today.

DIA

 Intraday on the 1 min chart, the DIA is showing a relative positive divergence followed by a leading positive divergence as it trades slightly upward, but largely lateral compared to recent action.

 The  1 min chart has bled in to the 2 min chart which is also now showing a leading positive divergence (these charts are mainly intraday moves, but if they continue with strength they bleed in to longer charts that effect longer trends).

 Even the DIA 5 min is leading positive now.

 The big picture in the DIA on the 60 min chart which trumps all other intraday timeframes shows the DIA apparently under distribution as it moves higher, this is because Wall Street trades in huge size, they can't sell a position in a day, they have to let out a little at a time as to not drive prices against their moves. However recently the 60 min chart has shown strong 3C downside, leading negative momentum suggesting we are very close (this can be selling or more likely short selling)-remember in the size they trade, it takes time for them to build a position unlike the way or size we trade which doesn't effect the market. The leading negative divergence is also in a rather flat area of DIA price action compared to recent months, it is nearly lateral, the exact place we see smart money most active.

IWM

 The IWM is showing a positive relative divergence at the arrow and a leading positive at the square.

 The two minute chart shows the same, suggesting, like the DIA, there's short term accumulation in to price weakness. Wall Street needs sellers to fill their positions without moving the market against them. If they bought in to strength, they'd drive prices up, exactly what they don't want. This is all short term and in my opinion in preparation for a head fake move.

 The strength has bled to the 5 min chart today as well, again note the lateral trade.

 Longer term the 15 min chart has shown 3C negative momentum pick up as the IWM has been flat for over a month.

 The 30 min chart shows the momentum picking up as well recently and this entire move up as being under distribution, we identified the accumulation period which was August through October and a little after in November and December. Wall Street plans way in advance, I have charts of the home builders being accumulated in 2000 when no one was interested, then they made 5000% moves when the housing bubble started.

QQQ

 We are seeing the same confirmation in the QQQ intraday on the 2 min chart...

 And intense leading downside momentum in 3C recently.

 We also see that momentum bleeding in to the 30 min chart.

SPY

 Again, the SPY confirms the other charts with a leading positive divergence on the 1 min

 Also seen on the 2 min as strength migrates to longer charts.

 The 5 min is just showing hints of positive divergences now. These are not the kind of divergences that suggest the market is truly strengthening, just the kind we'd expect to see on a head fake move, the longer term charts, like the Risk Asse/ Credit charts show how bad the market truly looks.

 SPY 30 min has shown long term distribution, the momentum has picked up recently all pointing to a top / reversal and AAPL I think will be the trigger as APL is essentially the market.

Long biased trades on market averages or correlated assets could be taken, but they will remain risky as I expect the break this week, but it could really come at any moment. The real set up is waiting for a head fake move, that is where we really want to look at loading up on some trades with high probabilities and low risk. There are of course longs that will buck the trend, that is why I say market average longs or stocks that are closely correlated with the market.

HGSI Update

 I liked Friday's doji close, it looked like a short term move up was in the works as it touched on some support (although as we have seen several times already this morning, support and resistance being shaken out are all too common), I believe there is also a larger base in the works that is a separate trade and not quite there.

 Looking closer at a 60 min chart, there appears to be another support level that may be more influential, you can see where it is at the green arrow and trend line.

 This is that same support area, note the pick up in volume as it is crossed, so this does appear to be an important area locally, after the break of that level, HGSI has been pretty much lateral, so I'm guessing there were a lot of stops piled up there and it was too juicy for the pros not to hit. This is another reason I prefer not to put any of my orders in with a broker until I'm ready to execute them, you re showing everyone where you "Uncle" point is and what your intensions are. This is also why i don't put stops near obvious levels.

 On the 1 min chart there is a 3C positive divergence as that support level was broken today. Like that Japanese game that was mistranslated, "All of your shares are belong to us now!"

 The 5 min chart is showing a strong leading divergence here too so this may very well have been a shakeout move to grab shares on the cheap. This is more along the lines of a short term (maybe swing) move up, as I said, I see 2 potential trades here, the shorter one and a larger base and larger move up, this is where the shorter swing trade analysis ends.

 This 15 min leading positive divergence I believe is part of a bigger base being formed in HGI and a longer term trade.

 You can even see the recent positive divergences on a daily chart which is very meaningful.

Ultimately though, I would expect some form of a double bottom base, so on a longer term basis, I wouldn't be buying HGSI just yet, I think on a shorter term swing basis, it's worth a look and I still have the long calls in the model portfolio.