Today's Wrap

I was going to post a bunch of charts, but I think it's not necessary, the NFP will be what it is, although the late day positive action that just so happened to be at what would be a head fake level just in front of a huge economic release, is all seeming more than just coincidental.

There are several underlying factors that are offering the market some head room, Credit remains supportive as do Yields, the Euro looks to have a several day long positive divergence which would be supportive of the market. If you read the market updates today, you can pretty clearly see where I was going with the  analysis and what the underlying action looked like, so far it is all supportive of the market theory I put out Tuesday night-one good pop higher with a move in AAPL.

One chart I do find interesting and it's because it's the only one that can keep showing us the underlying action with the market closed is the ES chart, take a look at this current snap...

Other than the continued, very large positive divergence, what is also interesting is that ES is being kept in a range (accumulation is often seen in flat ranges as it provides stable prices). According to the ES model below, the underlying conditions are favorable for ES to move higher, yet it remains in a flat zone with a stronger and stronger positive divergence.

CONTEXT ES model.

And my AAPL position today, it doesn't matter what I know that may be contrary to entering the calls, it doesn't matter if the position fails miserably, I never pass up on a divergence that consistent and strong.

You may recall that a move in AAPL was the one last thing I've been looking for in this bounce before it ends.

I may add some more updates, depending on how the market develops. Tomorrow is looking to be an interesting day.

Important Update

 DIA 1 min didn't even confirm the downside so it is in a strong leading positive divergence

 DIA 3 min with the biggest divergence of the day easily, probably several days

 DIA 5 min

 IWM 1 min

 IWM 2 min

 QQQ 1 min, a huge change for the Q's

 QQQ 2 min

 QQQ 5 min

 I took this ES capture, then captured the charts above, by the time I came back to ES, look at the change..

Something is clearly going on, this is a hugely coordinated move.

Market Update-IMPORTANT

I said in the last update that now we have made what could be the head fake move, we need to wait to see if there's improvement in 3C, there is, HUGE!

By the time I capture the charts, it is already stronger than 15 seconds earlier. I'll try to get some up next.

This does appear to be the head fake move that we see so often.

AAPL Update

I'm going with AAPL May $575 Calls, this is a smaller position than normal as I consider this a speculative trade. I'll likely look to exit the trade (if successful) ASAP. The May calls were about 1/3 the price of the June and I''m looking for a short term move.


Here are some charts that influenced my decision.

 2 min

 3 min

 5 min

 10 min

 15 min

No matter what I may think about the rest of the market, when I have that many positive divergences, this is a high probability 3C trade.

I am going to take a speculative long AAPL position

The options model portfolio has been doing well with a lot of winners the past several months, I think I will try out some AAPL Calls, I'm not sure of the strike yet or expiration, I need to look, but I will report back to you momentarily.

ES Update

 On the same move featured in the last post in the SPX, here's ES, 3C downside momentum has slowed, just like the SPY, there are initial signs of a positive divergence on the break, just like the SPY it's too early or the signals are not developed enough to draw any conclusions other than what I already posted in the last update with regard to the market trends we have observed for some time now.

The CONTEXT model which was way out of balance earlier with ES rich to the model, has now reached short term reversion to the mean, or neutrality.

Still gathering information...

Remember, tomorrow at 8:30 a.m. we have non-Farm Payrolls, this is the biggest economic event of the week. The market could move huge on a miss or a better than expected print. It's not a simple 2+2=4 equation. A String of bad economic reports such as we have seen over the last few months with a miss in the NFP "could" have the opposite effect of what you'd normally think, this would be fostered by the QE-Crowd who sees any bad economic report as good for the market as they assume it will force Bernie to launch QE3, so even if we knew what the print was ahead of time, Wall Street will likely guide the initial reaction, that's just the way the game is played. I can almost guarantee if there's a miss and the market rallies, all you will here about on CNBC is how it is QE expectations, it is really about how Wall Street wants the market to move in the near term.

 I mentioned we could see a break below the range and before any major reversal we always do see a head fake move, so is this a head fake move or the real deal? Note the volume spike as stops were hit and shorts entered positions.

The initial 3C indication on the 1 min chart (this will either continue to build and effect longer term charts or it won't) has been relatively positive. We have a relative positive divergence and the start of a leading positive divergence. We want to see if these keep up and build, this will tell us whether the stops that were hit were accumulated or not. The general market trend has been a head fake move before a reversal and a volatility bounce on the break of important support, this is pretty important support for near term action.

I have more charts to look at and am still debating an AAPL position.

AAPL Update and Market Reaction on intraday pullback

First AAPL, as I said last night, this may be the single most important chart in the market right now.

 AAPL 1 min, I added something to these charts other than the normal positive/negative divergences, below I added white boxes in positive divergence areas and red in negative divergence areas, when viewing them compare to where price is, what the price trend has been and what happens after. The AAPL 1 min chart has been in a leading positive overall position since Wednesday, today it is showing an intraday leading positive on the morning pullback, this "may" hit a new leading high for the last 2 days.


 The 2 min chart since yesterday afternoon shows a late date positive divergence, this is almost certainly in preparation for today's a.m. gap up, as there have been pullbacks, there have been positive divergences, there are NO negative divergences on the chart.

 Long term AAPL 2 min chart since the decline late Tuesday, overall a rising trend in 3C.

 The 3 min chart (I don't usually use this timeframe, but 3C stands for "Confirm, Confirm, Confirm!!!" Therefore that is what I'm doing. You can see clear distribution in to the post AAPL earnings gap up, that was clear that day, since at several dips there have been positive divergences, positive divergence almost always show up in declining prices or flat areas; that's the power of 3C, to be able to contradict price alone and give you an idea of the underlying smart money action as price itself is deceptive.

 The 5 min chart shows a number of positive divergences, some are much higher than today's, I have seen this happen before and although you must account for the overall average of the accumulated position, it is quite common to see price rally higher than the first divergences at higher levels.

 The 15 min chart is where AAPL really comes alive, There are numerous positive from the day before AAPL released earnings and Tech rotated in on the 23rd/24th and the recent positive leading divergence of the last 2 days has hit a new high, this is very significant for a 15 min chart and has me considering a VERY speculative VERY short term options CALL trade for a possible bounce higher in AAPL. I would never consider it otherwise if this 15 min chart didn't look the way it does.

The chart is so beautiful that I'm positing it again with no annotations just so you can see it, I've only marked significant dates below.

 As I suspected, the last pullback in the DIA did see a positive 1 min divergence, quite strong too, it is leading positive.

 The IWM saw the same leading positive on the last pullback

 The Q's pulling back to the area I was looking for, also seeing a positive/leading divergence on the 1 min chart.

The saem for the SPY, also leading positive.

So far, if we stay along the lines of one of the theories I offered on Tuesday night with regard to the market bouncing, I said the market would need to consolidate, divergences take some time to put together, it doesn't happen in a few hours. Thus far we do have a fairly tight consolidation range. The other thing would be that buying would occur or accumulation, on dips, thus far the charts have been showing accumulation on dips, when prices moves to the upper end of the range we see negative divergences sending it the lower end of the range where we see positive divergences and this pattern is repeated and repeated. The trend of this repetition of this pattern is showing up on the longer term charts like 5-15 min as positive.

That's where we are now. If I decide to take an quick AAPL long Call trade, I'll let you know BEFORE I take it.

Market Update

Well the charts are still given very small and sometimes ambiguous signals, here's what I see thus far...

When I explained my theory, I said the market would have to consolidate and accumulation would take place at levels near this white line. That's why it is so important to see how the market and 3C react in that area.

 DIA 1 min for intraday details is largely leading in position

 Looking closer it looks clear that there's been light accumulation at the lows and when price moves up a bit too high, they feed shares out (distribute) to move it lower. This isn't uncommon, but the signals are quite faint.

 The 5 min chart has less noise, more trend, you can see where recent higher levels saw negative divergences and a positive at lower levels.


 The 15 min which the DIA was the only one that looked more bearish yesterday, has improved today, its still in a bearish position, but there's improvement.

 The IWM and QQQ started out stronger after Tuesday/Wednesday's decline, they are seeing more negative divergences lately and deeper. One "possibility" is if Tech is to lead, then they'll want to accumulate tech as cheaply as possible, that's one scenario. This is the IWM 1 min.

 The 5 min shows the same, but there's some recent improvement.

 The 15 min IWM is showing lots of improvement.

 QQQ 1 min, again seeing more short term negative divergences, but it too was one of the better performers in at least filling the gap yesterday.

 The 3 min started off looking better than the SPY/DIA, as prices have risen, the negative divergences are bigger, it looks like this wants to pullback to the Wed. lows which is where we can gather the most useful information.

 QQQ 15 min overall is still not in a horrible place overall, the recent activity is more bullish than I would normally suspect. This is one of the reasons I believe it is probable that there's one more move higher.

 SPY 1 min showing negative divergences at the highs and positive at the lows, this is a much clearer signal then some others.

 On the 3 min where more of a trend shows up, we are seeing the same thing.

The 5 min is also showing the same, whereas the QQQ/IWM were stronger on the initial decline and DIA/SPY were much weaker, Now the SPY is seeing more relative underlying strength than the QQQ/IWM.

I'll keep digging, I need to look at AAPL especially.

ES Update

As you know I just got back from the doctor with my wife, she is still there, my mother came to stay with her as she doesn't understand complex English being from Hungary and there were some scary words being thrown out.

In any case, it will take me about 30 mins to get caught up on where we are at, but so far, price wise, we are pretty close to the scenario I mentioned, "A pullback to accumulate and a final blow off top push". Price is in the range where that could happen, like a doctor, I need to verify and rule out certain scenarios to find the most likely probability, which is what I'm in the middle of now.

For the time being, lets just take a quick look at ES

 I have to get caught up on the European action, but ES did rise from the EU open at the white arrow and saw a negative divergence in to the early morning, pre-market highs. ES also saw a small positive divergence just after the market open which is close to being in line with price.


The broad CONTEXT model which is an amalgamation of a bunch of different assets like Credit, currencies, rates, equity prices, etc is currently showing ES as overvalued as the model has dipped lower than ES has, this may be an early sign of some Wall Street support coming in to the market like we saw last week as the market started to lose its footing, Wall Street stepped in with some minimal support that we saw on the 3C charts and halted the slide and got the market to pop on Tuesday, this may be a similar scenario and would fit with the one theory I've already put out.

So I'm looking at the averages and the different time frames, I'll update you there shortly.

I'm finally Back

First Market Update coming soon