End of Day Indications

Other than the Risk Asset Layout update which I found to be encouraging for our short squeeze scenario (make sure you see Friday's post which included many of the same indicators, but revealed subtle changes not otherwise noticeable using ROC), especial he moves in High Yield Corp. Credit and Yields/Rates, 3C has also had some interesting insights today.

As you know from the market updates through out the day, 3C was picking up on near term accumulation  as the market moved lower. I also showed you the Short selling on a "perceived" failed test of resistance was apparently in play today as I expected in an early post this morning. As short sellers are entering new positions, it gives smart money the supply needed to accumulate without anyone noticing anything strange (short selling is still selling and still putting supply on the market) as someone has to take the other side of the trade.

Here are some of the short term and longer term charts today, none of the charts are "Big Picture" long term, which as many of you know, is very negative.

 First up is ES, the S&P E-Mini Futures, while the early negative divergence wasn't huge (not at all as big as the decline would have suggested) it was enough to get ES moving lower on the news that Egan-Jones downgraded Spain. As I mentioned early with regard to market indices, there was accumulation in to the decline and accumulation in the flat area seen here on ES  1 min. Note how the positive divergence went from a relative divergence to a leading positive (in the white boxes) as it became stronger. The first leading positive divergence was just before 1:30 p.m. EDT (13:30), shortly thereafter the market moved higher, it seems pretty obvious accumulation was underway intraday. ES has remained strong going in to the evening session with a leading positive divergence that is the highest of the day.

 Just from looking at the price chart of ES (VWAP is added as well), the area in white looks like a very typical accumulation area, price is relatively flat/lateral, volume is lower and ES is below its VWAP.

 DIA intraday looks out of scale because of the afternoon leading positive divergence, I drew in a green arrow between Friday and the a.m. highs today to show in fact there was price confirmation and not a negative divergence, it's just that the positive divergence that started on this chart around noon time, became so strong and lead so high, it skews the scaling on the early morning action. As DIA closed, it had a new intraday leading positive divergence (the strongest kind) making new highs not only for the day, but for the entire period in which price has been in the pennant portion of a bear pennant/flag (approx. 5/21-5/25).

 DIA 5 min saw that strength in the shorter term charts (as I mentioned earlier, if the positive divergences are strong enough, they migrate to longer, more important timeframes) bleed through to the 5 min chart; note the VERY small negative divergence in the a.m., it's almost as if the Egan Jones downgrade was already known about last week, which isn't so far fetched as we know the S&P notified the US government well before they put out the downgrade. Again note that during the flat period of trade from 12 pm through 2 p.m. 3C was making a strong leading positive divergence, then price followed. This chart also closed with a new leading high, even though price itself didn't close at the highs of the day; this is a leading positive divergence in the DIA.

 A little longer term view reduces the noise, this 15 min DIA chart shows the very clear distribution we saw on May 1, we even called what the top would look like while the market was still moving higher that day. The green arrow shows confirmation of the downtrend, but recently this chart has gone leading positive and it's in the exact same area as the bear pennant.

 The IWM showed the same theme intraday on this 2 min chart, really there was no negative divergence at the a.m. highs, which either means absolutely no one knew about the Egan-Jones downgrade or the whisper was out on Wall Street and they intended to use it to their advantage (accumulating shares on the cheap), I lean toward the second option. Again starting around 12 p.m. 3C was very strong on the positive side and closed with a new leading positive divergence for the day, even though price closed off its highs.

 IWM longer term 15 min chart shows the May 1 top at the left which forms the flag pole of the bear flag/pennant, there's been signs of accumulation in numerous assets during the May 8-11th period, this may seem strange, but we saw the very same thing in CHK and had the actual levels and date at which Carl Icahn accumulated as 3C showed, so this wouldn't be the first time we've sen such a divergence.  Note the strength of the leading positive, it is higher than the May price highs, this is an exceptionally strong leading positive divergence, suggesting quite a strong move. I have a feeling it will be much stronger than we anticipate. Also note that leading positive monster formed mostly during the pennant, which is where traders expect to see distribution in anticipation of the next leg down-HEAD FAKE/Shakeout.

 The longer, more powerful IWM 30 min chart also shows the May 1 negative divergence/distribution as well as that earlier accumulation this month I mentioned above and an even stronger positive divergence in the pennant consolidation.

 QQQ 3 min intraday shows the same theme, no real negative divergence at the a.m. decline, but the same strong leading positive kicking in around noon, the Q's ended with a new leading positive high, even though prices closed off their intraday highs.

 QQQ 15 min has, along with AAPL, been one of the 15 min charts that have stayed in a leading positive position as price moved lower, the May 1 distribution is seen to the left. Note one of the largest positive divergences is at the recent price lows that started forming the pennant.

 SPY 1 min intraday shows Friday's end of day positive divergence, apparently accumulation in advance of a known move as few traders actually add to positions over a 3 day weekend. Again because of the leading positive divergence in the afternoon, the a.m. trade / 3C scale looks off, it confirmed as you can see at the green arrow to the left, once again, no negative divergence at the a.m. highs which is curious as Wall Street always gets this information first and their HFT's can react in micro-seconds, it seems they simply weren't interested in letting go of any shares, much in the same way I'm not interested in letting go of any of my core shorts even though I know I could trade around them and probably be fine (I'm not willing to take the chance at this point). Accumulation picked up as prices were still falling and grew stronger in to the afternoon flat range (a common place to see smart money buying or selling), the close left 3C in a very strong leading positive divergence.

 SPY 2 min shows opening confirmation of the gap up as well a accumulation late Friday in to falling prices. Again note the strong noon positive divergence in to flat prices (yellow arrow) and another leading positive divergence at new highs for the day and probably several days.

 SPY 30 min makes several tops and distribution at those tops clear. These are the areas we were building short positions. The May 1 rally shows a strong leading negative divergence in to higher prices until it failed later that day, one we got absolutely perfect, right down to what the afternoon fall would look like. Since then, the very strong positive divergence since May 7th stands out like a sore thumb, these are the kind of divergences you look for, if it doesn't jump off the chart, pass and look at the next stock. Again, the leading positive area is strongest at the pennant formation over the last several days, the opposite of what technical traders would expect, but their short selling inside the pennant as they view it as a bearish pattern, allows Wall Street to accumulate.

 Even the 60 min SPY chart shows a large (actually 2-the earlier positive I mentioned above) positive divergence and major change in character in underlying trade. When you look at the size of the negative divergence at the May top and look at the size of these positives, it really seems like something is up that we don't know about and we should expect on heck of a strong move up before the next leg down.

 Remember I mentioned earlier today that Treasuries-the safe haven trade or flight to quality was seeing distribution as price moved higher? Here you can see negative divergences not only as TLT moved higher (click the link to the post today), but it continued at the highs of the day for Treasuries, 3C is currently leading negative.

 I also mentioned the Energy and Tech looked better today than Financials earlier today, here we have a 2 min intraday chart of Energy seeing that same noon time accumulation/positive divergence, which went leading positive around 2 pm before prices took off to the upside. The close is leading positive well above the a.m. 3C highs although price closed below those highs.

 30 min Energy chart shows the strong distribution in to the May 1 top, accumulation around May 7th-11th and an even stronger positive leading divergence at the recent pennant formation. Note where the recent 3C divergences are strongest, right at the two price lows.

 Intraday Financials did see some a.m. distribution, then a strong positive divergence that lasted until 3 p.m., prices moves higher from there.

 While Financials may have been out of rotation today, the 15 min chart shows they are very much in a very strong leading positive divergence.

 Tech intraday also saw an a.m. negative divergence then a very strong positive in to flat prices (yellow arrow), there seems to have seen some distribution or profit taking near the end of the day.

 Ultimately though, Tech looks like it will lead any short squeeze move higher, remember when we identified the positive divergence in Tech and AAPL on April 24th before AAPL reported? Then in to the AAPL gap up we saw distribution, but Tech has remained in a leading positive position.

 Tech 30 min 3C once again shows the sector rotation/accumulation we identified on April23/24, you can see the May 1 negative divergence/distribution and an extremely powerful leading positive divergence now, the divergence now is the strongest on the entire chart, suggesting quite a bit of upside.

 AAPL 15 min, again we identified a positive divergence in Tech and AAPL on April 23/24, AAPL reported after hours on the 24th, on the 25th there was distribution in to the large gap up from earnings, since AAPL has stayed in a relative positive position (the reason my first speculative longs were in AAPL -which are all doing well), the recent surge in 3C has occurred in a consolidation area (yellow arrow). I still believe AAPL will lead a short squeeze move higher. I look forward to cashing out the speculative  longs which are doing great and adding to the longer term short position which is also doing great because we shorted at the top, we didn't chase the stock.

 AAPL 60 min shows confirmation at the 2011/2012 uptrend and then very sharp and fast distribution as AAPL topped, the distribution was leading negative which you don't often see form on a 60 min chart this fast. Even though the overall 3C position here is leading negative, there is a strong positive divergence (white arrow) on a 60 min chart, suggesting a move quite a bit larger than just a swing trade.

 Currencies-Euro/$USD-remember a higher Euro leads to a higher market, a stronger dollar leads to a weaker market.

 Euro 60 min chart showing a leading positive divergence.

 UUP / $USD intraday showing distribution and a leading negative divergence.

UUP 60 min negative divergence


OVerall everything looks set for one monster move to the upside. I will update later tonight as trade unfolds.

Risk Asset Update

 Commodities vs the SPX (SPX always green comparison unless otherwise noted) are underperforming today, this in large part has to do with the market outperforming the FX arbitrage correlation with the EUR/USD.

 Remember is was May 15th we first spotted something strange in the Euro and $USD, commodities rallied while the SPX sank to new lows, it seemed last week they reverted to the mean, I think the Euro/USD is putting pressure on commodities today.

 Here are commods, the SPX and the Euro, obviously Commods are following the FX correlation more closely and stocks, as they have been recently, are outperforming it.

 Yields which are an excellent leading indicator as equities gravitate toward them, were weak on the open, but since they have showed excellent relative strength, turning up before the SPX and hitting a new high on the day, this looks bullish for the market near term.

 Longer term you can see Yields leading indicator quality as they called the top back on May 1 days before the SPX topped and several other bounces they have called out as going no where. However this is the first time in quite a while that Yields have made higher highs/lows. Don't forget Friday's late day post with Rate of Change which offers additional insight that you may not otherwise realize is present.

 The SPX is oddly VERY much in sync with the $AUD, the $AUD is one of the better leading indicators among currencies and for the purpose of a near term/strong short squeeze move, I'm happy to see the $AUD is not negatively divergence, but rather in line and maybe even leading the market.

 $AUD over the last several days has had excellent correlation with the SPX, much better than the traditional Euro/USD.

 This is also the first time since the May 1 top that the $AUD has put in higher highs/lows, don't forget to check Friday's post with ROC applied to $AUD.

 In the afternoon the Euro is moving a little closer to the SPX.

 However you can see how disconnected the two really are.

 Remember we noticed something bullish in the Euro on the 15th, here it rallied from the 16th on as the SPX fell in to the start of the bear pennant formation, right now the two are quite disconnected and it's surprising to see the market as strong as it is considering, but we also know why the market is acting the way it is, manipulation.

 For a near term bounce, this chart is very encouraging, High Yield Corp. Credit is close to making a new high on the day and leading stocks, credit almost always leads equities, this is bullish for the market.

 Even more so is the huge jump up High Yield Corp. Credit made today on the open to get back in line and actually start leading the market, another excellent leading indicator.

 Long term HYC Credit has warned us about the big picture in the market, very bearish, however in the Credit downtrend you can see head fake moves both below and above the channel that give HYC credit that extra momentum it needs as traders are stopped out of their positions on these breaks above and below support/resistance, this is the point of head fake moves, to add momentum. The last upside head fake breakout of the channel led to a very rapid decline in HYC credit.

 As mentioned earlier, Energy and Tech looked better in underlying trade today than Financials, you can see it in momentum as well with Energy above.

 Longer term Energy, it is in pretty good sync with the market, although al 3 sectors will need to be to get a strong move going and sustained.

 Financials intraday fell off badly this a.m., they gained near noon and have been underperforming in relative momentum vs the SPX.

 Longer term in the bear pennant, Financials have been pretty much in sync, they are clearly out of rotation today, I would probably consider adding to a speculative financial long if I needed it while they are showing some weakness.

 Tech has been nearly perfectly in sync today.

 Longer term it has rolled in and out of rotation during the pennant in the SPX, but seems to be now moving back in to rotation which would agree with the short term 1-5 min 3C findings in AAPL.

Sector Rotation since Friday shows the Defensive sectors rotating out-Utilities, Healthcare and Staples, Financials haven't done much since Friday, Energy, Basic Materials, Industrials, Tech and Discretionary are all rolling in to rotation as the market looks more like a risk on environment than risk off, which is a significant change since last week.

ES-Market Update

The positive divergences that started in to falling prices on the Egan Jones downgrade of Spain, have been pretty consistent all day. Here's ES with a leading positive divergence.

FB to bounce?

It looks that way. We don't have a long enough history to know how FB trades, but there have been some great signals and it looks like it wants to bounce, beyond that, the charts are ugly.

 FB 1 min positive divergence

 FB 2 min with some excellent negative divergent signals-VERY CLEAR, and a current leading positive divergence- suggesting a bounce, bigger than any FB has seen thus far.

 3 min chart also showing a positive divergence and likelihood of a bounce.

The 30 min chart is in line with price action so I can't view this as anything more than a bounce at this point, the bigger picture confirms the overall downtrend.