Thank you

As usual, tonight is another event which confirms what I have known for a long time, I have the best bunch of members that any person could even dream of. Whenever you put a hundred people together, I'd expect the 80/20 rule to apply, 80% will be fine, 20% will be a pain.  Even foregoing the 80/20 rule, there's got to be someone  in a group this large and diverse who rubs you the wrong way at least once in a while, especially among traders (it's true, certain traders just can't take responsibility for themselves and always blame someone else). I don't know how it's possible, but I can say with certainty and in all honesty, I am BLESSED to have such an amazing group of individuals who never cease to amaze me with their caring, compassion, interest, generosity, and just about every other noble trait you could describe.

When I look at my emails from members, I don't have a single person, not one single member who makes me feel like, "Uh, not this person". It's really amazing to me how I can be so blessed with such a large, diverse group and not have a single crossed wire. I'll admit, in the past I've had two, one finally left on his own, the other was non-stop complaining, but he renewed for 7 months after he started complaining. It got to be so overwhelming, such a waste of my time that I really felt that 1 member shouldn't take up 40% of my time with non-productive criticism. I don't mind constructive criticism at all, but this was just something altogether different. I finally waited until he renewed, returned his money on that day (so he got the full 30 days he paid for) and cancelled him as he seemed content to renew every month and send me 20 criticisms a day. Since then, well over a year ago, I haven't had one person that I didn't absolutely appreciate.

Many of you know that I aspire to do something bigger with 3C, that I've met with hedge fund managers and have an ongoing relationship with an investment company. I'd really like to take from Wall Street and give to some of my favorite charatis like 4Kids of South Florida.

However, after all of the amazing birthday wishes and emails that not only moved me, but some even changed my perspective of turning 40 (which I didn't like-turning 40 I mean), it reminds me once again that it's just not statistically possible to have such an amazing group of people, it tells me something bigger is involved here and is telling me that for right now, I'm exactly where I belong.

I don't have time to respond to each and every one of you who wrote tonight, but let me just say to each of you individually, Thank you from the bottom of my heart. Time and time again you pick up on whatever may be going on in my life (whether it was my mother with cancer, the loss of my best friend-Tilla or my wife's recent trouble breathing ) and you inquire, send good thoughts our way and prayers (and yes my wife reads most of my emails --I don't know where she finds the time-- so she knows what concern you have shown for her and she is truly as moved as am I) .

There's no way this can be coincidental, I'm truly blessed to do what I love with the best of the best of humanity. Each of you and all of you really inspire me to do my very best, with such a special group I don't want to let anyone down. Considering all the Facebook b-day emails, the cards, the phone calls, etc., each of you, faceless people that I talk to every day in simple emails, have been the best part of this birthday, you really made it special. Thank you.

I'm Heading Out For my 40th B-day Dinner

Lordy, Lordy, Brandt is 40!

I'll check on ES when I get back, right now it has a leading positive divergence, the biggest of the day by at least 200%.

May 15th and Gold-Something is up

You may remember on May 15th we identified a positive divergence in the Euro and a negative divergence in the $USD. I asked the question, "Does someone know something we don't?"

The charts from that day for the EUR/USD currencies can be found in this post...

Here's what happened the next day after that post...

One very influential financial website said, "The Euro is ramping up on no news" and made some reference to how dumb the market was. A few things stand out, 1) we saw this forming May 15th and the Euro lost downside momentum the next day and headed higher over the next few days, while the market that is nearly 100% correlated to the Euro went in the opposite direction to hit lows that formed the start of the current pennant pattern in the market. Why did the Euro run on no news, why was the move planned (we saw it 2 days before the Euro really turned up and a day before it went sideways from down)?

 The divergences in FXE from Feb-late April make sense, they are the right size for the moves, this May divergence on a 30 min chart sticks out like a sore thumb, these are the kinds of divergences I look for for a real edge.

 UUP's/$USD's  30 min chart seemed to make sense as well until May.

 Even the price action itself is extreme, wedges and parabolic moves. UUP/$USD

EUR/FXE

Gold..

For some months I struggled to figure out what gold's correlation was, previous months had shown gold to be a flight to safety trade, other times it acted as a risk on trade with the market, at one point I figured it's just topping and doing it's own thing, but by paying attention to the news flow eventually a correlation revealed itself, one that made perfect sense. Strength in gold was a sign of market perception regarding Central Bank easing and why not? Look at gold's performance during easing periods such as QE1/QE2 and look at gold's performance since they ended. As far as risk assets, gold has the most to gain from monetary easing.

Which brings us to the horrible performance of the Euro, the strength in the $USD and the divergences in both that suggest there's going to be a turn around. From a professional FX trader's standpoint, a big move in the Euro (up) and down in the dollar would be a money making opportunity as the shorts in the Euro are so thick. The same logic can be applied to the market which is showing its own set of "similar" divergences.

Which brings us to a few comments I've made several times recently, "I wouldn't be surprised to see a round of globally coordinated easing" such as we saw in November or independent policy from the ECB or F_E_D.

Considering that, lets take a closer look at gold/GLD.

 GLD vs the Euro in red, you can see there's a fairly tight correlation there, not perfect, but close and that makes sense considering the $USD.

 However over the last 2 weeks or so, GLD has been lateral while the Euro has been trending down.

 GLD vs $USD, here you see an inverse relationship, when the dollar goes up, gold goes down and vice-versa.

 Recently though, the correlation is non-existient as gold tracks closer to the dollar than euro. Is it the easing perception?

 When we first noticed something strange in the Euro/$USD the next day GLD bottomed and has been holding support there since.

 Look at the intraday volume today as GLD touched that support above and then bounced off it.

 On an hourly chart, a leading positive divergence this sharp rarely develops this fast, note it was even stronger at support this morning.

 A 15 min chart since the 15th of May, again note the leading positive divergence around and at support.

 Even intraday the positive divergence was huge on the touch of support.

The 2 min chart over the last week and a huge positive divergence at support.


I obviously would have no way of knowing if CB intervention was coming, all of the chatter out of Europe suggests the ECB is content to do nothing right now, however if you have an Ace up your sleeve, you aren't going to announce it to the world. There' a lot of money that would be made in a strong short squeeze.

Just something to think about as Gold breaks the normal FX correlation and exhibits some odd behavior lately.

SLV Update, a good example of the mechanics of a price pattern.

Price patterns use to form out of market sentiment, more and more they are being artificially manufactured as Wall St. knows exactly what technical traders are looking for, they give it to them and in the process set them up to hold the bag. You can see this everywhere, not just price patterns, but research notes, Cramer's call to buy FB (GS his former employer was one of the IPO underwriters), etc.

More and more the market is manipulated and understanding how and why can often give you that extra edge.

As most of you know, gold and silver are my two least favorite assets to analyze because of the extra-market manipulation of both; i.e. margin hikes and in silver in particular the JPM silver short inherited from Bear Stearns. If you want to see extra-market manipulation, just look at Spring of 2011 when JPM and Blythe Masters where trying to defend their short, silver broke above their defensive line and ran up quickly only to see 5 or 6 consecutive margin hikes from the COMEX (remember JPM did the F_E_D a favor by taking on Bear Stearns-I think it's highly probable those margin hikes-EVEN AS SLV WAS FALLING were a little quid-pro-quo).

 It's interesting how many different asset classes have the same price pattern and 3C patterns. Here's a bear flag/pennant, just like we see in the market ad a number of industry groups and individual stocks. This is a historical bearish consolidation/continuation pattern. Technical traders expect this triangle to break to the downside and start a new leg down roughly the same size as the last leg down that led to the consolidation pattern. This is where Wall Street manipulated these pattern all of the time on every timeframe. Note volume is correct for the consolidation as well, it is diminishing in to the formation of the apex.

 Here's the medium term larger picture or strategic view of SLV, a 60 min positive right in the pennant, traders would expect this pennant to be under distribution, the opposite is happening.

 The 15 min chart has the same features many of the other risk assets have, that accumulation stage in early May, then a stronger positive divergence in to the consolidation pattern, this is leading at a new high, which if you think about it makes complete sense. We try to trade in the same manner as Wall Street, which means we often phase in to trades, the first positive divergence would see about a 1/3 normal position commitment, we leave room in our risk management to add at better prices. The much stronger positive divergence right now suggests Wall Street is doing the same as we do and at better prices is adding more shares, this is the same thing we do, often filling out the complete position where we think the reversal area is.

 Now looking at the near term and remember we are inside the pennant consolidation on these charts, we see a positive divergence at the lows which are right at the support line of the pennant, of course Wall Street wants to buy as cheap as possible, that's why they use VWAPS to gauge a market maker/specialist's fill of their order. As prices move out of the accumulation zone (higher prices) you can see a small negative divergence knocking them back down, I would bet a dime to a dollar this is the market maker/specialists influencing the market to bring prices back down to the area which they want to accumulate in (lowest prices possible).

 This 2 min chart shows a negative divergence as prices reach the upper support line of the pennant and knock them back down, once they are down, look what happens next-a strong positive divergence/accumulation which happens to be at the exact support trendline of the pennant pattern. Note the loss of upside momentum, but on a 2 min chart THERE IS NO NEGATIVE DIVERGENCE! The negative divergence on the 1 min chart is NOT strong, it is NOT distribution, just enough to turn prices back down. If the negative divergence on the 1 min chart was strong, it would appear on this 2 min chart-this is the manipulation of prices, allowing smart money to put on a position at the best prices while technical traders think the exact opposite is happening. The technical traders seeing this bearish pattern will sell short (early) in anticipation of the pattern breaking to the downside as nearly 100 years of Technical Analysis have taught them. This short selling (selling) provides the liquidity needed to accumulate shares without boosting volume on buying which would raise suspicions. Often we see a break below a pattern like this which for Technical traders, confirms what they have expected and they move in to the market short in bigger size, which gives smart money more shares they can accumulate on the cheap with the added bonus of a bear trap. As soon as prices cross above the triangle, shorts realize they have a failed pattern (at least in the near term) and they are forced to cover, all the early shorts who entered during the bearish pattern's formation and those that entered on a break below the pattern are all now at a loss and start covering, which changes the supply/demand equation sending prices higher, which causes the hold out shorts to cover, again sending prices higher. The head fake move is a primer that gets a bigger move under way.

One of my favorite examples of this was our GLD trade or the short positions accumulated in BIDU, both on head fake moves.

A quick look at GLD probably explains the concept better...

 GLD had formed a large triangle after an extended rally of many years, but at least 3 years of clean rally. We suspected this was/is at least an intermediate top if not a primary top. Price moved right around the apex of the triangle, a solid break above would cast the bearish top pattern in doubt, but we new something  few others did at this point in time, 3C was showing a large negative divergence/distribution. Since all of the concepts I explained above about head fake moves being a primer to get momentum behind a reversal, we saw a resistance area and thought "Before a downside reversal as 3C suggested, we will see a head fake move to the upside to trap longs). A day or so later the short term 3C charts confirmed small positive divergences suggesting this defined area of resistance would see a breakout. We waited for the head fake move to short GLD.

 Here's the head fake move, a breakout above resistance and above the triangle's apex, note volume picked up as momentum traders chased the breakout (which is an old technical analysis concept-wait for confirmation in price). At this point we could see distribution in to the buying demand grow even deeper and I entered a GLD put as did many other members.

 within a few days the bull trap was sprung and as GLD moved below former resistance (current support) longs started to panic and sell, which put more supply on the market than demand and pressured prices lower, then more longs sold at a deeper loss, you can see it in the day's candlestick and the volume-a perfect bull trap. The GLD puts were closed for a nearly +215% gain in just days with minimal risk.

Ultimately GLD moved much lower as 3C had told us before the head fake even began, but that initial reversal day provided the momentum for the reversal and the extra profits for smart money.  I could have kept the puts longer, but as they say, "Bulls make money, bears make money, pig get slaughtered". The momentum of that day caused premiums to soar and that was the best single day to exit. After that there was some consolidation and between that and time decay, it just seemed best to take the gains on the original plan. What should be clear by these charts is the fact that we see these head fake moves on all timeframes, before all reversals probably 80% of the time, technical traders are just that predictable that it is virtually guaranteed money.

Back to SLV...

 On a 5 min chart you can see the small distribution sending SLV lower and to the bottom support trendline where a powerful positive divergence formed-buying on the cheap. Note there's no negative divergence on this chart today, there was a smaller one sending prices a bit lower, but it wasn't serious, it's just the tactics of those who are filling the orders and making a market.

On a 15 min chart in the pennant, last Friday was the only serious negative divergence sending prices to the lower trendline and there we see a serious positive divergence. It's sort of the same way market makers work a VWAP.

Ultimately SLV looks like it will move higher, again to do so, dollar weakness will be needed. It's nearly impossible to predict the exact specifics of whether there will be a downside break below the consolidation before a reversal or if they are ready to break it out to the upside. More now than ever, fundamental news events/surprises are influencing the market and I suspect Smart money has to adjust to these events as they unfold; we knew that we'd be entering a more volatile, less predictable area a month ago, but like I say, "Don't get lost in the lines", keep an eye on the larger picture which is this chart...

The increasingly powerful 15 min positive divergence in SLV.

AAPL Plan looks like it may just work out.

With my options trades I always go out much further with the expiration than I expect the trade to last and July is my preferred expiration, I closed the June Calls (held the July) so I could hopefully rollover the equivalent of what I closed in June Calls. I explained in the last post my reasoning and thought process there.

 On the daily chart at the white arrow, this is the high volume and bullish (or bearish in a trend that is up) candle reversal that we see so often and on every timeframe. For a reversal to the upside it's like mini-capitulation, for a reversal to the downside, it's like mini-churning and this seems to work well on any timeframe. The Green arrow shows AAPL crossing above the major support/resistance level that is being watched, it caused some short covering as shorts would be expecting a failed test of that level, you can see that in volume for the day. The next level that will really get shorts thinking is right at the red trendline, I think we'll need some dollar weakness first though before that can become a real full on short squeeze. Right now a lot depends on dollar weakness which depends on Euro strength. The mid term strategic trends in both suggest it will happen, how amidst all the bad EU press, I have no idea, but I lean toward some favorable remarks toward ECB easing or some CB easing.

 AAPL today formed a nice little bull pennant, volume was up on the move higher, volume is declining in the triangle/pennant, most traders will look at this and expect a breakout move to the upside, I'm hoping for a little pullback first to add July Calls in to price softness to replace the June position just closed.

 On a 60 min chart, the major trendline is to the left, the next area that would really get shorts worried is where we are currently. AAPL backing off that trendline would embolden AAPL shorts which isn't a bad thing, especially when it needs some extra momentum to push it above the next resistance level, their covering (as they tend to place stops at EXACT price/resistance levels) would give that extra upside kick.

 Again two strategic views, the long term 60 min chart leading negative, which is why I'm holding equity AAPL shorts and will add to them on price strength/3C weakness and the more immediate intermediate trend which shows a positive divergence at the white arrow on a 60 min chart-this is no small matter on a 60 min chart.

 The inline status of AAPL we saw earlier on intraday charts is backing off, remember traders will be expecting a bull flag/pennant to break to the upside, whenever a move like that fails, they are taught to take the opposite side of the trade (go short).

 The 3 min that was in confirmation, now seeing a small leading negative divergence.

 Overall the 5 min chart is what made me feel a pullback (along with AAPL's parabolic like momentum today) is likely and why I closed the June Calls as they are more susceptible to losses at this point with time decay a factor.  Either the 5 min 3C chart will move up, or AAPL will pullback a bit and accumulate and get ready to break that next level of resistance.

For tactical planning, I'm hoping for a bit of a pullback, 3C to gain momentum in to tht pullback, add the July Calls and get ready for the move through resistance which should get stronger short covering moving.

AAPL Update-Closing June $540 Calls

The June $540 Calls did well at 131% gain, but I'll be closing them and looking to roll them over to July on a pullback.

 AAPL has done well today, I have expected that the final move will be led by Tech and AAPL, I may need to re-confirm that, but that is what I have expected. AAPL is near resistance right now .

 The mid-term strategic view shows a strong 60 min positive divergence, longer term primary trends in AAPL look horrible, but it can and I believe will bounce before making the next leg lower.

 This 2 min chart shows what I believe to be market maker activity, pulling AAPL back to accumulate and as of now 3C is in confirmation with the move, this doesn't mean it can't pullback and still be in confirmation.

 The 3 min chart shows the exact same activity.

It's the 5 min chart that needs to catch up and this last AAPL move up looks a little too parabolic unless short covering is causing it. I'll close the June Calls and look for a pullback based on the parabolic move and a probable pullback before a break through resistance that should cause short covering.

Quick Market Update

The SPY migration through the various intraday timeframes continues...

 1 min which stayed leading positive all day has improved even more.

 That strength has migrated to the next timeframe at 2 min which has also stayed leading positive all day, but I wanted to point out some specific intraday leading moves.

The 3 min as you can see is also leading positive.

As I tried to explain before, from March to May we had the strategic view in place, meaning the longer term 3C charts were very negative. From there we just wanted to enter positions on price strength to get good positioning at lower risk, we waited for price strength with 3C negative divergences and added shorts (all of which are still doing very well). This is kind of the opposite, the strategic view is the positive 15-30 min charts that are in place and for long positions, the same as short, I don't want to chase them, I want them to come to me (buy on price weakness/3C positive divergences).

This is one of the reasons I feel comfortable adding the USO position today, really there are probably quite a few speculative longs I would add if need be on today's dip in prices. USO just happened to stand out of the crowd.

Going to Start a Long Position in UNG

I'd rather a specific natural gas play, but for the time being, this is one of the few sectors I like as a secular long play (longer term).

UNG has pulled back and looks like a decent risk:reward proposition here. I'll probably add about 50% of the total intended position size.

UNG vs Energy, as you can see lately UNG has been doing its own thing, I think this reflects UNG building a large base.

 5-day chart of UNG and recent change in character, not only has the downside momentum slowed, it has actually reversed and look at the volume.

 Below this descending triangle is where I have seen and showed you accumulation in UNG.

 On our X-over screen to weed out false crossovers, there are 10/22 day moving averages on price; there's a custom indicator in the middle window with a 22 day m.a., and RSI in the bottom window, all 3 have to align for a signal, you can see several long crossovers in price that weren't confirmed by RSI and none until this most recent was confirmed by the custom indicator.

 After a crossover, typically the first pullback or first few are to the yellow 10-day ma, subsequent pullbacks are deeper to the blue 22 day, we have a deep pullback and today's daily candle thus far looks like a bullish reversal candle.

 The long term Trend Channel has a stop on the close in the $16.95 area, I might add a little extra room being it is so close to a whole number at $17 where stops would naturally pile up, but to me, this looks like a low risk entry.

 The overall 60 min chart confirming the downtrend and then going positive where I mentioned above and leading positive now.

 Short term intraday charts are also going positive suggesting the pullback is done-2 min

5 min.

So I'll be adding about half a normal position size of UNG, later I will likely switch to a Nat-Gas specific company.