Nice Close

However more than that, it accomplished something is the strategic thinking. I already showed you some short covering at intraday resistance as price moved above and volume picked up-those are likely new shorts seeing the market action yesterday as a failed test of resistance. If I was a perma bear, I'd be a little nervous with today's close.

 SPY trend confirmation and there were some last hour negative divergences out to the 3 min chart, nothing trend changing, but most likely some profit taking by momentum/day traders or those who typically de-leverage in to a weekend, it wasn't enough to turn price though.

 Around the last hour it looks like some small hedges were put on in Treasuries, the flight to safety trade as you can see 1 min accumulation and price responding thereafter, these positions in Treasuries would be used to hedge long exposure in to an uncertain weekend rather than closing the long position.

 The SPX daily chart had a VERY different tone to it yesterday, thus the reason I believe the invisible hand of Wall Street helped push the market lower during the last hour. As of yesterday the Candlestick pattern was a classic shooting star reversal and right near resistance: 1) it appeared the test failed 2) this is one of the first short set ups I learned when I first started using TA, you wait for a break of support, then a bounce back up to it that doesn't break through resistance and you short it there with a stop just above resistance. Combined with the candlestick pattern it would have been a classic set up for bears. Today however the confirmation candle that should have been a lower low was not there, instead a higher close, so I'm sure some shorts are nervous about this close.

3C was in line with ES all day and ES has a short covering look to it, not strong short covering as there were some pullbacks, but a consistent uptrend. Es also closed above yesterday's 4 p.m. close at $1323 today vs $1316, that's quite a come back from the overnight lows of $1298.75. Some bears may develop a slight bald spot from a lot of head scratching over the weekend, but as I say, Wall Street never makes anything easy, just compare today to yesterday.

I'll have some more charts later or over the weekend, I want to cover China specifically.

Until then, enjoy your weekend

Risk Asset Update

So far I like the looks of how the Risk Asset layout is developing, both intraday and since the recent bottom in the market.

Pretty much everything we've been looking for from the bar pennant head fake move to the backing off of the test of resistance in the Euro and the market yesterday to the 3C signals and the risk asset update which confirms the market is acting much better than some of the correlations (I mentioned the market's stronger open compared to ES earlier today). All of the market's behavior that is meant to trap bears has thus far played out exactly as was predicted (with the exception of very specific things like exact times and price levels), it is the macro concept that matters, not so much the exact timing and length or depth of a head fake move. Put another way, the strategic view has been right on, the tactical execution is nearly impossible to predict, but we've been close enough to position. Now it's a matter of patience as we need the final piece of the strategic view to play out to start entering high probability/low risk trades as well as take profits on established spec. longs.

In general our biggest advantage over Wall Street is the fact that we can pick and chose our battles.  That means patience is one of your greatest advantages. I often feel like if I'm not making a trade I'm not doing anything to further my goals, but since we have been letting trades come to us, the results have been far better that ever before with far lower risk.

 Commodities are back in line with the market intraday

 Here you can see commodity momentum even outperforming the Euro.

 This is commodities vs. the SPX vs GLD.

 High Yield Credit is where I am very interested as credit tends to lead, equities follow or confirm. In a risk on move (market moving up), we have caught nearly every top by noticing a negative divergence in credit first. At the market lows this week Credit was already moving higher, a positive divergence and a a leading indicator it was giving us a good idea the market would rally off the lows while most traders expected the next leg down to begin. Yesterday HY credit which is one of the top choices for a risk on trade, held up even as the SPX dropped end of day, I told you why I thought that happened (the SPX EOD drop). Today we have credit making a new high in its trend and leading the SPX.

 Here's the bottom of the market-lows, HY credit was positive divergent, the green line is the SPX highs which have not been reached yet, the white box is HY Credit's new high.

 Yields gave the same signal at the bottom, they got beat up from yesterday's action so they are lagging a bit, but intraday in perfect alignment with the market.

 The $AUD also got beat up overnight, intraday it is nearly perfectly in sync with the SPX.

 The Euro is the same situation, intraday perfectly in line, this i an example of how the market is stronger than the correlations like currencies of ES.

 High Yield Corp. Credit is also a risk on asset, perfectly in sync today with the SPX

 HYC Credit is making a new high as the market sits just under it's recent high, thus credit is lading the market, this is a very good signal for our expectations, plans, strategy.

 Energy itself is seeing weaker relative momentum today...

 Energy intraday

 However oil/USO did what was expected in today's earlier USO update and at least filled the gap

 Financial momentum is excellent today

 Tech momentum was a bit weak, but came back to life.

Sector rotation shows financials in rotation as the chart above suggested, the Safe haven sectors are declining, Health Care, Staples and Utilities, Energy as you saw above is a little weak, mostly consolidative, Basic Materials are making a comeback, lots of momentum stocks in that group, Tech i hanging in there and Discretionary is performing pretty well considering yesterday's Consumer Credit report.


All in all, I'm happy with what I see.

TLT Update

TLT look like it's getting ready for a bit of a flight to safety trade, this has to do with the weekend and the China data dump tomorrow, but the short term vs the long term tells the story in 2 charts.

 A 2 min positive divergence, it doesn't go out much further than this so it looks like some safe haven positioning for the weekend, as I mentioned pros's usually de-leverage in front of a weekend and an unknown like the Chinese data dump. Even though the market hasn't moved down (that's when TLT usually moves up), there is a little upside EOD momentum, this could also be a hedge, if the market doesn't pullback in to the close and TLT moves up, then TLT is most likely being used as a hedge for long positions carried over the weekend.

As I mentioned, the positive divergence is small, it's not a fundamental/primary  flight to safety. The 60 min chart shows the risk on move as TLT positions are being sold, that money is likely flowing to risk assets.

Quick Market Update

I think we're about to see some of that weekend de-leveraging soon. Pro traders often leave early on Friday so they tend to de-leverage a bit earlier.

ES Update

I was surprised how much Es lost overnight vs the SPX open, but thus far during the day, ES has been in good shape. With China's data dump tomorrow and the weekend I would expect some selling in to the close, most traders don't want to hold larger positions in to the weekend, especially with a data dump.

But for now...

Good confirmation in ES

AAPL Update

 This ascending triangle looks like it's mature and ready to breakout.

 The 50 day m.a. means nothing to me except that traders value it, so they'll be looking for resistance at that m.a., a move above would break out of the triangle as well.

 The Trend Channel on a daily basis has held the entire 2012 uptrend, it gave a sell signal and recently a BTC signal, the current stop is in the $550 area, but with extremes in volatility I might consider a little wider stop.

This is the 60 min AAPL chart, it's pretty self explanatory, but as I mentioned the other day, it looks like the accumulation period in AAPL was quite large, I don't expect to see further positive divergences, in other words, they're all loaded up for  short squeeze, it's just a matter of price.

FB Update

I'm still really liking FB for a sentiment twist.short squeeze. This has to be one of the most hated stocks out there which makes it perfect for a move up. It also has minimum data which makes most garden variety indicators pretty worthless.

 The 50 bar 30 min m.a. seems to be an important average where I can see at least a few head fake moves, the average is turning and price is holding above it.

 This is another highly prized technical short set up, when I first started with Technical Analysis these descending triangles after a downtrend were so reliable, once the internet took hold, cheap online brokers popped up and people started managing their own accounts. When's the last time you heard someone say, "My stock broker"? With that T.A. took off, as I've mentioned before, I think it went from a Voodoo "Oh, so those lines tell you when to buy huh?" to mainstream out of pure laziness. There have been studies done showing these price patterns now have a 50/50 probability of working, the reason? Wall Street figured out what main street was watching and used it against them. To bolster my "Lazy" argument, traders STILL (over 12 years later) use the same nearly 100 year old set ups.

 My award winning (that's true) Trend Channel had the FB stop at just under $26 a couple of days ago, it has held consolidations, even a inverse H&S pattern and it keeps locking in gain, now at $26.50, although FB is yet to make a huge move, I do think it's coming.

 The 1 min chart has been mostly in line today, it's starting to get positive

 The 2 min chart is seeing that strength as it should.

 Interestingly the 30 min above and 60 min below are adding to the leading positive divergence every day, this is today's change.

 Just for giggles I looked at MoneyStream 60 min, which is constructed totally different than 3C and it too is leading positive

For those using my X-Over screen to avoid false moving average crossovers, you can see the short/sell signal in red, there was a bullish crossover on 6/1, note the screen did not confirm it, saving you money if you use crossover systems. However currently there' a confirmed long signal.

All in all, I think FB is going to surprise a lot of people.

Stops hit

Earlier in the first market update I showed you 3C and I said I thought the short term charts were simply showing a consolidation below resistance as a little battle between shorts and the invisible hand was playing out, I thought that it would resolve to the upside based on the 5 min charts showing no negative divergences and being leading positive.

I show you this because a chart is worth a thousand words, this is how predictable technical traders are and why placing orders on the books are not a good idea.

Keep in mind a lot of intraday volatility is to create volume which institutional traders receive volume rebates for, so generating volume is profitable and hitting stops or limit orders is a way to do that.

 The lower trendline is the resistance I showed you earlier, the upper trendline is the next level of resistance.

 Look at volume surge, almost certainly short covering, as price breaks through resistance levels.

And that 50 bar 5 min moving average left over from the day trader days, look at the volume as that was decisively broken.

Just saying...

EUR/USD

When going through the charts I must admit, even though I had an expectation for something like this to happen, I'm still surprised. I'd like to just get some quick feedback, for instance in this post I'm showing you a lot of charts so you see for yourself, but would you rather fewer charts or just a synopsis rather than all of these charts? It takes time to capture and upload them which I don't mind doing and I know some of using 3C probably like seeing the charts as examples, but I'd just like to get an overall consensus.

 Now...

 This is the daily chart of EUR/USD, the Euro is thick with shorts and a move above this resistance line would start a strong short covering rally, probably not only in the Euro, but in stocks/market as well.

 Yesterday we tested the area 3 times and it appeared to be a failed test, I didn't specifically mention to look out for this to happen in the FX pair, I did mention it in the market, but they are so correlated I kind of assumed most would understand the same concept would apply. The uptrend line from Friday I mentioned last night, I said it's obvious to me so it's obvious to FX traders and I wouldn't be surprised to see a shakeout/break of the line, this is just typical market behavior.

 The FX pair on a 5 min chart since today's 9:30 open.

So I'm not surprised at the test of resistance yesterday and the initial failure, the same concepts about short seller sentiment on a failed test that applies to the market, applies to FX as well. I'd expect that 3C would not see too much damage as I believe the failed test was engineered to suck in more shorts as this is a classic short set up, adding more shorts (as I explained last night and many times in the past), is kind of like a primer to kick start a snowball effect on a Euro break above resistance.


 I suppose I shouldn't be too surprised as this is what I expected, but the degree to which this chart has stayed in line and un-effected by the drop in the Euro actually did surprise me. 3C is moving as the trend never broke on this 1 min chart.

 The 2 min chart trend looks very similar, there's no big negative divergence, which would be perfectly acceptable on a short term chart like this, I suppose that is what is surprising. I wouldn't expect the longer term charts to be moved much, but a negative on the 1-2 min chart would be acceptable and understandable, it's not there though.

 2 min chart close up shows the Euro positive on the 9:30 open and leading to a new high a price is lower.

 The 15 min chart shows a lot of in line trend confirmation, it is also positive at the open and leading positive currently. There was a normal negative divergence on the 6/4-6/5 pullback, but none here on a bigger move down.

 15 min chart close up is in line at the top, no negative, the open is quite positive and 3C is leading price.

 The 30 min chart needs no annotation

 The $USD 1 min negative at the top, in line on the downtrend, a slight positive in to yesterday, the gap up though is negative and in leading negative position compared to price. As I mentioned yesterday, I'd expect the Euro and $USD to look a little different with the F_E_D yesterday.

 USD 2 min negative in to the top, a positive divergence in to yesterday and the pop that it implied, but 3C won't confirm the gap up and is negative at the open.

 $USD 5 min looks as it should, the signal that is most important now is the gap up today not being confirmed and actually negative intraday.

 USD 15 min shows a small positive divergence and a negative today on the gap up with no attempt to confirm.

 $USD 30 min

Now even the $USD 60 min is changing character from a clean confirmation of the uptrend to a negative divergence starting weeks before the top and a current leading negative. The 30 min signal was strong, the 60 min is stronger. It seems to me there are two different issues, the Euro looks like a technical short squeeze, the $USD seems like there's something more fundamental going on. We'll have to look at that closer.