Nimble

I'm glad I closed those UVXY calls for a 1 day 23% gain, look what they'd be worth right now...

They are now below yesterday's close.

Here's the reason I closed them...

As mentioned in this post... I'm not a huge fan of short term trading, at least not this kind of short term trading, but as the charts in this post have shown, we have seen just about ZERO movement in the market over the last 4 months while volatility has doubled, this means short term trades are about twice as profitable as they were 4 months ago, but they need to be watched closely and closed out quickly when there are signals such as the signals seen in UVXY (linked above) and the market in general today.

There are longer term trending trades available. Of the core short positions we built and I have held, several are at gains of 10-20% with no options, no leverage. The long positions added for reasons I'm sure you are well aware of, were added at key areas as well and those positions are at gains of 10-20%, in fact, in the equities model portfolio there are 6 shorts and 4 longs, only 1 position is at a loss, 5% in one of the longs, but these trades I don't even look at, I haven't closed any since opening them, so it is possible to establish longer term trending positions and see good profits (gains of over 20% in a market that has moved about 0% since these positions were opened), just goes to show you it can be done, the key remains to be patient and let the trade come to you.

As you saw in today's sentiment update, one of the traders who is considered to be a good trader, was just knocked out of the game. This market is a meat grinder, but it's possible to make money in it (even when it hasn't moved in 4 months!). You need to know what you are comfortable with and wait for that nice pitch down the middle before you swing. I feel pretty good about having 10 long and short positions and numerous short term trades that have made good money in 1-3 days and I don't even have time to really make these trades, so you can certainly do it. In fact many of you are doing it by the emails I receive every day.

This is the difference between having an edge and treating trading like a business and wondering around the market from 1 system to another, wildly swinging at any price movement.

I'll have updates over the weekend and maybe a few more tonight. I hope you all have a great, relaxing weekend!

SLV/GLD

With the 5 min negative in the Dollar and the 5 min positive in the Euro, the market activity makes sense, so would a similar move in GLD and SLV, perhaps again, a gap fill.

Longer term there's some constructive action in both, but I don't feel comfortable trading wither from the long side yet, although when the time comes, it may be a very profitable trending trade, we'll just have to see if the slow improvement of the longer term trends continue. For now, the short term, like the market...

 GLD 5 min-below SLV 5 min

AAPL Update

There are several different timeframes in play here so I'm going to do my best to describe them and obviously depending on your outlook, timeframe, trading style, there are several possibilities.

 AAPL, like the market, has been choppy as well. The ascending triangle that formed was really in the wrong place for that type of price formation, but the failed breakout at the yellow arrow probably would have emboldened the shorts. The daily chart earlier looked like a Harami downside reversal, but right now we are seeing the start of the move up I have described today on the short term intraday charts with positive divergences, if traders entered AAPL today on the short side based on the Harami reversal, they may be covering shorts right now, although it isn't a huge pattern, AAPL is closely watched.

 The 60 min chart went positive in mid May and has moved up since then, but now the 60 min chart is a bit negative, indicating that a pullback would probably be the logical next significant price move, which is in line with our market expectations.

 The 4 hour chart is leading positive, so just as I believe we will see a pullback in the market and then a resumption of the move up in to a real short squeeze, AAPL is displaying the same potential on this long and important timeframe.

 The shorter 15 min chart has a negative divergence suggesting the same pullback I envision for the market in the near term.

 The 5 min chart for the most part agrees.

 On an intraday basis, the 2 min chart has been in a leading positive position since 12 p.m., similar to the intraday positive divergences I have described in the market, perhaps they try to fill today's downside gap, perhaps its less ambitious than that.

The 1 min intraday chart was in line with price action and is now leading positive a bit, so as I mentioned, we may see some gap filling Monday or even some upside action in to the close, this appears to be confirming that upside in to the close.

So to put it all in order, we have a near term (through the close, perhaps Monday) divergence that suggests some gap filling from today's move down or some backing and filling. The pullback in the market still looks like the most probable outcome, there are several charts suggesting this could be a sharp pullback, it may even be enough to create some new lows in several key stocks and bring the bears back in to the market. AFter that pullback is complete, I believe we have the signals on the right timeframe to resume a move up and finally effect a real short squeeze. Should we get that short squeeze we'll be looking for distribution in to the move up and looking to add or establish primary trend short positions, by that time, as far as I can see now, we should start to resume the primary move to the downside.

Gap Fill Monday? Closing USO Aug. $33 Put from yesterday

Or maybe some action in to the close...

The USO position from yesterday...

There's a nice 1 day 30+% gain, here's why I'm closing it as I don't have a lot of patience for pullbacks or corrections in options...

 The SPY 5 min chart I showed earlier thinking we'd get some intraday lift is still putting in an intraday positive divergence, this suggests some gap filling to the upside, perhaps Monday, maybe in to the close?

 On the same timeframe the $USD has an intraday negative suggesting it pullback, which would hurt the USO Put.

 On the same timeframe, the Euro is confirming the above charts with an intraday positive divergence.

Now, I still haven't changed my mind about a larger pullback, this is an example of why...

SPY 15 min leading negative divergence.

So it looks like in the very near term we'll see more of that chop on a short lasting move up, longer term charts still say pullback, but why give up a 1 day 30+% gain?

Sentiment and the right tool for the trade...

Today's sentiment report from the Twitter-verse...

Hi Brandt,

This is from one of the better traders:  my heart broken simply because my last day trade short position was stopped out with nothing. Now I hold nothing, so pretty much out of the game."

I thought I might give you a little volatility update, this is why some of the better traders out there are going bust, they aren't listening or don't have the tools to listen to the message of the market.

 Over the last 2 months nearly to the day, the SPY has lost exactly 0.23%, in other words, while volatility has increased, the market has gone virtually nowhere.

This is a representation of 10 day (2 trading weeks) average volatility or more similar to ATR, Average True Range. We went from about $1.01 a day on average to $2.21 a day on average over the last 4 months. The market movement from the left side of the chart to today, +0.31%

This is what I mean when I say "The Market will never make it easy". I think we've done pretty well, but this is an absolute washing machine or blender, just knocking traders out of the game, a ZERO SUM GAME.

UVXY Calls follow up

 UVXY July 8 calls from yesterday, I'm not seeing much upward momentum and would rather not give up this gift.

 2 min intraday negative divergence has me a bit cautious about a little gap filling in the market averages or some consolidation, neither of which will help this position in the near term. These are July Calls, if I had August I might wait them out.

 The 5 min-this is just the intraday divergence, the longer term chart looks fine.

Ultimately the VXX/UVXY ETFs should have quite a bit more upside in them, just on a short term basis and with July calls, I'd rather take that quick profit.

Closing UVXY Calls

You may wish to keep them open, I'm just thinking about a possible gap fill and I'm not all that comfortable personally in these volatility ETFs.

I'd rather look for a place to re-enter and keep the 23% 1 day profit.

BIDU UPDATE

BIDU is another one of my favorite trades, not just because it's a core short position still being held in the equities model portfolio at a +20.5% gain (with no leverage-just a straight short), but because that gain in and of itself proves what patience and letting a trade come to you can do. I often say that the individual investor's greatest edge over Wall Street is patience, YOU DO NOT HAVE TO BE IN THE MARKET ALL OF THE TIME, you get to pick and choose your battles as our orders are small enough to make us maneuverable.

I'm a firm believer that no matter what asset you trade, whenever your money is in the market, it is at risk. Look at Mortgage Backed Securities; I can just hear the sales pitch when they were pushing these, "The safest investment, your investment is backed by real tangible property, etc." and look what happened... MBS nearly brought down our entire financial system and to this day the problems around the world/Europe started with MBS in the US.

So in my opinion, if you are going to put your money in the market, there better be a very good reason, if you are looking for adrenaline, I live in Florida, I can recommend some great roller coasters that won't rob you of your life's savings.

The primary BIDU trade and the sub-intermediate trade...

 The BIDU 5 day chart... What's wrong with this picture? 1) volatility went nuts in a nearly parabolic move during the QE era as BIDU was one of the favorite momentum stocks, but what about volume? What about that tangle starting in 2011? A 5 day chart will reveal things a daily chart will not, such as BIDU's personality and character which looks very much like a stock that went through mark up/ distribution/ a topping process and is near stage 4 decline.

 The daily 3C chart with accumulation at the 2008 lows, some moderate distribution in to higher prices (remember institutional orders are large and they need time and they need demand to sell in to strength. The leading negative divergence of 2011/12 looks a lot more like short selling or VERY aggressive distribution, this should tell you something about the longer term BIDU probabilities.

 This is where we stalked BIDU and were patient. A large triangle like this after an extended uptrend is almost always a top, but before we see major reversals, we almost always see a head fake move; we waited for that head fake move in yellow to short BIDU, we let the trade come to us and it's still at a decent profit because of that patience.

 BIDU 4 hour, distribution in to a breakout move. Traders see a breakout from a large triangle and they buy, perfect for institutional money to sell or short in to as there's buying demand to fill the sell/short sell orders in large quantity. We basically shorted BIDU at the same place smart money would have.

 The long term Trend Channel held the uptrend without a single stop out until we hit the top area, at this point the indicator is telling us that the trend is over.

 Since then, BIDU has moved down as expected and formed a bearish consolidation/continuation price pattern, it even broke below it and it appears to be another bear trap.

 Th 30 min chart was positive during the formation of the bearish price pattern, this gave us our first hint a bear trap was being set up, look at the positive 3C divergence in to the break below the pattern where traders would be shorting on price confirmation.

 But is an 8% gain all hat we should expect from a bear trap that took some time and expense to put together?

 The 3 min chart going very positive as BIDU breaks below the bearish price pattern, then the reversal...

 The 5 min chart shows BIDU acting like the rest of the market with a negative divergence suggesting downside this week, the positive divergence today created not much more than a consolidation. In my opinion BIDU will pullback more with the market, it may even make a new low, but that may give us another opportunity to trade BIDU from the long side on a quick trade or sub-intermediate trade, maybe even a short squeeze with an impressive move up.

 Why do I think that? Look at the 15 min chart, it is still leading positive. If BIDU were about to start a new primary leg down, I'd expect to see a lot of distribution, not a positive divergence.

Even more evidence, look at the 4 hour chart, leading positive through the bearish consolidation, the break below it and since.

Keep BIDU on your radar, we need to watch for short term positive divergences telling us the pullback is ending and the next move up is about to start.

FB Update

When I think about FB, even though in the last week we've probably made more money on a percentage basis in quick trades in GLD, FB is perhaps one of better pieces of analytical work.

I just want to take a moment to mention for newer members and remind older members that I DO NOT favor these quick trades, this is not a day trading site. I simply look at the market, look for opportunities and bring them to you when I see them. I would much prefer a trending trade over a 1 or 2 day options trade (I'm not a fan of leverage unless it is needed). However, the market dictates what the proper tool is for the trade, I'm not going to recommend a trending trade in a volatile choppy market (unless of course we have the charts to back that trade up). When I taught Technical Analysis for 3.5 years I use to try to correct people's methods in picking a trade which almost always focussed on analysis of a stock. The most important factor in how an individual stock will move (as a rule of thumb) is the market's direction itself which has given rise to phrases like, "A rising tide lifts all boats". This simply means whatever direction the market is headed in, chances are very high that your stock will head in that same direction near term, it has a bit less influence on longer term trends. The second most powerful gravitational pul on prices is Sector rotation. You may recall over the last week or so I've ben mentioning how "Highly correlated" the market is, this simply means that pretty much all of the sectors are moving together with the market, which means "Stock Pickers" will have a hard time in a market like this as a simple market ETF will likely perform just as well as a "Stock Pickers" pick.

As the market starts to trend, sector rotation will come back and stock picking will be advantageous, right now though it's a very directional market.

As to the FB update, this is a stock that trended well for us DESPITE what the market was doing; it's a stock we picked as a long and made good money on when EVERYONE hated it and I imagine they still hate it. FB also, to this point, has done everything we expected it to do when we it first appeared on our radar back in late May/early June. This is why we use 3C in multiple timeframes, it tells us generally what to expect near term, mid-term and longer term. Another factor is market behavior, you'll just get a feel for it as we go along, but a market or trading journal will help expedite the process and I recommend everyone keep one, you'll learn a lot and become your own teacher as well as identify what works best for you.

FB Update...

 This is when we first picked up on a change in character in 3C for FB. Think about FB at the time, it was the most hated IPO probably ever except maybe E-Toys. Think about the market psychology, everyone said FB was a short because of price action and what they read and heard in the financial media. From a Wall St. perspective, FB was a prime candidate for an upside shakeout which shorts continued piling in to even as it moved higher each day. There's no room in trading for loving or hating a stock, it's business.

When we first identified the long opportunity in FB, the red trendlines represented a stage 2 breakout area, it also represented an area I expected to see volatility, even a pullback from that level and although I closed my long position in FB, I waited for a pullback to materialize to re-enter the position.

 Here's the 60 min positive divergence (shorter timeframes were already much more positive) in the area in which we started buying FB long. I suspect MS/GS (the FB IPO underwriters and defenders of the $38 level on the first day, lost significant money and were looking to make it back). As FB reached the resistance level, look at the trajectory of 3C, not VERY negative, but it obviously looked like upside momentum was failing and we'd see that pullback; the question remained, "Is FB going to pullback and move higher as originally expected, or is this it for the move up in FB?"; we can only get  hint on the actual pullback and those hints are coming in now.

 I'm working from the longer timeframes to the shorter ones as each shorter timeframe provides a little more detail. The 30 min chart made it clear to me that FB was going to reverse near that resistance level. Keep in mind a reversal or correction can occur in 2 ways, 1) through price in which price pulls back and 2) through time in which price is relatively stable, but trades laterally or 3) a bit of both.

Since going negative at resistance, FB is starting to give clues as to the question above, "Is FB done or more to come?", the 30 min chart is showing the makings of a positive divergence in a flat area of lateral consolidation after a slight pullback in price, this appears to be the pullback I was hoping for to re-enter a new long position in FB and hopefully see a breakout to stage 2 mark-up, a definitive short squeeze area.

 The 15 min chart has more detail as a shorter timeframe than 30 min, but I'm focussed on the trend which has been leading positive . We do have a negative relative divergence in effect, but again this comes back to the gravitational pull of the market, I don't think it i FB specific.

 The 5 min chart with more detail shows the actual reversal and is showing a positive divergence in the flat trading range.

 A closer view of the 5 min chart...

 Now we'll work from the earliest timeframes to try to better understand near term activity, we see a negative divergence today at the FB highs and a small leading negative divergence, this is intraday trend and does not compare to the 15-60 min charts. Think of the longer timeframe charts as strategic and the shorter timeframes as tactical.

 While the 2 min chart has been leading positive recently, we see a negative divergence on today's activity.

 There's a slight hint of the same on the 3 min chart (remember divergences progress or migrate from short to longer timeframes).

During this lateral period which is often where we'd expect to see accumulation, note the market has not allowed a support level to form and there have been plenty of volatile shakeouts, the market doesn't want anyone getting wind of what's going on.

In my view FB is accumulating on the expected pullback, suggesting it will move higher. We may have to wait for the market to move in to better, more bullish territory before FB really looks strong enough to enter on the long side, I don't see that yet, but I do believe we will see it and as such, I would keep FB on your radar as a probable long set up, we just ned to see higher probabilities/timing to emerge.

Market Update-Intraday Jiggles

I often say (because the market often shows us), "The market is never going to make anything easy". No matter how right you may be on the market direction, the market is going to throw barrels like Donkey Kong for a couple of simple reasons, 1) It's a zero sum game, for someone to win, someone has to lose and even those who are right on the market's direction are going to have their faith tested as the market tries to knock as many of these people out of positions. 2) There's more profit for Wall Street in creating shakeouts as volume typically accompanies shakeouts as stops or limit orders are triggered and as if Wall Street doesn't already make enough money, they make additional money in the form of volume rebates for order flow-in fact there are several firms that specialize in order flow volume rebates, such as proprietary trading firms and many High Frequency Trading programs. 3) is kind of a wrap of what's already been said, but if the market simply does what you expect, such as trends down all day, it's the same concept as very high short interest except on an intraday basis; THERE ARE TOO MANY PEOPLE ON ONE SIDE OF THE BOAT and Wall Street needs people to trade against, not with.

This update doesn't change anything I've said about my opinion on the pullback, I just consider this intraday noise, but it can be useful to enter or exit positions and knowing what it is, that it is normal, hopefully will keep you from being a victim of volatility shakeouts.

As for the market update...

 DIA 5 min has an intraday leading positive divergence, it's hard to see or at least doesn't look meaningful in the context of things, but it's there so I'd expect an intraday move, maybe even a gap fill.

 SPY 3 min intraday leading positive divergence suggesting an intraday move up from here.

 QQQ 5 min intraday leading positive divergence, suggesting a pop to the upside, but look at the same chart with a little more context...

The 5 min QQQ's intraday positive divergence is just a small blip within the bigger picture's leading negative divergence. So look for some probable upside noise, if you can use it to your advantage that's great, otherwise this is just a warning of what to expect as the most probable path intraday.

VXX / UVXY Volatility ETFs

I'm usually not a big fan of the volatility ETFs, especially in the choppy market we have seen, however because I was expecting a pullback (these ETF's move opposite the market) and because there were some decent signals and these can really move, I decided to open a call position in UVXY yesterday in July 8 Calls

I had some trouble opening the model portfolio earlier, but the UVXY calls from yesterday are up +19% and the USO put position is up over 20% since opening them yesterday.

These volatility ETFs can be very volatile, I prefer not to use leverage unless the trade looks very good, but otherwise doesn't offer the kind of gains I feel are necessary to be at risk with a position open in the market. As such, I try to spend the least amount of time in leveraged positions as possible.

Thus far though, I don't see any compelling reason to exit the UVXY Calls.

Here's an update, I use the non-leveraged VXX most of the time for analysis as it seems to give better signals than the Ultra ETF (UVXY)...

 Here's UVXY on a 15 min chart vs the SPY (red), you can see the inverse relationship the two have, being this is the case, analysis on the volatility indices should be similar, although the mirror opposite to analysis of the market averages, this is just another form of confirmation and the more we look at, the more confirmation we receive, the higher our probabilities are of successful analysis. 3C is named such as a constant reminder, "Compare, compare, compare".

 Here's the 5 min chart of the same, note the volume in VXY looks as if it is in a consolidation in this area.

 VXX 1 min is in confirmation of the move up this a.m.

 The 3 min chart shows a relative positive divergence in VXX followed by a leading positive divergence, as mentioned yesterday, this is typical (to see a weaker relative divergence followed by a stronger leading divergence).

 The 5 min chart since going negative on the 28th has remained in near perfect confirmation of the price trend.

 The VXX 15 min chart shows several negative divergences sending VXX lower, but in the larger context we have a large relative positive divergence with a newly formed leading positive divergence, I like this chart for timing purposes.

 Many of you know that I like to look at the long term charts, there's less detail of smaller individual divergences, but the trend in underlying action becomes much more clear, here we have a VERY clear negative divergence at the top and a clear positive and then leading positive divergence near the bottom. One word of caution when using 3C on volatility ETFs, I generally require the signal to be much stronger than other risk assets, I have found in the past a good looking divergence is often not enough, I'm usually looking for GREAT looking divergences on these volatility ETFs.

 UVXY 1 min this morning fell a bit, this does not always mean a reversal on a 1 min chart, often it is a consolidation, recently UVXY has improved significantly intraday.

 UVXY 2 min is a bit better than confirmation of the move up with a recent leading positive divergence starting to form.

 Removing some noise, the 15 min chart is in leading positive position.

Finally the UVXY 30 min chart shows a clean relative negative divergence at the May top, confirmation of the downtrend and a positive divergence, now in leading positive position.

I may decide to trade around these positions a bit "if" the market gets choppy or momentum looks like it is fading, but for the time being, in the near term I'd prefer to trade these from the long side only until we are fairly confident that a market pullback is near its end.