UHHH-Stuck with FAZ

Slow browser with too many things running. Let that be a lesson, NEVER TRADE OUT OF BOREDOM.

In fact, let me expand on that.

1) Never trade to try to make up a loss

2) Never trade to try to make something happen

3) Never Trade unless you have a REALLY good reason to.


You have an edge in the market (I'm not talking about this site-although hopefully you find it useful), you DON'T have to be in the market, you can pick and chose your battles and you can move in and out of a position much faster than the big boys (even with their HFT's-it still takes time for them to get out of a large position).

My worst losses came from boredom, trying to make something happen so my ex-wife wouldn't get on my case about whether I made money or not that day, revenge trading (very early in my career)-"I lost it in XYZ, I'm going to get it back in XYZ", or "I'm down 5% this week, I need to make that back this week".

I think it might have been in one of the "Market Wizard" books, but a fund manager/trader said he never trades unless the trade looks like money sitting on the ground that he just needs to lean over and pick up.

Use the edges you have over Wall Street, there aren't many.

This is getting lost in the lines...

Just as a market update, the divergences here are very short term as I showed before, this kind of looks like sport-hitting stops on new shorts from today. In any case, I'm in micro manage mode and here's what the pop looks like on the 4 averages.

 Dia 1 min

 IWM 1 min

 QQQ 1 min

SPY 1 min

Tick Chart (3C)

This is literally what I'm watching and it reminds me of the day trading days, surprised I didn't end up in a padded room.

 FAZ TICK

FAZ TICK

FAS (long Financials) TICK

Euro update

This looks like a little late Friday game, I can see 3/4 of the traders have left for the weekend and and few sitting around playing with the market out of boredom kind of like my FAZ trade.

As for the Euro which has obviously been the main catalyst today as the charts showed in yesterday's post...

 Th 1 min which is the fastest, shows distribution in to the pop up, is it serious?

 The 2 and 3 min charts don't have anything that would suggest it is, it just seems like a fishing expedition to hit stops.

Been a long time....

Since I've day traded. In any case, this kind of looks like a shakeout move, but I'm still hanging with the FAZ calls.

Just like in the days of old when I was day trading, I'm watching the 3C TICK chart (instead of 1 min, each tick) as well as the NYSE TICK chart. Here's what the NYSE TICK chart looks like, right now it looks like this pop isn't going anywhere, but it may have served a purpose in scaring new shorts at the SPX 1350 level out, and that's some extra money for the weekend for Wall St.

 Very dull TICK chart today

The TICK on the pop and since.

This is the number of NYSE advancing stocks per bar less the number of declining stocks.

FAZ Opened

This is more just for entertainment, this is highly speculative.

I may try that FAZ Day Trade just for fun

Looking at FAZ July $22 Calls and closing them today.

ES Update

I've been watching this divergence in ES develop, it is a positive divergence intraday, but within a non-confirmation or slightly negative position. It could be used as a head fake move up and then a pullback or it could be what I just mentioned. In any case, the market might get interesting momentarily.

Dull Markets

When markets are dull I get nervous, I mentioned this earlier in the week; they're almost always up to something.

Wouldn't it be interesting if the $1350 shorts were knocked out on a move higher?

In any case, try to remain alert in markets like this, usually something big is right around the corner and that often opens up opportunities.

Gold/Miners Holding Their Ground

Yesterday's GLD Call is up 24% right now.

 GLD 1 min is even showing some recent strength in a leading positive divergence intraday.

 The 2 min chart is close behind with a 2 min relative positive divergence.

 5 min is in line

GDX 5 min is in line as well, both look set to add to their gains.

Correlation between the Euro and Market Still High

We haven't seen much of anything in the market for hour because the Euro hasn't done much of anything in hours, it is setting up a very visible bull pennant, so that price pattern being gamed is highly likely. I don't want to short the market (beyond a day trade) but rather use any price weakness to likely buy.

It seems many traders are shorting the SPX at $1350, not surprising, especially given the whole number.

 SPY vs the Euro, both lateral, but the SPX/SPY is a bit elevated from support of the FX correlation.

 Euro 1 min trend with a leading negative divergence today, as mentioned, this can cause a consolidation rather than a pullback.

 The 3 min chart is in line

 5 min is overall very positive, this is why I wouldn't want to be short the market against this chart, probabilities are just not on your side.

 SPY 1 min negative, but not really all that bad.

 While the 2 min negative divergence "Can" cause a consolidation, it's more likely to cause a pullback.

 The 5 min SPY trend and leading positive vs the intraday negative, I don't want to short the market against the probabilities implied on this chart.

Here's the SPX 1350 level where many traders are saying they shorted today. As I showed you earlier, with the recent trend and this move today, this is an old school short set up, the problem is old school is exactly what is manipulated every day.

For now just being patient...

Market Update/Opinion

First the update

 First the intraday negative divergence on the SPY 1 min.

 The 2 min's trend and the intraday negative divergence. For all of you using 3C, my interpretation of this is a strong underlying trend with an intraday pullback. The market is dynamic, there are very few days I've seen in which the market simply travels in one direction, but something inside of us as humans expects things like that. For instance, if I were to say, "Tomorrow will be a strong day up", most people would expect a day that moves almost entirely up with no intraday pullbacks or consolidations, that's just not realistic. Many on the sell-side of the game or the pros, make their money through volatility and movement so it will always be there. The only real exception I have seen is a short squeeze.

 At 3 mins we don't have an intraday negative divergence so I don't see this as anything to be concerned over for the near term expectation of a continued move higher.

 The 5 min position and trend trump all intraday charts and this still looks very good for continued upside despite intraday volatility. Remember I recently showed you hoe daily volatility has DOUBLED over the last several months so intraday pullbacks are bound to be much bigger than what you might be use to with the ATR or daily range doubling over the last few months.

In my opinion, this is exactky what shorts are looking for and I think the market doesn't mind throwing shorts a bone to lock them in. The short term trend is down, today's move up represents an opportunity for shorts to enter at better prices and they'll likely do so.

If the market can fly-trap more shorts, then when the market moves higher, those short serve as fuel to push the market higher as they cover at a loss.

As for me closing the SPY Calls, the reason is time decay or if you manage trades using the Greeks, then Theta. With the current gain I had today and time decay/theta becoming a bigger issue, I'd have to see a move much more significant than today's just to get back to where the profit on the trade was today. If the market is going to move higher and my position is not going to benefit from that move, then I'd rather close it as an open trade always represents risk and in this case, risk that has no real strong probability of further upside because of the July expiration time decay.

Instead, I can wait for a pullback and re-enter the SPY trade which because of the July expiration is doing better than the IWM trade entered the same day with an August expiration (40+% vs 11%). If I feel VERY strongly that we have a signal on Monday (I won't enter July expiration trades on Friday) then I might choose July again, but this would have to be for a VERY short position of a day or 2 at most.

Otherwise, I'd be looking to enter August expirations.

I warned many months ago as the top became more clear that volatility would increase, randomness would increase and the chances for a Black Swan event that even Wall St. may not see or be prepared for would increase. This is exactly why I held on to the core short (non-leveraged) positions in the equities model portfolio that were entered between March and May 1 on market bounces, as a result, nearly every single one is still at a gain and some very significant.

Again at the June 4 lows, longer term leveraged longs in the equity model portfolio were entered as a hedge for the shorts. These are the only two long term trades (I rarely even look at these on a day to day basis) that have been entered, both at market extremes (the shorts at the highs, the longs at the lows), as a result almost all are in the green and some very significantly. Ultimately I prefer longer term trades, but until we reach another extreme, this is not the time to try to force long term trades on the market, the Twitter/Stock Twits stream will confirm that as traders are going through a meat grinder.

I'm not fond of options generally speaking, but I also don't want to sit for months with no trades so they are used sparingly in situations in which probabilities for a move are high, but percentage gains are low, then they make sense, but I don't want to play options the way Wall St. wants me to, I want out ASAP, options are set up in every way to benefit the writer and take money from the buyers, the answer? Just don't play by their rules.

FAZ as a DAY TRADE

With Financials gain and the strong probability of a pullback, FAZ looks like it would make for a nice day trade. It obviously is speculative and I can't take it as I don't have time to watch it. I WOULD NOT hold it past the close.

2 min leading positive, but that's about it. Day trade only.

Quick Market Update

I sold the SPY calls as the time decay is a bigger issue and the gain was decent.

 Over a 40% gain in a couple of days, I don't thin I'll get a gain like that again with time decay on July calls

Momentum in price is running out, there's no more short squeeze to drive it and the market is extended from support, this is the negative divergence I believe is from arbitrage traders.

The SPY has moved too far from the currency support. This doesn't change my near term outlook and I'll look to enter a new SPY call position on a pullback.

Closing SPY July $132 Calls-

I am leaving the Aug. IWM calls in place, I think this pullback is going to be bigger than what I would feel comfortable holding through for July Calls, I'm okay with the August Calls.

Quick Sentiment Update

"Most were caught short on this today.  I have to admit if I used traditional indicators I would have gone short yesterday at EOD too.  "


I still find the 3C chart from yesterday in the currencies amazing and even more amazing the obviously planned accumulation of the Euro and the move starting right at 9:30 on the open.


As they say, "To make money, you have to see what the crowd missed"

Risk Asset Update

For longer term members, you probably understand the way in which we use 3C, we are not only looking at what we think will happen next, but how long or strong and what the next trend is after that and the bigger trend that will be the most important. There are several trends in play in the market all at once, depending on your timeframe, so we try to identify what we expect from each.

The Risk Asset Layout helps us confirm current trends, see areas of potential trouble in trends and helps us confirm the expectations for different trends (whether longer term or shorter term).

 Commodities which have been performing well lately, even when their FX correlation suggests they shouldn't be. I believe there may be a clue in there somewhere as to why commodities are performing better than we would normally expect. I have floated the idea this week that perhaps there's some insider knowledge with regard to an upcoming round of  QE. I certainly don't think it represents a shift in attitudes about global manufacturing, QE would seem to be the only other option that would send commodities higher; that's just an early theory a we have seen some unusual trade this week, but something to keep in mind as we look at the different pieces of the puzzle.

 Longer term commodity performance vs the SPX, there's actually a bit of relative out-performance in commodities.

 High Yield Credit- Credit is a huge market and one in which is mostly traded by smart money, therefore it can often be an excellent leading indicator. High Yield Credit specifically has been doing very well lately, this is the credit of choice when smart money wants to express a risk on/bullish position, otherwise they'd move to investment grade credit, so the recent strength in HY indicates to me that we will see more upside in the market as credit usually leads as the markets follow.

 The recent strength in HY credit.

 Longer term HY credit was flat while the market rallied in the top, it was a bearish sign for the market, however recently credit is moving back up to the area in which stocks were back in April/May.

 High Yield Corporate Credit is much like HY credit, thus far locally it is leading the market, which is a strong signal for continued gains, even though we should expect corrections, shakeouts, and the like, however the near term trend should still keep moving higher. When we get strong signals that the move is over, we'll look to add some shorts and determine whether we still expect to see a strong pullback followed by one more move higher or whether we expect to see the primary bear trend re-emerge-two very different trades.

On the 60 min chart the downtrend in HY Corp. Credit for now, is broken. This downtrend is part of the reason we entered core short positions in to market strength from March to the start of May. Right now I am wondering whether our short term move higher will make it to short squeeze territory and become a larger move higher or whether our original trend analysis will hold (short term higher, then a deep pullback followed by a short squeeze and finally the re-emergence of the primary bear trend).

 Yields intraday also suggest the market is a bit ahead of itself, I believe it is short covering that is lifting it and thus it should pullback a bit which would be fine with me, I don't ant to see the short term move higher (which I have open long positions for) stray too far away from the assets that support it.

 Yields over the last few weeks have been a real concern as they are dislocated from the SPX, however a few days ago I thought I noticed the downside move ending and now it seems we are getting a bit of a base, I'd like to see Yields move higher long enough to support the short term (I usually mean about 5 trading days or so) move.


 The $AUD took a big hit on Australian unemployment this week, however it is just starting to recover and close to in line with the SPX.

 Here's the hit it took on overnight news and the move toward confirmation

 Long term the $AUD was an excellent leading indicator pointing out the 2012 top, now it's in line with the current move off the June lows.

 Euro intraday is losing a little momentum as the SPX moves higher on what is most probably short covering, that open was probably a very emotional ordeal for new shorts in the market. This is one of the reasons I think we see an intraday pullback which is fine with me, we don't want the market venturing too far from its support.

 Longer term the Euro has been hit hard making 2 year new lows recently, we'll see how much it will gain on a short squeeze that 3C seems to be forecasting.

 Euro pointing out the 2012 top and the current dislocation.

As for Sectors today, Financials, Basic Materials, Industrials and to a degree, Discretionary are all doing pretty well. Tech and Energy are lagging a bit. The flight to safety trades are also moving out of rotation: Health care, Staples and Utilities.

We have some new questions to answer and some possible hints at large, market moving fundamental events that may be in play. We have to see how the market reacts, but so far and from what I've seen from the sentiment posts, we have done well navigating this choppy market.

Some of the Twitter market posts are very enlightening as far as how retail is feeling about the market, they are basically cursing it.