Some other closing indications

Op Ex week has typically been a pin pretty close to the week's range, we haven't seen too many big surprises on op. ex. Friday (tomorrow).

The underlying trade is what is getting a little, I'll call it, "Scary", although it doesn't present any real problems, it just hints at more extreme conditions than we might normally expect. From looking t the SPY alone, I don't get the feeling of an extreme element in a pullback, but some of the other averages, even those that have been doing well outwardly such as the Q's today, are starting to show signs of the stress that causes the more extreme movements. Often it is the extreme movements that offer us some of the best opportunities. I don't want to call an extreme movement, but point in fact, it did make new highs in to negative divergences and lost over 4% today, making it look like the head fake I suspected it might be back on Monday. These extreme movements are one way we can let the trade come to us o they're not all bad as the word, "extreme" may imply, but they do become more unpredictable.

Here are the other averages at the close.

 DIA 1 min is almost perfectly in line today

 The 3 min shows worsening underlying trade

 The 5 min is actually quite bad.

 This 15 min chart is what I'm talking about when mentioning the pullback could b more extreme as the 15 min charts are dragged lower.

 The IWM 1 min is nearly perfectly in line with price today.

 The 3 min is divergent, not just what's in the red box.

 The 5 min is becoming extreme on its own.

 And the 15 min has been pretty ugly for some time now.

 Today is the first day the QQQ 1 min chart has really broken loose from confirmation to go negative.

 The 2 min chart is right there with it showing migration.

 The 5 min chart has been showing problems for a longer duration.

Now the 15 min chart has seen a pretty dramatic 1 day shift to a leading negative position.

Closing Indications

 The rate of change in the SPY is obviously turning down.

 The 1 min intraday was negative at the highs, this late move to the upside is merely in line.

 As I mentioned yesterday, the market seems to be like a thin branch sticking out, the longer term timeframes continue to add to the negative divergence, here's what the 2 min added in the leading negative today.

And the 3 min, both of these in depth and length are of sufficient magnitude for a decent pullback, the question remains whether that pullback goes extreme as we have seen recently.

Sector Rotation

 Including yesterday... Financials have fallen way off, the defensive sectors are coming in to rotation, healthcare, staples and utilities.

Intraday, Financials are obviously falling off quite fast, Energy looks to be stagnant, Basic Materials is still in rotation, but it may look like Industrials soon which look like they have peaked. Tech is hanging in there and Discretionary seems to be slowly fading.

IOC Follow Up

Since adding IOC to the core short portfolio or equities model portfolio, it's already in the green, but that's not what I'm most excited about with this opportunity, it is that this is a high probability, low risk entry at a good price point.

For example, if IOC were to turn around and head right back up, my risk here is minimal, I could define the stop as a percent or two above the recent intraday highs, which would give me about 5% position risk and about 1.5% portfolio risk.

In any case IOC is near an important area of last support.

 The intraday high level has already been broken, now the former closing high is being tested.

The 5 min 3C chart look like it won't hold, but I wouldn't be surprised to see some congestion in the area, maybe some peaks above and below support and resistance to try to generate orders and volume.

All in all I'm pretty happy to get a shot at a core position sort of out of the blue.

I'll be happy when a head fake move is confirmed and I can put this one away and not look at it every day.

USO Update-Closing All July Calls

This from the Daily Mail UK

Is this the end game for Assad? Syrian dictator flees to coast and his British-born wife 'escapes to Russia'
USO has seen a lot of gains born of event risk, this may be some finality for the market and may slow crude down. I'm closing all remaining USO July Calls (all at a loss, but at least I'll have something left of the positions: USO July $34 -52%).

The charts...

 USO 1 min

 USO 2 min leading negative pretty quick

USO migration to the 3 min.

FAZ Update

We're getting some movement out of the FAZ long entered earlier in the week, I decided not to use options and just closed a profitable FAS hedging position and added FAZ (so I wasn't hedging a hedge). FAZ is up over 3% using only the built in leverage as I decided not to use options just because I didn't want members thinking that was the only tool we have and because I thought FAZ would deliver a decent return without the need of leverage.

Here's today's update as it looks like we entered at a pretty good level (letting the trade come to us).

 Another bullish long term descending wedge acting totally different from what Technical Analysis Dogma tells us.

 I don't usually believe in straight up or down moves so I think between these two levels of resistance there's some room for consolidation or chop, but ultimately I think FAZ should be able to break above the $26 level without much trouble and if there is a head fake move at support of the SPX bear flag, then FAZ could see a quick move quite a bit higher.

 The 2 min chart with an overall rounding base and very positive leading divergence.

 FAZ 3 min signals

As to the long term primary trend, FAZ has a fairly large leading positive daily divergence, this is rare for a daily chart, it's also in the basing area after the descending wedge. In other words, the market enters the primary bear market, financials should head lower with everything else, FAZ should head much higher as it would be in a primary trend bull market.

Opened IOC Equity Short- 3/4 Full position

This is an equity (stock) short, no options or leverage and considered to be part of the core or primary trend short positions. I may have to adjust the hedges with a new short position, I'd like to do that (add a hedging long) in to a short term pullback.

IOC Follow Up

The last update for IOC this week, "IOC Possible Trade"

From the last update:

""Let the trade come to you", IOC gained 7+% today on no news, in fact the only thing that looks like it may be responsible for the move is a technical breakout, but there's not enough 3C support to rule out a head fake move, in fact it looks pretty likely."


I am going to look at adding IOC as a core short position as I do believe it has likely hit an upside extreme, this would be an equity short, no leverage (no options). 


IOC Today:

 IOC likely bull trap mentioned earlier in the week.

 The move above both intraday highs and closing highs, check the volume on the breakout. The 16th is when the post was published to keep an eye out for this kind of move, "Let the trade come to you".

 1 min is in line with price

 2 min leading negative on the breakout move.

 5 min leading negative in to the breakout.

 15 min leading negative

 30 min with a strong leading negative divergence


 60 min with a large relative negative and a leading negative starting.

The 4 hour chart showing this as a likely head fake move from the start.


And the daily...

Confirming the 4 hour chart, this is why I'm willing to look at this as a core short position here.

LONGER TERM-

This is more or less the reason I decided in June as the market bottomed, to go with long positions in the equities model portfolio as hedges and probable profitable positions as well, rather than what I would normally due, which would be to close the core shorts set up at a very nice gain of 25+% (no leverage) in most and then look to re-establish those shorts on price strength.

The increasing volatility and unpredictability of the market caused me to say, "I'm not going to try to over trade and trade around this one, there's too much that could go wrong" and decided instead to hedge those core short positions meant for the primary trend. So far, even though I only made rough guesses at the size of the hedge I would ned, it has been profitable, even hedged.

So I decided it's time to take a loo again at the VIX long term as we haven't looked at it in some time.

 As has been the case for the last year or so (as this time period produced the largest number of these wedges), the wedges have not behaved as Technical Analysis books would teach you. In this case, the bullish descending wedge in the VIX by TA standards should reach its apex and then take off to the upside, that would see the market move down as there's an inverse correlation between the VIX and the market. Instead, these wedges form either a base such as this one did or a top in the case of a bearish ascending wedge, but in time, they tend to follow the implied path of the pattern, just not when TA says they should and as a result have caused many head fake moves, some we have used to our advantage.

 The VIX in green vs the SPX in white, showing the May 1 top and the June 4th bottom as these were the last two places longer term trades could have been made and still have them work. As you can see, the VIX is nearing a "W" type bottom with March 2012 being the first part of that bottom pattern.

 Here you can see the daily VIX and 3C showing a positive divergence at the March lows leading to a move up in the VIX ultimately that caused the Jun bottom in the SPX to form and since then, the VIX has been in an even stronger positive divergence, suggesting that the primary trend (longer term market classification) will likely move the VIX much higher and put the market in to a primary bear market trend. This is still a ways off from what I can tell unless we have a Black Swan event.

 As for short, sub-intermediate and Primary trend classifications, I'd expect the short term trend to be down, perhaps touching support of the flag pattern, maybe even breaking below it on a head fake move. From there, I'd expect a move toward he top of the flag, again, perhaps even above it in another upside head fake move and finally the primary trend to re-establish itself as a true bear market moves to new lows.

You've seen the short term 3C charts suggesting the short term trend is most likely a pullback.

Here are the other charts for the other trends...

 The Sb-intermediate trend on a 4 hour SPY chart is already higher than 3C was at the April-May top, a short term pullback should see this chart improve and thus the sub-intermeduate trend should be able to hit the top of the flag.


Ultimately the 2 day chart of the SPY representing the Primary trend, the market just never really recovered as there was no new QE introduced after the 2011 top formed and broke,  the rally we have seen since then, I have compared to a "House of cards".

In any case, this is what the probabilities are looking like as of now, the market is obviously fluid and dynamic so we aren't married to the analysis, if new information changes the outlook, then you'll be the first to know. I just thought this might be helpful in putting together some ideas as to different trends.

Keep IOC on your radar

IOC was just put out the last couple of days as a probable head fake trade as it moved above resistance, today it is looking like the head fake portion of the trade is starting. I'm finishing another post, but will get IOC charts up next.

Market Reminder

Choppy trade is tough on every thing, traders, indicators, sentiment, ect. As many of you have heard me say in the past, when things look muddy and noisy and it's difficult to pick out a trend, look toward the longer charts that may have less detail, but they have less noise as well.

This is a reminder of the path of highest probabilities regarding near term trade, it's hard to look too far beyond near term trade (usually meaning about 5 days or so) in a market like this.

 I do think this large flag-like pattern will contain most near term trade, I'd also expect a few extreme breaks above and below both the support and resistance levels of this formation. The white trendline today would represent a higher probability head fake move than anything else as resistance is clear in the area, a break above it and then a failure of that move would be apt to catch the most people off guard, however we can't forget it's an op-ex week as well.

 DIA 5 min shows the near term path of highest probabilities.

 The IWM 5 min looks eerily similar.

 As do the Q's 5 min chart.

This is the SPY 3 min, the 5 min is also negative as well as the 15 min.

NFLX Follow Up

 1 min intraday

 2 min

 3 min intraday and trend

 30 min -this could also set up a nice head fake reversal shown below.

 Ultimately the 60 min chart looks very positive, a pullback should see positive divergences in to it and we should ultimately see a move quite a bit higher in NFLX longer term.

On an intraday basis, a move above $86.65 or even on a closing basis if we can get that, with continued or worse negative divergences would set up a high probability head fake short that should move to the downside pretty quickly. I'm not sure if it can make it there though.