WOW, Here's Another WHOPPER

When we see 3C divergences we really don't know what smart money knows, we can make guesses based on the obvious like AAPL is reporting tonight, but we don't know. I think the timing of this article from the WSJ coming out when it did in relation to AAPL earnings is interesting and if you want my opinion as to whether Wall Street is hot-wired in to what the f_E_D is doing and saying, my answer would be a resounding, "yes".

As for the story, again from the WSJ

Fed Sees Action if Growth Doesn't Pick Up Soon

In any case, if this is about anything, I doubt the release is about a smoke screen for AAPL earnings and has more to do with a probable Spanish sovereign default with the Northern countries that hold the purse strings having been put on warning yesterday that if they keep handing out bailouts, they can kiss their Aaa rating good bye.

Amazingly FAS is still in the green

Price paid for FAS=$80.29, current price in AH $80.75

AAPL's Whopper

As I mentioned in an earlier post, when MSFT issued a dividend it was the end of the growth phase for MSFT. Core short positions in AAPL are still in place, no AAPL longs, the long term charts just look too bad as you can see in this update from today, pay attention especially to the longer term 60 min chart.

The above post is interesting to re-read as it shows very clearly that the AAPL bull flag seems to have been constructed rather than being natural and there's no accumulation in it, take a look at the post again, this may seem paranoid, but these are the kinds of games Wall Street plays every day although this one took a little more effort.

Earnings:

• Revenue: $35 billion versus street expectations of  $37.1 billion

• EPS: $9.32 versus street expectations of $10.36

• iPhone: 26 million versus street expectations of 29 million

• iPad: 17 million versus street expectations of 16 million

• Gross Margin: 42.8% versus street expectations of 44%

• Mac sales: 4 million versus street expectations of 4.1 million

• iPod sales: 6.8 million versus Morgan Stanley estimate of 5.9 million

• September quarter revenue: $34 billion versus street expectations of $38 billion

• September EPS: $7.65 versus street expectations of $10.22

• Apple's cash on hand: $117 billion, up $7 billion from last quarter

Market Update-Closing Indications

Last night I showed you the short term charts of yesterday's action which started out very strong (with regard to 3C underlying trade), the rest of the afternoon those charts almost all deteriorated, I was very interested today to see which way these short term charts would go, if they continued to deteriorate badly then we would likely be close to making a new, serious move lower, however if there were to maintain or improve, then the chances of some upside noise within the trend becomes more probable, but that also allows us to enter positions to trade with the trend at much better prices with far less risk.

The deterioration in the charts late day yesterday carried over in to price today as we'd expect, but much of the underlying 3C trade activity today in to lower prices (at least in the short term -day or so) became stronger as the afternoon went on.

**UPDATE-AAPL's earnings aren't impressing anyone and the real item that counts, guidance is lighter than usual and that's saying something for a company that always guides lower.

Th short term charts still have several short term positive divergences and we still have a long night ahead of us, we'll see whether we get the short term move up that many of these charts seem to indicate, the longer term and more important charts have stayed negative and that's what we expect the trend to be, although it will be scattered with noise here and there/counter trend moves.

Here are the charts for the major averages as of the close...

 DIA 1 min stayed leading positive all day. What is impressive is that the 3C positive leading divergence didn't make any lower lows with price.

 The 2 min chart was negative at the bump up in price yesterday afternoon, from there the selling took the DIA lower as there was no institutional support, but they seem to have stepped in and in stronger fashion as the day wore on, as you can see the positive divergence kept moving higher. A lot of times the 1 and 2 min charts are indicative of middle men loading up their account in advance of a known move to come, they are the buyer/seller of last resort on a market order and before the advent of HFT, about 30% of any given stock's volume per day was either the market maker or the specialist trading their own account. In any case, thy fill the larger orders so they typically know what's coming down the road. To me this looks like some stocking up for a move higher (still noise), but not so much as to change the trend assumption. As I said last week before a move down even started (as we were looking for that to be the next trend), nothing moves straight down or up and there's unprecedented volatility, ATR and game playing in this market, we have to expect counter trend moves with in the trend.

 DIA 5 min relative positive

 ES leading positive at a new high on the session.

 IWM 3 min leading positive divergence

 IWM 5 min leading positive divergence

 QQQ with a strange initial leading positive move, followed by downside and an even stronger leading positive move very close to the EOD.

 QQQ 1 min close up of just today.

 QQQ 2 min is leading positive, but again most of the leading action was late in the day and very fast.

 QQQ 5 min relative positive divergence-this would suggest (at least at this point) the stronger positive divergences on the shorter timeframes have begun to effect the 5 min timeframe, but the shorter timeframes are not yet strong enough (and may never be) to move the 5 min higher than a relative positive divergence which is the weakest. It could also signify that any move to the upside will indeed be weak, it may not appear that way in price initially, but the strength and duration of the move are kind of capped by the divergences' strength.

 SPY 1 min leading positive

 SPY 2 min leading positive

 SPY 3 min relative positive followed by a leading positive move.

SPY 5 min relative positive followed by a leading positive move.

AAPL Update

There's some more change, this is not the kind of signal I would consider an earnings leak, but it does look like something that maybe goes like this, AAPL gets an initial knee jerk reaction higher and that action is faded to the downside moving forward.

 1 min

 2 min

 3 min

5 min

Already Saved Money on FAZ and Green in FAS

ES Update

Ironically ES is seeing its first leading positive divergence of the day, perhaps including the entire overnight session, CONTEXT is also going positive and I grabbed a chart of High Yield Credit as well with a short term positive in it.

 ES making a leading positive divergence, now well above the noon readings, actually higher than anything seen in regular hours trade.

 Also CONTEXT's model is going positive, higher than ES is (time delayed).

HY credit isn't making the lower lows intraday that the SPX is making here, it's making higher lows, strange for HY credit to be acting like that with the SPX making lower lows, seems something is up, still if it is, I expect it's near term games and short term noise.

AAPL as the Fulcrum for trade

If not for tomorrow, at least for overnight and perhaps the early trade, although it could be a fulcrum for longer than a day.

Here are a few minor, but noticeable changes in AAPL today, right when ES is starting on its first leading positive divergence of the day.

 At first this 1 min chart just looks negative, but zoom in to this afternoon's activity...

 And you can see as AAPL make a new intraday low (always have to consider the head fake), 3C 1 min is making a series of higher highs, it may just be a 1 min timeframe, but it's still a change.

 The 2 min time frame is in a leading positive position, actually pretty impressive for this chart alone.

Now the 3 min is seeing some migration and has started a relative positive divergence.

I still would not choose to trade AAPL earnings, but if I HAD to guess, I would say AAPL may be used as a short term positive fulcrum in the market, followed by the earnings being looked at closer and the market giving up any gains.

USO Possible EIA Energy Report Leak

The report comes out tomorrow at 10:30 a.m. EDT, here are the USO charts, this would be a very speculative trade as well as short term.

 USO 2 min from negative at the top to lateral the last 2 days with a relative positive divergence

 USO 3 min with a leading positive divergence at yesterday's open as USO continues sideways (often where we see accumulation and distribution).


The 5 min chart is mostly in line until the open yesterday where it is at a relative positive divergence followed by a leading positive divergence and is yet to make a lower low. I'd consider this a speculative, short term long trade.

Financials follow up

Here's the closed FAZ position, I normally would have held this, but seeing I wanted to enter a FAS position it didn't make much sense (a VERY short term hedge?).

 Faz at nearly a 12% profit as a straight long (no options), I think it has more to go and will look for a better entry.

 Here's the Financial Sector today on a 1 min 3C chart in a leading positive divergence.

 Financials with a 5 min leading positive divergence-remember last night I was very interested in which direction these short term charts would go.

Financials larger trend is definitely negative, however the 15 min chart even shows some sign of a leading positive divergence at this level, it doesn't look like any kind of threat to the overall trend, but again, noise in the trend.

 FAS is a 3x leveraged long of Financials so it should look similar to Financials above/XLF. The 1 min chart in a leading positive divergence

 The 2 min in a leading positive divergence, remember the market is fractal in its behavior and almost all reversals are preceded by a head fake move, a move below support would pull in some shorts that could later be squeezed for a move higher.

 FAS 15 min trend is in a leading positive position.

 FAZ is the 3x leveraged short for financials, it should look the opposite of XLF and FAS above. The 2 min chart in a minor leading negative divergence, it doesn't look like a big threat, but it does look to be enough to create some counter trend noise.

 FAZ 3 min has a very strong base with a great positive divergence, but the recent movement looks like FAZ wants to consolidate. The base should allow FAZ quite a bit more upside when all is said and done.

The FAZ 15 min isn't horrible, but it's not confirming either, for these reasons I think the most likely near term move in FAZ will be a quick move down and FAS a quick move up. I'll be looking to re-enter FAZ on price weakness and 3C strength.

FAS position is smaller-All longs are speculative for me

I think you need to be very nimble to trade FAS long here.

Charts coming.

Closing FAZ long position -Entering FAS long position

Market Update

Keep in mind that these market updates can very well have a lot to do with AAPL's earnings, IT DOESN'T MATTER WHAT AAPL'S EARNINGS ARE, the market can create short term sentiment any way they need it to get the position they want to get off. If Wall Street wants AAPL earnings to be taken as positive, they have many ways of moving AAPL higher (market makers and the bid/ ask; phantom flash quotes; short term accumulation in the open showing volume; CNBC -Yes I'm serious), so always think in terms of the bigger picture. We know the evidence still points to the next trend that already started as being a down trend, but we did expect there to be upside noise and head fakes even before it tarted so don't be surprised, just use these moves to your advantage whenever you can.

Intraday there looks like there will be an afternoon reversal, the media will likely play it up as AAPL excitement, but there's almost always a meaning and a reason for these moves even when they aren't apparent immediately.

As yo can see and as I often remind you, reversals are almost always a process, not an event. As the market is fractal in nature, you have to scale the reversal to the timeframe we are dealing with, that's why I didn't feel late putting out the XIV idea a member asked about, there's time (more often more than you might otherwise think).

My original expectations from yesterday morning and last week...

 Here's the bear flag in the SPY, nice and obvious. As of last week our trend projections were for a shorter term trend (relative to the other trends) to the down side, but it would include noise, not just be a clean move down. The short term trend would likely break below the bottom of the bear flag drawing in new shorts. As of yesterday morning I suspected we'd see a move inside back inside the bear flag as part of the noise and shakeout, I expected this to be at least a 2 day move even though we entered the bear flag yesterday. We could still see volatility in to both gaps or even at a new high, the point is the pullback move will eventually hve to be strong enough to convince shorts the next leg down is starting so we'll have to see a deeper move below our current lows.

Our next trend we expected was the continuation of the sub-intermediate trend up, it would likely move above the bear flag in a very volatile manner with short covering including new shorts that aren't in yet on the break lower we are still expecting in the short term trend.

Finally the long term Primary trend down would re-emerge and we'd see new lows in the market, we are still a ways off from that and I suspect at a noise area of the short term down trend or extreme pullback move, it will need to be convincing to bears who have been chewed up recently so it should be quite ugly on the downside when all is said and done.

Here are the gaps and in white the new high, these would draw in longs and on the return move down (as this would be noise within the trend), the longs losses and selling would accelerate the move down, which is what we'd like to see to give shorts confidence to enter the market so they can later be squeezed as well.


As for the market updates...

 DIA 1 min has remained in a leading positive position all day today, this has migrated to some longer term timeframes.

 The DIA 2 min is also leading positive intraday today, this suggests a decent intraday/ day to day , move up from these levels, the current price action os relatively flat, this is to be expected before a reversal as few reversals are "V" shaped.

 Even the 5 min DIA is in a leading positive position today after going negative yesterday afternoon, last night I talked about these short term charts and how they would be important in understanding near term direction within the trend, thus far it looks like we'll see a move higher in to the close or in to tomorrow or both.

 Ultimately though the trend's firewall is still standing firm as a leading negative divergence on an important 15 min timeframe. Despite whatever noise we get intraday or day to day, the trend we should see at the end of this should be a pretty ugly looking move down.

 IWM 3 min leading positive divergence today after yesterday's ugliness.

 We even have a 5 min leading positive divergence today in the IWM, this could build to be stronger with a little more sideways or down price action.

 The 15 min IWM chart is the negative divergence firewall and represents the trend we are looking for once noise is removed, but it is the noise that has been the meat grinder for many traders I've heard about on the StockTwits stream, this is why yo either are trading nimble like some of the trades from today and yesterday or are looking at the longer term and not letting the noise throw you off.

 QQQ 1 min leading positive today

 Also a 5 min positive divergence that has the start of a leading positive move (leading divergences are much stronger than relative divergences).

 QQQ 60 min as shown yesterday is leading negative, this as well as some shorter charts represent the trend without the noise.

 SPY 1 min positive and slightly leading positive divergence today in to lower prices, in other words, lower prices seem to have been accumulated, only to be sold at a move higher.

 SPY 3 min from a relative positive to a leading positive divergence as the SPY moves lower.

SPY 15 min firewall shows the trend and the leading negative divergence.

Understand the timeframe you are trading and don't let other timeframes get in the way of your trade. I prefer to keep leveraged trades short and move out quickly, longer term trades I prefer to use no leverage and will sit through noise with those.