Wednesday, August 8, 2012
FAZ Comparison
FAZ is a leveraged Financial 3X Bear ETF. Basically, although it's a shorter term tool, it should look nearly the opposite of XLF, longer charts aren't as useful as these sorts of ETFs are meant for shorter term trading.
The green arrows mean 3C and price are in line or trend confirmation, the red box is a leading negative divergence from last Thursday as XLF and just about everything else long was being accumulated so this is the exact opposite of XLF/Financials as it should be being a bear ETF. At yesterday's lows there's a positive divergence confirming the negative divergence at yesterday's highs in XLF. Yesterday and today we have a leading positive divergence, this is the strongest kind of divergence, it typically implies stepped up institutional activity, in this case accumulation.
The 3 min chart shows the same neg. divergence from last Thursday and a nearly diagonal positive divergence since FAZ moved toward the lows as XLF moved toward its highs. The areas of price with white boxes show where there are positive divergences , you'll notice most are at lows, if you knew where the market was likely moving that day based on order flow, you'd want to buy as cheaply as possible too.
The 15 min chart shows numerous divergences sending FAZ up or down, but what's important is the recent positive divergences, especially this week as they are at leading positive highs. If you compare how high the 3C divergences are vs where they were in the past and look at where price was in the past vs now, you'll see this is the largest, most powerful positive divergence on the chart.
Financials
Being Financials was the one group that as of Friday, looked like it alone was holding the market up, I think it's important to look at them and we may even see why they were the group that looked like they were holding the market up.
First, remember the concept of wedges and how they no longer acted like Technical Analysis said they should, but ultimately they would be fulfilled, well here's a bearish wedge with a head fake breakout-everything TA says "Shouldn't happen". We noticed they move along to form a top or bottom for descending wedges and then eventually move in the direction the wedge implies, this wedge implies down.
Note the resistance level for XLF/Financials, both Energy and Tech broke ABOVE resistance 7 days ago, perhaps Financials were still holding the market up as they didn't break above resistance until 2 days ago, all 3 candles with very bearish upper wicks too and declining volume. This goes back to the concept of the head fake reversal which we literally see as the last move about 80% of the time right before a reversal.
XLF 22 min shows a neg. divergence knocking it down to Thursday's lows where we see the same accumulation we saw everywhere that day, lifting the market in many cases above resistance levels that would bring in demand, allowing the head fake trade as demand is needed to sell or short in to. Since yesterday, XLF has been leading negative below even Thursday's low BEFORE the accumulation started, even though prices are significantly higher!
Again, the 5 min timeframe is an important confirmation timeframe for intraday charts faster than 5 mins as it also includes some longer term institutional activity, it is leading neg. WELL below Thursday's lows last week. Look how fast this went leading negative after it broke above resistance and was at the highs in a flat trading range (for newer members, accumulation and distribution are VERY often seen in flat trading ranges).
The 15 min chart, a very important reversal timeframe, it has been leading negative ever since it made a move above last Wednesday's highs, it also additionally went negative at yesterday's highs and today's-"selling in to price strength".
This may be the most damning chart, the 15 min. trend, huge accumulation in June, but since it looks like those shares have been sold in to strength every time they had a chance. As we move in to August, the divergences are so bad they are leading negative and well below the original June 3C level when accumulation of Financials started.
This is a VERY clean signal and a very negative signal.
This is a VERY clean signal and a very negative signal.
IOC Charts
I double checked Don Worden's (the father of all money flow indicators) Money Stream just to see if there was anything approaching confirmation...
AAPL Update
If I had anymore room in the core short positions for AAPL, I'd add to it. I may look at seeing if another options position is possible.
There appears to be some VERY short term upside coming, the charts that really matter to me though and what has kept my AAPL Core short profitable since March (?) are looking bad, like this is where I'd like to add to the equity short, the options are a little different because the timing issue is more crucial, yet I have an open put there that I'm not concerned about.
As I have said before, even if you had a crystal ball and knew exactly what was coming in a week or so, the market is NEVER going to make it easy for you, that is why I remind you every now and then of Jesse Livermore's comments about why and how he made money when so many others were of the same opinion as him and they lost money, it was because of (in his words), "His sitting", meaning seeing the big picture and not panicking every time an intraday or daily move went against his view, it's having the courage of your convictions which is good if you have an edge, not so good if you are just gambling.
The charts...
This is the least influential chart, a 1 min intraday chart used for intraday moves, there appear to be several positive divergences, although they can often just lead to a consolidation and they can be run over as well.
The 2 min chart should show some of that positive activity if it had any real strength to it, it didn't bleed through to the next timeframe, I don't think it's very strong at all.
The more important 5 min chart and its trend in a leading negative position as AAPL has been in a range and above resistance, this is where we often see distribution.
More importantly, the 30 min chart, this is a VERY important timeframe and represents the trend of underlying activity without the day to day noise, leading negative at the same range area.
The 30 min chart trend-rmember I said there was one big AAPL accumulation area and I didn't expect to see another, I just expected those shares to be distributed in to higher prices before AAPL tumbles for real, there it is to the left in May. The negative divergence has grown worse from June to July, in August at the range and above resistance, it is leading negative and at it's worst on the entire chart, this is what really matters to me.
There appears to be some VERY short term upside coming, the charts that really matter to me though and what has kept my AAPL Core short profitable since March (?) are looking bad, like this is where I'd like to add to the equity short, the options are a little different because the timing issue is more crucial, yet I have an open put there that I'm not concerned about.
As I have said before, even if you had a crystal ball and knew exactly what was coming in a week or so, the market is NEVER going to make it easy for you, that is why I remind you every now and then of Jesse Livermore's comments about why and how he made money when so many others were of the same opinion as him and they lost money, it was because of (in his words), "His sitting", meaning seeing the big picture and not panicking every time an intraday or daily move went against his view, it's having the courage of your convictions which is good if you have an edge, not so good if you are just gambling.
The charts...
Question on UVXY
VXX and UVXY are short term VIX Futures ETFs, I have some open positions in UVXY, I intend to continue to hold them.
Here's a look at the intraday and the much more important trend on the 15 min chart.
UVXY going positive intraday yesterday as the market was going negative on this 3 min chart as they trade nearly inversely to each other. There's a negative divergence on the open in UVXY and a leading positive divergence since then the rest of the day.
The 15 min trend saw a negative divergence on last Thursday (remember it trades the opposite of the market), then a strong relative positive divergence at the white arrow and an even stronger leading positive divergence at the box which is making a new high for this chart.
Here's a look at the intraday and the much more important trend on the 15 min chart.
USO Update
Would you look at that! We may get our chance to open or add to a USO position after all...
There's the break below support I warned we might see accumulation in the area of the stopped out shares from longs with stops RIGHT AT SUPPORT, how obvious and predictable can you be?
There's the volume as the stops were triggered and USO creeping back above what was resistance and now is support again. This market's hallmark over the last several months has been as a meat grinder, punishing longs and shorts with just this kind of volatility, this is why it's important to take a step back when viewing the market.
The 3 min USO chart is in leading positive position at the break below support, my guess is those shares (and someone has to take the other side of the trade) were accumulated. There aren't a lot, it's not enough to start a new trend, but maybe enough to shakeout the shorts above the triangle where they will likely have their stops.
The larger view, I'm using an important 15 min chart, but the even more important 30 and 60 show the same, a leading negative overall divergence. I used the 15 min because it shows a negative intraday divergence as well.
ES-S&P E-Mini Futures Update
I should have mentioned in the last post the disconnect I showed you yesterday between European stock markets and not only credit, but more importantly soveriegn yields, the two are going in opposite directions. If I had to get inside information from the smartest people out there, they'd be in credit and bonds and they were not enthusiastic like the market averages were, yo may recall the chart from yesterday.
It seems some of that may have carried overnight in ES.
Risk Asset Update
Most traders look at the market and are moved emotionally and make decisions, come to opinions and conclusions based on intraday trade or trade over a short period of time, like a day or a few days. These same traders also trade in 100 lots. Wall Street/Smart Money/Institutional money has a much different view, a much longer view (we have seen the cycles they set up numerous times), they trade in size most of us can't even contemplate, even the market makers and specialists-forget the HFTs. There's a fundamental disconnect in that issue alone as far as retail traders understanding Wall Street, they trade totally different, they look at the market totally different. To beat the market, you have to understand Wall Street, yo can't do that by watching every tick or daily close, Institutional money thinks in terms of their quarter or year, not their day.
This layout looks at risk assets that "Should" trade with the market (SPX in green is the comparison symbol unless otherwise noted), when there are divergences in these assets, it is a clue or a piece of the puzzle that helps us understand what's going on in the market and where likely reversals will take place or confirm a price trend.
USO
So far the USO break below the triangle looks confirmed by 3C, BUT, it also JUST broke below that support area we talked about. "If" there was going to be short term accumulation to run the other side of a Crazy Ivan shakeout, the stops that were hit on the move below support would be the supply needed to accumulate to run USO back the other way. I'm talking about short term tactics, I still feel the larger picture is USO moves down, but for options and adding to the position, short term tactics are important.
Here's the volume as support was broken-AGAIN, this is how predictable traders are, put their stops right at support, what market maker/specialist wouldn't hit that stop, it's free money in many ways incl. volume rebates.
This is why we NEVER put stops at obvious places and try to avoid placing them with our brokers in advance as Wall Street can see them, why not play poker and just show them your hand?
Here's the volume as support was broken-AGAIN, this is how predictable traders are, put their stops right at support, what market maker/specialist wouldn't hit that stop, it's free money in many ways incl. volume rebates.
USO Update
Watch USO carefully, this may be a Crazy Ivan shakeout...
The intraday triangle and a break below it, if we see a break above, then everyone is being shaken out and we have a Crazy Ivan shakeout, the end result expected would still be a move to the downside after an upside shakeout.
I just opened the Risk Asset Layout so I don't have 3C open, I'll check USO as soon as I'm done with the Risk Asset Layout and update you if there's anything to see or know.
I just opened the Risk Asset Layout so I don't have 3C open, I'll check USO as soon as I'm done with the Risk Asset Layout and update you if there's anything to see or know.
Market Update
VERY INTERESTING!!! Pop Quiz! Which average has shown the best 3C relative strength the last several days? If you said the IWM/Russell 2000, then yo have been paying attention to the market updates. Bonus question? Why? The answer, IMHO is because the DOW, SPX and NDX all broke ABOVE near by/obvious resistance (on a head fake move you need demand to sell/short in to) and the IWM hasn't made it there yet until yesterday and even at that it wasn't a strong move so it has been a full 2 days behind all the other major averages.
Today I expected to see a lot of intraday volatility with the more important trade later in the day, that's just been the market's behavior lately. If we looked at the SPY, DIA and QQQ alone, you might get the impression the market is just treading water right here and upside volatility would be hard to come by, but as the R2K should always be the leader of a risk on move, it seems the attention is focussed there today in order to create that volatility, you'll see what I mean, but when looking at the IWM charts, make sure to distinguish between the 1, 2 and 3 min intraday timeframes and the 5 min timeframe which is the first of the short timeframes where we see institutional activity.
First the SPY...
The reason for the SPY first, remember the last post-USO and remember the accumulation on the short term charts from Thursday of last week? Well, here's Thursday of last week, Aug 2nd. Remember also the FB post and why I thought FB would likely pullback and create a larger base rather than make a large run up? The reason why is no matter how strong the accumulation, if it is only 1 day and it's largely confined to intraday charts, they simply can't accumulate a large position and the size of the accumulation is somewhat proportionate to the size of the move, although we have to allow for mark up and possible short selling that shows up as distribution also, but in other words, "if" it was going to be a BIG move, a nice trend up, they'd need a bigger base. This size is perfect to push the averages through resistance, make a quick buck and set up the next cycle.
In any case, the leading negative divergence on the SPY 1 min is much larger than the positive divergence in white, this would suggest short selling in to price strength which is found at a break out above resistance as traders wait for price confirmation before entering, at least many do.
SPY 1 min intraday with yesterday's negative divergence, trend confirmation at the green arrows, note there's NO positive divergence on even the shortest charts this morning in the SPY. There is a very slight leading positive intraday that could lead to some intraday volatility, but it may be long gone by the time this is posted.
2 min intraday-again in yellow, no positive divergence intraday at all.
3 min leading negative intraday yesterday, in yellow no positive divergence even on an intraday timeframe.
DIA 2 min trend shows 8/2 accumulation and a much larger leading negative divergence since.
2 min intraday for DIA, there was a small positive divergence on the open sending the DIA in to the gap, then a negative divergence at the highs.
3 min trend from Thursday's accumulation, note the leading negative trend.
3 min intraday is almost perfectly in line with price, or confirmation , again there's a small leading positive developing, it's so small it may just be noise, but given the IWM, maybe not.
DIA 5 min in leading neg. position
QQQ 1 min with a small positive on the open, that saw a negative/distribution at the highs today
QQQ 2 min with yesterday's leading negative divergence, today shows no signs of any positive accumulation.
QQQ 3 min, again leading negative yesterday near the highs and today.
Here's the QQQ 5 min trend, this is really ugly, a bad leading negative divergence that looks exactly like the move above resistance on Friday has been an area of short selling by institutional money.
Now the IWM
1 min relative positive intraday followed by a leading positive divergence, this looks like it wants to create some upside volatility.
2 min isn't nearly as strong so neither is the divergence, but there's still a leading positive right in this area.
The same that applies to the 2 min applies to the 3 min
Now, pay attention to the 5 min, this is where the signals move beyond intraday and more toward trend, leading negative.
Today I expected to see a lot of intraday volatility with the more important trade later in the day, that's just been the market's behavior lately. If we looked at the SPY, DIA and QQQ alone, you might get the impression the market is just treading water right here and upside volatility would be hard to come by, but as the R2K should always be the leader of a risk on move, it seems the attention is focussed there today in order to create that volatility, you'll see what I mean, but when looking at the IWM charts, make sure to distinguish between the 1, 2 and 3 min intraday timeframes and the 5 min timeframe which is the first of the short timeframes where we see institutional activity.
First the SPY...
In any case, the leading negative divergence on the SPY 1 min is much larger than the positive divergence in white, this would suggest short selling in to price strength which is found at a break out above resistance as traders wait for price confirmation before entering, at least many do.
Now the IWM
