FB Update

We were looking for something good to happen in the world's most hated stock and it has, today FB added nearly 4% on increasing volume while the market darling, AAPL added +0.15% on decreasing volume.

We didn't pick FB because we believe in the company, we picked it because of the charts and now look at the results thus far!

Hope you made some $$$

More Evidence, The NYSE TICK Chart

The TICK chart is the number of advancing issues per tick (1 min) minus the number of declining issues, this is calculated as either up or down from the last tick, it IS NOT calculated on the basis of whether a stock is in the green for the day or red.

If you looked at ES or AAPL alone, you'd think we were seeing a MONSTER afternoon rally, however when looking at the TICK chart, we see max readings of about 1000, this is strong, but no where near as strong as the moves in the last hour or so have "appeared". When I pulled up this chart I was expecting solid +1250 with spikes to the highs of around 1500, instead I see spikes to 100 and a lot of action only at 500, this means there weren't nearly as many stocks participating in this afternoon move as you'd think by looking at the momentum stocks or the popular stocks like AAPL.

Not every stock is going to see a head fake move, usually the more visible a stock is (popular) and the bigger the pattern (resistance or a big triangle like AAPL) the more likely we see a head fake move. With such low participation, it seems the head fake moves were reserved for the stocks that most of the market would be watching on what is typically the slowest day of the week any way.

In other words, I try to trade with the probabilities, I have no problem having opened positions today given the evidence from 3C to price patterns, expectations of market behavior before a reversal, CONTEXT, our risk asset indicators, etc. Like I said earlier, every once in a while we see that "ah-ha!" moment when it all seems to pull together, today looks to be such a day.

Monday

Basically exactly what we expected today happened, and on no news. I have to assume it also happened for the exact reasons we expected it to happen (head fake reversal). Now, is it done today?

Take a look at this AAPL 2 min chart...

You saw how bad the 1 min was, it takes a little time for it to migrate to the next timeframe, the 2 min above. However, could it be we open strong Monday to finish this off or is there just not enough time for these charts to migrate that fast?

I don't know the answer to it, but I do feel strongly that I want to be largely wrapped up and in position today. The % gains today in stocks like AAPL are not so hot as to bring longs in excited about the gains unless they watched the closing hours.

UNG Charts

Here are a few

 1 min

 3 min

5 min

UNG giving strong positive signals

I don't have time to get the charts up, but I intend to fill out the equity position to a full position on these signals- LONG

AAPL

AAPL 1 min is solidly negative, the market is moving so fast I don't know if the longer timeframes will be able to catch up, that's why I said for my purposes, BIDU is fine right here.

AAPL 1 min now leading negative

SPY 3C

SPY is starting to lose 3C momentum and is negative on several of the timeframes we are looking to turn negative.

AAPL

So here we are, looking for a head fake move and the market moves up as we have been waiting for on no news, what are the chances?

Here's the update

 AAPL has went in to a triangle consolidation, this has bullish implications for more upside, but it too could be head faked and sent lower instead.

 The 1 min chart starting to show some of that negative activity we want to see in to the move up to confirm a head fake, but I think we already have so much other evidence, I personally would just want to try to get the short trade off before the close.

 The 2 min chart is in line

In the last AAPL post, this is the area I meant for a head fake to be truly effective, above the triangle highs, I don't know if we get that, at least today. Perhaps a carry over in to early Monday...

USO September $35 Put

Position opened in options model portfolio, this is just a little smaller than normal size position for risk management, the equities position is at full position size.

USO-Fill Out

For me, this is as good as any a time to fill out the USO equity short and open a September USO put position.

USO 5 min negative on the run up

AAPL/BIDU cont...

I think we get more out of AAPL, to do its job it needs to decisively break above that triangle. BIDU I don't feel like it's going going to get much more and if it does intraday, I'm ok with that.

I'm adding a small position in September BIDU $135 Puts.

I'll let you know about AAPL/USO

AAPL/BIDU

We have the move we were expecting in AAPL and BIDU starting, also USO. I'm going to post the 3C charts, but generally, this is the strength I want to short in to

Risk Asset Update

Here we are, the Risk Asset layout is our more detailed version of CONTEXT, it confirms CONTEXT and is now giving a majority of signals that we have used so effectively in the past to time reversals and be in the trade BEFORE the move.

 Commodities as a risk asset are way underperforming the SPX today as they have been the last couple of weeks.

 Commodities were week over the last few weeks, this quick burst I'm betting was a sector head fake move.

 This is FCT, as a student of the market, I'm not ashamed to say a member told me about this one and I verified it, when FCT diverges, a reversal is near, it is diverging.

 Yields are also diverging, they are like a magnet for equities.

 I think the same thing happened with yields as commodities, in any case, they are negatively divergent, we seem to be right in the reversal zone.

 The Euro is also a leading indicator as it moves opposite the $USD and the $USD moves opposite risk assets, in simple terms, when the Euro falls/diverges, the market typically moves with it as a way to view the inverse $USD correlation with more ease.

 HY Corp Credit isn't performing well today, it's well below the close yesterday momentum-wsie.

 Here's the big divergence in Credit, credit leads, stocks follow, this is ugly for the market.

 Here's high yield JNK-Junk credit also recently not able to make new highs with the market and diverging negatively this week.

 The Dow in green vs Transports in red, typically they move together in a healthy market, the last divergence in 2011 led to a 20% drop, we are diverging again.

 Financials were the thorn in our side the last week, look at them compared to the SPX, I think its safe to say they are rolling out of risk-on status and in to risk off.

Sector rotation from yesterday shows financials weak and getting worse, Energy losing ground, Discretionary too. Tech is in an area that is rather flat, but holding-our head fake moves? The Flight to safety groups are rotating in, Utilities, and Healthcare.

I like this, today is a good day for us.

Important Message

I'll say that sometimes it's a bit hard to judge, "Is this it?", is this the moment of a reversal and where I want to get my positions in order so I'm not chasing them. Every once in a while with large changes of trends, there comes an "Ah-Ha!" moment when everything lines up just right, I feel like this is one of those moments.

This is where I want to work fast and fill out short positions started in to price strength.

Risk Asset Layout coming next...

ES/ CONTEXT Update

You saw the ES chart in the last post, it wasn't impressive at all on the bullish side, now look at CONTEXT and recall we didn't have much overnight to move the market lower in the way of news, it was technical levels being broken just as 3C long term and short term charts aligned negatively.

Since 9:30 last night the ES model has deteriorated badly, ES/3C doesn't even look good and we have this much deterioration in the ES CONTEXT model, this doesn't look good for the market, but I want to see our own indicators with my own eyes.

Quick Market Update

In brief, the VERY short term charts look like they "may" provide enough lift for us to be able to get off some shorts in to higher prices, but the slightly longer charts are sufficiently weak that I don't see this as anything more than what I described in several posts, an intraday head fake move or "GIFT".

 DIA 1 min positive divergence.

 Remember the longer the timeframe, the more important the signal, the DIA 5 min leading negative today.

Thus it looks like we may get the intraday move mentioned earlier, but in to weakness, which makes it a high probability short at a better price with less risk, the essence of "Let the trade come to you".

 ES if it shows anything today, it's negative, nothing positive on this chart.

 QQQ 2 min positive divergence, a relative positive which is the weakest form and it is in its weakest state, but maybe enough to get the job done.

 at 3 min leading negative.

 SPY 1 min relative positive, not very big, not very strong and on the shortest chart.

SPY 3 min leading negative today.

Maybe We'll get lucky with BIDU

I'm pretty much full with BIDU positions, but for anyone interested in the short trade, you might just get a chance at a better entry.

More often than not, when we see large volume like this on a bullish candle, it's an intraday turning point, we may get a move in BIDU as discussed earlier.

IOC / USO

 IOC broke support, note volume picked up as traders remain predictable. This isn't a good sign for IOC, I like it being short, but the reality is when important support is broken, price tends to linger for a bit and move back and forth above and below, so I'd look for that intraday, but otherwise, this is a good start.

 USO couldn't fill the gap, I'd still like to add to USO short/ open PUTS on some intraday price strength, but as you'll see, the migration of the divergence through the timeframes is leading negative, maybe I'll get lucky.

1 min

 2 min

 3 min

5 min at a new low.

AAPL Update

As mentioned in the BIDU update, there's a chance BIDU or better probabilities, AAPL, may make an intraday/day head fake upside move, I'd consider this a gift to short in to if it were to come.

AAPL looks like a higher probability and I'll show you why, I'll also show you why I would consider it a gift to short in to.

 AAPL is a good example thus far of a "Crazy Ivan" shakeout, I call it this from the movie, "The Hunt For Red October" about a highly advanced new Russian submarine and the tactics sumariners use to follow and track their targets. Submarines will try to get right behind the sub they are following as the noise of the following submarine is not heard as it is lost in the baffles/prop wash of the sub they are following. The Russians deal with this by making a 180 degree turn toward any sub that may be following and thereby exposing the sub's acoustical signature.

Here in AAPL we have a bullish flag, technical traders expect it to break to the upside, but it first saw a head fake move to the downside knocking any weak longs out of their trades, just look at volume on the day AAPL moved below the flag, that's longs being stopped out. Then a move to the upside is made, shorts are now knocked out of the trade and longs start to re-enter, a subsequent move from here back down and below the flag will have shaken out everyone and give AAPL a jump start on downside momentum as longs sell at a loss and shorts enter, that adds up to a lot of supply and little demand to soak it up which leads to lower prices, as with all head fake moves, they kick start the momentum of the final direction.

 On an intraday/15 min chart we see a triangle, technically a bearish triangle as it is descending, a move above this would bring in longs and cause shorts to cover, a move down after that, completing the head fake, would add to the downside momentum needed to move AAPL below the daily bull flag. This pattern is pretty obvious in probably the most watched stock in the market, the stops and limit orders are most likely lined up already, it would almost be a shame not to hit them, but it would provide us with a high probability short entry at a better price with less risk.

As for 3C

 The 1 min chart shows nothing of interest, but the 2 min chart shows a positive divergence, just the length and strength needed to make such a move, but no where near strong enough to sustain it.

 The 3 min chart shows the same positive divergence in the same area, even though the bigger, more powerful trend is the leading negative AAPL is currently in since moving back in to the bull flag. Remember the post I showed you that proved there were no positive divergences/accumulation in the bullish flag, but rather a series of divergences that looked like they were there just to create the daily flag?

 As far as sustainability of any such head fake, this 5 min chart should answer that question, thus such a move is looking more and more like a gift to those who are brave enough to short it, but we don't need just bravery, we also want 3C confirmation of the head fake, by the looks of these charts, we would get it.

I've made the longer term case for AAPL numerous times, that's not what this post is about, but just to remind you, here's a 30 min chart of AAPL in a leading negative divergence at the bull flag and in yellow, the price pattern I'm addressing above.

BIDU Update-Another I like Short here

BIDU has been a core short position since March/April, I also recently opened Puts in the options model portfolio. Here's the update...

 From left to right, BIDU core short entered on a head fake move higher while 3C was negative, it took some time for BIDU to head lower, but 3C stayed negative and I stayed with the position and it moved as 3C implied. When the bear triangle (descending triangle) showed up, we already saw positive divergences and had an idea there would be a head fake move lower, we used that for some longs on what I expected to be a counter trend move up-not a change in trend, just a counter-trend shakeout and the core shorts remained, we made money by buying the head fake lows and holding for the upside ride. That upside move looks to be ending and the trend ready to re-assert itself, I think we are in the last moments of the BIDU counter trend move higher.

 This 1 min chart is in line, but does leave open a question of whether BIDU makes an intraday or daily move above local resistance on a final head fake move before reversing, "if" it did so, I would want to almost certainly short in to that price strength/3C weakness, "LET THE TRADE COME TO YOU".

There are some VERY recent signs that AAPL might do the same today that weren't there 30 minutes ago.

 The 2 min chart, again, that resistance area I'd be looking for a head fake move above to short in to on a leading negative divergence.

 3 min chart shows something very similar, not seeing the positive for a head fake move higher, but if the 1 min goes positive then the 2, 3 min charts may show the same for an intraday move. This is a VERY obvious level of resistance and the more obvious, the more likely the head fake/shakeout.

 5 min chart leading negative as price is nearly the same.

Ultimately the story can be seen here on the 60 min chart.

I'll set some alerts.

IOC Update

The IOC Sept $95 Puts are at a small profit, the Equities model position is at a loss as a core short position, but I'm sticking with both as I still like IOC as a short idea. As I showed in the Big 3 post from yesterday, Energy looks to be at a turning point, IOC is in the Energy Sector.

Here are the charts, I especially like where IOC is now (thus the reason for opening the recent put).

Like most stocks, IOC has been drafting off the market and its industry group. Most traders go about stock picking the complete opposite way; if you understand that the biggest influence on most stocks on any given day is the market direction itself, then the first thing to look at is the market, not the stock. The second most influential force is the Industry group and finally the stock, this is why most stocks follow the market and why advance/decline lines and other indicators are useful as they show when there's a change in character in this trend. Above is IOC in green and the SPY in red, even the second to last break above resistance at the end of July happened in the SPY and IOC almost the same exact time.

We know the underlying trade in the market and Energy is not good, now IOC...

 The first move above resistance saw stronger volume than the last move, today is the first day IOC has traded under what is now support as well.

 Here's the 5 min intraday chart with IOC moving below support on a volatile move, after that in the white box a candle with a long upper wick at the day's highs which looks like a distribution candle or "churning", in either case the highs ended there for the day as higher prices were rejected. Right now IOC has found some intraday support at the important support line, a serious break below this line would almost certainly confirm a head fake move and bull trap, a move below the next support level would be an even stronger bull trap.

 Only the 1 min chart is positive intraday which is likely support just mentioned.

 The 2 min chart is in line with price so the 1 min divergence can't be that strong.

 The 3 min chart is in a leading negative divergence right where IOC made the breakout (head fake?) move above resistance, this suggests that there's been underlying selling in to that price strength.

 The 5 min chart shows the same implication at the same area.

 Here's the 15 min chart close up, lading negative at the breakout area.

Here's the long term 15 min chart, leading negative on a long term basis as well as intraday.

The real monster chart and big picture in IOC is this 4 hour chart which showed perfect confirmation with 3C making higher highs with price at the green arrow, since the last run above that major resistance, the 4 hour has been leading negative with NO confirmation.

I also like IOC here because a stop can be placed just above the recent highs, thus the risk is not very large.

I'll continue to hold both positions (core short and the PUT)