Euro-Zone GDP

This is a pretty east graphic to follow, this is why I mention Black Swan probabilities rising...

Note the trend, this is what the Core has feared, contagion and it's here, just ask the French.

AAPL Synopsis

As you know I have AAPL as a core equity short and put positions in AAPL, today's very thin market I suspect is behind the "mushy' signals seen earlier in the day and a little toward the end of day. However I think there are some decent signals in AAPL today, which put in the needed pivot that wasn't only resistance but a variety of bull flags/pennants on multiple timeframes, with a Doji close yesterday and what looks to be a lower close today, however the closing numbers don't quite do the underlying trade signals justice.

As you know, in June I had to make a decision, take substantial profits on core short positions including AAPL or hedge them with some longs. Normally I'd trade around a situation like this, cover the shorts, go long and look to re-enter the shorts at better prices. I instead decided to hedge the core shorts with longs and hope to make money on the longs, hedge the shorts and maybe add to the shorts before a reversal to the downside, my reasoning was simple; we are seeing a market WAY more volatile than what we saw the first 3-4 months of the year and we are seeing some explosive events in the EU that could produce a Black-Swan on some quiet Tuesday.

One of the positions that showed the logic of not trying to trade around these positions was the recent move in PCLN which is a core short entered at $761.79.

While the 1-day drop of over 17% is one example, the thinking was simply that we are in a fundamental environment where the second shoe can drop any time. Since making that decision, we've seen Greece fall apart even more, we've seen Spain on the verge of a sovereign bailout which there are no funds to cover, Italy will be right behind them, the spirit of cooperation (that never got anything done in the first place) in the EU is destroyed, there's a north vs. south mentality in the EU and the once tight relationships between Germany and France and Germany and the ECB are in ruins.

The fundamental reasons for hedging the shorts rather than trading around them have proven to be what I expected and even worse, even 3C can't predict what Merkel could say overnight that sends the market crashing down.

As for AAPL...

 Intraday 1 min chart saw a deep negative divergence, much deeper than the move in price, if you compare relative price and 3C position at the trendline vs relative price and 3C position now you can see how much underlying damage appears to have taken place today. This is what sets up drops like what we saw in PCLN, when the underlying support is so eroded that there's no institutional buyers and retail can no longer hold up the stock (not to mention institutional short positions), you get a break of an important support level that hits stops and creates more supply, sending prices lower until the next stop is hit-it's the snowball effect and AAPL is well-positioned for such a move.

 The 5 min chart is where the timeframes move from intraday to more institutional activity. Do you notice anything interesting about the dramatic change in character in 3C and what might have caused it? AAPL moved above some resistance levels (a bull flag breakout and a resistance area) which brings in buyers allowing shorts to sell short in to price strength, the same thing we did with AAPL or PCLN, it's not easy, but it's actually less risky. This is not coincidental that 3C went deeply leading negative as price moved above key levels that would bring in retail buyers.

Here's the mechanics of it, what is needed is demand to sell in to or short in to.

Volume at key breakouts, before this volume in AAPL was dwindling away to nothing, not conducive to selling in to higher prices.

 The 15 min chart negative at the highs, interestingly today, all of that damage on a 15 min chart (usually they take longer to move) was done today.

The longer the timeframe, the more institutional activity is exposed and the heavier that activity, again note 3C never made a higher move after AAPL made that pivot breakout, on the 30 min chart to the far right, all of that damage was done today.

Treasuries... TLT/TBT

Although I'm way behind on emails as I have to first do what is best for all members, I have noticed a lot of emails about treasuries and TLT specifically which is a flight to safety trade when the market is in risk off mode typically.

I say it almost every day and long term members have seen it, I'd conservatively estimate that before a major reversal in any timeframe, there's a head fake move first, a false break out or false break down and there are numerous reasons for this, not the least of which is it gives the reversal a kick start/snowball effect when the bear/bull traps are sprung on the head fake moves. It is almost always a VERY obvious area, support, resistance, a major price pattern, but it has to be obvious to do its job.

I DON'T SAY THIS TO TAKE UP SPACE IN A POST, I SAY THIS BECAUSE WE OBSERVE IT ALMOST EVERYDAY ON SOME TIMEFRAME.

Lets take a look at TLT and it's inverse leveraged ETF TBT which should give us the opposite signals if there's confirmation.

First TLT...

 TLT Daily chart, the obvious feature here is gap support that has been tested, if the shorts are going to enter TLT they want to see price confirmation and that is a break below that support, but did they bite?

 There's decent volume on the break below support, someone has to take the other side of the trade, this is the fastest, most inconspicuous way for smart money to accumulate without leaving obvious footprints.

So was there accumulation ?

 The TLT 1 min trend is nearly the opposite of the SPY 1 min trend as it should be for confirmation purposes, it also shows underlying activity that you would never notice in price alone. Also note the leading negative divergence to the left sending TLT lower, remember, smart money buys in to weakness and sells in to strength or supply and demand respectively.

 Is the 1 min trend a fluke? Here's the 3 min trend, leading positive.

 The 3 min chart on the move lower under support today shows a leading positive divergence.

 As does the 5 min chart

 even the 15 min chart which is slower to move.

 Take a look at the big picture 30 min chart and the large leading positive divergence in TLT, it would seem someone has been putting together a decent position long TLT, a flight to safety trade.

Now for TBT, this is the opposite-UltraShort treasuries so for confirmation we want to see the opposite 3C signals...

 1 min intraday leading negative in to price strength.

 1 min trend, this confirms TLT as well as the SPY.

 3 min leading negative intraday divergence

 3 min trend leading negative

 5 min leading negative today as TLT was leading positive.

 Even the 15 min moved down intraday.

The larger view, confirmation of the downtrend at the green arrow and a leading negative divergence at the red arrow in to price strength, suggests distribution in to price strength.


It seems we have pretty good TLT/TBT/SPY/Market confirmation.

USO Update

I'm very tempted to add to that USO position that yesterday I said, "I'll be patient and wait for the EIA report tomorrow", I'm still trying to be patient, but wondering if we are not "close enough" as this is not a stock, but a commodity that will trade all night. Here's what I see and what's holding me back at this second.

I certainly think this is a decent area to start a USO short/Put position if you like the trade and don't have exposure.

 USO did make it above resistance, this isn't the type of pivot I would really get excited about, but it is technically above the level, the problem is, it didn't cause a swell in volume and draw in the longs, that's a minus for me as that is the entire reason for the exercise.

 The 1 min chart is EXACTLY in line, it was leading positive this morning, I'd like to see it leading negative on an add to.

 The other charts stayed negative as I had hoped, the 2 min

 3 min

 5 min

 10 min

and 15 min.

I think I'll still be patient with it being I do have exposure already.

Market Update

As fast as the market turned up, it's starting to turn down (3C)

The QQQ, SPY, to a lesser degree the DIA and ES are all turning down here. Honestly the 1 min divergence looked big enough to provide more upside, but this is such a thin market that it can be pushed around very easy by even small institutional players.

Important market update

There are very short term signals for an intraday move up, this is mostly 1 min charts and hasn't had the strength to hit 2 min, in fact 2 min and longer have seen some damage today. Take a look at QQQ

 1 min leading positive for an intraday move up...

 No migration to the 2 min chart which saw some damage today, some pretty heavy damage.

5 min chart still solidly negative, maybe a quick move before closing trade, maybe setting up tomorrow's open for ugliness...We'll see, I just wanted you to know

IOC Follow Up

I'm leaving the equity model portfolio IOC short in place, as you know, I have little tolerance for corrections with options positions, I decided to leave 20% in place.

I expected some near term volatility in IOC and this looks like the area in which we will get it, in the equity position I don't mind sitting it out and waiting, but options are different, especially with that gain that fast.

 A nearly 74% gain, the contract still in place is already well paid for and it is September.

 Daily these were the two areas of support/resistance I am focussed on near term, I figured the $79 area would offer some temporary support so I'll look for a bounce and a negative divergence to add a new put position. The higher resistance zone was the pivot I was hoping to see several decent closes to solidify that as a likely head fake move, we have them.

 Had I seen this one earlier, I probably would have exited as stops were hit on the break below support, those stops give Wall Street the supply they need to accumulate short term for a quick counter trend move to do the same thing I'm looking to do, get short at better levels.

The 2 min divergence shows those shares being accumulated today.

 As does the 3 min and 5 min.

 The more important longer term view of the 15 min chart shows a leading negative divergence at a new leading low, so longer term I'm still happy with the short position and will look for short term opportunities on the short side.

Ultimately, the 4 hour chart is the one that has the most damage, this is a horrible leading negative divergence and looks like the entire run up from the lows was used to sell in to/ short in to.

Selling 80% of IOC Put Position

Volatility Indications

If you have option positions, it's not just about direction, but volatility as increased volatility will increase or decrease the value of your options depending if you are on the right side of the trade or not.

It was just Monday that the VIX hit 5 year closing lows on a VERY complacent market, also recall that it would be hard to drive the market higher on a short squeeze as the QQQ was seeing the lowest level of short interest since I believe 1998 and the SPY I believe 2006.

Extreme's in volatility and sentiment are often turning points in the market. I have mentioned how over the last few days we have seen some very strong intraday leading positive divergences in the short term VIX Futures (VXX / UVXY), well take a look at both and also the daily VIX 3C chart.

 1 min leading after a relative positive as is usually the case.

 Same on a 2 min in both the leveraged and non-leveraged ETFs.

 The 3 min with an initial leading that lifted prices and a new leading positive divergence.

 The really impressive move is the 15 min chart, not just the overall trend, but specifically the leading positive of the last 2 days, it takes a lot to move a 15 min chart that much that fast.

VIX Daily, positive divergences in the past have lifted the VIX such as 2008, 2010, 2011 and now we have the largest divergence of the last 6 years, probably more with a huge leading positive in the VIX.

Quick Market Update

As mentioned earlier, we went from VERY mushy, weak signals to improving, solid signals that were negative, that trend has continued and the DIA which had been the strongest looking is now solid in signals.

I don't have time to post all of the charts, but this is the first move in ES so it should help understand what's going on with the averages.

As we have discussed before, ES 3C signals seem to be stronger than market average 3C signals. ES is now leading negative with the first really solid signal in ES other than the relative negative from pre-market.

Financials Update

Financials aren't looking that great here, sometimes you have to look a little further...

 1 min XLF positive on the open, but small, then a leading negative dip, otherwise in line, but...

 Look at the longer 1 min trend and the in line downtrend is VERY leading negative at the last 2 day's price action. The 1 min chart didn't even attempt to confirm.

 Longer term 1 min chart back to the market wide accumulation on Aug. 2nd (Same day as Goldman's long Euro Call), a deep leading negative divergence.

 2 min chart intraday seems to be perfectly in line.

 However the trend shows a different story, again the accumulation of 8/2 and a nasty leading negative divergence has migrated from the 1 min chart.

 3 min has some in line moments intraday, it is seeing a leading negative divergence from 12 pm today

 And the trend, leading negative.

 The 5 min trend  is very clean lower highs/lower lows, and migration from every timeframe from 1 min to 3 min intraday timeframes to the 5 min that is more of an institutional underlying timeframe rather than an intraday timeframe, although when the intraday charts trend like that, you can't ignore it.

The key 15 min chart and the negative divergence where we set up core shorts in March, the positive divergence on the bear trap head fake move in early June and a nasty leading negative trend as Financials moved in to higher prices which is what institutional money needs to unload their large positions, demand and higher prices. Now that all the timeframes are aligned, it looks to be the pivot.