A week ago Friday we were entering leveraged long positions, by mid-week last week we were closing them out and looking for a move down in the market. As of late Friday, as op-ex passed, it started to look like the makings of another short term reversal, it may in fact be a larger reversal that we have been seeing signs of, but one bridge at a time; we first need an upside reversal and this is the reason I started phasing in to some speculative leveraged long late Friday afternoon on some positive divergences.
As reversals are a process, not an event, we need some lateral price movement, there is always volatility even in lateral price movement especially on an intrday basis, but as we open the futures and FX market for the new week tonight, we are at least on the right path for this latest tack in the market.
(10 min SPY) A week (+) ago we saw a positive divergence and entered leveraged longs for a move up, last week as 3C started to go negative those trades were closed out at a small profit, the leveraged longs were the right tool for the job. As of last Wednesday the negative divergence was sufficient enough for us to expect a pullback in prices, we finally saw that after a couple of days of lateral trade on Friday.
(2 min SPY) As of Friday, especially later in the afternoon, the short term charts where new divergences start, began going positive, thus I started the process of phasing in to some leveraged longs, leaving some room to add to the positions.
The divergence was quite fast for the short amount of time as you can see on this 5 min SPY chart, we still need a stronger divergence and for that we need some lateral (maybe slightly down or choppy trade).
The EUR/USD has opened this week flat to slightly up, we really just need this to maintain a more or less lateral price pattern, no doubt there will be chop intraday which we may be able to take advantage of for entries and some potential exits.
A longer view of the EUR/USD, again you can see where trade for this week started at the green arrow, we just need more lateral trade for the divergences to grow larger, this increases our probabilities and helps with timing.
The AUD/USD is off to a decent start this week as well.
As for the SPX futures (ES)
ES shows the negative divergence Friday and the start of a positive divergence which has carried over in to opening trade for this week, again a more or less lateral course would work well.
The ES 30 min still has what can be viewed as a larger positive divergence, agin you can see the negative divergence from mid last week in to Friday. Lateral trade gives the chart/3C time to put in a positive divergence on the longer more important charts.
As you can see, ES put in some lateral trade that produced a positive divergence and sent ES up on our long trade, we need something similar to this and thus far, we are off to a good start, thus far, but as I said, one bridge at a time, always listening to the message of the market.
NASDAQ futures
NASDAQ futures (5 min) are also off to a good start as trade opens in the futures markets tonight.
We are starting to see the positive divergence move to the 15 min chart, this is fairly strong for the short amount of time we have had since 2 pm or so Friday.
The 30 min NASDAQ futures may have the same larger positive divergence, we'll have to see how it develops, but it could produce a move higher than just a couple of days, ultimately that's what we are looking for and have had hints of.
As for sector rotation, I suspected that Financials may rotate out and Tech in...
The 5 min positive in Financials isn't quite as strong as the 5 min positive in Tech below, this is why I waited on starting to phase in to any financial long positions Friday.
Thus far the 5 min Tech chart is looking better, we'll see. I'm not suggesting Financials fall out with the market, I just suspect Tech will have better relative performance at least in the next rotation as far as what we see thus far which is admittedly fairly new, as of late Friday afternoon.
We still have the European open in about 3.5 hours, we'll see how things develop overnight, but this is what we are looking like form here, perhaps the tradition of AAPL giving conservative guidance and handily beating it may be part of the Tech rotation as AAPL reports this week.
I'll see you in several hours, I hope everyone had a great weekend and will have a profitable week ahead.
