I Shouldn't, But I Can't Resist... A Look Back

Do you imagine it is hard, difficult, impossible for the market to bounce hard in this area as we have been preparing for and expecting?

We have a 30 min positive divergence, leading positive in the QQQ right now!

Before this range started, this market could have done anything, up down, sideways, we said sideways before it had even stopped going down and were right, in fact we predicted a range. One of our concepts is that before any reversal, 80% of the time (and if the price pattern is obvious it's even more likely) we get a head fake move in the opposite direction first just before the reversal (in this case a shakeout of shorts to the upside).

We have a 30 min leading positive divergence at the head fake area (yellow), we watch for positive divergences to tell whether it's a head fake or the real deal.

Well imagine or recall this and I caught a lot of flack for this at the time...

Going back to Sept. 13, 2012 when the F_E_D announced QE3, this is what CNBC had to say...

"Buy everything that's not nailed down... as bearish as I want to be, you cannot fight the Fed. You buy everything. Buy copper, which i did today, FCX which i mentioned last night. Anything else? Emerging markets! everything! Just buy it. Buy it all. You never have to short again. Buy it. I had a guy call me today trying to sell me research on the short side, and I said I'm sorry, I think you're going to go out of business. You shouldn't short anymore."

Not that I'm smarter than anyone else, I just like to think for myself.

Initial reaction that day...

Conventionally my first instinct is to cut short exposure, but I think I'm going to wait just a bit and see how things shape up, see if this announcement was fully priced in.

This post after QE3 was announced on the 13th...

Right now the IWM, QQQ, and SPY/DIA to a lesser degree are showing negative divergences that I believe will bring them down as sure as the AAPL positive 5 min sent it up.

Here's a chart from the 13th and we had a lot worse in every average.

I use this chart of the SPY on Sept. 13th because it's sort of close to the QQQ chart above, a 15 min negative divergence in to the QE3 announcement. I continued that post saying...


"There are some other markets too that I have pointed out, but the main point is I'm not making any drastic changes on a 4 hour move, which is almost always a knee jerk reaction and against the bulk of the evidence without decent evidence to support that change."

To wit, that same day was this post again after the QE3 announcement...Adding SQQQ Long This is a 3x leveraged short on the QQQ, but this was all based on facts we could observe.

Here's what happened since, not that I'm making any predictions with this chart, I'm just pointing out how gathering hard evidence and thinking for yourself can pay off.

The yellow arrow is the 13th, not so great since then. So why can't we bounce from here on a strong move?

If this post is worth anything to you, I hope it is that there's no replacement for gathering hard evidence, thinking for yourself and not being afraid to go against the crowd or CNBC if you have the data to support your view.

Rochdale Looking for a Rescue After Bad AAPL Trades?

According to this story in Bloomberg, yes.

This is the firm that employs legendary banking analyst, Dick Bove.

Apparently the story line is that unauthorized trades in AAPL around the time of the Oct. 25th earnings in the amount of $750 mn to $1 bn went south and now Rochdale looks to ned a rescue.

There are a few things that don't add up. I can see why someone might buy AAPL before earnings as they (at least when Steve Jobs was still there) always put out low ball guidance and always blew away consensus, that hasn't been the case lately. I don't understand why the incident is being investigated by the FBI, SEC, FINRA, and who knows who else, when it "seems" to be an in house lack of discipline.

From the article...

"The Apple trade is the focus of an FBI investigation as an “alleged market-manipulation scheme,” the New York Post reported, without saying where it got the information. The newspaper said the U.S. Securities and Exchange Administration and the Financial Industry Regulatory Authority joined the investigation."

Market manipulation scheme? How does this story go from rogue trader which is nonsense to market manipulation? 

According to the article, in a regulatory filing the company had $3.44 mn in cash at the end of last year, there's not a lot of room for error there.

Here's what else is bothering me, the firm's risk management department, unless they don't have one, but even if that be the case, the accountant or someone has to be responsible for squaring up positions with the clearing house, how in the world could this trade have lasted more than a partial day without someone noticing and with that little cushion, what would a trader be doing buying that much AAPL before earnings? 

Something stinks about this mess, the hedge fund I met with earlier this year was much smaller and had 100% knowledge of every dollar that the firm saw that day, I just don't buy this rogue trader.

In any case, I guess smart money isn't always so smart, but what I'd really like to know is why the FBI is involved and who broke out the cattle prod to get the SEC involved?

NYSE TICK

I'll admit and you probably could feel it, although I'm expecting one last, strong shakeout move before a substantial leg down that would be much stronger and moving than anything we've seen since late July of 2011, I was a bit thrown this morning as the momentum in the market picked up, but without a good reason (with regard to what moves a market emotionally: price levels, resistance levels, short squeezes, etc.). The 3C support wasn't at all like it should have been if this were the start of the move, leading indicators weren't where they should have been. I really felt a LOT better when the market started reacting to the 3C intraday negative divergences and when I realized that this was a buy the news, sell the event (Obama's speech). As a day within the set up, it was fine, it's still very much in scale.

I will admit though, the early action, although seeming bullish, just didn't have the support it needed and for a brief few minutes I was considering whether something had really changed and it was time to sell all the leveraged longs recently bought and take whatever shorts were still in range. Luckily things straightened out and that scare-that is a scare for me- was over.

In any case, I was just looking at the NYSE TICK for today, you can learn a lot from the TICK chart, especially if you are trading intraday or what we use to call day trading.

Here's something I noticed I thought was interesting given the last post.

This is the number of NYSE stocks closing that 1 min bar up minus those closing that 1 min bar down.

 If you look from left to right, the early momentum was running in the 750 range which is moderate, nothing exciting, pretty common, as momentum continued to move up and the market didn't pull back, it started to take on the look of a short squeeze (although there was no reason for one here), as we approached the intraday highs we saw a couple of +1000 hits on the tick, at the top it was back down to 750. Between the 3C negative divergence there or any other indicator you want to use that works and the TICK falling off to 750 at new highs for the day, it's a pretty plain sign that the move up is done for now.

 This is later in the afternoon in which the market looked pretty hum-drum, there were a few moves, but nothing that was a real spark, but even in this hum-drum environment (as compared to the earlier momentum) we saw several +1000 Ticks and even a +1250, I find that interesting considering the last post I put up.

This gives you an idea of the TICK during today's session, early momentum was around 750 or so, that's really not impressive, then a couple of 1000s and back to 750 at the top. To give you an idea, a flat range hits 750. Later in the day though, we weren't hitting new highs or breaking anything technically interesting, but we were hitting a lot more +1000s and +1250.

Just something I found interesting for late in the session on a Friday when most of Wall Street are already pulling in to the Hamptons.

AAPL , XLK and GOOG

Like GOOG in the last update working on a positive divergence late in the day, AAPL is doing the same as well a Tech broadly. I imagine others too, I'm just putting them up as I find them if they are material.

 AAPL 1 min positive and leading positive

XLK 10 min leading positive.

And the GOOG chart-3 min leading positive, all in the same area, interestingly they're big names, large caps too.

GOOG Calls from Yesterday

The GOOG December $650 calls opened yesterday are up over 15% today, I usually take profits in options pretty quick and I'm sure if I had looked at them earlier there was probably a more tempting gain there, but they are there to hedge the core short until GOOG can be added to on the short side, first we need the shakeout.

I decided to hold the calls although this isn't something I'm entirely comfortable doing, but there are several things poking out that have me wanting that hedge in place against the core short which is also profitable right now, so both the core short and the Calls from yesterday are in the green.

Here are the charts so you can decide if you need to.

 This is about the most damaging or ugliest chart in GOOG today at 5 min with a negative at the intraday high, but still it's leading positive and bigger than yesterday's positive divergence.

 The shorter timeframes are faster so this 3 min chart appears to already show GOOG working on a positive divergence right now.

Ultimately, the daily price pattern is way too common not to be run and have the shorts shaken out, Wall St. isn't going to give them money that easy. The white box is the area the market was in a range, note the leading positive since the break below support, just like a lot of other charts...

Take the Q's for example at 30 min!

This is what I was trying to illustrate the last few days, what "could" happen to a positive divergence if the market consolidates/pulls back, this 30 min leading positive is now a perfect example that I don't have to draw theoretical lines on the chart.

ZNGA charts

This is a recent stock of interest, I believe we started looking at ZNGA over the weekend?

In any case, the long term charts and there aren't many in the 60 min range that look like this, look fantastic. There's a trend in nearly every timeframe I look at in ZNGA that is interesting.

 ZNGA hourly in leading positive position which is one part of the trend, the shorter timeframes have more details, but the 60 min chart is a serious timeframe.

 The 30 min chart shows the other trends in just about every timeframe, first the negative divergence on the open of the 25th and then a positive divergence in to the 31st and 1st, then at the top on the 2nd/5th there's no negative divergence and finally the current leading positive.


 Here you can see all the trend on a 15 min chart, note in yellow, no negative divergence turning ZNGA down.

The 5 min chart, looks the same. I could keep going through the timeframes but they all look like this.

Adding a little to ZNGA Long

I don't have much room to add for ZNGA, but there are some key charts looking great here in the long timeframes, not the speculative longs for a market cycle.

I'll get the charts up ASAP.

AAPL Continues to improve

I mentioned the change in character toward improvement in AAPL maybe last week, definitely this week and I said that I might consider calls at some point, but my standards for AAPL calls would be very high. There are a few charts that just about meet those standards, I'd be looking for just about all of them to meet that standard and then I'd be looking at a short term leveraged position (calls) to eventually short in to.

The point being is the market has the 3 pillars, Energy, Tech and Financials, maybe the 4th should be AAPL, I don't see any shakeout move getting too far if AAPL is acting as an anchor, so in that way it's good to see AAPL improving.

 From downside trend confirmation at the green arrow on a 15 min chart (an important timeframe) to a leading positive divergence in AAPL and I'd also mention the first positive divergence of ANY kind on this chart.


 The 10 min with a leading positive move as AAPL is up, but still very much within what would be the reversal range.

And even on a 1 min chart where you might not expect to find much, look at the 3 price highs today and where the positive divergence and now leading positive divergence can be found as AAPL in this area is for our purposes, range bound.

FX-EUR/USD Also Interesting for the bigger picture

Take a look at how the EUR/USD 3C divergence has progressed today, I really like what I see here. If this hold up and the negative divergence overnight at the European open held up and was correct and the last divergence we saw in the pair was also correct (as it is a new pair we are using 3C with exclusively on the pair), then the signals in GLD make sense and this also fits with the bigger picture of the longer term and the short term trend positive divergences in the market averages, AAPL, etc.

The pair reversed premarket on a decent size divergence and as it has been pretty much lateral all day, 3C has gone in to a higher leading positive divergence. This would be helpful for market upside as well as that GLL long.

MCP Update

I haven'f found an exit here and was a bit surprised after being halted it started consolidating sideways. The loss is already there, so I'm going to keep an eye on it for a bit longer and see if there's anything interesting to develop.

The 1 min chart is mildly interesting.

Pullback/correction is pretty mellow so far

I'm glad to see it too. There are no ugly negative divergences and in a few cases there are even some looking more positive than just in line with the price trend.

These are only intraday view 1 min charts.

 DIA is currently in line with price, better than a leading negative divergence as we saw in a few places earlier.

 Case in point, the SPX futures (ES) were not only negative earlier, but in leading negative 1 min position, now we are seeing at least some moderation.


 IWM 1 min was leading negative before the reversal intraday and now the 1 min is shooting up

QQQ 1 min is also in a better position than just confirmation, the bottom line is it doesn't look like any mass hysteria/distribution, but more just a consolidation like I mentioned before in some of the example models.

GLD / GLL charts

GLL is a leveraged short on gold so the signals and price action in GLL should be nearly the mirror opposite of GLD to give confirmation.

You may recall 2 days ago I closed out the UGL leveraged long in GLD, but I didn't feel the charts were there for a short position, to me they look much better now.

 GLD with uptrend confirmation on the 1 min and a negative divergence, a large portion of which was on the open today in GLD.

 2 min chart showing the original accumulation area for this run up and a leading negative divergence in GLD with a big move at this morning's open.


 3 min chart-the same story, except here we can add migration of the divergence through the timeframes.

 The 5 min showing the cycle from accumulation to distribution, both leading divergences (positive then negative).

 Even the 30 min is now leading negative.

 I'm not going to add another 5 charts of GLL, but here are a couple like the leading positive in the 5 min, opposite of GLD's leading negative.


Also a leading positive 15 min chart, this should be good for a decent swing, GLL seems like the perfect tool.

Opening GLL Position

I like GLL here as a speculative long. I'll post the charts shortly, but take a look at it, it looks to me like the move in GLD is about to reverse to the downside near term.

Example

This is a shorter example. It seems clear the market was ahead of itself earlier as I was mentioning and uncomfortable with, is clearly because of this speech from the Republicans and President. That leaves some excesses in price so it's not surprising to see the pullback, the negative divergence was there in the intraday charts suggesting profit taking.

So here's a quick look at the Q's as an example and what is probable.

Looking at the full market update earlier (last post-not quite full, but enough to make the point), we have some very positive divergences that were in place and confirmation moves today that added to several. The other thing is the longer term charts and that's where the highest probabilities are, are positive and where before today. Here's a possible scenario that isn't much different than what I described on Wednesday this week.

 Looking at the 1 min chart for the QQQ on an intraday basis, you can see two negative divergences, the first with a consolidation through time the second through price.

Now look at the 1 min chart's trend which is far more important than the intraday signal.

 This is leading positive in a big way, this is overall bullish.

 Just to see, the 2 min chart saw little to now damage so it doesn't appear there was any strong distribution today other than profit taking on an intraday basis. Again a very bullish chart.

 I used the 10 min chart in the last post to make this example, but even using the 5 min chart, if price pulls back here and I'm not going to even make a guess as to where and we get accumulation in to that pullback as the charts have suggested on this move since Wednesday, imagine that 5 min or 10 min chart leading even that much further, we'd be looking at what may very well be an INTENSE move to the upside even larger than I've contemplated.

Market Update Before President Speech

I want to get the charts out before the President speaks, I'm thinking buy the rumor/sell the event, but that could be good as I'll show you with the Q's.

 DIA 1 min intraday slightly negative


 2 min overall is in good position, but intraday there's a negative divergence like the 1 min chart above. I'm guessing there's some profit taking on the move up and some short covering.

 3 min chart is as positive as I could expect.

 The 15 min chart, the most important for the overall trend, leading positive in a big way.

 QQQ 1 min intraday negative, but intraday negative.

 2 min is now going negative on the intraday chart, but the trend is leading positive.

 Just as the 3 min is leading positive above even the area it broke below.

 5 min QQQ leading positive is insanely positive.

 As is the 10 min, imagine a pullback as I drew with 3C moving up higher, that would be incredibly bullish.

Here's the speech, Ill get to the rest later.