Second Dominant P/V Tonight

Honestly this works pretty good for short term overbought/oversold, for a bit today before the Israeli airstrike it looked like the market might just find some legs.

In any case, again tonight (this isn't that common) we have the same Dominant Price/Volume Relationship, except today it's even stronger. The P/V today is the same as yesterday, Price Down and Volume Up. As a reminder this isn't what the average itself closed as, this is how the component stocks in the average closed; 6 of the major averages, all dominant.

Dow-30

Not only is the P/V relationship oversold, the count of advancers/decliners is about as oversold as you get in the Dow-29 of 30 stocks down, only CSCO was in the green after good earnings!

All NYSE Stocks

Russell 2000

Russell 3000

S&P-500

TNA Vs. IWM

TNA is a Small Cap 3x leveraged long ETF, it is kind of similar to the IWM/R2k in a sense. If I'm looking for coverage and I have a long like DIA, I might pick a long like TNA as it will give me the small cap exposure (the DIA is the large cap exposure), but it's not the IWM which is more likely to trade closer to the DIA whereas small cap/ large cap will likely see more rotation. There's no point in being redundant in your selection.

In any case, there are leveraged ETFs for the IWM like UWM or URTY for 3x leverage. Luckily a member asked about TNA (I say luckily because I didn't see it today and wouldn't have otherwise).

While I'd hope the IWM and UWM/URTY would give the same signals for confirmation, I wouldn't necessarily expect TNA to look as similar as it does.

 The 10 min IWM, which is a good timeframe because if it were seeing heavy negative underlying action with price, the 3C indication could have easily moved down by noon time today to reflect that, it's not so long that it takes days to move, but not so short that the divergence is only short term.

In addition, the 17/18th of October is seen as the reversal area-which is kind of where I consider this cycle to start and we have seen the same date in just about every risk asset and finally the leading positive divergence is hitting a new high, well above anything else on the chart.

Now, TNA...

Nearly a spitting image of the IWM right down to the leading positive divergence at a new high.

When I see a chart like this or even better, a bunch of charts like this, my experience is not to expect an oversold bounce or a week or so of rally, there's usually a move coming that I often underestimate how powerful it will be and when it is near its finish, most traders feel very different about the market and I have to work hard to make the case that the move is over, it's time to sell and short.

FB

From the time I posted about closing FB, you left a total of about $.11 on the table from the highs of the day. You may recall the 1 min chart was one of the only ones holding up well and giving us a good signal all day until later in the afternoon something changed.

Something changed and shortly after that the steady uptrend in afternoon price also changed as it broke below the trendline.

A lot of people seem to be confused as FB saw 777 mn shares unlocked today and would expect FB to be down huge on those insiders selling their shares and getting paid. I mentioned several times FB should be higher by the time the lock-up ends, that's part of the job of the underwriters of the IPO, GS and MS.

In addition to that, we've ben watching what appears to be a base of some consequence, so why sell today? As I said, if I had a bigger position open it probably would have been only half the position closed, but I'm not quite sure what the added 777mn shares will do to our signals and I suspect after a 1-day move of 12.59%, there's probably going to be an opportunity to buy FB back at a better price unless we see follow through and FB is moving to a stage 2 breakout. Even if that were the case, there's still plenty of opportunity, but when there's risk you can't quantify and you are left with options that aren't much better than a coin toss, you don't have the kind of edge you should have to be in the trade.

When I'm trying to decide whether to close a position like this or not, I often ask myself, "If you didn't have any position here, would you buy FB right here at this price today?"; that helps put things in perspective.

While I still suspect FB is carving out  nice base, these two charts (actually the same chart) puts things in perspective for me.

 This 15 min chart suggests FB is carving out  substantial base, however if we take a closer look at the same chart to determine near term actions...


This is the same 15 min chart, just zoomed in.

I'd rather wait and make sure the edge remains or grows.

I Want to say, "I don't get it", but I do

I think most of you can attest to the truthfulness of the statement that there's probably no stock out there that I have written more about, warned more about and posted more charts than AAPL.

Even when AAPL was moving up it was exceptionally clear the stock was in huge trouble.

Now it seems almost like a daily event of notable hedge fund managers taking HUGE losses and many because their #1 or in their top 5 was AAPL.

I want to say that I don't get it, but I do. Hedge Funds aren't much different than retail when it comes to the "sheep mentality". Several months ago it was only 11% of all hedge funds were outperforming the S&P, the last I heard it was only 8% and the reason why? If you are a fund manager/owner you are getting between 1.5 to 3% of AUM a year just for management, for a fund of $100 mn that's $1.5 to $3 million dollars a year. Then there's a performance fee usually of 20% of any money they make above the high water mark, so if they make 10% or $10 mn that year, another 20% of that is theirs- $2 mn and this isn't a huge fund at $100 mn, there are funds out there above a billion in AUM. Some funds even make 50% as an incentive fee so they get half of that 10% they made plus the yearly management fee, it's a good job, leave early on Fridays, lots of 3 and 4 day weekends, lots of money.

If you are a fund manager, you don't want to lose your clients, but more importantly you don't want to lose your job. This leads to the herding mentality, they all buy and sell the same stuff, that's why we can see it so clearly when they are really active.

Today, if you watch CNBC you know him, Whitney Tilson of T2 released his September 30th 13-F and guess what his top 2 positions were? AIG and AAPL. Remember when I said there are too many owners of AAPL all trying to fit through too small a door at once? It was only about 2 months ago.

In any case, with me saying today that an AAPL buy may be very close at hand, I think I should be clear about AAPL and what I see as probable and where I stand because it's not "Long AAPL", that's just an opportunity because something seems to be going on right now.

You may recall when Paulson's fund lost somewhere around 56% last year with his big position being BAC. Right as he finished selling his BAC position, BAC took off and nearly doubled in the next 2-3 months.

Any way, lets look at AAPL and see what the real problem is, where it is and where AAPL is likely headed.


First I like AAPL right now as a trade, it's not a position I or anyone has to take, there are ways for it to prove itself and if it does, then it may be worth taking for a trade, if it doesn't we just look for the next opportunity. In this post I explain why I like AAPL now and specifically NOW, meaning I think a position is probably very close.

Here's 1 chart that sums it up...

This 30 min 3C chart went from up with AAPL to a clear negative divergence at the top, since then it hasn't let up on the downside or shown any really strong divergences, this is the first with a leading positive that formed in 2 days, it's above the last 2 3C highs and almost at the level in which AAPL was trading for $650, I wouldn't consider AAPL if I thought this was going to be a 10 point move. However as you all should know, the real trade I want to see is shorting AAPL in to price strength.

 This 2 day 3C chart shows where there have been MAJOR events in AAPL, 1985 was a big year for accumulating AAPL, 2003 (the start of the last bull market) was another large accumulation area and then 2011 and 2012 showed us something never seen in AAPL before, distribution. Remember these funds are so large, their positions so big, they can't sell on a dime like us, it takes time and demand.

I made an argument for AAPL's 2012 parabolic move up and how these never seem to end well and how AAPL will likely see just as nasty a parabolic fall on the right side of the pattern which we already see. In fact I even went so far as to say there'd be a small "U" shape on the 5 day chart to the reversal.




On a daily chart, this is that "U" shape reversal that you see on the 5 day chart. At first this looked a lot like a complex H&S top with 2 left shoulders, a head and at least 1 right shoulder and I was hoping for a second, AAPL fell from there and this could be considered a Broadening top as well. The normal volatility shakeout after a break like this never came for one simple reason, the sellers were too desperate to get out anywhere they could and they are still trying to get out, but at this point a lot of them are going to need a bounce in AAPL so they can get out with something left to their hedge fund.



Below this 2 hour chart was one of many I showed you making the case this was a top, even volume analysis was used to verify the top.

The daily chart was used as well, this is a great example of the basics of 3C, price is higher yet 3C is lower, there's less money coming in to AAPL at a higher price than there was at a lower price. This tells us what underlying trade looks like, money is moving out.

Here we see at the red arrow the H&S top shown above, but that's not the real problem in AAPL, the real problem is around the yellow arrow.

On a daily chart, this is where the yellow arrow is. For the size of the uptrend in AAPL, this is the proper top formation meaning it is likely AAPL runs up to the $600+ level before making a bigger, stronger leg down.

On a weekly 3C chart we see a few large accumulation areas, again the start of the 2003 bull market is an area of huge accumulation, but here look where the divergence is and where the trouble really starts, in 2011 and 2012, there were a lot of AAPL longs over the years and since 2009 volume has dropped off badly, it takes a lot longer to get out of a big position now than it did pre-2007, this also should give you some idea of how bad the downside in AAPL is likely to be as this 5 day chart is leading negative.

I'm guessing the $350 area is the eventual target, but it wouldn't surprise me one bit if that was overshot on the downside as the market always swings way too far one way and then way too far the other. You think it can't happen? MSFT was trading over $150 and is now at $26.83!

So that' the game plan with AAPL.

One other note, when the FED finally withdraws their policy tools as they will have to at one point, the market may see an even bigger shock, just look at tech during 2000.

EUR/USD

This has been of particular interest, the 3C chart on the pair confirmed the move all day right in to the 2 p.m. highs, the EUR/USD lost ground there, which would put some pressure on the market short term/intraday, but its overall position being a good distance  above the SPX is what is meaningful.

So is this positive divergence in to the move down, because so far I believe every signal we've had on the pair since using 3C on it has been accurate.

Quick Update

Several charts are very close to what I would say would be a signal for an end of day ramp, I'd just like to see if the TICK chart hits extremes.

This also means I need and if you are interested, to watch AAPL very carefully here.

Just Closed FB Long

This doesn't man I don't believe in the base, this means I want to see how 777mn shares that weren't there yesterday effect FB and I believe I can probably find a better entry or at least lower than where I'm closing it here.

+13.64%

If this were  a full size position I'd probably only take half off the table, but its already small as is and that doesn't make much sense.

FB showing the first 1 min negative of the day

At a 12% gain, here's the 1 min chart finally going negative.

I may even consider closing or cutting even that small long position here.

AAPL Setup

First I'd have a difficult time buying options in AAPL unless this was a screamingly perfect signal jumping off the chart, but equity is a different story.

I showed you yesterday a 30 min positive divergence in AAPL, that's big news, but even bigger it developed in 2 days!

The bearish price pattern is there, it's very clear and the move I said I'd be looking for in AAPL has just started.

Here are the charts, really simple.

This is the consolidation//continuation pattern mentioned and I mentioned a break just below that, all technical traders are reading this the same way, bearish.

 Here's the start of the break below, traders will rarely buy the price pattern, but they will go in on a break out move so this is where they will short AAPL, now look for volume.

 Notice anything different in the character on this 30 min chart since AAPL's top? The first leading positive divergence after the first relative positive divergence and this is a long, important timeframe.

 1 min intraday we have the divergences to send AAPL below the triangle...

 I'm not sure if these 2/3 min positives will hold up or not, it doesn't matter that much, a volume spike matters and the short charts going positive matter.

 3  min

Keep an eye out for big red volume, that's the shorts taking the bait.

If AAPL doesn't develop this way, simple NO TRADE. However I'd say there's a good 80-85% chance.

VERY CLOSE to buying AAPL

And if AAPL is a buy, you know what that means.

Charts coming up, I doubt it's a buy today, but it might be, it is soon.

FOMC Minutes

Here's what the market update looks like as of now, I simply used the longest chart for each average.

These don't represent the trend (which matters with some of the longer term charts), in other words, these are presented as intraday only.

 DIA 2 min is about the best, cleanest DIA chart.

 The IWM amazingly hit the 10 min on intraday movement only, very interesting.


 QQQ at 5 min

SPY at 3 min

As for the FOMC minutes, I haven't had a chance to read them for myself, from what I gather:

-Generally happy with the effects of bond buying on Financial, Housing and Autos.

-Divided over whether to continue bond buying next year

-The $40bn of buying MBS should lower long term rates, should support pending and recovery in the housing market.

-Most agreed Additional Asset Purchases would be warranted after the end of TWIST next year.

-Not enough improvement in the economy to remove any extraordinary support

-Said their (BOND BUYING-not MBS?) would continue until labor markets showed improvement

-ZIRP interest rates through mid-2015

-Raised near term GDP projections/ Left inflation expectations alone

-Moderate improvement in labor, economy, housing may have turned a corner, etc

-More on the communication strategy, what interest rate would trigger what policy, what unemployment rate would trigger action, etc. Still looking for  new way to communicate policy expectations, *THIS IS EXACTLY WHAT I SAID ON SEPT. 13TH THAT THE MARKET DID NOT LIKE, IT'S TOO UNCERTAIN VS A GIVEN DATE.

Since the market dropped from the 2 p.m. release, I still think this is the bug-a-boo for the markets despite the possibility of more bond buying to replace TWIST!

The question now becomes whether the possibility of more QE/printing is more valued to the market than the uncertainty of their new communication strategy they are trying to develop.

***Remember with ANYTHING FED related, the first reaction or knee jerk is almost ALWAYS WRONG. Just look at the reaction on Sept. 13 and 14th and the reaction since!

2 p.m. TICK

I'm listening to the President, I'm not sure what if anything interesting he said at 2 p.m., but the TICK chart and volume in several averages was interesting, this was 1100+ more stocks moving up that minute than moving down, it's a pretty healthy TICK reading.

 With this candle I'd expect the TICK reading to be quite low, a bearish candle, instead at exactly 2 pm it was one of the highest TICK readings in almost 2 days. DIA

The Dow 30 at the same time

 the SPY at the exact same time

And the actual TICK at +1134

AMZN

I can't get ll of the charts and all the different views of each of these charts so I've tried to give a wider view of AMZN.

Like I said, I don't love this as a longer term trade, we had a good trade on AMZN at the end of last month, I'm looking for something similar to that and if we get that, we'll go with the message of the market.

 This is the last time I liked AMZN just before earnings after the close (white arrow), the AH trade was ugly, but the next day we saw a nearly +7% 1 day move.

 Overall, the big picture on a 60 min chart allows some potential for a bigger move, but that's not what I base my idea on at this time, this is along the lines of what I said above (We'll let the market tell us as we go).

 AMZN on a shakeout move would have to hit one of the two areas here to accomplish the point of a shakeout move.

 The recent descending triangle is very obvious, it's a pattern that we have seen often in bear traps.

 As we reach the apex of that price pattern, this 1 min chart is really standing out.


 The 2 min chart is also seeing migration.

 Here's a trend view of the 2 min chart, this is what I mean in saying I can't show you all of the charts that are significant.

This 3 min Chart is also looking great at the right area, if I showed you the trend of this chart it would look like the 2 min trend above.

For more conservative traders, you might set a price alert for a move above the $227 area.

AMZN December $220

As mentioned, this is a speculative position, that's half the size of a normal size position.

Picking up Small Call Position in AMZN

This isn't a trade I see as a long term move, I do see some things I like near term and a speculative position in some calls seems like the right tool.

More coming on AMZN.

FB Update

My interpretation here is that in the short term (intraday) FB probably has the capacity to move up a bit higher, but on a longer term chart where we see big money make moves, it looks like they are taking profits out now.

 1 min, as with the earlier update, looks great, very positive, but this is an intraday timeframe only.

The 5 min looks as it should up until today, the recent intraday bounce toward the highs looks like institutional money is taking profits in this area.

Market Update Before Obama Speaks

Obama is just about set to talk to US CEO's about the "FICAL CLIFF", this obviously could be a market moving event.

Instead of throwing out a lot of charts, let me just say the DIA, QQQ, IWM and SPY all have intraday charts that have improved and are positive as well. The backing and filling I mentioned as well as the test of lows has happened in most of the averages.

Here's an update using the futures charts and the EUR/USD.

*By the way, the more I look at AAPL, the more it looks like it's very close to exploding to the upside.

 ES had not been much better than just in line all of the day, it's finally leading a bit here.

 NASDAQ futures remain in a strong leading positive position.

And here's the Euro (EUR/USD) with a nice lead over the SPx, these two are typically in sync, when they fall out, it's usually not for long. I'd guess the SPX will move toward the Euro (orange) which has held up well today considering.