Futures

Here are the charts. There are two things that I'm looking at/for, 1) I want to see the divergence that was so strong this week it kicked up a huge red flag and had me scrambling to figure out which assets to keep, which to close and which to open; has lost its strength. If the divergence kept building then I would have to assume there was a change in institutional thinking and instead of taking the market lower, they were furiously buying, completely changing our tend expectations, so we are good on that front.

The second thing, just enough accumulation to make that pop higher that is best represented by the range in the Russell 2000 or IWM. That too was fine.

Something that was interesting was the pre-NFP accumulation, like I said, it wasn't the kind that was so large it would take all day to distribute, it was enough to make good money on a pop higher and if you have an HFT that can send out 2000 trades a second, you can unwind the trade very quickly.

 ES (SPX Futures) 1 min with a huge positive divergence leading to the NFP print this morning sending the market blasting higher, that was accumulated as prices moved lower right to th last minute t 8:29 a.m.

 ES 5 min chart, overall this was the chart that was so strong I almost panicked Tuesday, to make sure nothing fundamental has changed with trend assumptions it was important this chart deteriorated, it ended the week leading negative so check there!


 Looking at the same 5 min chart on an intraday basis, even though it's in leading negative position, the fact is on an intraday basis we have  leading positive showing us someone is getting ready for some move, it can't be all that strong (unless accumulation from earlier in the week was also held), but I expect as I said last night, a quick up and back down to a new low. The leading negative is the larger trend and that represents the move to the downside, but intraday as long as there is more money flow with 3C moving up vs another relative area, there is some money flowing in to the asset.

 I REALLY wanted to see the 15 min chart deteriorate because it's a stronger timeframe, carries bigger implication and it did so with a leading negative divergence today.

 Zoom in and we can see a leading positive divergence in the afternoon and after the initial selling after the NFP, there really wasn't any distribution as 3C moved with price.

 This is a 1 min of the EUR/USD pair, you can see the negative left over from the decline yesterday and a positive finding a bottom in the pair, a smaller negative divergence that cause EUR/USD to consolidate most of the day and then a leading positive divergence in to the close.

 NASDAQ Futures (NQ) 1 min, also showing a leading positive divergence this morning running in to the NFP print, if you looked at price lone you'd never know anything was happening, but someone was accumulating and then selling quickly in to the price spike, only HFTs can sell that fast.

 The 5 min NQ chart deteriorated as I hoped it would after seeing accumulation earlier in the week.

 The 5 min NQ on an intraday basis shows a leading positive divergence and accumulation in to the afternoon.

The NQ 15 min chart, I was a bit worried about the leading positive divergence here yesterday, luckily it started to break down yesterday and today it fell more, however even on this chart without zoom you can see the leading positive divergence today.

Here's the 15 min NQ chart, also showing respectable accumulation through a leading positive divergence this afternoon.

I'll post more as I run across interesting or useful charts, but for those of you who have  life after 4 p.m. on Friday, I wish you a fantastic weekend!

Follow Up on TLT-These are the clue you need

Yesterday at 2:43 p.m. I posted, "Money Flowing Out of TLT" and today after a 4 day rally that moved this very low Beta asset up 1.54%%, today it dropped nearly 1% (0.92%) to retrace nearly 2/3rds  of a 4 day rally in 1 day.

That's not the point though, TLT is a 20+ year Treasury fund ETF, essentially this is the flight to safety trade. If you are a long only Mutual Fund manager as most are and you know the market is going to either be flat and put your portfolio at participation risk with no probabilities on your side or you feel strongly that the market is going to decline, you can't go short like the rest of us can; that's one of the big differences between a Mutual fund and a Hedge Fund. What can you do? You can move asset allocation from risk assets like stocks and put it in to Treasuries like TLT or perhaps Utilities, the safe haven trades.

Conversely, when you feel there's about to be a move in the market and you want to participate, you pull your money from safe haven assets and put it in to Risk assets like stocks.

Yesterday when I warned money was flowing out of TLT it was only 3C that told me that, here's what it looked like...

 *This chart is rolled back exactly 1 day to 4 p.m. 12/06/2012 so you see what it looked like yesterday*

The start of the 4 day move up is in white at the positive divergence on the 3rd, interestingly the day before we started to notice something very strange going on the afternoon of the 4th, which is where we first see some trouble brewing in TLT, then a gap up with even stronger leading negative distribution, it's around this time I posted that money was flowing (not trickling) out of TLT.

What does that suggest? I think it suggests that smart money sees an opportunity to make more than an average of 0.39% a day in some other risk assets because they expect a pop in the market.

 Here's the same chart but as of today's close, note that there wasn't any additional heavy distribution today, it's not as if money is really trying to get out of TLT longer term like we saw with AAPL for a while.

In fact on a fast moving 2 min chart that picks up all the little moves, we have basically trend confirmation, sideways, not much going on.

My interpretation, money was re-allocated late yesterday or at least pulled from the safe haven asset because as we all have seen the highest probabilities are still for a nasty down trend, but this Tuesday late in the afternoon we saw something that said, "Not yet, we have one more game to play before we let that slide down begin".

I don't know how quickly smart money could re-allocate about a half a billion dollars, but I doubt it could be done in the last few hours of the trading day without raising some red flags for the predatory HFTs to front-run.

In any case, this is just another little sneaky sign that you can pay attention to that will help tell you the story once you start putting the facts together.

Futures Update

I was just putting together a post showing the futures for the SPX and NDX and some REALLY myopic positive divergences that are enough for a short term move, but within a larger negative deterioration that I have ben watching for yesterday and today. I was going to show you how these small divergences can all add up to a larger divergence (accrual of a divergence), but I won't have to because in the time I was capturing,  uploading and labeling the charts, the futures market started moving and the divergences became Very apparent, no myopic postings.

I will say it's interesting that the futures on a min timeframe which would be like  market maker or even HFTs shows a long positive divergence right in to the release of the NFP pre-market that sent futures spiking up. The government has already admitted that the NFP is leaked "Giving some an unfair advantage" in their words! So the government is building a new media room as all of these reports-even FED policy are all released ahead of time to the media on an embargoed status, but if you were a errand boy at CNBC and knew someone from Goldman Sachs and REALLY wanted a job there, it wouldn't be that hard to get the number out before it is announced.

This is why the new government facility will be a secure location and reporters will only be able to use government computers that are locked down so the NFP is no longer leaked. This isn't me telling you it's true and we can see it today, this is the government telling you it's true!

AAPL Update

OK, everyone loves trading AAPL, it's better than in the past, everyone just loved buying AAPL.
NEVER FALL IN LOVE WITH A STOCK, they'll only break your heart.

Here's the AAPL update because I know many of you are thinking "Oversold/Dead cat bounce"

Here are the probabilities....

 Longer term I always expected AAPL to make a sharp move down, probably to a new low for this leg down and then see a bigger/longer move up. This 60 min chart overall is bearish for AAPL's future, but it does show a long term relative positive divergence at the November lows and a leading positive afterward.

 The 30 min chart shows the same thing, AAPL falling from $700 and a positive divergence in to the mid November lows with a leading positive divergence after that.

 This is the rally from the mid-November lows on a 15 min chart, this says closer term we are going to see AAPL fall from these bounce highs, this is what I expected, there are some initial small positive divergences at AAPL's recent lows from this leg down suggesting a small bounce, THIS IS NOT THE MOVE I EXPECT THAT IS SHOWN ON THE 30/60 MIN CHARTS, I think AAPL will see more downside before that move develops.

 10 min chart shows accumulation at the lows and a bounce from there, that was all used up, but we have another leading positive divergence now, it should be able to take AAPL a bit higher, but I don't consider this a high probability trade, you can probably make it work, but you need to be on the ball.

 3 min leading positive in the same are.

And the 2 min as well.

I can't give you any idea of price targets, I can keep an eye on flow and let you know when there's heavier distribution signaling a change to the downside.

It Appears that Euro move will still happen

Here re the charts so you can see how I arrived there, the importance of the Euro and USD is that the Euro and the market have a positive relationship, they move together for the most part, this is somewhat because of events in the EU, but it has more to do with the fact that the Euro, of all the currencies in the world, makes up half of the U.S. Dollar Index which trades almost exactly the opposite the market and risk assets like oil, etc. It is harder to see inverse correlations and divergences like the dollar/Spx, it is easier to see them with the Euro/Spx and they work out to be about the same.

 Yesterday's parabolic move in the EUR/USD (red) and today's attempt to reverse with a consolidation (orange). It's important that the Euro have some strength to support the market .

 Close up of the pair today, you see the move up and then consolidation. Since there's no definitive move in the pair to the upside, something must be triggering the market, expectations of upside here so we'll look at 3C.

 This is the 1 min chart for the US Dollar Index Futures, they move opposite the Euro and market, they do have a small negative divergence in them, this should allow the Euro some room to the upside on a short term basis, but that's all we were looking for.

 The Euro Futures 1 min chart is showing the initial move off the lows on a 1 min chart, then a negative divergence causing a consolidation, with a positive divergence in to the consolidation, this should send the Euro and EUR/USD higher along with stocks.

 The big picture US Dollar Index Futures 30 min chart shows the positive divergence and a continuing healthy 3C trend, this is why the Euro reversed so hard to the down side as the Dollar reversed to the upside.

 On the same timeframe, the Euro 30 min futures with a negative divergence at the top above $1.31 and the nasty move down that shows 3C consolidation, note there's a small relative positive divergence now suggesting the Euro bounces, this is exactly what we were looking for to occur today in yesterday's currency updates.

 This is the USD intraday on a 2 min chart showing a negative divergence, this should also allow the Euro to rise.

 The FXE (Euro ETF) chart shows a leading positive divergence today, again in line with the Euro rising short term.

 The $USD ETF again on a 5 min timeframe shows the positive divergence that turned the EUR/USD down from $1.31 to that sharp parabolic drop, it also shows a recent negative divergence for a pullback, again supportive of the Euro short term ONLY.

 Euro ETF 5 min with a leading positive divergence, that's a LOT of confirmation.

 Longer term-big picture the USD 15 min chart with a large positive divergence sending it higher

The same timeframe on the Euro with a large negative divergence sending it lower.

So we have a lot of confirmation for a short term move higher on a corrective basis in the Euro which is supportive of the market. Bigger picture, the Euro is headed down and will take the market with it

Market Update

It appears we are going to get that move, the divergences in the averages are not that strong on this move, there are some, but what I think is really behind it is the flow in the EUR/USD, I looked at it more closely and I think it will be supportive of the market for this last or second to last move we are looking for (the last being a sharp move down).

Next post is almost ready, it shows the EUR/USD and why it's important.

Leading Indicators Update

There are several themes in Leading indicators: 1) we are still waiting on a very quick, short term upside event to take place (think IWM post) 2) The things I have said I wanted to see break down are breaking down and 3) the move in the EUR/USD may not be as strong as I initially thought, it may not be a parabolic retracement and instead start to fail soon putting pressure on the market so a currency update will be next, these are the triggers.

Yields paint 2 pictures, high probability move down for the SPX (always green on these charts) and some movement with the SPX suggesting some quick possible upside.

 FCT I showed you is such low beta, no one would use it for a quick move to the upside, but it is an excellent leading indicator in a situation like this for the higher probability , big picture move which it is clearly negatively divergence with the SPX and getting worse by the day.

 Intraday FCT/SPX.

 The $AUD is going in to a negative divergence w/ the SPX as I hoped.

 $AUD intraday vs. SPX, note they are trading exactly opposite-a negative divergence.

 High Yield Credit, I wanted to see a negative divergence in credit as it often leads and stocks follow, here it is, getting worse today although it started yesterday.

 Intraday vs. the SPX, down it goes. This is indicative of big money taking risk off as these are usually much bigger positions in credit and take longer to move them around.

 HYG Credit is finally out of any type of positive reading, I'd like to see the SPX follow the green arrow and HYG follow the light blue arrow; that would make for a stronger divergence.

 Junk Credit which is HY is also moving in to a negative divergence vs the SPX.

This is what has me concerned about the Euro being able to make a strong bounce from the parabolic move down (I never expected the bounce to hold, just a fast, sharp correction), however commodities are now trading as if they expect the Euro to fall and USD to rise, this would be commodity negative (SCO is one I like-short oil and leveraged) as well as stock and almost every other risk asset negative.

I ned to look closer at the Euro/USD

Partial Positions Elsewhere

I do like the idea of partial positions elsewhere like SPXU, SDOW, SQQQ and some have already been opened as you know as well as some Puts in the Q's and IWM.

There are of course others I like, FAZ, TECS, etc. I prefer leveraged positions, whether 2 or 3x because I don't see this as a primary trend in which case I'd go with equity shorts on specific stocks mostly) and I don't see it as a very quick move over in a day or two, in which case I'd favor options.

The way the 1-15 min Futures charts are shaping up, they look exceptionally ugly and most of the real important work on the 15 min chart came about today.

I'd rather have some exposure than risk missing the entire move.

I'll be updating the Futures momentarily after a look at leading indicators.

IWM-SRTY

I like the idea of a short position on the IWM which is also similar to having some exposure to small caps in the way shorting the QQQ would give you some exposure to Tech or the Dow to large caps. From Tuesday there's a IWM Put position that is still in place, but after any initial drop, I'd prefer to have a leveraged ETF like SRTY (3x short IWM).

The difficulty with the IWM right now is it is in such a clearly defined range that it's very likely there's a ton or stop and limit orders on either idea of the range so a Crazy Ivan shakeout seems like a probably occurrence, I would guess a shakeout move to the upside followed by a real move to the downside.

Here are the charts and I checked them against URTY (3x long IWM) and SRTY (3x short IWM) and the confirmation looks pretty good there, I imagine on a head fake move it would look even better.

 This is probably the most defined range of all the major averages, Technical traders will almost certainly put their short stops just above the top of the range and there could also be limit buy orders there as this does look like a bullish rectangle consolidation/continuation pattern (they have no directional bias except the preceding trend which was up-that's why it is bullish). If you want to give a stock an extra push to the downside, you do that by first popping it above a VERY obvious range, trap bulls in long positions and then send the stock down below the range. The bulls are at  loss, they start selling which adds more supply to the market and these failed moves (failed breakout or head fake) often fall very fast and very sharp.

 I like the looks of all 3 o the charts on the different ETFs, the IWM 10 min here has a sharp leading negative divergence-remmeber I never have thought this was going to be a primary trend move down, I think sharp, but followed by a likely stronger move to the upside after it is over.

 IWM 5 min leading negative, with 1 smaller head fake in yellow.

IWM 3 min with a head fake and a negative leading divergence even on the gap up open today.

Because I think the range is so tempting for a stop run, I would prefer to hold off on starting or adding to an IWM short, whether Puts or SRTY or just short the IWM. However if we do see that move to the upside above the range, I would be very sharp and ready to make the move to open a position as I do think a failure of the position could come very quickly.

QQQ looks ready for an intraday bounce

Important Mile-Market Passed-NASDAQ Futures

Earlier I didn't have access to the NASDAQ Futures 15 min chart, the one I've been watching for deterioration and an eventual negative divergence, we have it.

Yesterday I mentioned we had our first lower highs/lower lows in the red box, now we have a real negative divergence, this is exactly what I was hoping for, now to let it continue and perhaps start leading negative, again, things are moving according to plan.

Financials should be on your radar-Starting Partial FAZ Long

Tuesday of this week when we first started seeing strange signals that told us something other than a plunge in the immediate future of the next few days was coming, I put out a number of posts very quickly as it was not the typical "Directional move" in which all risk assets were going to likely move together-at least not in the initial start of this.

In this post I thought Financials were going to rally as I was calling for the closure of FAZ calls, which is an ultra-leveraged position short financials, I wanted it closed based on my view that Financials would be moving higher in the immediate future.

Financials as a group moving up over 2% since the note was posted, individual financials may have moved multiples of that. A leveraged Put on Financials would have been killed.

You may recall I didn't think the QQQ/Tech would do so well on the same day so it was a tough call because it was a totally split market which we rarely see, but these calls were all based on the signals, not my opinions as I wouldn't generally have an opinion like that.

However, when it's time to add or initiate new positions on the short side, Financials are near the top of my list.

Lets take a look...

 To be clear, I don't think Financials short at this moment is a Primary trend trade, I think it could last weeks perhaps, I think it is worthwhile, but I'm not ready to say it's a primary trend trade. Here's XLF, Financials on a 60 min chart since the October top, you can see this counter-trend rally has been sharp, they always are in a declining trend, but the negative divergence is just as sharp-more so than any other on the chart.

 XLF 15 min showing Tuesday the 4th and a leading negative divergence here.

 XLF 10 min also leading negative, the 16th is when the entire market started this move up.

 XLF 3 min seems to be about in line, I'm not too concerned with getting the exact top, I'd rather have some exposure with a partial position than risk missing the entire move because I was trying to be too fancy.

 This is FAZ, the 3x leveraged short on Financials, it has a leading positive divergence on the 5 min timeframe here, with an in line move at the green arrow, not negative.

 FAZ 15 min is also leading positive, it has broken below any local support so a potential head fake is in place, it may go a bit deeper, but that's why I chose to phase in to the position in 2 or 3 entries-make sure your risk management/position sizing is figured out before you enter the first position, phasing in is a plan, not a reaction to losing money like dollar cost averaging.

Here's the 3x long FAS 15 min chart, leading negative.

I actually have a FAS equity position at break-even that needs to be closed and I like the idea of picking up 1/3 of a full position of FAZ here, at this point I would not use options until it is VERY clear we are ready to fall, just as it was very clear Tuesday we were going to see Financials up and Tech down the next day and that reversed the day after.