MCP AH

I suggested a trailing stop for MCP Monday, tonight in AH it's down -5.5% on a management change, I saw something I didn't like in 3C there, we may see why over the next few weeks. In any case if you have a position there you might consider what you might want to do with it.

I am not a fan of AH trade, I think for the most part you are better off during regular hours.

I have a feeling this one will be a case study.

Post Coming Tonight

I may post a few more things and try to answer as many emails as I can, but I have to take my wife to the airport tonight as she is returning to Hungary again, many of you remember the last time not too long ago. She needs some medical care and it's free for her over there so a last minute plane ticket booked yesterday is actually less expensive than taking care of the issue here in the U.S., plus her mother is a Doctor and she hasn't been home for the holidays in several years.

In any case, I'll actually have more time for analysis as I have nothing to do all night.

I will be posting my end of day findings, you can read them tonight which may be late because of the airport issue or tomorrow morning before the market opens will probably be fine a well.

We will be watching carefully for anything that indicates a leak re: the F_O_M_C_ policy statement, believe it or not, we did find a leak that was insanely obvious a little over a year ago, we put on positions before the announcement, we had to sit through some knee-jerk stuff, but the trades were right on the money.

Also many of you may have forgotten by now, but 3C was dead on accurate at the QE3 announcement on Sept 13th this year. Many were scared and thought I was trying to fight the F_E_D, but as I said back then, "I have to make decisions based on facts that I collect, not on emotion, not on what happened the last two times or what CNBC says" and even though I was pretty nervous about staying in a number of shorts, we did so anyway. The first two days where the knee-jerk and I had more emails then than I think I've ever had, the market was up for the 13th and part of the 14th. Then came the long 6 day wait as the market was mostly sideways, this was like torture for many members because most still expected the market would breakout to the upside, but I continued collecting data and 3C charts and became even more confident of the 3C signal. Then the market gave back all of the QE3 gains in about a day and trended down since.

So just know that I make decisions in the most impartial way I know how to, I make them after gathering as much data as I can and I do so with your best interest at heart. Last time it was very hard to stick with the signal, but those who did were rewarded, those who didn't, didn't make any money as the market had already shot up pretty fast and then it was sideways before it fell.

My job is to bring you the best data in a way you can understand and see for your own eyes, I have no ego-dog in this fight, I just want to give you what you came to Wolf on Wall Street for and I will work as long as need be to give that to you.

Volatility ETFs

There are some more positive signals in VXX and UVXY, I'd say more than usual, but not the screaming signals I like before going in to either too deep.

To me they almost look as if they are preparing for a screaming signal, that could very well be tomorrow.

Quick Asset Update

I can't squeeze this many charts in this fast so I will present that later tonight.

Financials / XLF don't look good, they have a longer term leading negative divergence that saw a lot of damage done today and a 5 min leading negative divergence intraday.

FAS-3x bull Financials is similar, leading negative on 5 and 15 min.

FAZ 3x bear Financials - 15 min and 5 min leading positive divergences. There's good confirmation in financials, bearish.


Tech...

AAPL has sen some negative divergences in intraday timeframes, it's not that bad though that I would go short, whether to take profits or not on the long is an individual decision, I personally would have as I like to make options trades quick.

XLK/Tech

I would say XLK / TECH is similar to AAPL, on certain charts it even looks bullish, but I would think it has to come down before it can move up.

I'll get more out ASAP

Futures and more considerations...

OK, so tomorrow we have the F_O_M_C announcement, it is widely expected that the F_E_D will announce  $45 billion a month in TREASURIES.

When the F_E_D first announced QE 13 in September, I got so many emails from members telling me, "Don't fight the Fed", "Why aren't we closing our shorts" and I told them that we do things based on evidence, not based on market mottos, not based on fear, not based on what happened in one situation when this situation is totally different.

I thought we should remain calm, not make any knee jerk decisions and collect the evidence and make a decision based on the evidence.

What happened on September 13th (the announcement of F_E_D M.B.S. buying or QE 3) and 14th is something I ALWAYS warn about before any F_E_D or F_O_M_C policy statement and that is...

BEWARE THE F_E_D KNEE-JERK REACTION EFFECT!!!

I wouldn't say it if I didn't see it so often. Here's the knee jerk reaction from the announcement of QE3 from September 13th...

*All charts are of the S&P-500

 September 13th at 12:15 was when QE3 was announced, the market roared higher, many members were panicked, even though I had posted many charts during the previous week to show them the different possibilites, how the knee jerk effect works and basically to stay calm and not let emotion decide.

As the market went higher I reminded members of the F_E_D 'Knee-jerk" effect in which the initial reaction is almost ALWAYS the wrong reaction.

I felt the pressure of "Don't fight the F_E_D and clearly remember QE1 and 2 ramping the market, I even said to members, "Emotionally I feel like I want to close all shorts and go 100% long, but I can't make decisions based on emotion, they must be based on fact and highest probabilities.

The next day, Sept.  14th, the market started to move even higher, members were really panicking, I still said we must gather facts and make decisions based on facts we can observe.

 Over this lateral period after the announcement at the white arrow I gathered facts and they told me the highest probability was the market goes down, who would believe that?

 After 6 days of fact collecting the market took back all QE3 announcement gains in 1 day.

Here's QE3 at the white arrow and the downtrend that has dogged the market since until our recent positive divergence at the lows of 11/16 , which is the same move I'm looking for to complete the downside target and then probably put together a stronger move.

The things to consider include QE1 in 2008 didn't work well when it was M.B.S. buying by the F_E_D only, it wasn't until the F_E_D announced they'd buy Treasuries too that the market took off in 2009.

The original QE3 statement was for M.B.S. and the continuation of the maturity extension program.

According to Bloomberg...

"The Federal Reserve will amplify record accommodation tomorrow by announcing $45 billion in monthly Treasury buying that will push its balance sheet almost to $4 trillion, according to a Bloomberg survey of economists."

"Forty-eight of 49 economists predict the Federal Open Market Committee will purchase Treasuries to bolster an existing program to buy $40 billion in mortgage bonds each month. The panel pledged in October to continue that plan until the labor market improves “substantially.”"

You can read the rest of the article.

Things to consider include the fact that on of the reasons I felt the announcement of QE3 would not send the market higher like it did in the past was because the market already expected it; both QE1 (or at least the Treasury buying part) and QE 2 were unknowns to the market, it sounds like once again the establishment knows or has felt Treasuries would be added so there's the same chance that it's already discounted in market  price and we just see crazy volatility to take money from retail that thinks Wall St. is just reacting to the news, they aren't.

The other thing is the situation across the world is much different now than QE1 or 2 or even Twist.

Inflationary concerns (which is one of the biggest products of QE) could severely damage the economy.

While there are dozens of things that should be considered, the last is this.... The F_E_D is looking for a way to change their yard stock for asset purchases. Up until now and even now, the f_E_D has given dates, such as "ZIRP policy will remain in effect until April 2015".

The market loves that because they know exactly what to expect, what the market hates is uncertainty. The F_E_D has been talking a lot about making asset purchases contingent upon the incoming economic data, that takes away all certainty, it makes more sense, but Wall Street doesn't like it and when Bernie was questioned about it, that marked the high of the day, that exact minute, that means the market didn't like the F_E_D's new policy yard stick they are trying to create, this could cause even more disruption to the markets if the F_E_D talks more about moving toward that system. 

If you are smart money and know a policy will be in effect until an exact date, you can make all kinds of plans, but if you don't know if next week's Non-Farm Payrolls may substantially change the size and makeup of F_E_D asset purchases, you don't want to be the guy loaded for bear when the music stops.

So it's not as simple an affair as people think.

The same quick pop up and reversal down I said I was looking for last night that started in the market today, can be created the exact same way or in the manner I expect via the F_E_D knee-jerk mechanism.

I do have to take my wife to the airport tonight as she will return to her native country, Hungary., to receive medical attention as her mother is a doctor there, so I will be positing my wrap tonight, but it will be late.

VERY QUICK market update

This is to just give you a feel for some of the divergences that have developed today, this fits with the idea of a quick move up and a quick move down, but so would F_E_D reaction tomorrow.

I'll look at some individual assets after this post and the next.

Futures are a little confusing as their signals are not aligned. I think when I do my analysis tonight I'll have a much better understanding, but the F_O_M_C is always a wildcard, unless leaked which has happened at least once we have seen with 3C.

 DIA 15 min leading negative divergence and that's almost all from TODAY!

 Strangely ES 1 min is actually in a positive position in to the decline.

 ES 5 min is deteriorating like I wanted to see, 15 min hasn't started yet, but 5 min i just getting underway.

 IWM broke out above the area we expected and this is a 10 min leading negative divergence with ll of the leading done today, strong distribution on that chart, but we have to take the market as a whole.

 NASDAQ futures 1 min are slightly negative, this is better than what was there most of the day, confirmation.

 NQ 5 min is just starting to move as well, I'd really like to se the 5 and 15 min charts negative in futures before making a final addition to phased in positions, however if I didn't have any started, I would certainly start in this area.

The 15 min chart for NQ hasn't gone negative yet and that's ok based on where the 1 and 5 min are.

SPY 1 min leading negative, there are negative divergences throughout the SPY timeframes.

Please check out my F_O_M_C post next.

Market Update

All of the averages have significant intraday negative divergences in them, they all look like they are ready to fall from here. If the FOMC meeting announcement wasn't tomorrow, I'd probably be adding to shorts here and now, that can be down and they can always be closed out if price moves above them.

The thing to remember is the FOMC and market's knee jerk effect.

First I wanted you to know about the market so you can make any choices yo might want to, I will follow up with charts as well as FOMC thoughts.


The FOMC would also make for a perfect catalyst , switching from a positive trend to a negative trend and doing so VERY quickly.

FB as a Short and Other Market Considerations

I received an email from a member who is more of a trader and would like to try to short FB for a pull back which is something I mentioned yesterday in the FB update a being high probability, "A Pullback'.

This is not really my type of trade, I might consider trying to trade around it by letting go of some shares, take the profit and try to buy a greater number of shares with that profit on a pullback, but because I view FB as a long term trade I prefer not to mess around with it too much.


However that wasn't the question.

Lets take a look at FB as a possible short on a pullback move.

I'm not going to make the bullish case for FB because I did that already in yesterday's post linked above, I would just encourage you to look at the bullish scenario in FB and understand that is where the highest probabilities are, that does not preclude FB from a strong or tradable pullback whatsoever, it just must be considered a counter-trend trade and those are a little more speculative than trading with the trend (in this case the 3C trend). Just know what you are potentially trading against.

 FB 15 min -I'm not going through each divergence, you can see the general positive 3C trend with price and the recent negative 3C trend against price, this is a divergence and suggests a pullback as 3C is contradicting price.

 FB's large ascending triangle base has seen a breakout, the orange area though i where we see some of these negative divergences suggesting some selling in to strength, perhaps because a pullback i part of the plan, perhaps the base ultimately will look more like a 'w' than an ascending triangle, I don't know what their thoughts are, I can only see the 3C signals.

I find volume on the breakout to be low and not impressive, this may also be a marker suggesting a pullback and larger base before stage 2 is hit solidly.

 30 min 3C chart shows trend confirmation and a recent negative divergence. This looks too big to be consolidation only, I think some price consolidation/pullback must come out of this.

The question now is, "Where is the entry? When?". On the 5 min chart this one move up around the 3rd doesn't look like a strong candidate as a head fake move, the recent small accumulation sent FB higher and today in red we have a small intraday head fake move or failed gap.

Here's a closer look at it...

 5 min

I'd prefer a head fake move above the recent highs, I kind of doubt we get it with the way the charts look now. I think a break below the 50-bar 60 min chart's moving average is probably a decent area to consider FB as higher probability.

One thing you might consider is a phased entry if you are trading the stock and not options, take 1/2 the position here and maybe add on either  break above the red line on a negative divergence (better pricing/less risk) or add on a break below the moving average above (still decent average pricing, better probabilities).

There's also a strong chance that the initial break of the moving average leads to a volatility shakeout back above the m.a. and then below it on the real move to the downside.

I will say the 3, 5, 10, 15 and 3 min. timeframes all have a negative divergence of some degree, so I think it's a pretty good bet FB pulls back and there's probably some money to be made on that pullback.

The Trend Channel stops would have the highest probability, but they would also require you give up significant chunks of the trade as you'd miss a better entry in this area.

Feel free to email me with any questions.

FB is still a long term long position in my opinion, that hasn't changed.

Leading Indicators

I see some surprising moves among short term leading indicators, however there is one that may be setting the example for the others and how this will play out, what it will look like, if this is the case, it just quadrupled my work load as I have many more assets I need to watch like a hawk.

Here are today's charts for leading indicators, of course end of day is always best because these can move fast, but here's what we have so far.

 FCT intraday is surprising, it's an excellent lading indicator when it diverges with the SPX, however as I mentioned, there's 1 asset that may be a model for the others intraday , furthermore...

 The more important trend in FCT vs the SPX (green) is the larger negative divergence in place since the move up from the lows of the 16th of November. You can see to the left how a very small negative divergence was able to send the SPX lower, one this size...

 Yields are another that are surprising intraday, but again more important is the larger trend since the 16th with Yields totally dislocated from the SPX, again to the left a smaller negative divergence send the SPX lower, one as large as this....?


 Yields intraday...

 High Yield Corp. Credit was surprising, but if there's a risk on move, this is where smart money will place large bets, in credit as it is such a large, liquid market, HYG may be showing us how this is going to go down as it is diverging way negatively from the SPX (green) intraday, if this continues, it could lead to a very fast shift in market trend/price, this is why it makes it more difficult as I have to watch all of these assets for anything out of the ordinary.

 High Yield Credit is remaining at a negative divergence with the SPX, I don't think it is as fluid as HYG, so that may be the reason if they need to make a fast change in positions intraday.

 HY Credit on an intraday basis also may be providing the model as it was moving in the same direction as the SPX early today, now it is diverging negatively. If this keeps up, this may be the "FAST" reversal I have a gut feeling about.

 Here's the Euro ETF/FXE intraday with the SPX

 On a longer basis it is negatively divergent.

 Commodities just aren't taking the bait, they refuse to follow the SPX both intraday...

 And among the larger trend, they are moving in the manner in which I expected the market to move before last Tuesday's weirdness, however I still feel the market will make a move that looks similar to this.

Here are commodities vs the Euro, note they were in line when the uptrend started off the 11/16 lows and then the Euro stayed stronger than commodities, even though commodities usually track the Euro almost tick for tick, it is as if Commodity traders know that the Euro isn't going to hold and they aren't going to be caught off guard like AAPL longs were and be a part of everyone trying to squeeze through the same door at once sending prices plummeting.

QQQ Update- Broader Market Update

I'm going to use the QQQ as an example to show you how close we are to a very pivotal moment before I switch templates to look at leading indicators, I want you to see how close to the edge we are.

Remember my perspective has been we are going to see a move lower (probably a new low for this leg), we were moving that way and had a "transient" interruption last Tuesday which I believe is imply part of a tactical move that is still part of that larger move lower. Within this transient interruption that started last Tuesday afternoon, I have thought we would see a sharp move to the upside taking out obvious resistance areas (the IWM is one of the best examples of that today) and that move would be followed rather quickly by a downside reversal to complete the original "larger" move down.

The QQQ charts should reflect much of this and they are representative of the other market averages.

 From shortest to longest, the break out today in the market is seen here on a 1 min chart, 3C is not confirming, the price move is very parabolic and i have to watch it VERY closely because I do expect the reversal to come quickly and to be sharp.

 The 2 min shows the interruption that started late Tuesday 12/4 with sudden positive divergences, that weren't that bit so I didn't expect them to change the ultimate move down, just to delay it and possibly cause volatility/shakeouts (as Wall St. doesn't do anything without a reason) and we can see the QQQ strength I mentioned yesterday and the IWM mentioned yesterday prepping the QQQ/IWM for a move today. That move is seeing a leading negative divergence so it looks like it is being sold in to on a shakeout as I expected.

 3 min shows less of a positive divergence which reflects the strength of the positive divergence, the negative today is clear.

 5 min chart longer trend from the positive at the lows of the 16th sending the market higher, then a had fake move (yellow arrow) with a leading negative divergence as the market starts to roll over. In orange the transitory delay/shakeout from last Tuesday 12/4 and the breakout today associated with that move, there's no point in Wall St. expending resources if there's no game, a move like this that fails sets up great positions for them and causes downside momentum to increase making the move down even sharper. You can see yesterday's positive I mentioned here, even though it is still in leading negative position and at the orange arrow you can see today's move looks very parabolic-these don't typically end well.

 15 min shows the positive at the lows of 11/16, the distribution in to the top, a head fake move (yellow arrow), continued leading negative 3C signals with what I believe is another head fake move today as the IWM and others were just too obvious as Technical traders are soooo predictable, Wall St. uses them all the time.

The 60 min long term trend, I do think there's a good chance after we make a lower low that we are building toward a longer lasting/stronger move to the upside, but we cross that bridge when we get there.

You can see how quickly the market could turn down.

AAPL Update

I really didn't expect there were going to be so many members taking the AAPL bounce trade, some still hanging in there, some bought a few contracts yesterday and made several thousand dollars today and are out and relaxing for the rest of the day. I'm really happy to hear it, but for those of you still in, here's your update and since there are multiple trends in AAPL ( a bullish one we have been following since late October that is much larger as well as a bearish one), I'll briefly address those and when we get to that bridge I'll cover them in more detail, but just for some context as things are moving as expected.

 AAPL 1 min did not confirm, it is showing an intraday negative divergence so I believe there is distribution in to price strength here...

 The 2 min intraday timeframe shows the positive divergence (which improved a lot yesterday for a short term trade), but again no confirmation this morning. Now for those who are trying to hold longs/calls as long as possible or profitable, we want to watch for migration of these negative divergences to the longer timeframes, when that happens, I'd really be looking at taking partial profits, putting a trailing stop in or just closing the position out.

 The 3 min showed a positive leading divergence yesterday, this is something that wasn't there Friday, that's why on Friday I said, "You can probably make a long trade work here, but it's not my favorite and you need to be on the ball". Yesterday I said I felt much better about a bounce trade and if I had the time, I would have opened a call position there.

We can see a relative negative divergence here, so the 1 and 2 min timeframes ARE seeing the negative divergence migrate to longer timeframes, but I think there's still more left in AAPL, it's not at the target areas I mentioned earlier either.

 The 15 min offers a look at a larger trend, but this is also part of a different trade we are yet to take, a longer term long position, I don't think we are there yet. I think we will see a sharp, stronger move in AAPL to new lows for this move before that trade is ready.

 On the 30 min chart you can see the basis of that trade which I have been updating since mid-October, I do think AAPL will make a new low here first before this long is ready, but when it is, I think it will be a strong long trade.

Today's 60 min chart w/ a 50 bar m.a, note the volume pick up as it crosses above the m.a., but on the whole, volume is deeply unimpressive for the day vs recent days past.

Again, I think this is a sign that the AAPL trade is a bounce trade and not a long term trade. I still have an open AAPL put and I have no problem leaving it open, I think it will work.

Mixed Futures Charts

I have tons to look at and keep tabs on, but as I go and I notice extraordinary events, I want to share them as it helps you understand the process that is unfolding, it helps you understand correlations, how to confirm or see problems with a price move, etc.

ES (S&P E-mini Futures)

 This is this morning's 1 min chart provided for context, to the far left the time is 11 p.m. EDT (yesterday), where volume picks up is the 9:30 New York open.

 Zooming in on the same chart from 4:30 a.m. today to present, there's a negative divergence in to a price spike and then a leading negative divergence, this is what I'm looking for on these moves up in which we suspect a head fake, we are looking for signs that price strength is being sold in to, that helps us confirm a head fake or false break out move and that helps tell us whether we may be close to a sharp reversal in which we can take short positions (in this case) that have very little risk and a lot of potential-(basically the area in which I would add the final position in a phased in trade).

What we still want to see is migration through the other timeframes, that gives us stronger probabilities.

 The EUR/USD Spot which was showing a positive divergence yesterday, the Euro has a positive correlation with the market and helps or even sometimes drags the market higher. This also has a lot to do with the $USD which has an inverse relationship with the market.

This leading negative divergence in the pair is new, it's the deepest 3C move on the chart, it's one of the early signals that the move up we saw as very high probability in the Euro/market yesterday, is also seeing distribution and could be preparing for a sharp reversal to the downside (along with the market). These currencies are important confirmation assets.

 The longer 5 min EUR/USD chart is also showing a loss of 3C momentum, especially right before the pair made a small, but strong move down.

 This is the Euro Future alone-no $USD, the 1 min chart here shows 3C distribution in to the highs of the Euro and the Euro lost ground from there, this effects the pair and it effects the strength or support for the market, this is market negative.

 The longer 5 min chart shows a better / longer trend, it too has turned decidedly leading negative.

 And the 15 min chart from a positive at the lows to a negative building in.

 This is the US Dollar Index 1 min with a small positive divergence, which is the opposite of the negative divergence in the Euro, thus confirmation.

 This is the USD Index 5 min chart with a positive divergence in to the pullback, this is market negative and matched s the Euro for confirmation.

The USD Index 60 min chart shows the trend and a positive divergence that got the USD headed higher, the break in momentum that really came from last Tuesday's change in the market, which again as I said yesterday I view as a transient event, is not much of a problem here, it's not negative on the $USD Index, it's just in line so again the currencies are pointing toward the downside for the market just as I showed in last night's post with the longer charts exerting a gravitational pull that the market should give in to. We needed an event like this because of averages like the IWM's range and the 50-day, these kind of events I also view as transient and kind of like a primer to kick start a bigger trend (reversal in this case).