It Looks Like the Overnight Session Will be Volatile As Well

And why not? Here's what the S&P and NASDAQ Futures look like on an intraday basis (1 min chart) right now...

 First a really nice positive divergence running through most of the day sent the SPX Futures off their lows after the Dow took a 150 point plunge with a 177 point range today, amazing the Dow only closed down -0.16%. In any case this after hours leading negative divergence in SPX futures looks like it will make for an interesting overnight session.

The NASDAQ futures show the same leading negative divergence at the same place.

The SPY Calls are about the only position meant for an upside pop, other than a few assorted longs I like, the rest of the positions are geared up on the short side.

We have some decent positive divergences lined up on the 2-5 and even some 10 min charts which could give us that sharp pop that would make those January SPY calls worth some money, but the fact remains that the longer term charts and the length of the divergences on them are making this market like a very thin ledge that is cracking with each step. Today was just a warm up as was the 50 point drop in ES last week, that's why we put together short positions.

With all that's going on with the Fiscal Cliff, year end trade, low volume, etc, not to mention a long overnight session, I hate to try to predict how the market will look tomorrow morning, but from the charts I have, I'm going to say weak in the a.m., maybe a gap down, maybe something worse, but this market showed us one thing today and it's what I've said a number of times, "When this happens, it will happen fast" so we could easily pop up in a volatile rocket-like move, ultimately though, the charts are still very much on the side of, "The market owes downside".

Here are some example charts...

 SPY 1 min positive divergence sending the market off the lows, but with a smaller closing negative divergence, this should keep market tone on the negative side early in the day.


 However, when considering those SPY Calls, we haven't seen a 5 min leading positive divergence like this since we first looked at that position, I'm guessing this is going to have something to do with that move.

Looking at the bigger picture with the up cycle that started from the 11/16 lows seen with a positive divergence before the lows were hit (accumulation in to cheaper prices), the head fake move is in place (yellow), the 15 min chart is leading negative-that's a lot to overcome so this is why I'm expecting the highest probabilities to be to the downside even though I still think we get that upside pop first, eventually this divergence needs to be settled and I think it will be new lows below 11/16 before it's settled.

I could post 6 charts in all timeframes for each of the averages and they'd all say the same thing.

You may recall what I thought was strange, accumulation in TLT, the flight to safety trade, well today may explain some of that on the intraday move, take a look now...

Accumulation in Treasuries in the 3 min timeframe, short term and we see the price pop today, but in to that we see a negative divergence so it looks like these were sold short term and if that's the case, the money would be heading in to stocks for a short term pop on the upside, it just so happens that the second chart of the SPY above shows that influx short term in to the market average.

If that were the case, then we'd expect short term volatility to die down as well and VXX/UVXY to head lower...

It just so happens the 5 min VXX chart saw a negative divergence at the highs today and headed lower, then it went to a leading negative divergence suggesting volatility will die down. All these are short term cues for a market pop and those SPY calls to benefit from it.

However as I've told you, there are 3 very clear trends and a 4th that looks to be real as well, I'm only addressing two as we don't need to be trading any further out than these two until they start to resolve. You must remember the second trend that is more powerful because the divergences are on longer charts and they have lasted longer, is a nasty downside one.

I'll of course keep an eye on all timeframes, I'm not married to my views, it's the market and what the market tells us that is most important and if that changes, I'll be the first to tell you. There's no shame in changing your views if the market gives you reason to and if there's a dynamic creature out there, it's the market.

 In more simple language what I'm trying to get across is I'm not interested in being a guru who can foresee the market and Wow people, I'm interested in what the market is telling us, this isn't about me, it's about giving you the best edge I can.

Candlesticks... You know what I look for, reversal candles with increasing volume; today we saw Hammers (bullish reversal) on the daily of all the major averages and all with increasing volume, this has been a very reliable upside reversal signal, there's no time or target associated with these, but the next day we usually have a reversal so that's something else.

I'm not as interested in the close above the 50-day m.a., but many traders will be, especially after the afternoon recovery in the Dow, I'm more interested in that beautiful Hammer (think of it as, "Hammering out a bottom" and it must come after a down trend) and the heavier volume.

Other than what we've seen today and what's above,  the only other interesting set of indications I haven't covered are our Leading Indicators, I'll keep it simple.

In credit land, the very liquid High Yield Corporate Credit moved with the SPX today which isn't much of a leading indication, but it is a confirmation of the afternoon recovery. In fact HYG closed in the green today where as the SPY closed just in the red. Junk credit also moved with the SPX and I think gave a decent leading intraday signal around 2 p.m. showing strength for the market ahead.

In currencies yesterday I showed some very short term loss of downside momentum in the $AUD, today it confirmed that and is giving short term positive market support, this pales in comparison to the bigger picture leading negative divergence in the $AUD that suggests the market see a new low, but that's what we expect to see.

The Euro is acting better than the SPX on an arbitrage basis, "if" there was a reversion to the mean, I'd guess the SPX would be headed to $1440-$1445 based on the Euro alone.

Yields closed before they could respond to the market recovery today so we'll have to see what they say tomorrow, but in general they are also pointing to a very fragile market with the ability to make a move higher before a nasty one lower.

Finally... Commodities acted well today and if you were watching them intraday, they also gave a positive indication in the afternoon suggesting the market recover (it's not like we didn't already have enough signals suggesting that).

So that will do it for now, I'll fill you in on any developments I may happen to catch before the open tomorrow.

Quick Look at Gold/GLD

After a brief interruption as the Senate leader retorts, which is one of the main reasons I said last week that I expect today to be volatile because the whole bus of clowns is back in D.C. today, it's back to this post I was working on.

This is a quick look at GLD because beyond the very short term, it's difficult to make heads or tails of what we have on the charts, when we have a situation like that we don't have an edge and when we don't have an edge, there's no point in trying to guess, either wait for the edge or move on to the next candidate.

I see short term weakness and I can even see that in the gold futures right now, I am guessing based on what I see that there will also be some intermediate term weakness or sub-intermediate to be more exact (think of this as similar to the market making a new low under the 11/16 low and around the same time). That would put gold in an area where it seems to have seen long term accumulation, perhaps preparing for an event a bit off in to the future that we are not aware of yet, but again, those aren't strong signals, just a best guess.

The charts...

 GLD (green) vs the SPY (red), it's very hard to make out what the Gold correlation is as it flips back and forth between moving with the market and moving against the market. Looking long term, gold has always done well under Quantitative Easing as the F_E_D prints fresh dollar bills which devalue the dollar and stir inflation, to buy Treasuries (also known as our debt) from Primary Dealers at a handsome profit for the PD's like Goldman Sachs and others. Someone has to buy our debt because increasingly we have seen Japan and China backing away from it at auction.

With QE3 announced as buying MBS, just like 2008, it had no effect on the market. It wasn't until 2009 when the first QE program was expanded to include treasuries did the market really take off and if you recall at the last F_O_M_C meeting, they added Treasuries to the list of monthly purchases, so Gold "May" be preparing longer term for dollar devaluation and inflation.

As for the immediate outlook, not so hot.


 1 min leading negative divergence in GLD, a similar signal can be seen in Gold Futures on the same timeframe. For the time being, I would probably look to close out the GLD position picked up (long) a little bit back.

 The 2 min chart also shows several areas at price highs where there have been negative divergences sending GLD lower and we have another one today.

At the 30 min chart we have a negative divergence at the September highs and 3C has pretty much followed GlD lower since. The one thing I suspect "may" be happening is this...

There seems to be a trend started about 14 months ago to buy GLD around the $150 mark, if we do see that happen again, we will have to take a look at gold more broadly as that would make nearly a year and a half (by the time it reached the zone) of accumulation. If there's a year and a half of accumulation the next great ride in gold may be getting prepared and once again it may be an asset that you might want the actual physical over the paper.

As always though, 1 bridge at a time.

More Volatility Ahead-Seems Like a Urinating Contest Between the House and Senate Right Now

Quick Answer on AAPL

"Is AAPL showing confirmation?"

It just started to today, it hasn't shown very positive signals in the fast timeframes, but longer term AAPL is one of those multiple trend stocks that is complicated and there are longer term/ longer trend positive signals.

I'll cover AAPL later tonight

UVXY -As a market indicator

Remember UVXY trades in the opposite direction of the market (most of the time unless there's an extreme anomaly), so UVXY price moving down is usually happening as the market is moving up. Negative divergences in UVXY suggesting its price moves down is a positive indication for the market.

So here's the update, recall I said just minutes ago that the divergences that I care about for the moves we are set up for are all still in place, however as for the day trading...

 1 min suggests at least a consolidation as we move toward the close and that is what is happening at last look.


 2 min leading neg.

 3 min leading neg.

 5 min leading neg.

10 min leading neg.

If I wanted to hold UVXY short for a longer time (several days perhaps), I have enough signals here to justify that.

Quick Update

Still sticking with the SPY Calls for a short term pop, still sticking with the 2-3X leveraged bear/short ETFs for the longer move down after I expect.

As far as getting myopic, the intraday charts I care about for the pop up are still in good shape, the intraday 1 min chart for the SPY is looking a little thin, it does have momentum on its side though and that is emotion so that can trump short term technicals.

Here's what I mean...

 The NYSE TICK (green) vs the SPY (red) look to the far right.

 As the SPY makes higher highs, the TICK is not making higher highs, meaning fewer stocks are making a higher high than the previous high, this is VERY myopic, very intraday , but it may be helpful for anyone day-trading in the UVXY position or others.

SPY 1 min with a very slight intraday negative divergence here.

This doesn't have any bearing on the bigger picture for even the short term move that the SPY calls represent, just for EOD trade.

Closing UVXY Short

We'll take a look later, I just see some 1 min. 3C signals that are losing a bit of momentum. If I had not said this was going to be a day trade, I would consider keeping the trade open overnight and in to tomorrow as the longer charts like 2 min, etc are still looking good.

We'll review the trade later.

UVXY Trade Management

The UVXY position is now about 1 point in the green ($1 per share).

Originally the initial target was the lower end of the Bollinger bands (20/20) on a 10 min chart.

Being UVXY just broke below the lower bands it's now in an extreme, you want to watch it carefully and perhaps even consider taking partial profits or some type of phased exit. You can also move your stop to break even as well.

I'm going to be checking on the rest of the market so I won't be able to pay as close attention.

UVXY Short Now in the Green

I wanted to be able to show some trade management concepts today for a swing trade on an intraday basis, unfortunately it was a bit too volatile for that today, I'll see what I can dig up though that you can put in your tool box.

The first lesson I think is to make objective decisions based on objective data, it would have been very easy to be run out of UVXY earlier on emotion, but the charts held up and said to stay with the position.

The second concept may in fact be risk management and position sizing when taking on speculative trades like this, if the position is too large, the emotional burden is magnified so good risk management and choosing the right tool for the job are important in allowing you to think clearly and not out of fear.

Not Surprisingly Volatility Has Returned

The intraday charts not only stayed positive, they added to that positive divergence so no longs were closed out. This is why I never want to make decisions based on emotion and the volatility today certainly can be emotion evoking. This is also one reason to consider end of day stops, give yourself and the market some time to come off intraday volatility.

In any case, I'm not quite sure how I'll end up playing the UVXY short, if it is worth holding overnight as it was meant to be a trending day trade, but I picked the worst day for such an example with this volatility, but it is a good example of letting the market tell you what to do rather than your emotions.

Updates are coming.

FAZ- Short Financials, not only a trade, but an indication

I had a lot of charts I wanted to get to today, AMZN, LULU, etc. but I should have known today was going to keep me busy as I said it last week, "Thursday is when we should see the most volatility".

In any case, I was just looking at FAZ and not only can I update it, but it seems to be another good example of the multiple trends (today's volatility is not a trend). I'm not going to go too far as to confuse everyone with 4 different trends, but at least 2 are still obvious and the 3rd fits in nicely as well. This should also help you with knowing when, how and where you might want to position in Financials or FAZ in particular.

I will say that I expected there to be downside volatility at the republican press conference or conference call this afternoon, I kind of wonder whether the market front-ran that event, kind of like buy the rumor, sell the news except in reverse.

Try to think of the charts below and the timeframes keeping in mind the market averages and other charts and their timeframes.

Remember, FAZ is a 3x leveraged SHORT Financials ETF.

 1 min is leading negative, compare to the market averages 1 min leading positive, that is confirmation between the two, if the market moves up we expect FAZ to move down, but also remember the move up we are looking for is a short move, it may be very strong, but short in duration.


 2 min chart also leading negative

 3 min chart also leading negative and reminds me of one of the charts of the averages I just posted, except almost a mirror opposite.

 Around the 5 min timeframe is where things get a bit more mellow, in my view, this is what separates the short term (move up) from the longer term move down and I'm talking about a move down probably below the 11/16 lows to complete this cycle.


 It may seem strange, but this is an example of the different trends, all of the sudden just as the market charts go negative in the 10 min range, FAZ is positive, that again is confirmation and speaks to the longer term move (down for the market/up for FAZ). If this plays out this way, FAZ should be able to be bought at lower levels with even better looking charts.


 FAZ 15 min leading positive over the course of the 11/16 cycle, again this fits perfectly with the marketaveregs' leading negative 15 min charts, remember FAZ is a bear ETF.

Now I'll stop after this, but once we get a new low, we do have even longer term indications of a large base. A new low could very well set up that longer term trend to the upside.

FAZ at 30 min is not positive, but in line, essentially this may be where that even longer term uptrend plays out and FAZ would not do well in that scenario.

This is what I mean by at least 3-4 trends all converging and they can play off each other, very interesting.

Other Averages-SPY and QQQ

I didn't put the IWM here because it's probably a bit redundant and time is a factor right now.

The other averages are similar to the DIA...

 QQQ 1 min positive from earlier has kept up all day, it appears lower prices today were accumulated and the divergence is much stronger than any of the intraday recent divergences.

 QQQ 2 min also leading positive, stayed positive all day, this appears to be that move to the upside that we have SPY calls open for.

 3 min has migrated to the strongest leading positive since we have been watching for this move up, then down hard (much harder than today).

 For the Q's at 5 min the positives stop which still indicated to me a short term pop and the longer term 11/16 cycle in white to the left saw the QQQ head fake move in yellow during distribution and i at a leading negative low. This is the, "Market owes us downside" chart.

SPY

 After the initial EUR/USD plunge on a negative divergence, the SPY 1 min is leading positive at a new high today.


 The 2 min is seeing a very strong leading positive high.

 As is the 3 min, there's some 5 min positive, but it pretty much stops there.

As for the 11/16 cycle and the 10+ min charts, leading negative with a head fake move in yellow.

Dow 13k -Kind of a Dud...

****I was working on this post and about half way through I put out the last post you received as I saw some fast moves in ES 1 min****


Ok, lots of excitement, but we knew or at least thought as far back as last week that Thursday was going to be the most volatile day this week. There are some strange occurrences in the Dow-30 and DIA as $13k was broken, but the market barely seemed to notice.

I haven't moved any positions and don't plan to as of yet, I still think the market owes us downside that probably ends up below the 11/16 cycle lows and it can still surprise on an upside shakeout, so nothing is being moved, no trades are changed based on emotion.

Here's the Dow-30/DIA

 A longer view of the Dow-30 (Not the DIA), this is a break below $13k which is a major psychological level, where's the volume?

 Here's a closer look on a 5 min chart, that volume earlier was above $13k, under $13k, NO VOLUME.

I'd think they'd be fishing around for stops, but it doesn't seem that way.

Take a look at the DIA which has seen the positive divergence from earlier migrate to longer timeframes-I have to look  closer at the other averages, but I expect the same.

 DIA 2 min

 DIA 5 min leading positive

 10 min relative positive
 
Even 15 min relative positive.

I suspect this will hurt the leveraged short ETFs, but they are chosen for a specific reason, they don't have so much leverage that they become unmanageable in an upside move, they can be held and I do expect the 11/16 lows to be taken out, they are there for that move.

As far as shorter term longs , even UVXY short today, they are still in place and the DIa charts above show why.

Quick Update

I'm working on a little bigger update, but it looks like we just hit an intraday low as ES and all the averages are positive, you'll see more in the next update.

UVXY

I have several emails about UVXY intraday trade, yes, it's still open and will remain so for now. I'll let you know always before any position is opened or closed.

And Volatility Doesn't Disappoint....

Ever hear, "Don't get lost in the lines"?

Yeah...

It looks like the  fragile market is going to skip any upside pop, although with today's volatility who knows, we still have a Republican press conference.

This is the reason we have been building  2-3x leveraged Short positions and holding them, the higher probabilities have always been the second trend, the longer and stronger trend, a move toward the Nov. 16th lows.

UVXY short is a bust, but the longer term VXX long, ERY, SQQQ, SRTY, FAZ, SPXU as well as the left over Core Shorts just sent the equities tracking model portfolio up 4%.

The longer term charts, the stronger ones and the ones that said the market owed us downside...

 The 11/16 cycle starts, the head fake move which are never as obvious when they happen as they are after and a 60 min leading negative divergence.

Here's the 15 min chart...

Back to the charts, I have a feeling the surprises aren't close to over.

UVXY Target

I've had a couple of questions about day/trend trading this ETF in particular, there are some difficulties that are specific to this time of the year, mostly having to do with large institutions trying to hedge sending the VIX higher, but I think this is doable so I'll post occasional updates when I have the time.

My first target is the lower 20/20 - 10 min. Bollinger Band.

Of course that's a moving target, but that is an initial general target, I am going to of course use all the tools I have at my disposal, but that gives you some idea of what I'm looking for initially.

Going to Try UVXY Short as An Example Intraday Swing Trade

This is just an example trade, I have a lot going against me like my duties to the site and individual members as well as a delay, but lets see what happens here.

Should be close

The Q's, SPY, DIA and IWM  just took out the stops in the area and the volatility indicators are getting worse, these are still intraday signals, but if I wanted to trade this reversal to the upside, I might go with something like UVXY or another leveraged product, but we are talking about day trade. A 50 bar 5 min chart works pretty well for a stop, but ROC on price and spotting the first divergence is also another good warning signal.

 QQQ with stops right below intraday support as usual.


UVXY negative divergence getting worse, but as I pointed out, remember these are still intraday signals.

Intraday Market Charts

These are just a few examples from the last post, I still want to see how the shorter timeframes fit together with intermediate ones.

I just used the SPY, but it's pretty representative of the other averages in these timeframes and I used volatility as a confirming indicator.

 SPY 1 and 2 min intraday positive divergences above and below.

 VXX and UVXY 1 and 2 min intraday negative divergences above and below respectively.

The TICK Index shows this move was a pretty strong one as far as market breadth is concerned and this is the fragility of the market I've been talking about...

That's an almost -1500 extreme NYSE TICK reading, we have barely broken above +500 today, this is more or less because of the negative divergences in the mid-term charts, the market has very little underlying support here (the last several weeks).