Daily Wrap

Another uneventful day in the market except a good call in AAPL yesterday with the right asset for the job and interestingly as I was waiting to see, right on schedule with DeMark's call although our call was about 7 hours before I even heard of DeMark's AAPL bottom call.

It also probably stinks to be a long term BA investor, an officer or a design engineer as the FAA was grounded the Dreamliner; that should put some pressure on the Dow, but as you saw today and many other days recently and as you know, the market isn't moving based on value, FX correlations or anything like that, it's part of a Wall St. fed cycle.

Tonight futures have lost a little ground, but nothing that seems noteworthy.

I think the tight ranges of the last week (or even longer) looks exactly like what 3C has been telling us since before the move higher that we were expecting , started on 12/31/12-these flat ranges are most often associated with distribution or accumulation if it was after a downtrend. The market stays flat, middlemen fill and complete institutional orders in a stable VWAP environment and traders get bored and caught off guard before the market moves in a direction that gets traders' attention and calls them to action and then drops the floor out from under them-we've seen it too many times, but at this size it suggests quite a move to the downside.

All of the things we look for in this scenario have either come about or are in the process as slow as that may seem and the dull rangebound market makes it seem even slower. However we made some good progress today in Credit which we've been waiting for nearly a week, currencies, Yields have been working in our favor, and several other indications.

As another indication of how flat the market is, the Dominant Price/Volume relationship today, THERE WASN'T ONE-not even close. I think we'll see a dominant P/V relationship just before we turn, but I could be wrong, I just have a gut feeling.

The rotation from the IWM (yesterday's top performer) to the Q's (yesterday's worst performer) today as predicted last night just as the night before as the IWM was predicted to be a top performer and QQQ to be weak, was right on. Now though this rotation is getting messy, there's less and less in the way of short term bullish signals to make those kinds of predictions-at least today. We actually saw that start yesterday as the IWM looked strong Monday and the QQQ was stronger last night in 3C trade, but nowhere near as strong as the IWM signal Monday.

To give you some kind of idea of where the averages should be heading (each is a little different right now, but the larger theme is the same), take a look at the Q's.

 The least influential chart, the 1 min intraday shows the QQQ looking pretty good yesterday and staying in line with price today, no short term negatives there which is in my opinion, due to AAPL.

 At the slightly more important and longer 2 min chart, at "A" we see the weakness that allowed us to predict Tuesday's price weakness and at "B" we see the 3C positive divergence that allowed us to predict today's better relative performance.

 However as pointed out last night, the QQQ positive divergence Tuesday didn't go beyond the 2 min chart whereas the IWM positive the day before was out to the 5 min chart, so we are seeing even rotational strength evaporate. The 3 min chart not only stayed negative, it went in to a deeper leading negative divergence which is not unexpected considering price was moving up, price strength is used to sell in to or short in to.

 The 5 min chart on the QQQ is negative at the end of day, I'm sure the weakness here is coming from the 3 min chart, "migration of the divergence", basically the divergence or underlying trade getting stronger (heavier distribution), so I expect that will be a theme that continues in to tomorrow.

The 15 min chart has been leading negative ever since trend 1 started and that was part of the reason we were able to predict it, the market needed strength to sell in to and they did so as you can see on this influential 15 min chart. In my view, when the 5 min chart deteriorates like the 3 min chart before it and spreads to the 10 min chart, we'll have essentially a Full House of negative divergences with every timeframe negative, this has typically been a good timing signal.

With Leading Indicators turning negative and picking up momentum, the timing is just about right.

I'm almost wondering if there's an earnings event forthcoming that will be used as the catalyst. Don't confuse a negative earnings event as being the reason the market tipped, but Wall St. likes to keep people ignorant and the Financial media makes a living off it. You can see on the charts why the market will crumble, it was set in motion long before any catalyst, but try explaining that on a 15 second radio/news spot. See if CNBC tells you the truth about how rigged the market is. It's easier just to say, XYZ's earnings sent the market plummeting today.

So perhaps we ought to be on the lookout for a possible earnings play among one of the heavy hitters due to report, see if we can't find a leak.

Other than that, I would just continue to look at your shopping list, any quick spring cleaning you might have to do on a moment's notice and above all, be patient. I suspect AMZN will be a decent example of why we are patient. For those of you who have been here since Q1 of 2012, you know what patience did for us, BIDU was one of the best examples, but of all 9 core shorts, nearly every one was entered within a few percent of the top, every single one was green and by late May (in some cases only a month), every core short had a double digit return-all of that was patience.

Just as a very quick example of why patience and to let you chew over how Wall Street works and how we use what we know to our advantage, here's a quick look at the BIDU entry.

 We saw this large triangle, it proceeded an uptrend, but it's too big to be a consolidation, these are almost always tops, however technical traders see them as continuation patterns. We already knew there was distribution by the time the triangle was nearly complete so we expected a breakout to bring in the longs, at that point we had our strategic view, we just needed our tactical entry or execution of the trade.

Another smaller triangle formed, this one was a bullish consolidation/continuation, but we still could see distribution in 3C, technical traders would absolutely buy the breakout and they did, it may not look like much, but volume was up a good 50% on the breakout, that's what smart money uses to sell short in to and that's what we did, we phased in at two entry points in yellow at the very top as distribution signals got worse and rode BIDU down for a quick 30% gain from late April to early June.

Take a look at the technical patterns, all patterns technical traders are very familiar with. Look at the way Wall St. used these bullish patterns against technical traders and why? Smart money trades in size, they need the demand and higher prices to get their position in place. Everything that was done in BIDU was done to accommodate Wall Street's position, right down to the bulltrap/head fake move that gave the downside reversal extra momentum. Patience is what made that trade possible, successful and with minimal risk.

You can learn a lot by just paying attention to their habits, the things they do over and over and the way they use TA against retail traders.

If anything interesting pops up in futures, I'll be sure to let you know.