I try to lay things out, what to expect like the market making moves that are so extreme that you, yourself-as much as you know and have seen, will feel completely over-run by emotion, I try to prepare members for what's ahead, what to look for, what the sign posts are.
Some random comments and analysis from this week included (this was before it even happened), HYG would be used as a manipulation play to lift the market. We saw HYG used twice, I predicted the first and second time either day or days in advance and predicted that any price strength in HY Credit (a risk asset would be sold), it wasn't only sold, it was sold hard and immediately.
I said on Thursday that the symmetrical triangle was the most basic of technical set ups that anyone who made it through the first chapter of a technical analysis book would recognize as well as "Any significant reversal will see a head fake move-failed breakout first".
The set up Thursday was so obvious (I've also told you about how these triangles are nearly useless in TA now because Wall St. uses them to manipulate traders and create traps with them as they are so recognizable), yet even using lever, Thursday's failed almost immediately. I posted that institutional sellers were very aggressive and they were selling any strength, even the start of a breakout from Thursday's triangle in the SPX was sold until the SPX closed lower.
I told and showed you that immediately after Thursday's failed attempt, there was a move to distribute TLT which made its largest 1-day move in more than 5-weeks, that began almost instantly after it was obvious Thursday's head fake move (breakout from the triangle) failed.
I showed you another attempt Friday with a much smaller, less ambitious SPX triangle and showed how TLT was down Friday from distribution starting Thursday (even though Thursday it was seeing some of the most bullish activity in well over a month-also predicted before hand) as soon as the breakout in the SPX failed. I showed you how HYG was held up near Thursday's close on Friday's open, but again was seeing the same heavy distribution as it did on on its first run on Tuesday May 14th (predicted to fail before it even started) as well as distribution Thursday on the next run which was predicted not only to make the run, but see distribution in to the run.
I showed you Friday's move lower in VXX which was under heavy accumulation as it moved lower.
The result of Thursday was the assets that make up the SPY Arbitrage (and there's only 3), HYG (High Yield Credit-a risk asset) , TLT (20+ Year Treasury Bonds - a flight to safety asset) and VXX (Short Term VIX Futures -like TLT, another "Safe" asset) where all set up as soon as Thursday's SPX triangle failed to breakout, to give maximum support to the SPY via arbitrage. That meant TLT had to be down, VXX had to be down and HYG had to be up. However, even as all of these assets were where they needed to be due to short term manipulation to allow the SPY to breakout of a much less ambitious triangle (much smaller), the safe haven assets were under accumulation-not being sold in underlying trade and the risk assets like HYG and the market averages were under distribution. This was all predicted well before it started. Even the USD/JPY was used to knock the Yen lower to help the SPX higher-you see the correlation above; I even pointed out that a minute after the 4 p.m. close, the Yen started rising again! Forget all of the $1666 weirdness which was clearly shown to be another manipulation using a flash crash to bring the SPX to the 1666 close !
I even said that the symmetrical triangle was such an obvious set-up, bull trap, I couldn't believe anyone would buy it, but I knew they would.
The thing that made Friday's breakout in the SPX triangle different from new SPX highs, New Dow Highs, The NASDAQ 100 touching 3000 again after years, was that it had volume (which is the very reason for these moves). As I said Friday, Retail took the bait, they bit, it was obvious in volume and if there's one thing we know, it's that smart money doesn't chase prices higher and buy on large-open for all to see orders, with obvious volume giving away their positions for predatory HFTs to go after them! So who did buy? The exact same people who the set up was targeted for-retail technical traders, even basic beginners.
That's why I thought it was so important to post this simple email from a member who is very in tune with retail market sentiment via the Twitter stream.
"They were all expecting the breakout and were long, even citing the "break down" in TLT. Nobody is short at least on my feed."
This is on the surface, a very simple, almost "No-Duh" kind of statement, but break it down...
"They were all expecting the breakout"
Of course they were, this was from Friday as you can see the original post above, by 11 a.m. Thursday I was already telling you that the most basic technical price pattern, one that any technical trader would instantly recognize as a "Bullish continuation pattern", the simplest of triangles in Technical Analysis, a Symmetrical triangle was there for a reason, as I reminded you, "No significant reversals come with out a head fake (or failed breakout) move first". Friday's failed as sellers stepped in to take advantage of even the slightest strength (while retail was bullish on this pattern, who do you think the sellers who were aggressive enough to cause the entire set up to fail were?)
"They were all...long"
If you know anything about the most basic price pattern in Technical analysis, or even if you don't and you just read what I posted BEFORE there was even an attempt to breakout (the Triangle) is it any surprise they were all long?
Here's what is REALLY telling about retail's positioning, "Technical Analysis teaches to WAIT FOR CONFIRMATION", in other words, wait for the breakout move and Technical traders usually stick to this rule, which makes it easy to take advantage of them as they are predictable and they chase.
Why were they all long before this breakout even manifested? I actually went to a Technical Analysis seminar before I had even read a single Technical analysis book (of which I probably have nearly 100 in my library). After 6 hours of learning about moving average cross-overs (the "Golden Cross" and the "Death Cross"), the basics of "Candlestick Charting", "Trend Identification" and "Technical Price Patterns", there were three types of triangles: An "Ascending Triangle" which is bullish (according to Technical Analysis Dogma) if it appears after an uptrend, a "Descending Triangle" (which is bearish of it is preceded by a downtrend) and a "Symmetrical Triangle" (which is bullish or bearish depending on the preceding trend.
Guess what the first triangle I started looking for in hundreds of charts EVERY night? The Symmetrical Triangle. The reason why is because with all of the information I absorbed in 6 hours, remembering what an Ascending Triangle looked like and what a Descending Triangle looked like, often sent me back to my handout, but a Symmetrical Triangle was the easiest to remember, all you had to do was find it, identify the preceding trend and then wait for it to break in the expected direction or sometimes even buy early as Technical Analysis seemed infallible with all of the examples we were presented with. EVERY T.A. book I read after that, included the Symmetrical Triangle somewhere, it is the beginners of beginners price pattern and this is exactly why IO checked the 3C charts ahead of the "attempted breakout on Thursday that failed and the successfulk breakout on Friday-only after most op-ex contracts were closed.
But remember, it took evey lever possible to move the SPX up out of even the smaller second triangle on Friday, it took HYG up, TLT down, VXX down, and even manipulation of the USD/JPY to send the Euro down- Every single one of those positionings was meant to give the SPX the best chance possible to breakout of the smallest, almost insignificant triangle, BUT THE ONE ANY TECHNICAL TRADER WOULD RECOGNIZE.
BACK TO THE EMAIL STATEMENT...
"even citing the "break down" in TLT. "
They (retail traders) found confidence in the move lower in TLT on Friday, even though TLT as we knew, had been under accumulation and was ready for a pop higher by Thursday which it did for the biggest 1-day move in 5 weeks. They didn't care about the strength in TLT Thursday or even the relative strength in TLT for the year, they saw what we already knew on Thursday, TLT was going to bull back on Friday due to short term 3C signals showing intraday distribution right after Thursday's triangle failed to breakout. *Remember, TLT lower means more upside head room for the SPX/SPY due to Arbitrage Correlations. We knew Thursday TLT was going to pullback Friday, it was no surprise, although I initially thought it was just a common gap fill from Thursday's gap up, it turned out to be a move to make sure Friday's move in the SPY didn't fail.
Here's TLT over the timeframe...
At "A" Tuesday and Wednesday (as well as a longer and stronger positive divergence) showed us TLT was being accumulated (recall TLT is the Flight to Safety trade), the move up at "B" on Thursday was no surprise, what was a little surprising is how strong the move up was, as mentioned, the strongest 1-day move in 5 weeks. Also at "B", note the leading negative divergence on this 2 min intraday timeframe starting right around 11:30 a.m. as it was clear that the SPY breakout was a failure as some aggressive sellers were selling any hint of strength and the SPY closed lower on the day. This was the intraday negative divergence in TLT to MAKE SURE, they had every lever possible to see that the SPY breakout from the Sym. Triangle DIDN'T fail the next day (As well as manipulating HYG, VXX and USD/JPY for Friday). At "C" TLT's price moved down as the intraday 3C chart suggested, but rather than a negative divergence on Friday's move lower or even just basic confirmation of Friday's move lower in TLT, we instead saw accumulation of TLT at lower prices, the same happened to VXX as it was also down in support of the SPY and distribution in HYG as predicted early in the week and seen for the third time last week on any HYG strength which is also in support of the SPY.
*Remember the premise early in the week from what had been observed in the market the week before, VERY MUCH LIKE AAPL after it made new all time highs and was considered to be the stock that COULD NEVER BE STOPPED, we saw selling in AAPL on every bit of strength, despite divergences and attempts to send it higher, then we saw panic as everyone tried to sell at once and that's why AAPL had such a spectacular decline so fast as well as intense. We had seen the same in the market the week before; selling of risk assets and buying of flight to safety trades or trades that offered protection from a decline (VIX Futures). This is why I knew HYG that had a positive divergence and was going to definitely bounce, would see distribution in to the move higher, I posted this before HYG even made the first hint of a move higher and I was proven correct all 3 times HYG bounced last week as well as being correct about Safe trades being accumulated as seen in TLT above and VXX below as it drifted lower under short term manipulation to support the SPY.
The point being, the Twitter-verse, found comfort and confidence in TLT being lower on the day, when TLT has not only been under long term accumulation, but short term as well. It was also the day after TLT made its largest 1-day gap up in 5 weeks. Finally, TLT was being manipulated to support the SPX as soon as it was obvious that the breakout from Thursday's larger Symmetrical triangle failed-areound 11:30. Not to mention the EXACT same set-up, a Symmetrical triangle used 2-days in a row! I've been watching charts a long time, it's not very common to see the exact same pattern day after day. In fact, the most common reaction to a failed breakout is a sharp move lower which the SPX/SPY did intraday Thursday right after the breakout failed. "From Failed Moves, Come Fast Moves".
FINALLY FROM THE EMAIL ABOUT THE TWITTER-VERSE...
"Nobody is short at least on my feed."
*This also included a note that people he had been following who were RAGING bears and short, were now all long.
I would direct you to these two links, "Understanding the Head-Fake Move - How Technical Analysis Went From an Asset to a Trap" and part two... "Understanding the Head-Fake-Move - Motivation"
I know nearly all of you (except some newer members) have heard me say this over and over, "There are few moves that aren't designed to do something" and "You'll know we are close, when you who know more about how the market truly operates than 95% of all traders, actually start to feel overwhelming fear, as these moves are designed to move traders through emotion"
Our Twitter note's email included the information that traders who were raging bears 2 weeks ago are all now long, I recently have said a number of times, "Wall Street doesn't make money trading with the crowd, they make money trading against the crowd"
Think about it, this is only common sense. Trading is a zero sum game, for one person to make money, someone else has to lose money. Wall St. does not manufacture or sell ANYTHING tangible, the only way they make money is by taking it from someone else.
I believe EVERY Goldman Sachs call over the last year has been wrong, in fact if you did the exact opposite, you made money. Now ask yourself, "Do you really think Goldman Sachs is that dumb that they are always wrong?"
Also, "Why would Goldman Sachs spend millions of dollars on research and market analysis just to give it to you, who are not a client, for FREE?"
Beyond that, we already know conclusively that Goldman makes similar calls to its own clients and trades against their own clients, this is why GS is called, "The Vampire Squid".
There are two forces that move the market, if you took economics in high school or college, you'll probably say, "Supply and Demand", but you'd be wrong 95% of the time. The market moves in such extreme ways that it has spawned a saying, "The market can stay irrational longer than you can stay solvent". This speaks to the moves in the market that have nothing to do with oversold or overbought, there rarely is ever such a thing until we get to the most extreme of extremes, what this is really about is moving the market through the only two forces that move the market, "Fear and Greed".
Friday we saw a perfect example of Greed. What sane trader would buy such an obvious set up? There are millions. What trader would buy a breakout high on a Friday in on low volume in front on an unpredictable weekend? The Greedy kind.
Proof...
"C" was a much less ambitious triangle, but perhaps they knew something we didn't at the time, something that came out today. Note the volume shoot up as soon as the initial breakout attempt's resistance area was cleared-that's greed and VERY dangerous at that. We have already seen 2 months of longs taken out on a short move of about 1.5 days on MUCH lower volatility than present.
So, the point so far being, that small Twitter email contained a lot of information, retail FINALLY took the bait when they failed to at all-new high breakouts in the SPX, Dow and a multi-year high in the NASDAQ. Emotion has been swayed, traders are lined up on one side of the boat, making it very easy for smart money to flip it on them. You yourself should feel the fear by now, did you think you'd be immune to it? We know a lot that retail doesn't, but at the end of the day, it is still emotions that if pushed far enough, will over-rule logic and facts.
***So what happened today?
First recall what I have shown you about the Yen seeing recent accumulation, then recall the incredible correlation the Yen has with the market, far stronger than the Euro or $AUD at present and perhaps even when they were in their prime as coordinated assets, it's just the Yen has an inverse or reverse relationship. The $USD/JPY was used Friday to push the Yen lower to allow the SPY head room to move higher-this reversed as soon as 4:01 p.m. hit.
Today out of Japan, the Economic Minister, Akira Amari made a statement not too long after Toyota pulled a bond issue set to hit the market on soaring Japanese Yields.
"The Yen's excessive strength has been largely "corrected," and further weakness could be harmful, Japan's economy minister said Sunday"
Recall I've been showing you accumulation the last week in the Yen?
Remember the recent strong correlation between the Yen and the SPY...
Also recall my articles, "Currency Crisis" Part 1 and Part 2 (both linked on the member's site, that deal almost exclusively with the Yen being one of the main catalysts that hurts this market in a big way and the $USD which just broke out this week from a large, multi-month base.
Now, after having read that statement, I had an idea of how the Yen and the USD/JPY (most influential pair for the Yen right now) would open as Futures open for the new week tonight.
The $USD/JPY is a short on the JPY and long $USD, the pair moving lower means the Yen or JPY is moving higher and you know how that effects the SPY correlation. Momentum traders, (as they are so popular recently) have been buying the $USD/JPY, on the open tonight, from a Friday closing print of $103.20, fell more than 120 pips to take out the $102 $USD/JPY stops.
This was Friday's $USD/JPY charts posted at 2:49 in a market update with the following comments...
"And to knock the Yen down at exactly the same time HYG moves up, TLT moves down and VXX has been moving down, the USD/JPY is used...But this is not going to last long, it's amazing what a tiny move was needed, there's a negative in place here that will be sending the pair down, that's due to Yen accumulation."
Looking at the $USD/JPY open above this chart, could that last sentence and 3C signal have been any more accurate?
Interestingly on the $USD/JPY monkey hammering the momentum traders took on the open, one big one had to cash out of a large silver position to meet margin liquidation.
So, the obvious question is the AAPL scenario, are the Yen shorts squeezed sedning the USD/JPY significantly lower and the Yen higher, obviously not good for the market as you see the inverse correlation from above? The 3C Yen charts suggest that's the probability and now the $USD/JPY charts suggest that's the probability.
Here's the Yen I've been showing in a "Rounding base that I felt and still do, is more than half-way complete, I also have shown numerous 3C charts showing accumulation in this area as you saw above with an important 60 min chart.
"Any significant reversal will see a head fake move-failed breakout first".
This would be the same statement I'd make for the USD/JPY (short the Yen), but for Yen single Currency futures that I have been showing a base and accumulation, I'd say, "No significant reversal higher will occur before a head-fake break below support".
This is to draw in the shorts, create a bear trap and , well... you'll have to read my two part article on "Currency Crisis" and "Understanding the Head-Fake Move"
This is a PERFECT example as to why, the "Greedy" momentum traders chased the USD/JPY higher as it was helping Equity Momentum traders chase the SPY higher on Friday, look at the Yen's open tonight (you saw the $USD/JPY) -yellow above represents the head fake move Friday-the same one that helped the SPY breakout as posted Friday.
One Minute After the Close, Yen Futures Jump Up
So now we have a long night ahead of us, a lot can happen, but a lot that was set up on Thursday / Friday (in fact the whole week, month and year) that we expected as price truly is deceiving, has started playing out. If USD/JPY longs panic and a short squeeze develops as the charts seem to indicate, I can't see any way possible this won't effect the market in a negative way.
With the F_E_D getting everyone ready for their bad news and the market surely ready to front run said news, I think this is going to be a very enlightening time, that's putting it mildly and trying not to make too many assumptions beyond the data I have been giving you.
Ironically, many of the 3C intraday signals at the close of Friday were perfectly correct as Futures opened today.
If anything interesting pops up while I'm still awake, I'll be sure to post it.
Have a great week ahead.
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