QQQ Update

Not that the Q's are a direct correlation to TECS or TECL (Technology Bear 3x leveraged  and Tech Bull  3x leveraged respectively), but the Q's have a large exposure to Technology, so much so in fact that I'd be careful in choosing positions in Tech if you have a position in the NDX/QQQ because of the high degree of correlation. I mentioned TECS because it is a position some of us picked up on July 16th and through the volatility and chop, it's held up well for us, not at a big gain, but it's green because our timing in picking it up was pretty darn good (one day before the recent lows.

This is the timing I'm trying to hold out for to give you the best shot at a successful position, in essence I'm trying to put these ideas out as I see underlying trade moving in to them or said another way, following smart money in the assets they are moving in to at the time they are moving in to them.

This is our entry in to TECS long on 7/16, *note it is just making a head fake move below support which is something I'd say occurs on every timeframe about 80% of the time JUST before a reversal. 

We had 1 day of draw-down in TECS and that's why I strive to get the best timing.

As far as leveraged positions, whether options or 2-3x leveraged ETFs, I view them as different tools for different scenarios. In most cases I don't like to use leverage, but when we have a good signal, but not so great profit potential, then options are a useful tool to take advantage of that signal and allow us enough profit potential to make the position worthwhile or I like them if there's just an outstanding signal.

I actually prefer non-leveraged, Trending trades, however in a new bull or bear market I'll often see a sector that looks good, but until we get a strong bull or bear move, it can be difficult to choose the individual stock that looks to be the best longer term position. Also the initial moves tend to be larger and the added 2-3x leverage is nice to take advantage of that.

I digress, this is actually more about the QQQ, but it's also about entering the position at the best area/time (which is sometimes a compromise).

The IWM started showing some pretty nasty distribution intraday today as I posted around 3 p.m., but that doesn't necessarily mean its the best entry. The topic of a lot of discussion the last week or two has been weighing the best entry vs. micro-managing the entry too much and missing the forest for the trees which is usually not that big of an issue, but when a market starts acting like this one has been, it becomes more of an issue and that's why I'm pointing out intraday action like the IWM and QQQ today.

I'll cover the market a daily wrap, but I thought you should see the Q's.

 This is a 2 min intraday chart, resistance was hit twice today at Friday's close, but the afternoon 3C signal was by far the worst and this tends to be when institutional money is most active.

On the 3 min QQQ intraday chart we can see confirmation, this wasn't a fluke signal, it too saw a leading negative divergence develop quickly in to afternoon trade. This is also called "migration of the divergence", as the divergence gets stronger it migrates across longer timeframes. I wouldn't expect this one to go too much further considering the time of day it formed.

 The 5 min chart (and quite a few charts I've posted recently have highlighted June 21st, that's because that was the day we saw a lot of positive divergences and suspected a move to the upside was starting, the 22nd was the low before that move started.

You can check the archives for June 21st, but here are a couple of market updates that show you what we were seeing.

11:15 a.m. Market Update
Hints From VIX Futures
HYG Hints
Afternoon Market Update

On the chart above I show the gap down from Friday the 19th, there were many posts last week that this gap would be filled. The distribution before that caused the gap was heavy, the distribution filling the gap was even heavier.

Here we see the same on a longer chart as well as the small positive divergence that sent the Q's in to the gap.

However the real information as far as today goes is a continuation of the increasing distribution in to any price strength, even if it is a red close and just off intraday lows. When this kind or action is prevalent in the market, there's always an increased chance that the Hedge Fund herd will split up like we saw in AAPL before it lost 40+% as a few hedgies  (like Dan Loeb) break from the herd and decide, "HE WHO SELLS FIRST, SELLS BEST", which creates a stampede and we get moves like AAPL in which everyone is trying to fit out the same small door all at the same time.