Wednesday, December 18, 2013

Market Update

OK, I'm just checking in and giving you the weather, PARTLY CLOUDY with a chance of showers, although.

I just love that forecast, you can't be wrong.

For 2 hours I've been looking at this market and so far the only thing I have to show for it is eye strain, this is just such an ugly, disjointed market, it's not surprising at all that there are 4 Hindenburg Omens clustered because which in the recent past has led to a substantial market correction (relatively speaking), but the true H.O. portends a market creash, it has just been difficult I suppose as the Bernanke Put has been there the entire time, but the situation creating the omen is still bearish no matter if the Bernanke Put is there or not.

I am NOT using the Hindenburg Omens as an excuse for not being able to get a strong feeling for the market. Yesterday there were some very strong signals, last week there were as well, then there are these pockets of complete nonsense.

I think it's important to understand what a Hindenburg Omen is in the first place, this is the mechanical definition...

"The Hindenburg Omen is a combination of technical factors that attempt to measure the health of the NYSE, and by extension, the stock market as a whole. The goal of the indicator is to signal increased probability of a stock market crash.
The rationale is that under "normal conditions" a substantial number of stocks may set either new annual highs or new annual lows, but not both at the same time. As a healthy market possesses a degree of uniformity, whether up or down, the simultaneous presence of many new highs and lows may signal trouble."
To sum up the above, the market should either be largely trending in one direction or another, this has been the basis of cycle identification since I started using 3C, actually even before that when I'd look at 500 stocks every night, if there were a lot more that looked like great short set ups, I knew the market was about to come down, if there were many more that looked like great buys, I knew the market was about to go up.

With 3C I'm checking all the major averages, there should be a theme among them, then I'm checking their leveraged ETFs, both inverse and regular and they should confirm. Then I'm checking industry groups and I'm checking all of these in as many timeframes as possible and they should confirm that the entire market is moving the same direction. 

However recently and especially this morning, there's no sense of cohesion at all, not even among the same average and its leveraged ETFS, much less other averages and Industry groups and certainly not among individual stocks. This is something I really haven't seen very often and it is literally straining my  eyes as well as brain.

The confirmation of 4 Hindenburg Omens in 5 days or so makes sense, but I'm not basing my analysis on the fact the omen is there, I'm basing it on the frustration of looking at this market.
Numerous times the market has given a signal an hour or two before the F_O_M_C so I'm hoping to see that.

The theory about the SPY Arbitrage, well I'm not sure what to do with that because HYG is getting decimated in 3C today while VXX is improving in 3C and there is no SPY Arbitrage present at all. There are signs of VIX futures being bid which they haven't been the last few days, but this would be normal in front of the F_O_M_C, they should be screaming which they are not yet.
A few things that do look more solid:

IWM looks like it's losing 3C momentum. XLK(tech) has an incredibly nasty divergence at 10 mins, I would not be planning on hanging around any Tech longs too long, I'm still a fan of TECS (3x short Tech ETF). XLF looks like an upside breakout and then the floor dropping from under it which would make sense from a price pattern/head fake perspective. AMZN has some neutral intraday charts, at 15 mins though it's a red-headed step child. IOC's dip yesterday looks like it was accumulated, I'm still holding that long and looking for a bounce. AAPL has been horribly negative on the 15 min chart, everything else has been in line, the 30 min is now deteriorating and the 1-10 min charts are deteriorating and catching down to price. I'd think a gap fill of today's action would be likely at some point, but this is bases on market behavior when the market hasn't faced any extremes, if it does because of the F_E_D, then I'd believe that break-away and exhaustion type gaps can stand. PCLN's price action doesn't hold with the 1-5 min charts, it holds perfectly with anything above those, I have to wonder if we have a head fake move going on or whether the longer term charts are just running over the divergences, that's a hard notion to accept when we have a 5 min leading positive, if it were a 1 min chart alone, then it would be easier to believe. DGAZ looks like it may fill a gap on the downside, but still looks like a strong upside trade not connected to the market and likely at least a true swing duration.  GLD and GDX are showing signs of putting in a bottom or working on it, I'm not ready to make a move there, but I am paying attention, these are the assets that should be sensitive to QE. I'm a bit concerned about the FAS long, Financials look horrible, it's only been the very short term "bounce" timeframes that have supported FAS long, other than that, I'd be and am long FAZ in the core positions.

I'll give you whatever I can find, but what is happening in the market right now is total chaos and the Hindenburg Omen is a way to show that. In addition because of the holidays and the T+3 settlement rule, I absolutely expect window dressing for the end of quarter and year to be extreme.

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