Speaking of Signals-GOOG

I take then when I get them because that's telling me when smart money is moving and I want to be moving with them.

Earlier today I posted, Taking on a Speculative Size GOOG Put for those who aren't familiar with options, this is like having a leveraged short position, directionally any way.

Then I posted... Went With GOOG Feb. $720 Puts

Now, despite the move up in the market above resistance and the potential for higher prices very short term (this is the point of these head fake moves, to provide smart money with better entries and to give them the supply they need to fill their orders), if a chart looks good to me, I'd prefer to be in line with the market, but I'll take it as long as the signal is strong enough.

Lets see how GOOG ended the day...

 GOOG vs the SPY, note that GOOg topped out and headed down instead of tracking the SPY, I can't see this as anything other than weakness. Also look at the increasing volume as GOOG headed lower.

 The SPY needed to make its head-fake move for a reversal, GOOG made its move above resistance today, the daily candle did not close strong with a longer upper wick showing us higher prices were rejected.

 GOOG 15 min chart hitting a new leading negative low in the afternoon, very serious.

 10 min chart couldn't make a new high intraday and was already in a deep leading negative position.


 The 3 min chart is beautiful.

Look at the 2 min chart, this is migration and a deep leading negative divergence at the end of day as GOOG split with the SPX correlation.

All in all, I'm glad to have opened that position today.

EOD Market Update

We are in the zone, I'll show you why, but this is what was predicted this morning. The TICK chart for the breakout is not very strong, this looks to be exactly what it should be.

Other than some positions earlier, on this move I've held off on adding anything new, although I wouldn't be down on anyone for doing so, it's a much better price for a short, less risk and higher probabilities.

The one thing that I have learned over and over again, is "Wait for the signal". That's when 3C is working as an edge for us. Overall the signal is where it should be, but on this breakout, we want to wait and get a strong signal because a move higher is what is suppose to happen, it's the reason for this breakout, the signals tell us when it's at it's tipping point.

I'd say if Trend #1 had to be put in to some kind of timeline, I'd say we are 80-85 % through before the reversal, the things that have needed to happen have happened so far.

There it is... Like Clockwork

As of this morning's post,

"Speaking from a behavioral perspective, the market's highest probability move before a downside reversal from this move up is to break above the recent highs (resistance) at the red trendline. This is the head fake move, we see it at least 80% of the time just before a reversal."

Those words were right on, it' not my prediction, it's my opinion based on watching how the market behaves and works.

 There's the break above the level I was talking about this morning, a few times today it seemed like it wouldn't happen, but there it is. Look at volume increase as the break out occurs, this is confirmation of the very reasons we expect this to happen and it's not bullish.

This is the resistance area I posted this morning.

The IWM and DIA have made the same move, the QQQ has not, I'm not sure if it will or not, the SPX was the important one.

Now I have to REALLY Watch like a hawk as we have now completed the one thing that almost always precedes a reversal.

Short Term Volatility Futures VXX / UVXY

The signals for one are the same for the other so I'm not going to post all of the chart for both.

Basically they have done well and stayed positive in to lower prices which was necessary as the market moves up toward resistance, the correlation is what drives price in VXX and UVXY, they aren't falling on their own like a single stock might, they are tied to the market and almost all of their moves are related in some way to the market.

 VXX 1 min has put in an even stronger leading positive divergence today vs yesterday as price has moved lower, remember that smart money accumulated in to lower or flat prices, they don't chase prices higher.

 VXX 2 min hitting a new leading positive high since before the move up in the market started.


 3 min shows the negative divergence and head fake in yellow as the market prepared for the move to the upside, down for volatility, we have a positive divergence with higher highs as well.

 10 min is significant, the first divergence to the left was short, but strong, then the negative for the market pop, now we have a leading positive just as strong as the last one, but much larger which is better for VXX moving up.

 Just so you see the signals are the same, UVXY, the 3x leveraged version is showing the same leading positive divergence on the 10 min.

This may be trend 4, but ultimately there's a huge change in character in volatility and it looks like someone is expecting an enormous move in the not too distant future, that would mean an enormous move down in the market.

UVXY Calls Feb 16

Going to make some moves in Volatility-VXX & UVXY

The VXX position was entered as an add to, it's at about 1/3 a normal position size, I think I'll add 1/3 to VXX in the Equity Model Portfolio and add the other 1/3 in UVXY Calls. I know that's super leveraged, but it's also a pretty speculative position size.

I'll be positing the charts for both in a few minutes and let you know what strike, etc for the calls.

I like the way both have held up as they have had to go through the process of the SPY moving toward resistance.

AAPL Update

I'm keeping a close eye on AAPL for 3 reasons, 1) we have some members in some very leveraged options positions, 2) It can be a potential trade for others who might want to get involved and 3) because the Q's have been getting beaten up a bit more than the other averages and AAPL represents about 20% of the NASDAQ 100's weight so a mov there is about the same as the bottom 50 NASDAQ 100 weighted stocks all combined, in other words, AAPL is influential.

Today I have the same question essentially as yesterday's "What are the short term AAPL chart looking like?"

Here's the answer... I think the move is stronger now than it was earlier. I think this is good news for those who don't have a position and would like to look at a short/put position in to some price strength. For those holding Puts right now, it's time decay and generally speaking not good for the position (generally speaking as there are all kinds of variables.)

 AAPL's support/resistance zone that is important to traders is very obvious, just follow the money or in this case volume. I always say that it's the small moves in volume that most people don't notice that are the most insightful, EVERYONE sees a 500% spike in volume and there's no edge in that.

Today's volume is already higher than yesterday's, considering the support/resistance area, this becomes somewhat important in understanding what institutional money may be looking at or doing.

On a 5 min. chart support is drawn in at the red trendline, this is from the 12/31 breakout (from the descending triangle) intraday highs, you can see exactly where volume picks up right as price moves below that level -triggering orders.  Essentially the whole move is a head fake move as traders would have been expecting a descending triangle with a downtrend preceding it to be a bearish consolidation and then continuation pattern so they would be looking for a downside breakdown, the upside breakout seems to have caught a few at a loss as they had to cover and it brought in a lot of new retail money.

 Here's the 1 min chart, it was positive earlier going in to afternoon trade and as it pulled back it has an even larger positive divergence, basically smart money is going to buy at the lows, when price moves too high after 12, they sent it back down to accumulate a larger position which means AAPL should see a stronger bounce which is good for any of us who want to enter a short position-the higher the better.

 The 3 min chart's overall trend shows the accumulation prepared for Trend #1's move higher throughout the market and then right on the gap up opening, there was immediate distribution of AAPL, they took profits quickly. The 3 min chart is overall negative, but intraday it is moving with price.

 The 5 min chart also shows instant distribution as soon as AAPL gapped higher, we have seen this at least 3 times with AAPL, I assume they start selling so early because the positions are large, expensive and take longer to move out of. The overall trend is still leading negative on the 5 min, but...

Intraday it is at a VERY touchy area in which it could make a large leading positive divergence on an important timeframe. This could also fail, the signal hasn't completed yet, but looking at the shorter timeframes, AAPL has seen more positive underlying trade than we first saw. I'm assuming this is not just support for a consolidation and AAPL will move higher.

AAPL Open Put Positions

For those of you who know my style, my rules and habits with options, if it were me, I'd be out of AAPL Puts, but that is just me and I have VERY low tolerance for drawdown or corrections in option positions.

Update coming...

Would You Look at That

This is exactly why I keep saying I'm not ready to load up the truck, the signals are ugly, but the highest probabilities are still a move in the SPY above resistance before a reversal (that goes for any average that has clear resistance).

 The white trend line is the target, we are $0.15 away, but really there's no telling how high it will move above that range once longs step in to buy a new higher high, which is the entire point of this move, but for different reasons-to open up demand and higher prices to be able to sell and short in to and also set a bull trap which snowballs downside momentum on a reversal.


Meanwhile the 2 min chart is worse and worse. Remember that large accounts with large positions have to sell those positions or buy them in smaller pieces otherwise they drive price against themselves just based on very basic supply and demand, but it is more complicated than that. Market makers, Specialists, even retail traders will front run any order they can make out, so it takes time for these large positions to be accumulated or distributed.

The worst fear of institutional money trying to enter or exit a large position is that the predatory HFT's will ping them and uncover their order which is known as an "Iceberg" as only a small part is visible above the surface and as with an Iceberg, the greatest mass is unseen below the water. Once these predatory HFTs ping enough and discover an Iceberg, they front run it as they are faster than just about anyone else out there and the institution ends up paying significantly more for their position or gets a horrible fill as the HFTs become the buyers and sellers for the institution and move price against the institution.

The point is, we are close to the area and the signals are what they should be to confirm a head fake move, which is what we want to use to enter new shorts or exit existing longs.

UNG Update

UNG, Natural Gas has been a Long Time favorite here as a long term trade (long), this is not a trading or swing trading position, this is a secular trend trade.

Here's the update on recent action in UNG and if you closed out some of the position on the last warning of a downside move, you may want to consider adding those shares back in the area.

 You are seeing about half of the long term base on a daily chart. The yellow area is a confirmed head fake breakout and I suspected because the apex of the triangle is so narrow, we'd see a fast move (failed moves produce fast moves) to the downside for a Crazy Ivan shakeout, essentially there were two shakeouts to remove ALL weak hands, I'd expect this before a real breakout to stage 2 Mark up.

In white there's a daily candle Hammer on higher volume, a decent reversal signal and we are looking for UNG to move up like the green arrow above the base pattern.

I have answered a lot of emails about UNG this week and my gut feeling (since we could see this move up in the market in advance) is that smart money moved allocations out of lower yielding or lower Beta assets and put it in to higher yielding/Beta assets for this move. There was a short term negative divergence in UNG in to last Friday, that's when the market dropped and all high yield assets ignored the market and held up, it's also when UNG dropped. I suspect that was the switch off. If I'm right, I'd expect to see 3C signals show money coming back in to UNG as the trend 1 pop in the market starts to come to an end and sure enough, yesterday and today we are seeing that.

 5 min chart, negative in to last Friday on a head fake move, now a positive divergence as money seemingly is coming back in to relatively safer assets.

The 15 min chart is flying positive.

And overall, the long term is still leading positive.

I haven't changed any positioning since first entering the position and I don't expect I will, for me it's long term and needs to b managed that way, that starts with the stop/risk management, it needs to be wide enough to accommodate a long term trend.

SLV-

I'm not putting charts up right now because I'm slammed between the market and emails, but SLV (which I hate as it's so manipulated) is showing some short term very positive signals. It may be worth a call trade, but very SPECULATIVE, not a big position, this is one asset that gets manipulated more than most.

If I had time I'd probably consider SLV Calls in Feb., but again, small position size.

Market Update

We haven't hit the SPY target, but the charts are getting REALLY UGLY right now. I'll probably look at adding some to leveraged short ETFs that I intended to add to IF I have time. I won't go all the way yet, but adding here makes sense because of how bad the charts look.

GOOG Charts

I'll probably fill out the GOOG Equity Short as well, I was looking for higher prices to do that so this looks as good an area as any.

 The 15 min chart had a positive divergence and is now negative on today's move, this positive was what was needed to propel GOOG in to Trend #1.

 We are at a key area for traders, it has been support and resistance so this move above I consider to be a head fake move and this the Puts, I would almost never use option-like leverage unless I felt pretty darn good about the signals and timing.

 Overall, the big picture 60 min chart is negative, this trumps any trend 1, 15 min positive divergences.

 These charts didn't load in order, but we have the 3 min negative.

 5 min negative

And I didn't want to draw on this chart and mess it up because that divergence on the 1 min is so beautiful.

That's what the timing is about and the fact we are above an important resistance level.

Went with GOOG Feb. $720 Puts

Taking on a Speculative Size GOOG Put

I'll let you know what strike and post some charts, this looks like a decent opportunity for a quick move coming up

AAPL Update

 AAPL 5 min negative divergence on the breakout from the triangle or a head fake move.


 1 min positive, I'd like to see price hit the yellow area or above and then this chart to go negative, at that point AAPL might be worth the risk on a short position or add-to.

 2 min leading positive, so there's a little gas behind this move.

And it stops at the 3 min, all intraday timeframes, so it's not too serious if you are short, if you are not, it may be just enough to get AAPL in to a less risky area to short it.

Leading Indicators

Pretty much as expected, the divergence between commodities and the SPX now is huge.

 Commodities vs the SPX

 The $AUD is taking a more serious turn for the worse, remember early this morning I said some of the carry trade pairs look like they are being shut down? Well the $AUD is a key carry trade currency.

 High Yield Corp. Credit has nearly flip-flopped from supportive to lagging and in a negative divergence vs the SPY, risk assets are seeing a flow of money out it appears, this just got started yesterday recall.

 The Euro vs the SPX, this is going to be a significant problem for the market, the arbitrage players are going to tear this apart and it won't end until the SPX and Euro are back at their normal correlation, but first we'll likely see a downside overreaction before the correlation is hit.

 Volatility is seeing positive divergences in to lower prices to add to the ones already in place, this is what I want to see, on the other side of the coin, I want to see the opposite asset, the SPY seeing a negative divergence in to higher prices, that give us confirmation.

 VXX also leading positive in to lower prices and it even looks like an intraday move to the upside is coming in VXX/UVXY, I'd like to see the SPY cross resistance first though.

And the SPY doing what I expected to see it do, go negative in to higher prices. Yesterday's late day divergence suggested early strength in the market, now we are seeing negative divergences in to that strength so everything is going as expected so far.

AAPL Update

In my last AAPL update today I warned AAPL looked like positive intraday divergences were going to turn it to the upside and maybe it will reach an area in which it becomes a good short entry or add to.

As far as what I see so far,  I'm looking for a move around $535, that's an important technical area and will cause some movement from retail traders.

We'll keep monitoring it for a trade or any other information for those already short AAPL.

Market Update

The action over the last few days is exactly the kind of market you don't want to be in, of course planning positions and so forth, yes, but this lateral chop, no. However it is a sign of distribution.

Price is moving toward the earlier area I mentioned for the SPY specifically, but really applies to any average, industry or stock with a defined area of resistance.

 For the SPY, the mark is north of $146.37 which we are close to.

We do want to see negative 3C tone in to the move...

 The 2 min chart

 The 5 min chart, yo can see the divergence clearly and imagine price at a new high, that is an even stronger divergence and will likely see this chart move even lower.


 Intraday on the 1 min, it's negative, but we may see some pullback.

This is the first time since we have popped that ES has really been negative through the day.

ES 1 min negative divergence, so tone is shifting, the market is moving to where we need it, so far so good. We are moving closer to low risk, excellent entry, high probability trades.

AAPL Update

Yesterday I updated AAPL in this post, the gist of the post was AAPL was likely to see more downside and the only place I'd consider buying it is below a bearish triangle's support, under $500.

This post from December 31st identifies this move in AAPL (below) as a head fake move and as such several members shorted or have put positions in AAPL.

Yesterday in the post linked at the top and every post in the last week of December has the same conditions that need to be met to make AAPL a long.

 This breakout above the bearish descending triangle was identified on the first day as being a head fake move, that post is linked above so it makes for a decent short for those who have the risk tolerance. However the larger divergence has been a positive one and the place I said I'd consider AAPL as a long in below this triangle.

 This 5 min chart shows the AAPL breakout above the triangle and a negative divergence or distribution in to the breakout, identifying it as a head fake move that won't hold.

 Intraday there's a small "possible positive divergence", as of this capture it wasn't there yet, but even if it does make it there, I'd keep short and Put positions in place as I believe we are heading below the triangle and $500.

 One good question from a member who is using 3C is the deterioration in the 15 min chart's positive divergence, this is what buying AAPL under the triangle is based on. As I told him, we get "Jiggles" with moves down and up and when looking at a move down like this it looks bad, when you see it with a following move up, not so bad.

 I also said that yesterday's F_E_D minutes and the probability QE3 is cut short changes the whole dynamic of the market, I said the same yesterday. The market was counting on the F_E_D to be there, QE3 to be there and for the first time the F_R_D is hinting strongly that they may be ready to start pulling away, this could change the entire game as I noted yesterday, "We'll have to watch underlying trade over the next few weeks to month as these institutional positions are like large ships and take time to move".

For our purposes though, unless you are short AAPL, it doesn't matter if the 15 min.positive divergence falls apart because we have no long commitment in AAPL, we have an area and a set of conditions, but if AAPL makes it to that area and the 15 min positive has fallen apart, it's simply a "NO TRADE", there's no loss, it's just a failed set up and this is why we wait for confirmation in 3C.

As for this near term trade though, there could be a bit of a bounce, the volume surge first on the gap down and then on the break below resistance where stops were piled up gives smart money a lot of supply at relatively cheap prices and they can use that for a quick upside trade. If that trade can move high enough, then we may look at AAPL as a short or add to short position. I personally would not let go of any equity shorts on a bounce, as far as puts, probably not either, but that would depend on how strong the divergence is before the move.