Daily Wrap

I posted the bigger picture this afternoon because although we are usually focussed on what is going on, that is because it helps us position ourselves tactically; we never want to get lost in the trees and miss the forest so that was a little reminder of what the bigger picture, the next trend and where the highest probabilities are.

As for today, I'm going to cover the averages, the 3 Pillars (the 3 Industry groups that tend to be the most influential with the broader market) and some confirming assets.

Today was a bunch of small signals, I think the underlying short term trade was choppy because the EUR was choppy, but by the end of the day it cleared up for the most part. Here are the averages...

DIA responding exactly as it should to the 2 min negative divergence and now a positive divergence that has migrated to the 3 min chart.

 DIA late day positive divergence on the 3 min chart, this is fairly high probability of a move higher tomorrow.

 The DIA even migrated as far as the 5 min chart today, overall this is pointing to that move up, but very weak, this doesn't mean the price percentage gain can't be impressive, the more impressive the more effective it is as a bull trap, but it won't hold which just further confirms our expectations.

 The IWM and QQQ were the worst looking, they seem to have rotated as they put in stronger positives like this 5 min yesterday, today it was a negative bias.


 The same is true of the QQQ 10 min, but this is still a 10 min positive so even with the negative bias today, it's about on par with the DIA and SPY's shorter timeframe positive divergences today.

 SPY 1 min finally a clean and clear positive divergence after a number of smaller positives and negative that more or less followed or preceded trade today. I wonder if anyone played the downside day trade mentioned earlier in the day?

 SPY 2 min migration, also clean and clear positive, but not a strong one. These are usually enough to get a move started, if a break of resistance occurs, then retail usually helps with momentum as stops and limit orders are git.

 SPY 3 min positive

 Even the TICK chart looked the best at the end of day as it moved in to the +1250 zone.

 Financials, you may remember FAS (3x long Financials) earlier today mentioned as a very quick long trade, this 1 min XLF chart seems to confirm that trade and the short nature of it as we continue.


 The FAS 3 min positive added some more today

 FAZ is the 3x short Financials so the 1 min negative here after a positive that brought FAZ off the lows is actually confirmation of everything we have seen above so far.

 However, looking at the big picture, the Financial Short trade is the trade we really are trying to get to, this 15 min leading positive divergence shows a larger, longer, stronger trade that should see Financials see some significant downside. A lot of traders are going to be whipsawed like crazy out of this market.

 Tech/XLK 5 min moving in an overall positive divergence at a new leading high, hopefully this will make the AAPL calls work, after that AAPL short may be a trade worth considering.

 The big picture in Tech on this 10 min XLK chart, from 3C confirmation to a huge leading negative divergence, it looks like a lot of money has gone short or fled Tech here and they specifically waited for the Trend #1 pop to the upside before they really started distributing in earnest.

 Energy is the 3rd Pillar, the 15 min chart is leading negative so I assume we are going to see a lot of downside there as well, which suggests the dollar moves up and the Euro down pretty significantly for any of our FX traders. I'd expect short term the gap to be filled and maybe then some.

 1 min Energy in a leading positive divergence, this is enough to fill that gap.

 Treasuries-the Flight to safety trade have a large 30 min positive divergence, a position is in place long TLT already, but near term...

 We went from a positive divergence lifting TLT off the lows to a negative leading divergence the last 2 days, this also confirms everything seen above.

 The daily VIX, this has a huge positive divergence and this is one of the strongest timeframes you can look at, the recent lows have seen an even stronger positive divergence so someone is taking advantage of the discount to fill out a position, expecting the VIX/Volatility to shoot higher, the market lower.

 Near term on the 2 min chart, the short term volatility futures (VXX) went negative today, again confirming everything above, even the positive in the a.m. and negative in the pm, confirms the SPY/DIA divergences on the same timeframe. It's interesting to see how even short term traders push money in and out of risk assets and safe assets.

Big picture the VXX 10 min leading positive divergence is huge, it's also tight where the drop from trend #1 took place, there's a 15 min leading positive too.

Every chart above confirms every other chart. The only other interesting data tonight thus far other than futures is the dominant Price/Volume relationship, it was dominant again in all 4 major averages, except this time it was the most bearish relationship, Close Up/ Volume Down. I know that doesn't make sense with the way the averages moved today, but remember, this is not the averages, it is all the component stocks of each average.

Finally as for futures, there was one thing I was looking for in ES (S&P futures) was for the 15 min chart to go negative, it didn't once last week or really for the last several weeks, this week it started and is just getting worse.

So be sharp, be ready to take any short term market correlated profits and be ready to get those shorts filled out. I don't have proof that this will happen, but I suspect that because we've already had a head fake on the 11/16 cycle (trend #1 served as a head fake as it brought the Russell 2000 to all time new highs) that we really don't need another for anything other than a little better positioning and to act as a sort of primer to the bigger fuse. In any case, my gut feeling has been that we'd see a 1 day reversal, a daily candle that perhaps gaps up, has a long upper wick as higher prices are ultimately rejected and a long dark body with a close lower that cuts in to trend #1's range, maybe even below it. That would be an amazing head fake move.

If anything pops up overnightI'll let you know, everything is moving as we expected it to as far as the steps go, as far as the time goes, that's always something we just have to watch the message of the market to nail down, but many of the events that precede a reversal that we have predicted have already happened so I believe we are so close that it could be any hour from this point.

3C RULE REMINDER

You've hear it before, when in doubt, go to the longer charts. So please keep this in mind...

 SPY 30 min leading negative

QQQ 15 min leading negative.

Ultimately this is where the highest probabilities are

EOD Market Update

After a LOT of intraday chart noise this afternoon, it appears a trend is taking shape, the short term charts that are needed to get a move actually moving are FINALLY starting to line up on the positive side.

Credit hasn't fallen apart yet, so I was expecting this sometime soon.

Financials

I could have used XLF to represent Financials, but since the trade in financials long looks so limited, I'd  prefer use a leveraged vehicle like FAS (3x long Financials). I don't really like options in this scenario as I have a much higher standard fro the signals for using that kind of leverage.

FAS 1 min with a decent relative positive divergence, still short term.

 FAS 3 min is seeing migration from the 1 min chart.

 At 5 min we are very ugly, this is why it's a short term trade only, however it could still be a decent mover.

 If the SPX is going to break last Friday's highs, Financials are likely to be either following along or leading the SPX, so I'd expect a move above the yellow area.


 The longer term or trend 2 signal on a 15 min chart of XLF, leading negative

And that's when I want to move over to FAZ (3x short Financials for a much stronger, longer move as it is leading positive, the mirror opposite of XLF even though these are two totally different ETFs managed by two totally different companies, their signals confirm each other.

FAS a Quick Long

FAS looks like a decent long right here, but this will be a short lived trade, maybe a day or two.
Charts coming

AAPL Chart-The Reason for Options

Here are the AAPL charts and the reason for now, I preferred an option position over an equity long.

 The first three charts are all the same timeframe, 3 min, but each one will have a tighter zoom. First the leading negative divergence which was very clear to the left and then a relative positive at the arrow and a leading positive at the white box.


 This is a closer short of the leading positive (white box); yesterday toward the close it dropped very quickly which was odd, but AAPL did open lower today. This second divergence is what I've been watching today so far, I didn't feel it was interesting enough to post earlier.

Yesterday afternoon's negative move from the leading positive divergence and today's additional leading positive.

This is a longer chart now, 5 min and you can see the last positive divergence sending AAPL up, I have seen this more with AAPL than any other stock, on gaps up that are of decent size, it sees immediate distribution right off the open. Now we have a new positive 5 min divergence, being I view this as a short term move, the profit potential is limited and thus the use of options for the leverage.

There is a larger divergence on a 15 min chart that is still coming together, if that one comes together I would move to an equity long position, but I suspect AAPL will have to move lower with the market before that move is ready.

AAPL to make a move?

It looks like the Q's will get a bit of support, I've been watching AAPL today, it has been looking decent, no really strong signals, but now it appears it wants to try and make a move off some positive divergences that are in effect.

There's some improvement on some of the 2 min charts, I'll keep watching and let you know what that is likely to mean. The larger picture for the near term is still intact with the 5/10 min positives and what I suspect will be a move above last Friday's highs

Intraday Market Update

Since the last warning at 12:23 that the averages look set for an intraday move lower, we have a very short term 1 min divergence in a couple of the averages, just a loss of downside momentum in a few others. One minute divergences are one of the only timeframes that can either migrate to a more serious divergence that moves the market or can act as a consolidation signal in intraday trade.

My read on the market at this point with the 1 min charts losing downside momentum or being slightly positive in the case of the IWM and DIA, is that we'll see a consolidation (we actually are right now), but the 2 and 3 min charts which would move us out of the realm of consolidation and to actual movement are still negative, so this suggests after a consolidation intraday there's more downside coming.

This would only change "IF" the 2-3 min charts started going positive. In most cases it takes a little time for that to happen and price kind of makes a "U" shape rather than a "V" reversal.

One interesting note is the Futures are going negative on the 15 min chart for the first time since the move up started on 12/31. You may recall this is one of the signals that I was watching for to tell us when the market is deteriorating and close to a reversal.

Today is a POMO day (F_E_D buying of treasuries from PD's which usually ramps the market), we'll have to see if POMO days still have the predictability they use to have that spawned the motto, "Just buy the dip".

As far as other indications, Credit is still moving right along with the SPX, giving no signals at all. The $AUD is more or less moving along with the market, maybe a bit more negative bias. The Euro started to fall just after 12 pm and is still moving down, not a huge move, but it may be enough to keep some pressure on the market intraday. Yields remain negative, but are moving in sync with the market, just at  worse relative performance (negative) and commodities continue to act badly, earlier they were right at support from 1/4, now they are below it.

Now it looks like the next intraday leg down may be starting, I need to keep an eye on those 2-3 min. charts.

Market Update Charts

This is a pretty decent size update, but it shows the recent action and changes over the last few days and for those using 3C, it's a good overall set of charts to learn from.

 This is the intraday negative divergence that is in all of the averages (1 min).

To give you an idea of scale...

 This is the same timeframe, just zoomed out showing the positive at yesterday's lows and where today's negative stands, it's not really deep, but it's noteworthy.

The divergence is also moving through the longer timeframes so there's something to it.

Yesterday I noted some longer term (5 min) charts were showing positive data, to me suggesting the price level where distribution took hold as price crossed above resistance last Friday (seen to the left) would likely be breached on the upside and that's where there's very fertile ground not only for strong signals, but strong moves.


 DIA acting the same way from yesterday;s accumulation at the lows to today's negative divergence

 The longer term 5 min positive in the DIA.

 IWM intraday acting the same way...

 2 min acting the same way

 At 5 min there's no negative action and below we transition...

 This is 1 of 2 10-min charts that have a positive divergence.


 QQQ with the exact same theme on the 1 and 2 min

And the positive 10 min mentioned yesterday.

The message here as the charts stand is short term or intraday downside, but taking out resistance on the upside is still high probability.

Market Update

On at least an intraday basis, there are some very negative signals developing, I'll post charts shortly, this may be good for an intraday day trade if you have the leverage and are nimble

HLF Follow Up-Patience Pays

We did have some members make some money on the upside when we first looked at this as a short squeeze trade, but it never really acted like a short squeeze (price moves up intraday with almost no pullbacks typically on very light volume).

My question now is whether Ackman, Einhorn and Tilson (the 3 major short players) are actually caught in the short or did they have a part in the play with Loeb? I consider Loeb to be way more sophisticated than Tilson and kind of doubt he'd have anything going on with Tilson, so is it possible Tilson and Ackman really committed the sin of telling the investing world that they were short for some other reason that back-fired on them? Perhaps they thought it would bring in retail shorts as well? I really don't know if they're still in and every assumption before today was based on incomplete knowledge such as Loeb owning a big chunk of HLF. Did Loeb run a Jesse Livermore-like (reverse as Livermore was the bear in the raid) raid on the bears?

The short interest in HLF is still around 26 million at last report.

In any case, here are a few interesting charts and this is why I prefer to wait for confirmation with real signals.

 The original distribution in to that move higher of over 9% in I believe 5 seconds has shifted now to an in line status  or 3C / price trend confirmation. I'm nearly sure an algo headline scanning HFT picked up on the news and that's what that move was all about, I wouldn't be surprised if Nanex releases the transaction details which would be very interesting to see just to see how 3C works with High Frequency Trades, here it seemed to works well.

 This is the odd spot I have mentioned several times, this could have been Ackman covering or Loeb buying, but this divergence in to the low is typical accumulation (short covering would be read as accumulation).

Remember I said I wanted to wait for confirmation on the 15 min chart, for it to make a new leading negative low? Well it hasn't and in fact is moving the other way. This is why I wait for objective data, even though a short in this area looked to be a near perfect setup, the signal wasn't there and now we know why.

As the SPX Turns

As you know, I've been looking for a move in the SPY/SPX above last Friday's intraday highs, that's where the range is, that's where the action will be. This morning after seeing some slightly longer term positive 3C charts (meaning heavier institutional activity, but still within the intraday to very short institutional timeframe of about 5 min) and last night's dominant Price/Volume relationship (if it's not dominant in all 4 averages it's not a useful signal), it seemed likely we'd get that move and so far we're headed in the right direction although as it's happening it all may sound counter-intuitive if you are use to following the market based on price only.

In any case, what I want to point out are two things. Among the charts we are seeing this (the more important charts in the institutional activity zone (10-15-30 min, etc) and among leading indicators we are seeing some of this too. What is it? The market is more delicate than you might think. As ES hits new highs for the week this morning, the TICK data is pretty darn weak as you saw earlier, it should be hitting solid +1250 to +1500 readings, it hit +1000 once today close to the open and the rest of the time in the +750 zone which is really closer to the median.

In addition, several leading indicators are now breaking a bit more seriously...

 Commodities are back in a risk off mood after having been risk off, then moving with the market for a day.

 Since the 11/16 lows, commodities have diverged negatively in a big way, this is not how a risk asset should perform in a true risk on move that has legs, commodities are now below the 11/16 lows. I know this may seem un-correlated, but it's not-this is a problem in a bigger sense than just near term, intraday or day to day trade.

 Yields today are thus far negative with the SPX, they act like a magnet for equities.

And the Euro is also divergent, but many of these are divergent in a bigger way, a more meaningful way suggesting the market as it moves up here is a lot more fragile than you might suspect.

On the other hand, until Credit takes a serious divergent turn for the worse, I think the market can still move higher at least to that level above last Friday's highs, essentially above the range.

I just wanted to point out that this is a more fragile environment than it looks, that means it's also on track for the move we expected and for the right reasons.

I'll bring you more as it develops.