A Few Interesting Notes

Well we talked a lot this week about the range just sitting right there and really the only average not to make it through being the QQQ, although it made quite a run as it was the furthest.

Overnight there was little doubt what the level of choice was to drive the Futures, FX/Currencies, the EUR/USD and Japanese Yen weakness, you could see how obvious it was pre-market, but it ran through most of the day. Here's a look...

 This is ES from about midnight at the white arrow where there was a 3C positive divergence, the green arrow being the European open and yellow the US open.

 This is the EUR/USD after recent weakness, it rallied 100 pips overnight, same areas at the arrows above.

 After the 9:30 open to present in ES

The same for EUR/USD.

ES rallied well today, but that persistent negative divergence showed up today, we haven't seen a negative one since Q1 2012 and a positive one just before the June SPX lows, this was an interesting development, especially considering where price was relative to the range.

In to the close, ES came back down to VWAP.

ES retracing to VWAP.

 Look at the correlation between the Euro and SPX today...

I did find the $AUD divergence interesting though as one of my favorite Leading Indicators and my favorite among currencies.

At first I didn't get High Yield Credit today,

 I did know that HY credit was at record short interest highs, it seems like today shorts were squeezed, but that wasn't all...

 HY (HYG) credit looked almost exactly like the SPX, then I started thinking more about it.

 In to the short squeeze 3C was negative in HYG 1 min

2 min and it goes on through 3 min.

It seems the traditional lever that has been used to either support or ramp the market has been volatility, but it seems they couldn't squeeze anymore out of volatility today and instead had to turn to FX and a Credit short squeeze, remember how HYG looked just like the SPX, now look at VXX-volatility...

 Here you see a near perfect correlation (inverse) at the green arrow where volatility (which may have started off as legitimate hedges being moved forward)  was used to ramp the market, but today there was none of that, Volatility seems to be used up in that sense and it started rallying today.

 There were some sharp positives in various leveraged forms of volatility like VXX which we have seen the last 2 days

And UVXY -10 min with a huge leading positive divergence today.

The point is the market is not and has not been able to get it done on its own without manipulation of correlated assets, which seem to be running out-volatility tapped, Credit short squeezed today-take a look at the daily volume.

Normally the day before op-ex Friday is pretty mellow and op-ex stays fairly close to the action from the previous day, I'm really curious as to what happens tomorrow. DeMark was calling for a top in the U.S., with the caveat that the market had a little more upside to go, we were saying the same thing at the same time, I wonder if this is it. I saw some interesting shorts setting up today toward the end of the day as you saw, that use to be one of my best indicators, "What are stocks doing? Are there more bearish or bullish?"

The Dominant Price/Volume Relationship today (finally it's back) was a bullish Price Up/Volume up, however with the volume up as we are above or through the range, the chances of that being a blow-off move or part of one go up, I believe that is what DeMark was looking for as well.

A few of our DeMark inspired charts for some of the major averages...

 SPX daily

 Dow Daily

IWM 3 day

In other news, INTC reported today, they beat on Earnings per Share, they miss on revenue and they gave tepid guidance, the guidance is the most important, it's not what you did, but what they expect you to do moving forward. Intel closed down -5.25% in after hours.

If anything interesting comes up in futures (while I'm awake) I'll let you know.

VXX and UVXY also looking interesting here

I don't have time to get charts out, but looking interesting. I prefer VXX. LONG

SRTY Long

As for a leveraged position, this would be an add to as well, 3x short the IWM (don't forget if you like the trade, buy it, don't short it as it is already a short ETF).

I'd like to get this up to about 3/4 of a normal position size. Now I'm mentioning a lot of different ideas, it doesn't mean I think you should go with them all, in fact I prefer not to have much more than 6 positions, depending on portfolio size. You want good coverage and not redundant positions like a QQQ position and a Tech position, it's kind of 1 or the other as they move together largely.

 SRTY 2 min is very positive today, keep this in mind...

 Big picture SRTY leading positive 30 min

 Leading positive in a big way-5 min

 Now this is the IWM, SRTY is a 3x leveraged SHORT the IWM ETF) so we want to see negative signals here-15 min as the IWM breaks out of the range.

 10 min in the same area.

 3 min leading negative very deep like SRTY's leading positive


IWM 2 min leading negative very deep.

AMZN Short

This is a partial position as well that I was waiting on, for one to break above resistance which it did. Being a momentum play I'd really suggest good risk management with some room, you can do that by taking on fewer shares in favor of a wider stop. This will also be about 2/3rds of a normal full-size position.

As for the charts...

 Long term 2 hour chart in a leading negative divergence, this called a bottom and a previous top as well.

 The timeframe I'm more interested in fro a trade, 15 min was perfectly in line and then a very negative change in character. I like these types of signals.


Near term the 5 min chart negative t the area where AMZN broke above the $269 area which is where I was interested in AMZN.

This is not perfect as far as the 1, 2 and 3 min charts, but overall, I like it and have no problem, especially with some decent risk management (YOU ALWAYS NEED GOOD RISK MANAGEMENT) there's a link on the top right of the member's site, "The Holy Grail of Investing", that may give you some ideas.

IBM Short

IBM is a current open short that's in the money at 2/3rds size, I'd like to fill it out here.

Here are a few charts on IBM...

 Intraday 1 min leading negative

 5 min leading negative at a new low

 Longer term the 60 min leading negative

And the 15 min leading negative at a new multi-month low in to this last run

Going to Move on some positions

Tomorrow is op-ex Friday, that usually means a dull market, I have no idea what it will mean for tomorrow, but we have some volatility today, we have a lot of things lining up, even the persistent negative divergence, I didn't even expect to see that.

I'll be looking at spring cleaning (closing any longs that I think might be in danger) and adding to some shorts. I'll let you know as I go.

Another Big Hint

How many of you remember that phenomena we saw a few times in ES which I could only call, "A persistent divergence"?

The first time we saw it was Q1 of 2012 as the market was putting in a sub-intermediate top and we were building short positions, we saw it again, but this time positive June 1st of 2012.

Instead of the ES 1 min chart making the normal intraday calls, it just trended the opposite direction of price.

The first time I recall was Q1 of 2012 and here's at least 1 post on April 1 that talks about it (this is a large Sunday update post)

Here's a mention of the positive June 1st divergence.

The first one was a Sunday weekend update, the following Monday was the top of the market up to that point for 2012. The second was a positive version and the following day was 6/4, the bottom of the market for 2012.

Right now we are seeing the same thing in ES, the first time I think it lasted a few days.

It looks like this exactly.

The first time I saw it I had no idea what to make of it, I never saw that before and we had only been using it on ES for 6 months or so; I didn't know if the indicator was broken or what, but looking back, it called the top of the market and the bottom, it seems pretty clear it was persistent selling in to higher prices and persistent buying the second time in to lower prices which was also a head fake move.

And here we have it again...

AAPL Follow Up

Around 1 p.m. I put out an AAPL post  that we were in an area in which I'd consider AAPL shares long, but not options, I didn't feel the signals were strong enough for that, I even suggested maybe as a day trade. Since then AAPL has given about 4 or 5 points on the upside, but it's interesting right now and I'm not sure what it means yet, but there's some transition of some sort going on. If you are long AAPL whether day trade or otherwise, I'd urge caution and just pay attention, maybe even a trailing stop (not with your broker-like a moving average or channel).

 The 1 min chart is in line, the only thing that stands out is the gap up opening that was sold off right on the open which we see a lot in AAPL lately, in fact I'd call it a trait that is so consistent, I'd manage my trades in AAPL based on that behavior.

 These longer intraday charts are why I liked AAPL, but without leverage, basically being a bit more cautious. 2 min

 3 min shows the gap sell-off and the positive divergence that I liked.

 5 min shows the same.

 At 10 min the bigger picture chart doesn't seem to be abnormal or any cause for concern until you look a bit closer at recent action. This chart takes a bit longer to react and its signals are more important so I found that interesting, it may be just noise, but this is why I say "pay attention".

A closer view of the 15 min chart shows something similar, rather than the positive divergence from the shorter timeframes migrating to thee longer ones, there's this bit of strange initial activity.

This isn't enough for me to take any action other than to be careful and pay attention, but I need to point that out given the earlier post.

Reaction from the 2x leveraged ETFs

Earlier in the week I pointed out that the 2x leveraged ETFs were seeing more action, better signals, etc than the 3x leveraged ETFs, I though it might be that they'd wait as long as possible on heavier leverage, especially with that choppy range which is tough on ETFs. In any case, I noticed the 2x leverage reacted more quickly and stronger than 3X and the long ETFs where damaged more than the short ETFs where improved, which also sounds like a "Waiting" situation.

Any way, as the Q's pierced the range, here's the reaction of the 2x long and 2x short (QLD and QID respectively).

 QLD 1 min (2x long)

QID 1 min (2x short)

Q's Join the other averages, just break resistance

All of the other averages have had that distinction all day, some even longer like the IWM, but the Q's which were the furthest away and seemed to get some recent support to help out, just made the break and there's some interesting breadth plus some of the usual stuff that you should be aware of.

 Longer term daily chart, I'm not even going to get in to the H&S looking pattern, I'm just pointing out the trendline target.


 Here it is intraday just a few minutes ago on a 1 min chart, note volume, which is something you want to watch for-where orders hit, were stops hit, was it useful for Wall Street in creating demand?

 The actual TICK chart popped to just about +1000, a decent reading, but moderate for a move like that, then it came right back down (TICK).

The TICK today vs the SPY seems pretty thin in breadth, there's barely anything above +1000, normally we'd be seeing +1250 and +1500 spikes. At each higher high in the SPY, the TICK is failing to follow.

Closing GOOG Feb 720 Puts

Since we are getting closer to expiration and this is a bigger position than I'd prefer, I'm closing the GOOG puts out of an abundance of caution. The GOOG equity (short) position is still open and looking to add 1/3rd to it to bring it up to a full size position.

 Just a bit over 40%...

 The probabilities for GOOG are definitely to the downside, larger picture, however even if there's just a consolidation, the time decay starts eating those puts up.

There's also this 2 min chart so it's just caution.

I'll be looking for a place to add to the equity position and if it pops up, I'm not opposed to another put position.

Intraday Charts Are Getting Really Ugly

 DIA

 IWM

 QQQ

 SPY

 ES

NQ