Adding 1/3 To GOOG Short to bring to full size

Closing Half of ZNGA Out of Abundance of Caution

Decided to fill out ERY long

This is from a bit more than a speculative position to full size.

Inverse ETFS

It's very hard to look at SPXU, FAZ, SQQQ, SRTY, etc (basically the shorts) and ignore them, they all look very good in this area.

I would certainly consider any of them add to's or partial positions for sure here without hesitation.

Energy is the one I'm still on the fence over.

Out of SPY Calls -2.9% loss /-$180

Closing SPY position

As I said, I'd close it before the close today. ES and SPY as well as other charts are going negative.

I will not enter any option trades at this point , but I will look at some possible add to positions and see if there's anything I like.

 ES 1 min

 ES 5 min

 NASDAQ 1 min

NQ 5 min

AAPL Update

As I have said for at least 2 weeks now, something is going on with AAPL, but it has not become clear yet exactly what it is, where the highest probabilities are and when to look at a position, there's information there, but not a trade edge.

However in the less ambiguous shorter term timeframes, I do believe AAPL will see some near term downside, this may be one reason the SPY looks better to me than the QQQ.

Here are a few examples and why, personally if I had any profit in AAPL, I'd be talking it, but I would not be entering a short position personally.

 AAPL 2 min chart negative and consolidations should consolidate away from the trend, not toward it.

 AAPL 5 min

 This is a brief modification to 3C, the 1 min

 5 min

And 10 min

SPY Call Premise Easy, Execution difficult

Like I said, there are a lot of triangles, the Bollinger Band s are tight intraday on these triangles. As far as what Technical traders are looking for and they are already hugely bullish as we have seen by the sentiment indications, would be this...

 Between the volume and the gap up (remember I already said earlier the SPY would be at the top of my list if I were to take a late day position based on signals once expiration open interest is thinned out as it is by this time in the day) we have what looks like a bull pennant/flag.

 We have a very short term 2 min chart switch from negative to positive, but after that we are negative, so a quick move is what I'm looking for...

And the 5 min SPY is clearly negative, essentially looking to take advantage of a quick head fake move, it may allow a little wiggle room on short entries I want to take on any price strength.

If it turns out to be a trap in the other direction, I should be able to get out without too much damage.

Taking Out VERY Speculative SPY Feb 16 $150 Calls

I have every intention of closing it before the end of the day.

This is a VERY Speculative Trade. For most people I'd sit it out

Lots of Triangles

I can't name them all right now, but obvious the SPY stands out, BIDU, AMZN, ES, etc. Just take a look and you'll see, this isn't coincidental.  I'm also not exactly sure what it means, what it is a part of, but we know how most of these are interpreted, bullishly... and we know that most retail/Technical Traders won't enter a trade until they have confirmation of a breakout of the price pattern, that's the only way to get volume and price to move enough to be useful for smart money to use.

I'll fill you in with more once I have it, obviously I'm a bit loathe to enter anything long without the ability to watch it every minute at this point.

I think I'd rather use any potential move as a tactical entry for the strategic signals, meaning using price strength, if we get it, to enter short.

This "could" also be used as an actual reversal, creating a bear trap and then dragging it lower, I'm not sure if the currencies are far enough along that currency traders fear getting caught in a huge margin call.

Market Update-Bigger Picture

I just want to address a few emails that I have been getting a lot of, if you know me, although it may not seem like it, you know that I don't use leverage unless I have to and I try to use the minimum amount needed for the job, I also have a very high standard for leveraged trades.

This is exactly the kind of market where people fall in love with options, at least the way we have been trading them and then conditions (which are transitory right now and lend themselves to options-increased volatility, choppiness, increased ATR, etc.) change and all of the sudden options trades are no longer working the same way, then before you know it you are betting what's left of your portfolio on a Hail Mary option trade to "Hopefully" get back in the game and the it's over-your options portfolio (or main portfolio) is gone.

Please do not romanticize options, there's a time and a season for all kinds of trades, if you match the asset to the type of market you are in you are always going to do better than sticking to one rigid plan, you also have to understand the plan/market/trade you are in.

In any case, lets try to take a more complete look at the market, some things probably won't be evident until later today as more and more options trades settle and the market can start acting like itself rather than a pin machine.

Speaking of which...

 Two things to notice on the intraday NYSE TICK, the first is something we see often during an options expiration pin, very few stocks are moving because they are in the pin range like the NASDAQ for example. The TICK range of +/- 750 at the extremes is a very mild market with very few stocks making any moves, you can also get a rough feel for market direction, although very subtle.

As of this capture, the TICK was slightly more positive than the SPY, but both were nearly totally flat. There are certain options trades or writing options that can benefit from this action, but in general, I don't want to have much to do with it, it's an excellent time to figure out what's going on in the flat trade as flat trade is dangerous trade.

 We wanted to see the Q's above the 5min/50 bar m.a. and they did that, bit then went very flat, we were out of the calls well before we were caught in that volatility trap that eats option profits, even if a minor new high is made.

No when to use what indicators... The flat trade is not good to use trend following indicators like MACD, RSI is not my favorite, but a clear negative signal like this shouldn't be dismissed. The Stochastics pin is important to watch, generally in ranges you want to use Oscillators like Stochastics and in trends you want to use indicators like MACD.

The market averages are telling us what? *(Most of these were captures 30 mins or more ago so there can be some significant changes, I'll try to let you know).

 DIA 1 min is showing the option trade amidst volatility, the green square is an area that I wasn't sure what it would turn in to, turns out just more choppiness and no useful signal other than the bigger picture that is already in place.

 The 5 min chart shows NO INDICATION OF A POSITIVE TREND, it simply shows clearly the option trades we have been taking as the huge volatility is obviously controlled, likely as a last minute positioning mechanism.

 The 60 min DIA chart shows the high probability of the Dow's direction for the next move. From left to right it shows the negative divergence at the introduction of QE3, then volatile lateral chop for about a month as indicators continued to fall apart and then the drop in the market despite it getting exactly what it had been screaming for many quarters-essentially since QE2 stopped. You see the positive divergence and accumulation as I have pointed out numerous indications of the November 16th lows that started the new cycle (remember a cycle consists of 4 trends, I believe we are at the tail end of trend 3 and starting to bleed in to 4 with the recent increased volatility).

Speaking of volatility, Trend #1 which was predicted before it started actually did serve a purpose, it had no volatility, it had no ATR, it made huge headlines and it sucked dumb money back in the market after their increasing exodus from the market the last year and a half. Sentiment indicators everywhere are at extremes, as I always say, "We rarely know why when we get the signal, we can be sure as to why, but we can't make money and be sure". Now we know why, simply look at the trend of the 60 min chart over the last 5 weeks.

 IWM intraday 1 min still remains in line with price.

 IWM 2 min still remains in a negative position.

 This 15 min leading negative remains in the same position as the IWM moves through the increased volatility and ATR, this is a very characteristic and dangerous time in the markets, this is one reason why option trades are VERY short in duraation, especially long ones.

 QQQ 1 min leading negative means 1 of 2 things, consolidation or correction, on op-ex you can guess which one wins at least until later in the afternoon. A 16 cent range!?!? If that's not a pin, I don't know what is?

 The 3 min chart gives a better idea of what is going on behind the scenes, this is why flat ranges are so dangerous, you assume nothing is happening when it is one of the busiest times for institutional money.

 The 5 min chart is quite clear about confirming the same.

 SPY 2 min shows the short term volatility movement, there's a little more of a triangle forming in the SPY so there's an increased chance of some kind of head fake move, it may be useful as a tactical entry for something like SPXU long if it comes to pass, I'm just noting the price formation.

 SPY 5 min during the volatility stage, you can already see a move that would be considered a good tactical opening for SPXU long or whatever asset you chose to short the SPX. It may turn out that there's a late day signal after most of the open interest in options is settled, that there's a decent Put trade available, we tend to find them late in the day on weekly option expiration Fridays, from the looks of the SPY generally right now, it would be near the top of my list along with the IWM which would have more to prove to me as a pick.

SPY 60 min, again, understanding the signal, the trade, the correct asset to use is essential. Using longer dated puts for this signal would be a disaster for example, phasing in, using either leveraged or non-leveraged assets is more reasonable as well as risk management.

I don't care how many times I have to say it, Tops, Bottoms and Reversals of Either are ALWAYS extreme moves with heavy, exponentially increasing volatility.

Futures...

 ES 1 min is clearly negative, it continues this way.

 ES 5 min which I was wondering about, is turning to the negative as I had hoped.

 NASDAQ futures 1 min are clearly negative as they are pinned in place.

The 5 min is turning negative as I had hoped.



Risk Assets...

 CONTEXT for ES is at a -20 differential, the largest I remember seeing, other than the Q's which we picked perfectly as the Call position of choice, the rest of the market is not making what would be in my view, extreme moves, stronger than usual, but not anything I'd write home about, this means risk assets are REALLY heading the exact opposite direction.

 Even the SPY arbitrage model is showing the SPY rich to the model, no doubt owing to op-ex pins.

 Just so we have perspective, the 3C chart for High Yield Corp Credit is about as ugly as the dislocation between it and the SPX, this 30 min chart shows the positive in November, right at the 16th lows in fact as risk assets move with the market as they should, the leading negative divergence below even the 3C lows of the 16th of November seal the fate of credit, even with a potential rally in credit.

 This is the potential rally, the 15 min chart going leading negative as it turns from the SPX correlation and a leading positive now, still the dislocation is too large to overwhelm as is the longer term chart divergences and even the 15 min chart's if it is scaled out to it's longer term trend view.

 This is the intraday HYG vs the SPY, not very good.

And the trend since essentially the volatility picked up so the smartest of smart money runs fast and hard as volatility which is always present at tops turns up, what does that tell you about the nature of volatility near tops? What does that tell you about the kinds of short term trades you take and how they should be managed? The same as 3 weeks ago or differently?

 Junk Credit rallied perfectly with the market while it was in stage 2, when stage 3 started Credit took off the other direction, it is below the Trend 1 lows.

 FCT as a good indication always is showing a similar indication.

Volatility...

 After the but signal and the Bollinger Band squeeze, I said price would likely loiter in the area crossing above and below the mid point, it has, but it won't for much longer.

 VXX intraday just so you know what is being done with what in these flat ranges.

 UVXY-simialr, except leveraged, with a positive, a smaller run and a much larger leading 60 min positive, this fits with the VIX Bollinger Bands scenario.

Currencies-You never know what the catalyst will be when you first see these divergences, rarely do you know how they will act, but it seems clear currencies as I first realized in the EUR'USD will be most important as the carry trade baskets will likely be that which sends the market down VERY fast.

You already saw the pairs, now each individual..

 Euro has recently seen weakness, Draghi made that worse.,

 The yen went from clearly down to flat to the first day moving up-this is bad for the carry and market.

And the $USD up is almost always bad for the market as well as the carry trade basket as it is not a favorite on its own.

Lots of intraday Indications negative

If you look at even some of the most basic tools I have given you you'll see that.

The question I have to answer now is whether this is op-ex only or if this is tied to the Carry trade or something else I haven't even seen.

Maybe an op-ex pin...

It's very strange to think weekly options which are so limited in quantity or availability, could actually pin the market, but it's really the big stocks that control the market that have weekly options available as well as the market averages themselves, so although I'd never thought I'd say it, the recent evidence has been that even the weeklies are pinning the market.

Look at the Q's price right now, the SPY, the DIA and I'm betting the R2K in not too long, all look like a pin, all also are in the environment where distribution takes place and most have negative divergences in place.

I'll be positing an update very soon, but just know that about the underlying tone. The IWM has some short term confirmation, but beyond that the tone gets worse and worse.

The Currency Part...

So there's still a possible gain to come, that has been based on the HYG / HY Corp Credit 3C positive signal, perhaps there's even an entry today for another short term trade, but the idea was that the currency carry pairs would start to fall apart and when you have that much leverage and position size, you are even faster on the trigger than you are with options.

HYG 15 min 3C is positive as is the long term TSV 55, we also have a rounding-type bottom, so there's a possibility for a trade to the upside as mentioned last night.

Here's the good part though (these charts were captured just before the open).

The ECB came out before this week's rate decision and said they weren't in the game of playing with currency values, but when you say that before the rate decision, it's kind of like trying to inoculate yourself from something you're about ready to be criticized for so with France screaming about the rise in the Euro and Germany (who has no need to scream, they simply have the Bubba-bank pick up the phone and call Draghi directly) on the verge of a recession, I thought the most logical outcome was a rate cut that sent the Euro down, screwing up the Carry Trade basket and forcing the Carry to close, which means equity longs have to be closed to close the carry.

I was wrong (about the rate cut), the ECB didn't cut rates, but the inoculation the day before was for good reason, Draghi had so much smack to talk about the EU, you wondered why he didn't cut rates, but he did manage to talk the Euro down, or tat least to start that process and now it's going to start hitting carry traders (Hedge funds) in the pocket as each pip can be worth up to 100-200 pips in leverage, a profitable trade can turn in to a loss real quick.

This morning out of Japan come complaints the Yen is falling too fast, this is nearly perfect. The gut feeling I've had about a really fast reversal to the downside could certainly be the product of a mass carry unwind.

 You may recall the triangle from the EUR/USD in green and the break above it, now we are VERY near crossing below the apex of said triangle which makes this breakout a head fake move and possible is setting up a huge downside reversal in the pair, which translates to "Stocks Down".

The first red box is pre-ECB nervousness, probably some early carry unwinds, the second red box is Draghi jawboning the Euro lower during a press conference after the decision to leave rates exactly the same.

 Here's the start of trade for FX and the pair this week, at "A" is Draghi doing what the ECB said the day before they would not do.

 The EUR/JPY pair was talked about last week and on Sunday night in the "Week Ahead" post, I was looking for a Carry Unwind back then, at that point the best I had to point to was a bearish ascending triangle in the pair (I'd ignore this in equities, but is currencies they tend to be real).

Other than the wedging in the pair, we still had an uptrend, this week that started to change as we have a lateral (H&S-looking) price consolidation and perhaps top.


 Since trade started this week for the pair... It looks like we are just breaking below the consolidation.


 In the USD/JPY we also had an uptrend and an ascending wedge I pointed out, but that was as bad as it got until this week as we started another lateral consolidation that is just shy of failing to make a higher low.

 This week in the USD/JPY...

The actual currencies...

 The Euro seeing some initial downside, I do think this could quickly escalate in to a full blown unwind.


 Meanwhile, the dollar is making multi-day/multi-month new highs.

 The Yen that has been so beneficial to the carry trade and the market move (note where downside momentum picked up and where the new Nov. 16th Cycle started-that's not the only reason, but it's not coincidence, the accumulation of stocks in to that low came from money that was brought over from a carry operation).

Meanwhile this week I have been mentioning the flat zone in the Yen and how it "might" be a pivot point, today is the first day that really would hurt the carry profits.

So I was looking for some quick upside that can't last based on High Yield Credit alone and I've been looking for the downside reversal to be swift, all of the sudden changes in the carry currency pairs fall in to our lap this week, the timing for the  two is nearly perfect.