No Adverse Changes the last Hour to Underlying Trade

It looks like yesterday's weekly Call positions in IWM and QQQ are worth about 33%, which isn't too far off the 1 pm fills of 31% and 29% respectively considering we ended higher, this is why I have such a low tolerance for loss of momentum, it's a loss of profits.

In any case, as far as holding the Call positions over the weekend, I don't see anything that disturbs me about that in 3C's last hour of trade, in fact the IWM, especially the QQQ's 15 min positive divergences added quite a bit to the upside. In futures, I'm not too concerned with the 1 min chart as it will change a lot from the weekend opening until the Monday 9:30 open, the 5 min NQ and ES charts though are a different story, they also both added to their leading positive positions.

As for Gold, even better...

 The 5 min leading added quite  bit toward the close...

As did the 30 min which is rare to see it move this much intraday, even the 60 min and 4 hour went positive.

I think we are in a great position to take advantage of short term movements and next week we should be in EXCELLENT position to enter new shorts, add to existing ones and basically be in the right spot at the right time as everyone else gets whipsawed in some extreme volatility!

Quick GOOG Update

You know I started a short equity position in GOOG, the intraday charts out to about 5 mins suggest GOOG moves up in the very near term, likely with the market indications we have, the longer term, more important charts are negative, basically I DO NOT want to chance GOOG long her, but I do want to wait for some upside in price and short in to that strength, again we'll wait for the short term chart to turn, but...

The daily chart shows why I want to short strength here...

There was no significant accumulation in to the November lows to feed this last leg up, the leading negative divergence right now is lower than the last divergence around Sept.October even though price is higher, it looks like they have been handing off shares to retail in GOOG and preparing for a move to the downside.

This is also why I would not chance even a short term long in GOOG, I think it moves up, but I'm not willing to bet against these long term probabilities, long term meaning the biggest, strongest charts.

UNG Quick update

UNG never filled the gap, it didn't do much but spin in crazy volatility after the EIA yesterday. The short term 1-3 min intraday charts suggest a pullback, after that there are significant positive, I would want to see UNG fill the gap, make sure the short term charts go positive and either add to the long equity and/or add some more UNG calls with weeklies which worked great about a week ago. Wait for the pullback though.

Volatility

Looking quickly at the short term volatility, t seems to be in line with the short term market expectations of a bounce for a day, maybe two, but longer term which is really right on top of us, Volatility looks set to explode and probably does so later or mid next week.

 Here's the VIX daily chart with my custom buy / sell indicator, you can see the last 4 signals have been right on-I still don't have a name for the DeMark inspired indicator.

Since the buy signal, everything we expected in the daily VIX has happened. As volatility went from huge to a squeeze indicating a highly directional move was coming (up IMHO) I said, "Expect the VIX to loiter in this area for a while", it has done that, the last candle yesterday looked a little bearish short term and today we are seeing that, but I expect this to go through the roof and still hold a long VXX position and UVXY I believe.

 The daily positive divergence in the VIX is the largest since they changed the construction in 2003.

 The long term, important 2 hour chart for the VXX (trades like the VIX directionally) was in line on the way down, 3C confirming the downside, now it is leading positive, this also indicated a large move up coming.

 This is the 5 min chart, it is in line right now, no indications of any divergence.

 The 1 min shows an intraday negative from late yesterday at the market's bottom and mostly in line since.

I don't think there's any heavy distribution here for a reason, but there's also no accumulation which makes sense with our expectations for early next week.

 Looking at XIV which trades opposite the VIX/VXX/UVXY, there's a positive divergence going in to today, that fits with market action today.

Again there are no significant near term divergences here, but

Like the positives in VXX and VIX, this has a deep leading negative 60 min which confirms the daily VIX and the 2 hour VXX, it says volatility's big picture is going to explode, I think we are probably within several days to a week max from that happening.

Final Market Update

This is going to be the final market update unless something big changes, this is meant to help those with open weekly calls/puts to decide whether they want to hold. The last hour can move around a lot as most option contracts are closed, but I feel it's still worth holding the open positions even though I still think the SPY rotates in to better relative performance next week.

First futures...

SPX

 1 min looks like there may be some near term downside, this could be Sunday night, Monday morning, it's not that important to me.

 The 5 min chart isn't where I want it for entering new Index Calls, but it is positive enough to continue holding, this may mean the open Monday may look ugly and the afternoon looks good for the call positions.

NASDAQ

 1 min is nearly in line, again not too important right now.

5 min is positive and I'd keep the calls open based on this.

IWM

 3 min shows a late day negative pinning the IWM/market as usual for Fridays.

 The 5 min doesn't look  as strong here, but

 the 15 has added to the positive divergence which wasn't even there yesterday, nothing past 3 min, so this is a big development and I think even if the first day or even two are bearish next  week (I'm not predicting that), this is strong enough to make it worth holding the calls in the weekly IWM.

QQQ

 1 min looks good here

 3 min shows the loss of momentum with a small relative negative, I think this is the pin.

 However, again the 15 min is leading positive, this is a big change from yesterday and much more bullish short term.

SPY

 1 min s in line with price

 3 min is in line with price, no negatives.

The 15 min here is starting to come in to its own, I think it will continue to mature, I'm holding the calls, waiting on any major short positions until we get more upside movement.

New GLD Call Position

I know this is not good risk management and I don't encourage it, but I feel I have to go for it.

I went with April 20th (Friday 19th) monthly expiration, long $150 calls, full size.

Gold / GLD is Definitely Looking GREAT Here

This is a shorter term trade, maybe it makes it to swing, but I wouldn't count on it, this is why I prefer at least March monthly options, there's leverage if the trade is shorter and a longer expiration if it lasts longer.

Take a look at Gold Futures and 3C, AWESOME and RIGHT HERE!

 1 min YG leading positive, I love it right here.

 5 min leading positive and again specifically right here.

This is the 60 min chart that gives some possibility this is a longer term trade than I am expecting as far as probabilities go, but this is very strong.

GLD- Long!!!

I still like GLD March Calls here, you can even go with GLD long or some leverage, but I prefer the March monthly calls.

Take a look, I'd consider adding here again.

 2 min leading positive, I didn't want to draw on the chart because the divergence is so beautiful.

 5 min (the first institutional timeframe) leading positive and a nice flat range, I love it!!!

Even a hint of a positive out to 30 mins, I'll be looking at the risk profile here and adding to GLD March $150 Calls if there's room

QUICK MARKET UPDATE

As far as when to sell the calls from yesterday, I think we hit it right on the head today.

The IWM intraday has negative signals and looks like it's coming down, the end of day longer term 3-5 min charts will be important as far as next week goes.

The QQQ is a little closer to in line, but still has intraday negatives that look to limit any more upside and likely pull price back. The relative performance today makes sense wit the signals, even with the other averages.

The DIA looks the worst intraday here, it is actually in a position that I'm no longer willing to say that it will rotate in to better relative performance.

The SPY though, has some small intraday negative, but really looks like it will rotate in for the best relative performance, a big difference between what we saw yesterday short term, but those charts were correct.

I don't know or suspect we get an opportunity to pick up calls at low risk high probability, but it's something worth keeping an eye on, otherwise we'll use strength and weakness in the most profitable manner.

Leading Indicators

I'll touch on currencies, but I think they deserve a separate post, I'm going to post some charts that I recently posted as red-flag warnings and I'm not trying to rub anything in to anyone's face at all, this is about learning and beating the street thieves, however when you see this, you simply CANNOT IGNORE IT and just assume the high volume melt up will continue. I encourage all of you to go back and read the post the night before the F_E_D minutes  or This one with the VIX running stops the day before in the last 1/10th of a second before the close, the one on President's Day about Bubbles and the "It's different this time" mentality because of the F_E_D, here's the post.

These are but a few charts, but breadth charts to me are extra special because they are hard numbers, hard facts and it's very simple to figure out what looks right and what looks wrong.

 This is the Percentage of all NYSE stocks (green) above their 40 day moving average vs the SPX (red), in a  rally they shouldn't drop from 85% to 69%.

Here's where we really get a feel though...

 Momentum stocks, these are 1 Standard deviation above the 40 day moving average, from 70% to 50% to 25%, which is another warning in my view of being too aggressively bearish here without some relief in the market, we don't chase!

The real high flyers, 2 Standard deviations above their 40 day moving average, and this is one I really made a big deal about, 44% to 38% to 25%!!!! Nearly cut in half while the market is rising?!?!?

At the high, the reading was 12%.

Don't forget the sentiment indicators, the appearance of the Cats and Dogs, which I really am upset about missing that trade, Mass Psychology, reading the economic indicators closely instead of headline prints, Dominant Price/Volume relationships within the averages' component stocks,  looking at the full cycle of F_E_D policy, not just accommodation, but the dangerous exit as well; there have been so many topics we've covered I can't nearly remember them all, but I hope you put some of them in your tool box.

OK, now that we can come back after and see that these charts are helpful and I'm sure we'll come back again when it's even more meaningful, lets move on to leading indicators.

First the quick and dirty CONTEXT Model of risk assets vs the S&P (ES) Futures.

Overnight they were largely in line, but many key markets are closed during this time, by the open the model was negatively dislocated with ES, this has been the story in our Leading Indicators for a while, certainly since Feb. 1. As of this capture, the differential was -9 points, so ES is rich here, but this is where and when we can find opportunities.

 Commodities in my view have been a leading sentiment indicator about how smart money has really felt about F_E_D policy moving forward, since the November 19th cycle lows, commodities have really not kept pace with the SPX (always green unless otherwise noted). Check out commodities around Feb 1 when there were many changes in character if you paid attention to them.

Commods today intraday vs the SPX, but this has more to do with the $USD which I think will let up a bit so commodities may very well rise in to the afternoon.

 Yields intraday are not keeping pace, nothing huge or surprising.

 A longer view 15 min chart of High Yield Corp. Credit

 Intraday it is not looking too bad here vs the SPX, this may be part of what helps the market carry some strength in to next week as we have so far been planning for with the weekly calls opened yesterday.

 Long term when Credit dislocates like this it's not good, the bounce in yellow I believe is a short squeeze considering.


 This is the 3C 15 min chart of HYG (High Yield Corp. Credit), check out the negative leading divergence at the top, it was clear they were clearing out of credit and that's where the real smart money is.

The bounce seen above is shown with a small positive divergence (white arrow to the tight), note though the recent distribution.

 Here's a closer look at that distribution.

Touching on currencies-the $USD intraday vs the SPX

 The correlation in white is as it should be, the market moving up to the right of the box is not the normal correlation, but 3C did indicate it yesterday, thus our trade long calls yesterday.

 The Euro is a bit low and out of sync, this weekend may see some movement in the Euro with the Italian elections, "WILL GOLDMAN SACHS LOSE THEIR GRIP OVER ITALY?"


 THE AUSTRALIAN DOLLAR is one of my favorite leading indicators among currencies, it's doing well intraday vs the SPX here.

 Long term, there's a huge red flag as the $AUD falls away from the SPX.

 The more important currency recently has been the Japanese Yen and here intraday over the last 2 days we have a picture perfect correlation between the JPY and SPX.

In Red, note the break of the correlation as the JPY and SPX trend down, note the date, this is clearly because of the F_O_M_C minutes. 

IT'S NEVER "DIFFERENT" THIS TIME

Fill QQQ/IWM

The IWM calls were filled at $2.02 so the portion closed made 31% since yesterday, the QQQ position was filled at $1.24 so it did a bit better than above at +29%.

This 1/3rd closed is basically is the second addition yesterday of half (what would be about 1/3 of the current total) that was added later and put the position a bit above the normal spec. size, so closing it on some momentum doesn't bother me, it actually feels good to be back where the position size was intended to be.

With the gap coming up I can certainly see losing momentum and losing momentum is not good with these weeklies.

As I said in the last post, I think the SPY and DIA will rotate in a bit and show some better relative performance.

Taking 1/3 off the QQQ/IWM Calls

We have good momentum here and that's what I want to sell in to, I'll hold the rest, but I do think the SPY/DIA will rotate in to better relative performance soon, not that I would enter them at this point.

Watching Paint Dry

It's hard to get in to positions without some movement, usually whenever there's a dull market that's because something is going on and those are the markets you really have to pay attention to because they'll surprise you in a minute after 5 hours of nothing.

These weekly option expiration Fridays have been acting more and more like monthly op-ex pins. Look at today's TICK...

We are now in something around a 500 +/- range!

I've noticed as more and more contracts are closed as the day proceeds, we tend to get some stronger signals later in the day, usually after 2 p.m., even if price still stays flat in a pin.

I'm going to do a whirlwind through the leading indicators, all of the industry groups and some key stocks as well as the Cat and dog stocks and see if there's ANYTHING that might be going on under the surface that I'm not seeing.

As for yesterday's weekly QQQ/IWM calls, for now I'll still stick with them (they expire next Friday) and this is EXACTLY why I didn't go with today's expiration-in any case, the longer intraday charts as seen last night still suggest that those calls will see upside action, I want to make sure those signals stay strong enough to hold the calls over the weekend of course.

I'll be back in 20-30 minutes as I check out all of these areas.