Daily Wrap

It was a srtrange market since futures opened yesterday, you can look at yesterday's post and see that I felt very clearly that there wasn't a lot of near term visibility. This morning it seemed the market knew what it was going to do, after strength late Friday after the op-ex pin was no longer needed, we gapped up today, it looked very much like we'd fill that gap until strange and unexplainable 1-3 min positive divergences started to mess up that signal.


Well it didn't take long for that fairly large imbalance between the CONTEXT ES model and CONTEXT to catch down to each other, all it took was an article from the FT's Harding that Bernie would signal that the taper is near on Wednesday, as if we all didn't already know that, they've essentially already told us. However, this story hitting the wires sent futures down to the model.

The 18 or so pint negative differential was basically closed with an ES move from $1641 to $1624, 17 points, so the CONTEXT model was darn close, except it had been flashing this since last night, well in advance of the FT's article.

Then Harding posts doubt about his own piece on a blog, the market reaction?

The only useful information we got today was accumulation on the move down, but it was late during the move down which begs the question, were some market participants front running Hardings doubts of his own FT article published earlier, this after the WSJ's Hilsenrath's positive post last week?!?!?

Guess what? In the near term, the market is still pretty opaque. I hate to try to predict what the F_O_M_C may or may not do tomorrow, but it is still the Yen and $USD single currency charts that seem to suggest a very strong move this week, once again...

 Leading negative 15 min Yen and...

15 min positive leading positive $USD, both make for a rising USD/JPY which is the main risk driver in this market.

However, just like last night, the near term charts like 1 and 5 min are completely useless, just in line.

As you know, I closed two HYG calls for a loss on a 1-5 min negative divergence, this works against the market and I opened an HYG put position, however like most of the market, HYG saw some late day positive divergences, the question is whether they hold. For now, I'll keep the HYG put in place a I think it has a little more downside to go even with accumulation continuing.

Volatility is even opaque, I don't have much short term on VXX or UVXY, the only thing I find is a positive in XIV which would be a positive for the market if price follows the divergence.

5 min leading positive XIV, the opposite of VXX and moves with the market, I'd like to see more confirmation among the other volatility assets, but that's what we have to work with.

To make things even more confusing, the 3 min TLT chart that built all day today basically contradicts the XIV chart above, unless the correlation is about ready to break as big money flocks in to safe haven assets.

TLT 3 min isn't as strong as XIV, but it has grown from a 1 min divergence today so it has some momentum.

This is what I mean by the short term is opaque, it's usually best to just wait it out until signals become clear again.

Right now the Index futures aren't very useful.

Moving to Leading Indicators...

Our risk sentiment indicators are either in line or not telling us anything clear. HYG Credit is relatively underperforming the SPX, I have the put there, but I think HYG will NEED to shape up to some degree before the market can make any serious move higher. The AUD basically gave out any upside support near term today, the Euro however rallied a bit in to the close, still not earth shattering signs.

If I had to go by DHY alone, which is very illiquid High Yield Credit, I'd say this is a bearish reading near term.

DHY 1 min vs the SPX. fortunately this can move pretty fast, but it is what it is for now, cloudy.

Yields did rise a bit on weaker bond activity today, they tend to drag equity prices to them, but this is still no smoking gun.

Yields higher than the SPX, not by a whole lot though.

Commodities may be a hint, they showed excellent relative strength today...

 Commodities vs the SPX today.

This is commodities vs the $USD so you can clearly see it wasn't the normal inverse relationship between the two that drove commodities higher today.

I know it's not much, beyond that, the only probability I see based on market behavior is some repair work needs to be done with the SPY and IWM 5 min charts looking like this.

 SPY 5 min

IWM 5 min.

This generally means some pullbacks or consolidations allowing 3C to build.

We still have this pattern in the market...

 a larger Inverse H&S like pattern that did hold above resistance on the close and...

Shorter term the bull flag I mentioned last night that also held above resistance, technically 2 breakouts.

I don't have too much more, there is this VIX sell signal, which would mean the market moves the opposite, to the upside.

This VIX signal taken with the 15 min $USD and JPY charts may indeed be foretelling of the strength of a bounce move this week, for all I know it could be on the F_O_M_C Wednesday at 2 p.m., but it seems to me most people are more afraid of what Bernie will say, of course there's always that initial knee-jerk F_E_D reaction that can last hours or days before being reversed.

I'm afraid that for the very near term we have no better visibility tonight than we did last night in the very near term, that can change real fast, but until it does, I still urge patience until we get a clear signal from the market, the signals drop off every once in a while, but they always come back.

If anything pops up in futures tonight, I'll be sure to share it with you ASAP, for now, pretty quiet .

As for the Nikkei, if I HAD to guess, I'd say they see a little downside, they have a weaker 15 min chart and in line 1 and 5 min charts, but the night is still young.

Patience is a tool, it is a skill and it's a lesson most of us need to learn and re-learn. IF THERE'S NO EDGE, THERE'S NO POINT IN RISKING CAPITAL.

HYG Call P/L & GLD Charts...

Earlier today I posted that I was going to have to take a loss on the HYG calls that I was holding, looking forward to them really moving on a short squeeze, however with the way HYG was looking today, I opened a small put instead.

The loss on the $92 Calls was -5.76%, but very manageable at $-200

This was the bigger one, HYG $93 represented nearly a -36% loss.

As for GLD...

 The 2 min chart looks good

the 3 min looks better...

The 5 min is insane.

Also the 5 min Gold Futures looks good.

GLD Position

I know this is short notice, I'll get some charts up, but I'm going to try a July GLD $132 call, I think it's just about in position.

Market Update IWM

The IWM is a good example of why I think patience is needed right now.

Take a look at these 4 charts...

 This is the leading 1 min I showed you earlier, the concept is, as the divergence grows stronger, it migrates to longer timeframes, that's when our probabilities go up. Looking at this chart alone, I might be tempted to pick up an IWM call position, but...

At 2 min 3C is in line, this is much better than the negative it was earlier, but still not positive.

I did mention a relative 3 min divergence and there it is...

However the 5 min which is probably the fastest timeframe that needs to be positive before I'd take a position is still leading negative.

The good news is we know what Wall St. is doing in to market weakness, the bad news is we just need to keep a lid on emotions and wait for that high probability set up. At the speed things are moving, it probably won't be long.

Market Update

Know when to hold em, know when to fold em....

This is a time to either hold them or sit still. There's one good thing about the market making a move like this, it gives us information.

None of these are ready in my view to be considered for a trade, but the information with regard to how Wall St. is acting is important.

 IWM 1 min leading positive right as the gap is filled, there's also a 3 min relative positive.

QQQ 1 min leading positive as it nears the gap.

The early indications are Wall St. is gathering up these shares, if so, strategically we are still on track, tactically we have to be patient and make adjustments here and there.

Market Update

The market is just starting to gain a little traction, I'm not drawing any conclusions yet, but I'd rather have seen this in the a.m. than then p.m.

This is the SLV 1 min chart, it's only 1 min right now, but at this pace, it will spread quickly yo other charts.

SLV 1 min

SLV

SLV may be starting to put in a tradable bottom, I see it's showing good 3C movement right now, I would wait still, but it's one to keep an eye on.

More Charts

The oddness continues, ES looks like it's negative and ready to come down, the CONTEXT ES chart has the model almost 16 points lower than ES, BUT (I'm not going crazy) there's a very clear short term move to support or move the market in the SPY Arbitrage, just like I've been seeing in the charts.

 ES 1 min 3C chart

 CONTEXT for ES suggests ES is almost 16 points rich (this in itself is strange)

Look at the clear effort using arbitrage to lift or support the SPY/market around the same time those 1 min positives kept popping up.

I don't know if there's a new rumor on the street or this will pass and things clear up, but it's VERY odd

Charts - Market Update

This is still a very complicated market as it was last night, it looked like it was giving a simple signal of a pullback, but in many spaces that has improved on 1 and 2 min charts, a lot of 3 min charts are still quite negative and the 5 min charts are largely in decent shape.

HYG however looks really ugly and I don't know how the market holds it together without HYG.

VXX also looks like it's going down in almost every timeframe in the near term, very strange.

I'm not going to commit to much more unless there are good signals like HYG or the market straightens up.

I almost wonder if some new "news" is circulating on Wall St. about the F_O_M_C Wednesday.

 HYG 3 min, the 1 and 2 or the 5 min on either side look just as bad so I went with the $94 put.

This is that sudden shift from what was a clear signal earlier as the 1 min SPY  shows a reversal showing strength. I'd usually think it was just for consolidation or to pin a price, but some averages have a 2 min or 3 min positive. With the VXX looking bad and HYG, it makes you reconsider.

 Here's the SPY 3 min, still hasn't made it to that timeframe.

The SPY 5 min is pretty close to in line.

Here's the IWM 2 min not showing any positive activity, while the 1 min does, IT'S VERY STRANGE.

Like I said, for now I have pretty low exposure and I'll keep it that way until things become more clear or unless I find an asset that is very clear as HYG was.

Quick Market Update

I feel very confident that the market comes down intraday as we have been expecting, there's been some noise, but that's all. I don't see this as a danger, more of an opportunity, but we need to watch for positive underlying signals in the move to the downside.

Closing Both HYG Calls, June $92 / $93 At a Loss, Will Open a July 94 put

IF I have time.

AMZN Update

The only open position in AMZN right now is a partial Equity Short.

I would consider a quick put trade and perhaps a new call trade if the set ups allowed, but my primary interest is in a long term equity short position.

 I'd like to see AMZN above the $282.50 level, I think at bare minimum it should be able to move above the recent high.

The 5 min chart suggests the same, it's pretty much in line, which means it's not negative yet and there's still hope.

The 3 min chart intraday looks horrible, this is why I'd consider a quick put trade IF price kept moving to the upside and the short term 3C charts turned decidedly negative.

This is what I mean, Friday like everything else, the last 2 hours there was a positive divergence, leading to a gap up today, leading to a very negative divergence suggesting the market come down soon, and most recently an intraday positive as you see to the right, if that fails as price is above the recent highs, I'd consider a put.

FSLR Add to or new Position?

I like FSLR for a trade, I'll be adding to the July 45 Call Position. I'm thinking $52 and perhaps >$58 are not unreasonable targets, so you'd have to decide whether it's worth it as a long equity position.

First I want to show the real danger in FSLR and this bridge will come...

 The 60 min chart, this is FSLR's real future beyond these trades, long term. FSLR is in trouble with the rest of the market, but for now...

The 10 min leading positive is very impressive.

As is the min and 5 min trend. I've said to a few members today, "Wait for a pullback", well...

Here it is, moving toward the gap, but with positive divergences which is what we want to see when buying a pullback.

I'll likely add here, you may want to consider a phased position, adding some here and some if the gap is filled of better, but that can't be averaging down, it has to be part of your risk management plan before you even open the position.

AAPL Update

First the market, there are some 1 min intraday positives, I suspect because they are only 1 min, they are more meant to keep the market in a specific spot for a fixed period, usually not long. I don't see any serious examples of this positive behavior moving to longer timeframes to negative the last market update so I think that is still the likely near term outcome, just a bit delayed.

You may recall that I closed the AAPL Equity Short position last week, AAPL was meant to be a longer term short trade, but I'm just not so sure about it until I see what it is capable of, the second question that you have to ask with a stock that was cut almost in half in 8 months is, "Is this the best place for me to deploy capital?" 

It's not about being right or wrong on the direction, you can post that on Stocktwits and grab some props, it's about determining what is the best allocation of your funds, sometimes that's out of the market altogether.

There is an open AAPL July $420 call of some size, in fact a lot bigger than my risk management rules allow for, a LOT bigger, so I obviously see something I like in AAPL.

 AAPL daily, the triangle is the notable feature.

Here's a closer look on a 60 min chart, this is generally speaking, WAY too big to be a consolidation/continuation triangle in a trend, it looks more like a top or bottom, but in this case it's too small to be a bottom of any serious consequence, it may be enough for a 50% retracement of the $700+ to $385 decline and I believe that's what I said, why I closed the short equity and why I think AAPL is a playable long equity position rather than just options.

The yellow area recently is what? And when do head fake/stop runs most often appear? So it would seem AAPL is very close to a move to the upside of some size.

You can see the positive divergence all the way out to a 60 min chart as AAPL made a stop run or head fake, that gives me confidence in AAPL's ability to deliver on the upside.

 The 30 min chart...

The 10 min... I think we've established AAPL's positive character.

Shorter term, the 1 min chart was strong Friday afternoon like many, it went negative earlier like the market and id showing a renewed positive move like I just mentioned in the market, except this is a lot stronger.

The 3 min chart is positive too.

At this point I think AAPL is a decent equity long position right here, it's probably a good call position right here, although we want the trade to come to us so I'd watch for any pullback, I'm pretty sure it will be worth a call position, unfortunately I won't be able to join you.

I think this is bigger than just the market short squeeze, but could play a large role in that.