The "Zippy" Tone Today

From very early on to the last post preceding this one, I've remarked quite a bit on the tone or character of the market today, very fast, deep divergences and I didn't cherry pick any of the examples, the last one, Transports /IYT and the DOW-20 were just a possible add-to position.

I think I have an idea of what was creating this, I'll let you draw your own conclusions as to what it means. First a few examples... (I can't get too many charts on tonight as Blogger or perhaps my Internet provider... I hear they are throttling back after you use so many gigs of data-  is ultra-slow)

 DIA 1 min

IWM 3 min

QQQ 5 min

SPY 1 min

This character was EVERYWHERE today, but between 1-5 min and occasional 10 min charts. I think I have the answer that explains both the character and the 1-10 min charts...

TODAY WAS THE SPX'S LOWEST (NON-HOLIDAY) VOLUME OF THE YEAR!

CASH SPX volume.

I'm not going to go in to the importance of price/volume analysis, but I do think it's a lost art that is more important than most traders realize unless they are old-school when stuff like that mattered.

In any case, the TICK again today was in an ultra-tight range...

There were no significant moves as far a the number of stocks all day today (between -500 / +750) this is really a low range so any distribution signals would look like they looked today, accumulation signals would have had the same look to them if they were there, so I think that also tells us something about the tone of trade. The TICK readings above are entirely consistent with the closing Dow-30 +0.13%. NASDAQ 100 +0.03% and SPX 0.14% (not as much with the IWM +0.60%).

As far as not seeing these signals (INTRA_DAY) TODAY on charts past 5 - 10 mins (I'm not saying there weren't negatives past 10 min, just not with this character) is pretty simple, when you have a divergence on a 30 min chart, it's a much bigger underlying flow of money than say a 10 or 5 min chart. The volume simply wasn't there today to put those kinds of trades through without having every HFT and wanna-be day trader trying to front-run the order. I think this lack of volume, lack of larger signals today is largely why there was a lack of interesting trades opening up today, there just wasn't enough volume or activity to make those interesting trades pop up (if this keeps up-which I don't think it will or can, then we have to rely on underlying trends more).

Another oddity today (including the low volume) was the fact that volatility all but disappeared, we were seeing 1% moves with much larger high to low ranges, that's gone and it should have been amplified on the lowest volume day of the year, volatility should have been sky high.

The market also needed a lot of support again today just to get those pretty pitiful closes, it's very clear in the SPY Arbitrage which had to rely on HYG and VXX (as VIX contract expires Wednesday-partly why I think that's going to be an interesting day).

(Good lord the next 6 charts took nearly 10 mins to load, I thought my computer was broken)...

 Again the SPY Arbitrage was up near $1.20 by the close, that's a lot of support for an SPX close of +0.14%.

HYG intraday is very clear as an arbitrage asset, HYG needs to rise while VXX/ TLT need to fall to support the SPY and toward the afternoon you can see HYG's Rate of Change is much sharper than the SPY's, that's why the SPY Arb. chart looks like it does (gaining in to the afternoon sharply).

 VXX (VIX futures) which are already at a large cash advantage for the Put/Call ratio won't in my view, see any relief until the contract closes Wednesday, from what I understand the next 3 months after Wednesday are skewed to the Put side pretty heavily. In any case, VXX fell a lot harder than the correlation which is what creates the arbitrage.

 However TLT wasn't playing along, honestly they didn't need it between HYG and VXX, what is interesting is the dichotomy here and I think it makes very clear that this is manipulation arbitrage, not true asset movement.

This is TLT with the SPX inverted, the normal correlation without being positive for the arbitrage at all would have the blue TLT line run almost exactly in line with the SPX, but you can see that TLT WAY outperformed the SPX, in fact I wonder how high the SPY Arbitrage would have been if TLT just was neutral today? Something to think about.

So we have a "Flight to Safety" asset way outperforming (TLT above), the VIX protection is (from what I understand from the last update) is piled up for August/September contracts after July expires Wednesday. Then we get this...

XHB is the biggest sector under performer ar -0.96% (I believe we are about to see another housing price shock to the downside), but this is the real Dichotomy...

Utilities, one of the largest "Flight to Safety " sectors sees a +1.63% day. How does the IWM see a fairly strong +.60% while TLT is outperforming and even more strangely, Utilities are far outperforming?

All of the other groups were between -0.25 and +0.44% (taking out HB's and Utes.).

So while the market needs $1.20 in positive arbitrage to get a 0.14% SPX close and the IWM does pretty well considering at +.60 with the other two averages at +0.13% and +0.03%, TLT is significantly outperforming and the safe haven Utilities Sector is putting in a +1.63% gain, unreal!

As far as SPY position, this is the Classic, "Kiss the Channel Goodbye"

(whoa, that one didn't want to upload)

The red arrow is the Break on the upside of the channel, these always look bullish, but they almost ALWAYS see the channel broken on the down side (vice versa for a down trend channel breaking below at first). THE BREAK ABOVE JUST SO HAPPENED TO BE THE MAY 22ND KEY REVERSAL DAY!

If you look at some classic Technical Analysis books, the "Kiss" is suppose to stop at the lower channel as it acts as resistance and that's the low risk short with a stop in the channel, that hasn't worked for years, the premise still works and holds, but price always moves back in to the channel because it's exactly what retail doesn't expect.

I can't get a big breadth post out (and they are always big), but I figured I'd show you at least 1 chart.

This is the percentage of ALL NYSE stocks in green that are trading above their 40-day moving average vs the SP-500 in red. Obviously in a healthy trend the % of stocks should move up with price, you've seen this many times, how we fell from +85% to +73%, but what I'm finding really interesting as we continue to fall on the legs up in the SPX is the readings on the downside, the last one was at 19% of all NYSE stocks were above their 40-day moving average, meaning 81% were below it and this as the SPX is +24% higher than at the November 16th 17% reading when the move started!

As far as the areas I showed you last night when I said I wouldn't be surprised to see us higher at least until Wednesday which was based on resistance areas, well the NASDAQ and IWM have already completed the task, the Dow and SPX technically have as well, although not as impressive as the IWM and QQQ which is pretty much almost exactly as described as the "VERY STRONG" move up, setting up the last move up and loading the truck up with shorts.

Beyond that we're now at futures which as I showed last night already look horrible, the $AUD didn't give much of a show today, thus I think the SPY Arb was needed.

1 min everything is pretty mellow, the sharp behavior was seen in futures as well today, for example...

NASDAQ 100 futures (5 min) in red during regular hours.

Like stocks, the sharpness of them didn't show up in the longer charts, not to say they don't look bad, just didn't have this kind of character today just like the market.

It's taken me several hours now to get these charts loaded so I'm going to reset my computer, call my Internet provider and see what the deal is. If I see anything in futures that looks really interesting I'll either post them or I'll at least do a written update.

IYT & DJ-20 (Transports)

I DID NOT add to this one today, but I think overall we could have and the position would be fine even with a false breakout. I do have a put position open and that influenced my decision a bit as there's already exposure.

The three things that stand out here is how ready all of the charts are, how strong confirmation is between IYT and DJ-20 )(both Transports) and that "general tone today", as you can see I'm not cherry-picking any stocks, I'm just showing you what we were looking at today and it wasn't based on today's tone, it was based on the overall position.

 There's a very strong ascending triangle here which according to technical analysis is a consolidation/continuation pattern so technical traders will be looking for a breakout to the upside where there is another resistance zone that "could" be tagged.

The reason I think some patience makes sense here is the overall timing, I think we are really close, but may be have a day or two more several positions clearly look like we have a bit more time (I originally thought last night it would be best to be filled out by Wednesday or thereabouts). Another reason is it's just fact that with a pattern like this and the distribution signals, about 4 of 5 times we see a false breakout so if I look at the position from a perspective that is not rushed, not emotional, this looks like a perfect trade to stalk and let it come right to us.

Here are the IYT and DJ-20 signals showing IYT is clearly ready and also the shorter term signals show the tone of today, again not cherry picked at all.

 DJ-20 shows the tone of the sharpness of the downside 3C move.

IYT 3 mins shows a respectable divergence to the left and an even more desperate looking one today.

 DJ-20 5 min shows a negative divergence over 2.5 days and one simply today, very sharp.

 IYT 10 min (Note all the timeframes are falling or fallen in to place) again shows a strong and even stronger negative and on a 10 min chart today.

DJ-20 30 min with accumulation and a VERY sharp leading negative divergence, playing out the 4 stages so far nearly perfectly (accumulation, markup, distribution and next, decline).

IYT 60 min, this is a long and strong timeframe, the divergence is very respectable, I'd say any break above the ascending triangle and you have what I'd literally call a "Market Gift".

AAPL Update, New Website Detail and Overall Character Today

I'm back, I don't want to come off as a whiner, but I hate needles. My mom worked for an ENT and they did allergy testing on me (because my mom worked there and it was free) when I was 8 years old. From what I recall they had something like a stamp with multiple needles and me screaming, ever since then I'll do nearly anything to avoid a needle. So when the  Phlebotomist told me, "I'm going to use a thicker gauge needle because it will go faster" how about just not saying anything!

 

In any case for the third time in two days an order (market) didn't fill, this time it was the AAPL long equity position which I intend to see through as a longer/stronger counter trend trade, but until it looks like it has pulled back and is ready to run again, I think it's opportunity cost.

By the way, one of the things on the new website will be a window off to the side that will show any positions that were opened closed or otherwise changed with a link to the post so you don'y have to go looking around for what may have happened.

 I was watching today to see if the 10-15 min charts got worse, this 15 min chart is worse, but it wasn't the greatest concern short term.

The fact that the divergence now spread to the 30 min chart tells me it's healthy, it's growing and sitting in AAPL as we get a move to the downside no longer makes sense from a risk and opportunity cost position.

 There's even some deterioration on the 60 min chart that wasn't there.

This is the overall tone market wide today that I mentioned earlier today, a sense of priority, things moving along at a faster, stepper pace which makes sense considering yesterday's article and the many observations made.

AAPL 1 min, I'm not so concerned with AAPL itself, it's just a way to show that this tone was pretty much everywhere to one degree or another.

 AAPL 2 min

AAPL 3 min

It seems to me late day. there was a distinct effort to distribute AAPL to some degree, not a trend change in the counter trend bounce (overall), but perhaps for the same reasons I wanted to close it.

Today's exit of AAPL Calls from Friday was near flawless, before any momentum was lost, the position was over for a 50% gain with 2 hours of market exposure, I encourage you to have a momentum screen like the one I showed you today as another tool to help out in these situations.

Ideas

I need to go give blood now, the place closes at 4 so I'll be back shortly.

As far as trades that are ready or very close, TECS (long) is close, XLF short or FAZ long is close, GOOG short is much closer today, IOC I think has some more upside, but very speculative. I'm going to take off the AAPL long equity position for now.

XOM, already a core short I believe is in place now.

Went With USO Aug. 17th $38 Puts

Trade Idea USO

I'm leaving the DTO equity long (half size) in place, but opening a USO put, kind of along the lines of Friday's AAPL position closed today.

I'll let you know the strike.

Market Update, 3C Screaming

Although it's only a 1 min chart, this is what it looks like when 3C is giving a solid signal, here intraday.

 DIA 1 min

SPY 1 min

no comments needed

Ridiculous

If this isn't a tale of two cities, I don't know what is, but I'm glad to see it.

 SPY Arbitrage which is the intraday lever of manipulation bu sending TLT and/or VXX lower and HYG higher or TLT/VXX can stay the same and HYG higher, there are a number of combinations, the point is the lever is being pulled to support the market.

At the very same time, institutional risk assets that retail doesn't trade are telling us something else, something "Big picture"

Context for SPX futures is negative 45 ES points!

Transports

This is the other because not only does IYT look horrible, but it's counterpart the Dow-20 looks exactly the same.

However this is a bigger pattern, I already have a partial position in place, I think the right thing to do is to be patient as much as I really want to get this underway, we're on Mr. Market's schedule.

I think the ascending (bullish Technical price pattern) triangle is just too well formed and there for a reason, as you can see on a 30 min chart and as I said before I have about 5% doubt that it's not a head fake move when it goes which is about 80% probability. So I'll wait here.

Going with Half TLT Long Equity Position

This is the only chart keeping me on hold with TLT, which I have been interested in for months in one way or another.

 a 5 min chart that is honestly in line.

So if we get a pullback, what is it, 2% at most?

That is holding me back from a 4 hour chart that looks like this?

I don't think that makes sense.

I'll go with half a full position in TLT long and the second half will either be Equity or perhaps Calls.

TLT, IWM, IYT, HYG & VXX - SPY Arbitrage

The Q's are one that look a little more advanced than others today, the IWM as well as it is a similar concept to the IYT set up, but usually these aren't breaks that you have to measure, you can see them pretty well, they are means to change confidence and a little trickle doesn't do that.

Today the trades I'm most interested in are IYT short/Puts (add to Aug Puts) and TLT long (not sure if I want calls or a straight long, this is a long term position).

HYG and VXX are definitely being used in the SPY arbitrage to support the market, perhaps that's what that 1 intraday negative divergence in TLT that has me waiting on it for a better price is all about, but when I think about the kind of trade TLT is and the longer term nature, I'm starting to think getting in should be more important than possibly getting a little better positioning.

 SPY Arb lever of intraday manipulation is being pulled, so far only HYG and VXX have responded, TLT seems to be holding its ground which I like.

I was going to feature the Q's as the intraday damage there is clear and worse, but this (IWM) reminds me of the IYT position that I'd like to get in, I think we have time, I was planning as of last night to try to get most positions in place by Wednesday, but I'm more interested in putting a position in place when it looks like its ready to go.

 IWM in a similar intraday situation as IYT, the triangle in UYT is more obvious, but the IWM is more watched, the concept is the same though and the IWM started.

This is what we are looking for on these moves (IYT as well), the 1 min lower at the break above resistance.

The 3 min lower at the same area.

The 5 min clearly lower and a strong timeframe for that kind of move today, in fact in about 2 hours!

The 15 min was already in place so it's just short term meeting up with longer term charts and longer term charts migrating and getting worse so as you see the blue arrow I drew in, that's the kind of move I'd like to see here, at some point not to far off (perhaps tomorrow/Wednesday) the 15 min+ charts will look like the 1-10's I showed today with almost a desperate look to them.

As far as TLT. I do have to get blood work done and will be stretching it to leave here at 3:45 to make it (the office closes at 4), but  I'm not going to rush TLT, but I'm also not that concerned with the PERFECT entry on a long term position like this, I'd hate to miss it because of a few cents.

Currencies

Most of the averages have been fairly flat most of the day, the AUD of the AUD/JPY which is the pair that drives market risk was showing some 5 min intraday strength earlier today and nothing beyond that, it's like the AUD/JPY pair are in a downtrend that briefly bottomed to make a run uop and that's the accumulation period that was so quickly destroyed that I talked about last night.

In any case, the AUD still is struggling to get anything done, only some weakness in the JPY seemingly will help the pair and the market (AUD/JPY =AUD long/JPY short).

That's what I see right now.

Nikkei futures in general still not looking good, they look as if they are topping out.

Transports Trade Idea

I already started a position in IYT with Aug. $113 Puts, I'm tempted to add to it right here, but I have a strong feeling &75% chance) that there will be a brief, but better entry and I'll show you why. DJ-20 (transports) confirms all of the IYT charts so there's good confirmation as well. I wouldn't be surprised if transports broke first as a sort of leading indication.

 IYT 1 min overall trend is interesting, but so it the desperate action Friday and more so today like a lot of charts today, it's the character of the day.

 IYT 3 min, again such a sharp drop off, this is actually a position I'm really excited about.

IYT 10 min, this doesn't surprise me as we see a lot of this throughout the market in the 10-15 min area.

DJ-20 just as some confirmation on a 30 min chart leading negative, you see why I'm excited about this position?

DJ-20 now seeing the 60 min give it up as well, that 30 min should migrate very quickly through the 60 min chart.

This ascending triangle (and they have been everywhere today) lookds like a 75% chance of an upside breakout, but with all of those charts above I can already tell you there's a 95% chance it's a head fake, but also the best place to enter.

Since I already have a position started, I'll set an alert and only add to IYT Aug $113 Puts if that breakout comes.

TLT - Still Interested

So as I have said for a long time, when the time is right, I'm interested in TLT long or some leveraged version of that, the only two long leveraged versions are TTT and UBT and if you take a look at their volume, you tell me if you'd touch them. Ideally I'd like a 2x leveraged ETF, short TBT maybe? Long dated calls?

Here are the charts, if I knew what asset I'd like to use, I'd consider starting to build a long position in TLT (20+ year treasuries), I do think we can get it at a little better prices, that is why I'd consider this a phase in, but timing wise, I'd like to get in to some exposure within the next day or so.

 TLT (green) vs the SPX (red) and as you can see on the 10 min chart there are a few areas they trade together which seemed/seems strange, the very last move down in TLT was sharp and hastily, but firmly put together, TLT down gives the market/SPX an upside lift. Something went on here as I showed last night. However if we take a look at the larger trend and this is the one I'd like to be in position for...

 The issue of "Trading together" is not an issue at all, in fact this chart makes good sense, this is also the timeframe I'm considering for a position so a longer term position in TLT, I just need to find a way to leverage it up a bit, a 2x leveraged ETF would have worked, but volume is too low. Perhaps some long expiration calls, in to 2014?

This is UVXY, when it and/or TLT move down they help the market move up, they are also both flight to safety or safe haven/protection trades. Look at the UVXY/VXX 5 min chart, the area of the first divergence I showed several times and last night and the leading positive.

UVXY 15 min chart looks very similar, very strong as it looks ready to make a long term move to the upside.

 I know the timeframes are a bit different, but TLT 30 min looks a lot like VXX / UVXY. It even has the same two divergences where it looked like we'd get the initial reversal we originally expected.

TLT 5 min as shown last night shows how fast distribution worked in and how deep, it was already at the area where price gapped down too before price even moved down, so massive distribution, something changed really fast there and across the market, this of course is market positive.

 The same on the 10 min chart, all the way down to where price gapped, a true leading negative divergence. Now there's a leading positive in place.

 The 15 min also went leading negative to the area price gapped to and in 2 days, that was a huge and fast move. However we are also positive in the area, it's like someone knew or needed to push the market higher, but knew it was a ginger-bread house and accumulated TLT almost as desperately as the distributed it.

As a longer term trade, this is why I have NO problem starting a TLT long here, however, I do think it will pullback a bit more.

The long term 4 hour trend tells you everything you need to know, there are only 2 main divergences on this chart, the current one says TLT is a nice looking long prospect.

 Intraday 1 min looks strong in the same way that many of the market averages and stocks look week today.

It's only this 5 min chart that suggests a pullback to me, otherwise as soon as I figure out which asset I like the most for TLT long, I'll likely start opening the position.

Thoughts? I'm leaning toward 2014 calls.