Closing Charts

This isn't the "wrap" post for the day and I have some other posts in mind. I can hear the rush of water over the falls. This is actually quite a stressful time as head fake moves can be much larger or more intense than you'd imagine and on the other side of the coin, once the market is this broken, the herd (I mean the institutional one of hedge funds that all follow each other) starts to grow restless and there's a "He who sells first, sells best" attitude, this is what happened with AAPL; the result? A VERY unpredictable market and this is exactly why I prefer to be largely in position by now.

Of course we want the best positioning in the most profitable looking positions, rather the highest probability trades which encompasses profit, risk and timing.

This is a quick look (very quick) at what we are looking at, maybe  some idea of timing and I'll add to this in subsequent posts with a daily wrap as well as position and new idea coverage and approximate areas.

Here are a few of the other averages, I want to show you the difference.

This is ES, the S&P E-mini Futures with a negative divergence intraday at the highs today as well as a leading negative divergence in to the close, looking at charts like this, I feel a sense of urgency like, "We must act quickly", but acting out of fear, "fear of missing the move" is as bad as any other emotional decision in trading. The truth is, there's always another bus coming along in 30 minutes.

In yellow I'm going to extra lengths to point out, there was no intraday positive divergence at the low/reversal today at all (a theme that runs throughout the market today). Typically the 1 min/intraday chart is used to call exactly these kinds of moves, but there was no institutional risk taken on from what I can see.

Overall, this chart does make me feel a sense of urgency, but again, emotions don't serve you well in trading.

 QQQ 1 min intraday is leading negative, the point being is the intraday timeframes are more timing than anything, it's the long term charts that show how broken the market is, the short term charts tell when we are closest to the actual price reversal.

This QQQ 30 min chart is just presented as it is a very clean trend, it shows only the divergences at the turning points precisely because the amount of accumulation or distribution at each turning point is very significant, all of the very small divergences have been removed.

 SPY 1 min intraday shows a very clear, very negative divergence today that is leading price making it the strongest type of divergence. Again, around 1:30 when price makes the intraday low before reversing for a move up, there is NO POSITIVE DIVERGENCE AT ALL!

Even very small intraday moves on light volume typically have some small divergence, this essentially tells us that other means were used to turn the market (I know of at least 1 ) which keeps smart money from having to invest anything long at this point.

SPY 15 min trend starting with a series of head fake moves around the triangle to the left as we suspected at the time. There's a small positive divergence, no where near larger enough for a move of this size, but our original expectation based on the charts was for a downside move around July 8th with the final new highs or VERY strong upside move to follow.


Something drastic changed in the days leading up to the 8th right before the minutes release, it seems they cut out the downside move that we were expecting out, there's a lot of evidence the market was already in the midst of making the downside turn when something changed.

Instead of a downside move that was to act as a sling shot for a very powerful final move up, they just levitated the market in the overnight session using the AUD/JPY (which I said last night, was weak and not going to move the market anymore) . There have been other means to move the market since including the SPY arbitrage, Bernie jawboning, etc, but there's no real risk on demand left at all.

 The 1 min DIA is clearly negative on the move up-smart money sells in to strength and buys in to weakness (they get better prices and they need the demand and supply to fill positions as large as theirs).

Note near the EOD or afternoon there was an intraday positive 3C divergence in white?

 The DIA 10 min is VERY clear as to which way money has been flowing on this last move, especially since just after the expected down turn, at that point the original accumulation at the start of the move would have been exhausted, luckily they can sell short and MM's/Specialists can go naked short.

The distribution since that move has been staggering.

Finally the divergence may not look as powerful, but on a 4 hour chart this is one of the strongest you'l see before daily charts. The trend is so clean as few other divergences were strong enough to make it to this timeframe, but the downside negatives are very clear.

We can't even see the smaller, but still decent size positive that kicked this leg off.

The point here being the market's fate is sealed as far as the strategic view goes, only some very small intraday positives today kept the market from falling apart, the DIA and IWM were used to lift the market intraday or at least to put in the divergence that "could " do so.

 Here's the 1 min version of a similar positive divergence in the IWM through the afternoon, this kept the market together, but it is an exceedingly small timeframe and amount, it doesn't stand a chance vs. the longer charts, but it does give us  (probably) some time to enter positions on strength like AAPL or GOOG mentioned.

 IWM 2 min shows the divergence, but much smaller, this means it was a very small divergence.

At  3 mins there's nothing, that is an exceptionally small divergence, I'm shocked it was even effective.

IWM 10 min with today's move being what I pointed out earlier in asking you what you saw, an obvious head fake move confirmed with strong distribution. This move in the IWM's situation popped out of a bullish continuation triangle meaning retail would likely have bought what they were selling today which is of course one of the main points of a head fake move.

IWM 15 min

IWM 2 hour, that's the big picture and it isn't pretty.

Addendum...

I would however, as you already know I've been doing, would want decent exposure by this time in positions that were entered at favorable areas, even if they have a little draw-down, that's fine.

The IWM Is Giving a Gift

It looks like the IWM is giving us the gift of time and better entries. None of the other averages saw any kind of strength today which is great for us and current positions, it also gives us a bit of time to work out the best new positions, AAPL was one under consideration, GOOG and more than that be posted.

I'll post the charts next that show what I'm talking about above.

Patience is key in emotionally charged moments like this as we are getting close enough to hear the falls.

GOOG Position Update

I already started a short in GOOG as I think it has good potential, I'm open to adding to it, so long as the position is high probability/low risk.

This is yesterday's update for GOOG, you'll find a lot of the charts and what we were looking for to happen.

This is a position that I chose to phase in to, if I was interested in it and didn't have any, I'd have no problem taking something like an initial 1/3rd of the intended full size position (Again, risk management plans come first before any entry is made, we don't dollar cost average losers).

I need to take a closer look at the market, but I believe GOOG just put in the first half of what we call a "Crazy Ivan" shakeout, if so, then GOOg's tactical entry is very close, strategically it's already in the right area with the right signals.

 15 min chart...

Head fake moves are to create some movement, they often hit stops or breakout highs that they know retail technical traders will buy, this gives them the volume they need to get in to position, that's the main thing about head fake moves, we are turning a jet ski on positions, they are turning an oil tanker and need to create volume at advantageous prices to get in or out of positions.

The first move took out stops as you can see by volume, the most recent move 30 minutes ago took out another level of stops because they are so predictable as to where they will place them and it you put your order on the books (limit), there's a good chance they see yours and where everyone else has congregated, usually at support/resistance , moving averages, price pattern breakouts or breakdowns and popular moving averages like 50 and 200.

Look at yesterday's post linked above and you'll see the price level I wanted to see hit before I'd consider adding to GOOG short, that area was tagged already. The 4 hour relative negative positive at the recent new high is the exact reason I wanted to see price move there, I had a good feeling it would be sold/distributed in to the move making an ideal area to enter your own position as it gives you a great entry and a lot less risk.

 The 30 min chart, we already went through this yesterday, the most recent run to new highs has had no real support and has actually been sold or shorted in to (they both come across the tapes as sales) higher prices as is their custom.

Right at the last stop run we have a 15 min positive, this means there's a good chance GOOG makes another run to the upside and that's where we can likely find a high probability/low risk position.

If you view GOOG as a long term trade and you have good risk management and decent risk tolerance, I'd say entering GOOG short here may not be the ideal timing, but you are in and the probabilities are extremely high that in 6 months or a year, GOOG will be significantly lower.

Remember you are responsible for paying any dividends that come due while you are short the stock, luckily GOOG has none.

 The 2 min intraday also looks like a little stop run was exact;y what was going on this afternoon, which would set up (most likely) a limit run on the upside, consider they are selling in to strength, that's also the highest probability/lowest risk entry.

$910-$911 or greater would be an ideal area to enter GOOG short, but of course entering here at $907 really isn't that big of a difference, about half of a percent.

I'll set alerts looking for the move, I would consider having GOOG on your radar, even if it is only a handful of shares, it's the percentage move, not how many shares you control, that counts.

NASDAQ 100 Short

If you're not using options which in this case I prefer not to, then you can always use a 2 (QID) or 3x (SQQQ) leveraged ETF. I do prefer some leverage until I see what's going on in the initial move's relative performance, sector rotation, etc. then I prefer a straight equity short for this reason, Making More Than 100 % In A Short.

As for the Averages, they can give good, broad coverage, the DIA short or (SDOW 3x leveraged bear Dow-30) has large cap exposure.

The QQQ (QID 2x short the QQQ or SQQQ 3x short the QQQ) gives you a lot of tech so be careful about being long TECS and SQQQ at the same time, that's a lot of tech exposure.

SPY or SDS (2x short SPX) or SPXU 3x short the S&P 500 gives you good, broad overall coverage, some large cap, some financial. I'd be careful with something like long FAZ and long SPXU as the SPX has about 22% of its weight in Financials.

The IWM short or TWM long (2x short the Russell 2000) or SRTY (3x short the Russell 2000) gives you broad market coverage, this also tends to lead risk on or risk off moves, it probably will be one of the earlier  better performing (on a relative basis) shorts.

As far as the one I like most RIGHT now, if I had to pick one right now and not look at it for a couple of weeks, it would probably be the NASDAQ 100 short, I'd choose the 3x leveraged SQQQ for the initial move down and then switch to a more specific short.

The overall market updates can act as an entry, or if you have decent risk management and don't get emotional over day to day or intraday moves, then I think SQQQ long could be bought here.

There's a very good chance of a head fake move below the recent range at least on an intraday basis, but if I'm really looking at the big picture, I'd probably rather sit through a little "possible or probable draw down, especially if I've spent some time to set up good risk management with an initially wider stop, rather than missing out on the bigger picture). I try to giver you the best of both, but this looks so close I'd be remiss not to mention it.

SQQQ 3 short the NASDAQ 1000 (long)

 The intraday 2 min chart is in a good overall leading positive divergence so I think near term timing is excellent.

The only reason I'd suspect an intraday head fake move is for the very reasons in the two articles I wrote and posted on the member's site, the head fake acts as a charges or capacitor to get a move jump started.

 Note the 15 min leading  positive, but also the nice "Rounding bottom", that is the reversal process. A head fake move would be below that to hit the stops.

I would consider phasing in also if you don't have short exposure and are looking to start some, but you must make phasing in at potentially lower prices (this is the idea) part of your risk management before you enter. The idea is you have some coverage, but if we get a head fake, you get a better entry level with better timing, as I said, It must be part of your risk management plan before you enter the trade, not a reaction to a losing trade.


 This 15 min leading positive is one of the reasons I don't mind holding some of the short exposure already added, this suggests a very large upside move for SQQQ and down for the Q's / market.

 The 30 min chart's trend confirmation and positive divergence just make this a stronger signal

The same with the 60 min chart.

Overall, I'd want to have some exposure at this point, but a head fake move is seen about 80% of the time in a reversal so I keep a wide stop, my position sizing allows to add at a lower price (not a lot, but enough to shakeout any current longs ).

Quick Market Update

This may allow some positions like AAPL mentioned earlier, it needed price upside with continued 3C negative divergences.

None of the averages had a positive divergence on even a 1 min chart for an intraday reversal except the IWM which as pointed out earlier, has been holding up the best intraday, but this won't change the damage done.

After this post, I'll be looking specifically at positions in place and possible new ones as this is that kind of an opportunity.

 SPY 1 min would be the easiest place for a divergence (or short term accumulation by a market maker or specialist just to turn price up intraday for an hour or so), but even here there's no positive divergence, just trading in line at VERY best.

SPY 60 min has seen a huge leading negative divergence VERY fast, this is very negative for the market.

Even ES / SPX Futures didn't show ANY hint of a slight positive.

 The 1 min IWM does show a positive divergence intraday, no other average shows anything.

That divergence isn't going to change anything about the IWM negative/trend reversal signal above and this is a 15 min chart.

This is a decent time to look to short in to price strength and technical weakness.

SPY $171 Weekly Put P/L

This was meant as a position to fade the SPY's early strength intraday, I'd never go for a weekly expiration for a position I intended to hold longer and as most of you know, I want to get out of an option position as soon as momentum starts to die, *I can always re-enter the position later. The less time spent in an option, the better as far as I'm concerned.

I was not watching the SPY closely because I have responsibilities to everyone, not a single position so I missed the most opportune time to exit.

I'm going to show you some of the tools I used to make my decision and you may find them useful, remember these can be used in any timeframe for any kind of trade.


First the P/L which was not as good as it could have been.

The gain could have been over 20%, instead it came in  at just over 12%, momentum really counts.

 First, I said, "Don't read too much in to this", there wasn't anything reversing or going the other way in the SPY.

It doesn't often work out this way, but I think planning your trade and trading your plan are important, I always want to take as much as the market is giving, but for the way the position was structured, I should have closed it earlier.

The NYSE TICK data is such a simple tool that so many people don't use and it is useful. As you see the TICK's trend changed, that's a change in character meaning a change in trend is likely (even though we are only talking about 1 min intraday-it was the timeframe the position was set up for).

 This is the general momentum screen I use, in the top window with price is a simple "Momentum" indicator, then RSI 6 (I don't want to use what every one else uses because I don't want to see the same thing, there's no edge there). I usually use longer periods, but Wilder's RSI (Not to be confused with the Relative Strength) does not respond well in longer timeframes.

Next is a simple MACD Histogram, the periods are 26/52/9 so they are longer than usual, sometimes I'll use 52/104/9.

Then a normal Stochastics, but this is period 50, sometimes I use 100 period rather than 12 or 14.

All indicators are used as divergence indications, not their more typical applications.

 Again, a VERY SIMPLE momentum indicator that no one uses because it's "old"; Rate Of Change. If you are using Worden software you can't apply ROC directly to price, put a 1 bar moving average on price, make it invisible and apply ROC to the 1 bar moving average which is the same as price. The divergences in price/ROC are a great signal.

The longer term Stochastics 50 period reduces noise and shows trends, divergences here are all I care about OR embedded Stochastics. *One of my best testing/performing trading systems only goes long stocks that have stochastics embedded above 75/80 and short stocks embedded under 25/20, as soon as they move away from the embed, the position is closed. THIS IS NEARLY THE EXACT OPPOSITE OF THE NORMAL APPLICATION FOR STOCHASTICS.

Here too, I'm only interested in divergences.

Note the Doji candlestick, these are still very useful in my view. The thing that makes these candlestick reversal patterns the most effective (especially upside ones like this) is a simple volume spike, think of it as "mini-capitulation" or for a top turning down, "churning"

Closing SPY Intraday Put Position

Don't read anything in to this, it was meant as an intraday trade, I'm closing it.

Market Update

So far this is looking pretty good, I feel fine with positions opened this week and think that we are moving toward the end of the bounce we first got intraday signals for as early as 10:45 (first suspicions) on Tuesday.

I intended an intraday update, but added a little more as the charts added are relevant to recently discussed positions like Treasuries / TLT long as well as the arbitrage signals both intraday (as I kind of suspected last night as there weren't many currencies to drive risk (you may recall from last night's futures update) and for the current leg toward the reversal pivot.


The SPY Put opened earlier as a "fade" trade is at a +15% gain already, I could take it here and be happy, I'll see how momentum looks.

I captured the DIA last and took more charts as the arbitrage assets were captured second to last and some of them had some longer term signals so I figured I'd follow them up with the DIA.

Determining market flows, probabilities, risk, timing and rotation is the first job then finding assets at a high probability/low risk entry (often difficult trades to enter emotionally) is the next job.

DIA

 The 1 min with some late day accumulation, but limited and nothing has changed , the negative continues to lead.

A longer view of the DIA 2 min, note the flat range and 3C's positioning during that flat range as usual.

What does price and 3C look like to you at that yellow arrow?

DIA 3 min, you may recall earlier in the week there were signs of intraday accumulation, it actually started first with market psychology concepts and technical price patterns in AAPL, then was followed by actual divergences several hours after the first posts looking for a bounce were actually posted.

The intraday movement is what I'm interested in here, MIGRATION of the newest divergence - the 5 min going negative intraday is significant to the migration process.

A longer view of DIA using a 10 min chart, a much stronger timeframe and divergences than anything above. The accumulation period (stage 1) is clear to the left, the first signals of a relative negative divergence as well as some major changes in that area like the unwind of the AUD/JPY carry trade and many other very sudden changes.

Again, but on a longer timeframe (as the market is fractal), what does that range in the red box as well as today's move and the leading negative 3C divergence look like to you when you pull them all together?


IWM (first charts captured)

 1 min intraday showing some late day positive divergences in the final hour of trade, we have a negative and as the market saw a slight bounce earlier, it seems the only place there's any sign of strength (even very small signs) are right here on this 1 min IWM chart. Overall, Leading Negative.

IWM EOD positive yesterday and now the 3 min chart is seeing some negative migration, this is good as the IWM's intraday charts are the strongest.

QQQ

 I'm trying to show the intraday negative today as well as the first hints of an intraday signal for a bounce that we saw.

 Again I'm trying to show some trend on the 2 min QQQ, but the ,migration of the negative is VERY clear today with a near vertical leading negative divergence.

 QQQ 3 min intraday is flat or in line so far, we need to see this turn negative and migrate through 3 min

The QQQ 5 min chart shows VERY clear distribution. more interesting is the new leading negative low hit today, remember the 5 min timeframe is about the fastest timeframe depicting institutional activity.

SPY

 Again showing the original positive we saw Tuesday I believe and today's leading negative as the SPY has been one of the worst today.

 If that SPY 2 min chart's divergence today isn't a clear sign of migration and a building negative divergence, I don't know what is.


As for the Capital Context SPY Arbitrage model based on : HYG (credit), VXX (Short term VIX Futures) and TLT (20+ year Treasuries) shows clearly the invisible hand pulling the lever as I suspected would need to be done last night as the risk driving currencies all looked like they could push the market no further.

You can see the positive SPY arbitrage to the right, just below +$.50

As mentioned, Junk Credit (High Yield) trades almost exactly like HYG (High Yield Corporate Credit), even their 3C signals. However JNK IS NOT AN ARBITRAGE ASSET SO THERE'S NO NEED TO MANIPULATE IT, making JNK well suited to showing early credit sentiment.

"Credit leads, equities follow".
JNK

 From the earlier positive, JNK has clearly been seeing distribution in to any price strength.

Regular High Yield Credit which is less liquid shows the same.

High Yield (risk on) credit on an influential 15 min chart is clearly navigating risk sentiment, "sell/short, in to any price strength". HY Credit is also not used as an arbitrage asset.

ARBITRAGE-short term market manipulation... For supportive upside market arbitrage, HYG needs to move up; TLT and VXX need to move down. For negative arbitrage (rarely used) it's the opposite.

HYG

 HYG'S INTRADAY CHART WENT NEGATIVE EARLIER, IT HAS ONLY GOTTEN MUCH WORSE SINCCE.

HYG  2 min chart is CLEARLY showing migration and a leading negative intraday signal.

HYG 3 min is seeing migration as I was hoping to see

As is the 5 min chart, this is where we are at a pretty serious level for the bounce move started 2-days ago.

HYG 10 min intraday simply means there's strong underlying flow (distribution) for a 10 min chart to go leading negative intraday.

HYG's 15 min trend, the recent distribution has made it pretty clear what they've been doing with HYG, I doubt there's much selling of long positions in to strength and likely more short selling at this point.

VXX needs to move up for the market to see weakness or rather is a sign of market weakness.

I'm fine with yesterday's position, the intraday chart is VERY clear about the signal

UVXY's longer term 15 min trend (same as VXX just 2x leverage-used for confirmation) is also very clear about the highest probabilities for the next leg.

XIV trades opposite VXX / UVXY, the intraday trend here is leading negative so short term reversal signals building in VXX and UVXY are confirmed.

TLT- Treasuries...

 You know long term I like TLT long a lot, short term I have felt as mentioned again last night, that treasuries will pull back. This 2 min positive I believe is help on the SPY arbitrage, turning it negative.

This may also be accumulation of TLT at lower prices as I would suspect.

 TLT 15 min from the first real pullback we knew was coming (to help the market make new highs), to the very sudden shift just prior to the 8th of July, to the recent pullback expected.

As I said this week, I view any pullback in TLT as a gift.

TLT 4 hour long term is showing why I have been interested in TLT long recently.