Not Sure What Retail Was Thinking

Maybe we can get a retail sentiment update (Sam?). What I find interesting is there were very few positions this week, today AAPL and QQQ both worked, but lets face it, they weren't huge gains.

The last I heard, retail was at multi-month highs in their bullishness so I'd think they'd be playing along with similar positions, however it's pretty plain to see that we were not thinking the same thing when comparing rank which is my way of seeing how retail is or was positioned and thus what their sentiment is.

So that's #12 of 666 (oh, that's creepy) and it's not an insane percentage gain.

 The only thing I can think of is other positions in the Options Tracking portfolio that they would not have been in, saw a lot of improvement and increased the overall performance for the week, positions such as:

HYG August Puts as HYG (Credit and very important to us right now) dropped -0.85% today which doesn't sound like a lot, but for HYG that is significant.

USO August $38 puts as USO was down -1.81% today and even more the last 4 days, I doubt too many on the retail side would be short USO. DTO  which is the equity part of that position (long) was up +5% today.

IYT August $113 Puts, IYT is down over 2% over the last 2 days and looks great (I'd like to add on some price strength/3C weakness) and TLT is a major add-to if it will just come down a little more.

XLF August $20 Puts, they're down nearly -1.4% off yesterday's open.

In any case, I don't think it's the recent call positions that are making the difference, I think retail probably was very bullish and the positions above are seeing significant improvement. That's the only thing that makes sense to me unless someone has some idea of what the tone was toward AAPL before earnings yesterday among retail.

In any case, I have a LOT to do before leaving tomorrow through Sunday on my first vacation in well over 3 years, it's actually a birthday present to my mother and brother! It's like I bought my wife a bowling ball with my name engraved in it... 

I will however take a look at the market and try to give you some more basic themes and ideas for the rest of the week, Friday tends to be an op-ex pin and kind of slow until late afternoon and Thursday tends rto close near Friday's pin.

I'll be back with a little bit more shortly and I'll have my computer with me, I'm sure I'll peak in on the market.

VMW Charts

I was asked to look at VMW because it's moving significantly (up right now about 18%, but even higher earlier)  on apparently no news.

I will remind some of you who have been around a while, we bought RIMM (when they were RIMM) right before earnings because of the positive divergence, earnings stank and RIMM fell about 9% or rather our position, but I didn't close it for 1 simple reason, the positive divergence was larger and larger , something was going on.

Later RIMM had a big management shake-up and it flew higher and we made money on the position, but 3C was reflecting something that was assumed to be earnings, it was actually someone knew a month or so in advance that this major shake-up was coming so VMX "could" be a situation similar to that.

I would not chase this, but I will show you the charts out of interest.

This is an odd one and the kind I love to find, clearly something changed here and caused significant investment in VMW, what that is, I have no idea, but it's these sudden changes or character like AAPL Monday that are real edges, even though you'd still have to wait a bit for it to pay off.

 I used the cleaner version of 3C for the daily, although the regular version shows the same, the divergence in my view was perhaps starting months earlier, but there's a "Bowl" shaped area through July, this was the key, this is where something really changed and that is where that white arrow is pointing to accumulation, not along the entire stretch of the arrow, I'm just pointing out the relative divergence between price and 3C at two points (the left and right side of the arrow).

 A 4 hour chart is super strong, as you can see there's some sort of more traditional base trying to form since Feb and at the right pace, but June/July sat that bowl, something big changed to move a 4 hour chart like it was an intraday 1 min chart.

 The same with the 2 hour chart so we've established there was major investment here very suddenly (over a month or so).

The 15 min chart offers more detail than the longer charts, clearly this bowl is where accumulation was largest, look at the range. If you want to find stocks that are seeing institutional activity, look for flat ranges like this, there is a reason for it.

There was a final burst of accumulation right before take-off.

The 5 min chart has more detail, it's a steady stream of accumulation through that entire period.

Intraday - 2 min, there has been some profit taking, but no major distribution.

This may be a good one for my X-Over system, wait for the first pullback to the 10-day with positive RSI and my custom indicator, but the other two indications work well too.

Market Update , HYG and AMZN

A lot of people are asking about AMZN, it has held together well today. AMZN does not look to me like AAPL looked, AAPL looked like an earnings leak, AMZN looks like it is in sync with a short term market cycle, it may even be a leader. As far as earnings go, I would not dare to venture to make a call, but I do think that if Wall St. needs AMZN positive to help the market near term, they can make that happen no matter what the earnings are. After hours is easy to manipulate and retail doesn't care what the earnings are if AMZN is moving up, they'll just say, "It beat the whisper number". It may in fact beat and have a good response, but that is not what this is based on.

Also as I said, I personally WOULD not be trading much of anything long here, I'd be patient and be waiting for any potential / probable short term price strength  so I can use that to get the best tactical entries on short positions I like or want to add to.

HYG is making another attempt, this time it's not as far along as the earlier attempt, but price action looks much more conducive to accumulation (short term).

The market averages I'll just do a written update. The SPY is clearly positive to about the 3 min chart, there's some relative positive on the 5 min, but I would not consider this as anything significant; 3 mins IS enough to make a decent move, look at AAPL, it was only 1 min then made it to 5 min.

The QQQ is positive to 5 min (clearly).

The IWM, the same, 5 min so again, this is similar to AAPL at 5 min, I think it's enough short term and "IF" they can get the SPY arbitrage turned around that will also help as well as AAPL maintaining or gaining and I'll look at that in a moment.

These AMZN charts are about 7 minutes or so old, but they are still valid.

 AMZN 2 min has gained, it could use a bigger base, but it has at least some approximation of a "W" base.

AMZN 3 min looks good on its own, if the longer charts weren't so troublesome I "might " consider a call play (very quick trade like AAPL).

The AMZN 5 min has added to its positive divergence so I think that's enough to move AMZN.

 A move above the recent top is an area I'd definitely consider adding to a short, because the base area is rather small, it may be hard to get up there.

And why do I have confidence to make a move like that?

This AMZN 15 min chart speaks volumes, there's been no adjustment to it at all based on today's action and it's leading to a new low.

GOOG Update and P/L

I'm not doing a full GOOG update as I have done several recently, GOOG is a core equity short position.

The GOOG August $910 Put position was opened this Monday (July 22) around 3:30.

Here are some short term charts, the thing that bothers me with GOOG for "this" put position is the loss of momentum and the possibility of a QQQ gap fill which would likely cause the major bellwethers to at least draft the market to some degree.

 2 min with several accumulation areas, these are small, but for options it doesn't matter.

 3 min chart with accumulation at a "W" shaped base which is small, but more than a lot of other assets have which is a simple "U"or  "V" over the course of a day which won't support much at all.

 The 5 min chart has some positives in the same area as well. There's no downside momentum so I don't see a reason to keep it open. The GOOG core short position (equity only) will remain open.

The P/L

At the $17.70 fill, the position made a profit of +9.9% which is already down 5 points just from sitting there today.

Closing GOOG $910 Put Position

Quick Market Update

I chose the charts that I consider to be the strongest intraday for the averages, I'll also show you CONTEXT which supports the idea of a QQQ gap fill and the SPY Arbitrage which reflects simple realities.

 IWM at 2 min, try to concentrate on today to the far right.

QQQ at 5 mins, but I had to put this in perspective

SPY at about 3 mins.


 SPY Arbitrage is based on price, not underlying trade, of VXX, HYG and TLT. Between TLT and HYG both being down today, they effectively cancel each other out, that is why the earlier positives forming in HYG would have led to a positive SPY Arbitrage and helped support the market.

VIX futures are pretty close to flat, although up a bit so they really aren't moving the SPY Arbitrage model.

I think "if" the market is going to fill the gap or even maybe make that chimney I was talking about earlier in the week, I think the Arbitrage assets would need to help significantly, AAPL alone can't do it.

CONTEXT has been adjusting their ES Model weighting quite a bit lately, it's because things are happening so fast like Carry trades closed in a day or Treasuries and the way they've been acting so they are constantly trying to find the right balance between risk assets and the SPX futures/ES.

The way CONTEXT sits, would support a QQ gap fill, but the action in treasuries today is counter what you'd expect so I know that's at least one of the model's assets that would be throwing it off, still I think it's probably a matter of the degree more than direction.

Quick Market Update

Charts will follow. The SPY, the Q's especially, the IWM all have and have been working on today, intraday positives, these are intraday moves, not swing moves or anything like that, but they look like they'll make a run at the upside shortly. 

How price and 3C reacts will be important, "If" any and all price strength are sold immediately, then this market could go any minute. 

"If" they can stay in line or not see too heavy of distribution, then I think the Q gap fill is still the immediate market priority.

HYG NOT looking good

Credit is a great indicator because it's a much larger, better informed market and it tends to lead stocks, "Credit leads, stocks follow".

Several times in the last week and just this Tuesday I stressed the importance of indications in credit for market timing purposes.

This was from a post on credit Tuesday.

"I talked about this asset a lot the last several days because it's one of the most important signals right now, the market is broken, it's like a child's tooth just barely hanging on, HYG is an asset that can basically help us narrow down "When the tooth drops"....

as I said last night, the abandonment of HYG positions, even small ones will be a key timing indicator, even more so in the thinner markets of High Yield credit."

Earlier today in a QQQ/Market Update, even after massive HYG distribution to the point price failed, there seemed to be an intraday arbitrage attempt in HYG to support the market VERY near term and by that I mean most likely a QQQ gap fill attempt, you can click the link at the top of this paragraph to see the charts, very clear.

Those charts for the moment at least, have failed. This is why I've been making a much bigger deal recently about the decision between looking for the optimal entry and being willing to possibly give up some draw-down as to not miss out on the bigger picture.

Here's HYG now, I still need to look at other assets to see if it may come back.

 2 min positive failed, but keep in mind it was very early in the 2 min positive, it was not well established and a very short/less important timeframe so the failure is not surprising, especially when looking at 10 min + charts.

3 min trading in line today.

10 min chart shows major distribution, it will be very hard for short term intraday charts to get a foot hold.

AMZN Update

Sorry this is such a large update, but I want you to see everything I see, well at least the most important stuff.

 This is the AMZN daily chart, these are strong divergences. If you look closely at this chart you can learn a lot about the 4 stages, the interference of Central Bancsters, how long a solid base really takes to put together and why distribution in to higher prices over a long period is necessary, in short you can learn about how and why Wall Street operates as it does.

The flat range is boring for traders, its where they let their guard down, I call it dangerous and describe it as, "The kids in the room next door being a little too quiet, YOU KNOW THEY ARE UP TO SOMETHING"

One of the scans I'm working on for 3C divergences is flat ranges like 2004-nearly 2007, that's a LOT of accumulation in AMZN and 3C shows it clearly. The bigger the base, the bigger the move it can support. 2007-2008 are probably just victims of the general market tone. 2009 is where we saw MASS ACCUMULATION among almost every risk asset as QE1 went from MBS only to adding Treasuries around March of 2009.

There was distribution @ 2011, I don't know why, but it knocked price down and was accumulated again in 2012. The relative divergence between any point in the past and price/3C levels now show a large relative negative divergence, or you could say there's much less underlying capital flow in AMZN at higher prices than at significantly lower ones, distribution.

The yellow area is the 3 target zones I waited for before initiating/adding to AMZN short positions, I believe one was > $282.50, another around >$287 and finally the psychological level of $300. THIS WAS/IS A PURPOSEFULLY "PHASED IN POSITION" and is a "core short".

 4 hour shows the resistance range in yellow and why I waited before adding to AMZN because the range is so clear, it's certain technical traders will chase a breakout which gives institutional money the two things they need to sell or sell short here, higher prices and demand to absorb their supply.

3C and price are as they should be at the green arrow, before that you can see the preparations being made to accumulate AMZN below the range so it can be sold above the range, the same thing I'd do, but faster because we deal with 100 lot positions, not 100k or even million shares.

As expected, above the range where retail will bite, there's a leading negative divergence and very fast, VERY DEEP, nearly to new lows on the chart despite price just off the highs.

 60 min, again the range to look for a break above and distribution on that break.

30 min shows the process, as I frequently say, the bottom reversals are tighter than top reversals, but the 3C divergence during the top area is what is important.

I just showed you distribution on 30, 60 min, 4 hour and daily, this is the big picture. THIS IS WHY I HAVE PHASED IN AND AM PRETTY MUCH DONE WITH LONGER TERM PREPARATIONS, THERE'S ROOM  TO ADD HERE AND THERE, BUT FOR THE MOST PART I'M DONE.


Now the near term trade...

 15 min and the approximate price levels that were posted as breakout areas to look for and areas to look for distribution or head fake moves above.

Short term...

 AMZN broke below a level where I can guarantee stops without even looking at the order book, $300 which is a psychological magnet.

Look at the volume (stops triggered) as the bar closes at $299.97, this is how predictable technical traders are. This also gives anyone who needs volume, extra supply to accumulate,

 The 2 min chart on the break of $300 today, as I'd expect, it looks like clear accumulation of the cornucopia of stopped out shares.

 The 3 min chart also looks "somewhat" similar to AAPL before earnings.

Accumulation on the 5 min chart is not as sharp, but for a shorter term move I wouldn't expect it to be. Red areas are 3C distribution signals, white are 3C accumulation signals.

The 10 min chart is only relatively positive as it hasn't made a new low with price, but more importantly than that, it's leading negative which is like scissors to paper in "paper, rock scissors." Short term it can move like Monday and Tuesday's AAPL short term charts did, but longer term the probabilities are to short in to any price strength.

AMZN Update

AMZN looks like it's making a downside head fake move intraday that will lead to an upside move. If for instance, I wanted to trade AMZN long for a quick trade, I'd be looking at entering here.

They do report after the close and I'm putting together an earnings post, from what I see I'm thinking there will be an initial good reaction that will likely lead to a last area to short AMZN (equity).

Charts are coming

Market Update

This is just me thinking out loud. The market as we know, has been relentless about filling gaps, it's a shame because they were so useful, in any case, the Q's have quite a gap still, I figured AAPL was part of the engine to fill the QQQQ gap, I said as much over the weekend.

Remember that Thursday's tend to close near the Friday open or op-ex pin which lasts until most contracts are closed around 2:30 to the close at which time the market is free to move. Considering we have that op-ex pin (yes, even weeklies now) coming up and Thursday between, the Q gap fill seems pretty likely or at least the attempt.

I would think a downside move (which leading indicators should be in front of just as HYG started really moving in front of yesterday and certainly today) would be more likely after the op-ex pin and that just so happens to just about fit the time needed for a Q gap fill. Of course there's the reversal process, but on a small gap fill, it shouldn't be that big.

I'll look around for more data, but judging from the Q's and HYG intraday, it looks like that is a pretty good probability.

 QQQ 1 min intraday, the gap was clearly sold, but we have small accumulation around 10 a.m., for a move higher probabilities are the Q's need to pullback and form some small base, accumulation would be at the bottom of it like 10 a.m.

 QQQ 2 min, the leading negative on the 16th was nasty and price fell the next day. At point "A" that looks like stabilization to halt the bleeding, "B" looks like pulling the Q's back to an area they can be accumulated at better prices. All of the "C" areas look like accumulation zones, keep in mind this is only a 2 min chart and therefore not heavy accumulation, but over 3 or 4 days, it's enough to back a gap fill move and maybe then some.

"D" is simply bringing the Q's back down to the accumulation zone. If you look at the 1 min chart above, the pullback happening now from the 11:20 highs shows no "steering" distribution, I'd say because they can't afford to give up shares, I think that's why HYG is being brought in on arbitrage manipulation as you'll see.

QQQ 5 min is not bullish at all, it is in line with price within a deep leading negative trend, but that's enough to help it fill the gap.

The same is true of the 10 min chart, again read the archives for June 21st, you'll see we saw accumulation popping up everywhere and too long /call positions.

QQQ 15 min at a new leading negative low, MAJOR damage so I'd be using any price strength to short in to. There's no "in line" signal here, just trouble.

HYG 1 min and it's flat price range alone should be a tip off something is happening there intraday and you can see accumulation intraday at the flat range.

At 3 min it is just in line so this isn't a strong divergence, I'd say it will be enough to support a gap fill move, but it isn't going to change HYG's trend or larger picture.

HYG 15 min, I thought I'd point out the flat range and just let you look at 3C, this is where the probabilities are.

This is why I'd look to use price strength to short in to, I wouldn't necessarily try to play any upside move with probabilities in underlying trade being so negative.

I also see individual stocks that look like they may support, AMZN which I'll get to, take DDD, look at the large volume which in this case is likely short term capitulation allowing DDD to pop to the upside. There are just a lot of small events like this.

Q's to fill the gap?

I'm going to post more, but from what I see and from what I've thought since the weekend, I think it's a fairly high probability, it's also probably one of the last best entries if it happens.

HYG intraday is helping or at least getting ready to help on the arbitrage front.

This isn't a long that I'd want to pursue myself, it is however a potential set up bring trades (shorts) to me at lower risk, better entry points and higher probabilities.

In other words, I'm not as interested in trying to trade the upside probability, but use it to set up larger downside positions.

Charts coming.

A Closer Look at the Q's and the Market

All of this week and part of last week I've been asking myself and putting the question to you, "What's the best possible fill worth vs. maybe missing the big picture?"

Normally this wouldn't be a question, but we are at that stage in the market where it could gap down and take out 2 months of longs on any seemingly meaningless morning, this isn't the normal market action so we are now faced with a more important question of are we being too myopic and focussing too much on details and getting lost in the lines and missing the big picture right in front of us.

We are at that point in the market where we are standing so close to the big picture, that we are seeing pixels more than the picture so I wanted to use the Q's as an example. 

I don't think there's any 1 right answer to this question, I think it is what is right for you, your risk tolerance, your ability to watch the market or not, your risk management, etc. There's always the chance of a better fill like with AAPL around the $700 area, there was the chance of a better short position fill, but then all hell broke lose and being too myopic in looking to get $5 or $10 better fill may have cost you 300+ points.

So considering I'm on vacation tomorrow and Friday, I wanted you to know at least what I know and you can make your own decisions, of course I'll still always look for the highest probabilities and the best positions and if you miss one, there's always another, but in most bear markets there are about as many up days as down days believe it or not, it's just the size of a few of those down days that makes the difference, in other words, trying to get too fancy and trade around this kind of market can cost you that big 1-day move down.


QQQ from short timeframe to longer

The 1 min chart shows what I'm always talking about in yellow, "The reversal process", reversals aren't events, they are a process and this is a large one, they tend to be proportionate so that implies quite a large move down.

3C 1 min was clearly leading negative and price did what it should when you have that kind of distribution (which includes short selling as selling and short selling both come across the tape as a sale).

The 1 min chart zoomed from trend to intraday, there was clear distribution on the open today, who wouldn't take that gain (I mean pros) ? 

We have a very small positive divergence that bounces the Q's, that gap is still open.

 2 min at the intraday level, you can see the accumulation zone, I talked about this yesterday and last night as being disguised in what a lot of retail traders would call a H&S pattern, although this is nothing like a real H&S formation.

At "A" that distribution is just steering intraday to bring the Q'd back down to the accumulation zone, even in to the close we have strong accumulation intraday. That was dumped on the open this a.m. as there's no confirmation. "B" is leading, but this is still a 2 min chart, not that strong and mostly intraday moves.

 3 min: "A" shows in line, "B" is the accumulation zone (with the longer charts details are less, but trends are more clear, yesterday's accumulation, although small scale, is clear and more than enough for today's open). "C" is the distribution of the gap up, the same way I wanted to take advantage of it.

At 3 min QQQ is in line, not positive.

5 min is the first strong institutional timeframe, during the topping process you can see that distribution was heavy and throughout, you see what it lead to, but there's a lot more to go.

Right now intraday action is flat, that "Could and normally would" allow for the gap to be filled, but don't lose site of a new leading negative low while price is still elevated.

 At 10 mins, we see the entire cycle-the 4 stages (accumulation, mark-up, distribution and the start of decline).

"A" is accumulation which we saw VERY clearly on the 21st, just go back and look at the archives for June 21, we were calling a bottom 1 day before the actual bottom. 

"B" is mark-up. "C" is strong distribution, on a 10 min chart and leading like that, this is way stronger than anything we'd normally see or anything we've seen over the last 4 years. "D" is how low 3C was leading negative BEFORE price dropped. You can see a clear topping process at the yellow area and "E" is not positive, if anything it's a breather to maybe fill the gap. 

THERE'S TOO MUCH DAMAGE DONE HERE FOR IT TO BE UNDONE WITHOUT SOME MAJOR SHIFT AND SOME TIME, I DON'T THINK IT HAPPENS.

The 15 min chart shows the leading negative at a new low, this is very serious for a 15 min chart, how deep it is, how quickly it lost all of that ground.

If I were looking at QID for instance, (QQQ 2x short)...I'd really have to weight the big picture, the lower risk, the higher probabilities against a better entry. This is why I said phasing in at this point isn't a bad idea.

 This is QID 60 min chart, if a divergences isn't strong enough it WILL NOT show up here. There was a negative divergence sending QID lower, but it doesn't show up, what does show up is heavy accumulation. In fact so heavy I decided not to draw on these charts at all.

 The 30 min chart starts to show more detail and the negative divergence sending QID lower, but it's still no match for the current leading positive.

THIS IS THE BIGGER PICTURE I WANT TO PRESENT SO YOU DON'T LOOK AT IT AND SEE A HUGE MOVE AND SAY, "WHY WAS I WAITING TO GET IN AT THE GAP FILL?"

AGAIN, THERE'S NO RIGHT OR WRONG ANSWER HERE, IT'S WHAT FITS YOU.

 QID 15 min, the bottom process which always ends with a sharper right side than left (with tops as well). This is very strong leading positive, the market has been VERY diligent about filling gaps, but this strong chart shows no sign of that, shorter term charts can, but again it's how you want to look at the tactical vs the strategic.

QID 1 min intraday is accumulating all weakness so far, that's bullish for this inverse 2x bear QQQ ETF.