Gold, Carry and ES Futures

For the second time in nearly 24 hours gold futures have lost the $1400 level they had taken out, tonight gold slipped back below $1400, but not before making a new high for the week.

 This is the 1 min intraday chart of gold futures with a positive divergence sending gold higher and a negative sending it lower and under $1400 for now.

This 5 min chart of gold futures shows gold gapping up above $1400 on the start of futures trade for the week last night and quickly losing the $1400 level, the overall divergence is leading negative and tonight's attempt thus far hasn't stuck either.


This may be due in part to some $USD strength and JPY weakness, it's kind of "Which came first, the chicken or the egg?" as far as the JPY, but all happened at the same time.

 USDX 1 min positive divergence at the lows sending the $USD higher corresponds with golds move off the highs.

 The Yen's 1 min chart move lower also corresponds with the highs in Gold, it may be the USD/JPY carry trade moved and as a result dollar denominated assets moved like gold (Crude didn't have a distinct move).

The ES 5 min chart is VERY young here, but this kind of 5 min flat price range with a leading 3C signal is the kind of work the averages will have to do to get back on track and headed toward carrying on a bounce.

Daily Wrap

Friday later in the afternoon we had some clear signals that the start of this week would see some weakness. Today we saw that weakness very clearly when Secretary of State, John Kerry spoke out today saying that Syria's use of chemical weapons against civilians was, "Undeniable" and is shocked the Moral Conscience of the world, further adding that the Obama Administration would hold the Syrian government accountable.

I've told and showed you many times how the ending 3C indications (if there are decent divergences) almost always pick up the next trading day, that would have been today according to this Friday afternoon post saying to expect weakness early in the new week. I can see making the argument, well it was John Kerry's speech that moved the market and indeed it was, but this is the nature of smart money, the attacks had already occurred by Friday afternoon, when we see a divergence we rarely know what it's about until the chance to make money on it has past.

This is where I miss the $99 a year membership to STRATFOR, (Strategic Forecasting) and I'd highly recommend a book by George Friedman of Stratfor called "America's Secret War". Stratfor doesn't have a political slant at all, they are there to serve big business and are in the intelligence gathering business. However, the things you could learn ahead of time even with their basic individual $99 membership over 10 years ago were incredible, they could tell you that there were no WMD's in Iraq before there was even an invasion because Saddam had taken them in to the desert and destroyed them as an American Satellite watched,  they describe how SHOCKED he was that America came in to Bagdad because he had shown the US he had destroyed them, but the reason he did it like this was because he didn't want his neighbors like Iran who he was locked in a bloody war with for about a decade, to know that he was a tiger with no teeth. There are dozens of things they had predicted in advance because of their connections throughout the intelligence community, for instance, it would not surprise me if Stratfor or another company like that had already known what the White House's reaction was going to be and when, planes are already landing in Cyprus today so this wasn't a decision made after Kerry's speech today, this was made well before.

The expensive memberships (in the tens of thousands) would certainly be able to alert Wall St. to these probabilities, look how oil gapped up last night, well in advance of Kerry's speech, the point simply is, "Don't underestimate how smart smart money is". I've had my own experience with it and was quite shocked.

As for market response, the Dow lost $15k, the SPX lost the 50-day m.a.,  neither USO or Brent's response seemed unusual compared to some other assets, just watching them you might not know that anything was said, although both were climbing intraday at the time.

There was very little move in a lot of currencies like $AUD or EUR, but the $USD and it's carry partner caused some pain to any open carry trades with the $USD slumping and the Yen jumping.

 The intraday 1 min $USDX has already gone negative intraday and was heading down by the time Kerry spoke.

The Yen saw a strong move higher pressuring any carry trades.

Commodities saw EOD strength, partly because of the PM complex as well as oil which was as I said, heading up at the time, this could have had something to do with the drop in the USD, that's what we'd normally expect.

 Commodities vs the SPX

Commodities vs the $USD, lower $USD prices make for higher commodity prices as a general rule.

As for Gold, it broke the $1400 barrier like it did on the opening of futures last night, it couldn't hold it last night as I showed in last night's post, will it hold tonight?

 1 min Gold Futures with Sunday night's $1406.80 high for the week faded and today we saw just above $1404, we'll have to see if it too is faded.

The 5 min Gold futures 3C chart suggests it will not hold, the longer term gold charts don't get much better either.

Looking at some of the Leading Indicators...

 VXX vs an inverted SPX (for relative performance) shows the VIX futures bid and outperforming the normal correlation, but we knew something was going on with the VIX Friday and today, we saw even stronger examples leading to an add-to position.

 In fact this is the actual VIX 1 min futures and 3C is going nuts in a VERY flat range (which is very common at accumulation/distribution areas) , but as the move progressed from flat to parabolic, 3C didn't confirm all that well, one of the factors that made me decide to close out the short term VXX long call positions. It will be interesting to see if the VIX futures build a stronger divergence overnight or in to tomorrow, and telling, for now I'm just looking as war premium adjustment.

TLT's strange relationship with equities continues, although while the SPX dropped, TLT popped at the EOD today.

 One of our sentiment indicators, HIO acted better than the other, in fact it showed much better relative performance than the SPX.

FCT, our other sentiment indicator has been headed down since 8/22, that's 1 day after the 8/21 Syrian Chemical Attack, although it did have a strange little jiggle with the SPX at the EOD today.

Also as posted last night, Yields were below the SPX and they act as a magnet for equities, that's what we saw today so I assume the two will revert to the mean tomorrow.

Now to credit...

 HYG showed better relative strength than the SPX today so that's somewhat positive for the market near term. JUNK credit performed the same way.

HY credit, because of it's thin liquidity will often panic from a scenario, it didn't hold up great today, but didn't panic either.

HY Credit intraday

HY managed to stay in about a week old range rather than panic through the bottom of it.

As far as looking at risk assets and the averages, one thing I've noticed a lot of in 3C is rotation between different averages, most of last week the SPY looked great and QQQ looked horrible, but as you can see by price alone the IWM (which didn't look that great last week) and the NDX outperformed the SPX and Dow handily and they are showing that in 3C as well.

To me it looks like we are in the middle of a downside move (from late today) that's losing steam and the averages are separating as far as relative performance goes. I'd think even in a best case scenario if all downside ended, there's still need to be at least half a day of lateral movement (or thereabouts) to create an upside reversal process "IF" the charts can hold and do some damage control .

Certain averages saw more damage today than others, take the formerly leading SPY, it looks as I showed at the EOD, like it has more downside to go. If you look at the SPY, DIA, IWM and QQQ charts in this post from this afternoon, you'll see what I mean, the SPY looks like it has a clear, clean signal for more downside, the other averages, less so and some even have some positives starting, which is not to say they are ready for an upside reversal, but they have started.

For the moment (tomorrow), I'm leaning toward more downside, it might be constructive, meaning building a base/accumulation. I'd think we can at least pick up a couple of trades similar to VXX long today or SPX short (something along those lines) while we see what the market is going to do.

There are still some longer term positives in effect that still call for a bounce to the upside, tomorrow will tell us (probably by noon) whether those are being built back up or torn down and we'll have to adjust accordingly. 

If anything exciting happens in futures tonight I'll follow up.

SPY and VXX Update

I was in the middle of collecting these two SPY charts when things got exciting, NEVER fall asleep at the wheel during a dull market, they're the most dangerous.

 To me the 2 min chart looked like we'd either be seeing some downside in to the close (which is exactly what was called for Friday afternoon as well as last night, "Early weakness this week") or it would hit tomorrow morning if we ran out of time.

*Keep in mind we've lost some intraday ground from the highs, but the SPY is still only down -.38% or so.

This 5 min chart looks worse than it did Friday when I said I expect weakness early this week, at this point as the second chart in the capture you can see price was already moving.

This 10 min chart is kind of the Maginot line between the positive 15 and weakness. The 15 min is still positive.

One of the reasons I decided to close the VIX position was, "It was opened for a short term move of weakness in the market", we got that short term move even though we have some indications for more.

You know I prefer to close options in to volatility. Friday's position was added to today and it made it  bigger than a spec. position so I don't want to sit on that very long and I added a new position (Same VXX Sept. $14), this is not the kind of risk management I would condone, but to me it looked like a very promising position and I suspected I'd know before the day was out.


Here's the P/L on the positions and then a few more reasons for closing them.

The original position was added to to bring it up (75) again, not something I condone, but when I see an edge I find it very hard to walk away from it.

This was the first position from Friday which was underwater, when I saw VIX Futures with a beautiful divergence in addition to VXX/UVXY, but read the post and you'll see I considered it very short term, in fact "noise" was used to describe it.

The 25 add to was at $1.14 bringing the average to $1.31 (this capture is 15 min. delayed)

With the first fill of 25 at $1.48 and the second fill of 50 at $1.49 the average came out to be +13.5%or about +$1325


I didn't get the portfolio capture of the second position, but here's the purchase at $1.14 for 25 contracts.

At the fill of $1.49 the gain is almost +31% for about 1/2 a day of market exposure.

Here are a few other reasons I wrapped up the VIX position (remember these short term options positions are using that kind of leverage specifically because they are short term).

Other averages weren't confirming like the SPY.

 This is the DIA 3 min chart, the SPY 5 min was clearly leading to the downside, but a faster DIA was getting tangled up.

The IWM 1 min chart looks right for letting the VXX position open, but...

At 2 mins again unlike the SPY, things start to get tangles up, the depth of the weakness across multiple averages is not clear.

The QQQ 2 min was showing a relative positive divergence, while there can certainly still be downside from here or even probably best case scenario some lateral trending, this can't be discounted as the start of a positive divergence and typically signals at least a consolidation if not a bounce to the upside intraday EITHER ONE WOULD KILL THE MOMENTUM ON THE POSITION.

 The QQQ 3 min just confirms

The NYSE TICK which was mentioned earlier today went from VERY dull to very negative at -1700, but like the averages above, the water was muddied with TICK readings after that in the +1200 range so the number of stocks falling had given way to a large number rising during the sell-off, this told me things are not all clear on the downside and the positions that was meant to be short term should be honored as that.

I think my custom TICK Indicator (vs the SPX) captures the day's internals the best.

Also a number of very short term oscillators had data that was interesting and supported taking profits.

I'll follow up with what I see/saw today and what I think is likely going forward, although I posted that before the close after a quick look around.

EOD Update

As far as I can tell, we have some bottom building to do, but I do think we may be nearing the end of that particular move. I'd expect some downside to some flat activity tomorrow

Closing Out of Entire VIX Calls For Now

Taking Some Off the Table VXX Sept $14 Calls

I have the one previous position that was underwater, added to today that I'm taking some off the table as we go and 1 new as of today VXX Sept. $14, I'm slowly just taking some off the table especially in the first position as it is larger due to adding to it.

I'll try to keep you up to date on any changes.

**Important Update

As you might know, I closed an XOM core short position to open an XOM long because it had good signals for a bounce, it was extended and just looked like a good position swap, that was late last week. I opened some GOOG calls that have been in the green to different degrees ever since, however there's one thing I'm seeing that is really making me extra aware of the market.

When we get market movement up or down, we can really see what is happening, we get much better signals. What I'm seeing right now (and this is largely confined to today so far), looks bad. I see it in a number of assets, but 1- day doesn't make a trend, it does however raise a red flag.

Ex.

 XOM 15 min positive should allow XOM /to bounce, thus I closed the short, opened a long and wanted to wait to re-oprn a short at better levels.

However as the 2 min chart shows, there's almost instant negative divergences in to any upside as if all strength were being sold.

 XOM 5 min is not pretty.

GOOG 30 min positive helped make the decision to open the call.

GOOG 5 min showing negative divgerences in to any strength.

 15 min SPY should be good for a decent bounce.

However the 5 min chart shows a deeper leading negative 5 min chart.

Like I said, 1- day doesn't make a trend, but we really need to be on our toes with good risk management in case this market continues to sell all strength and doesn't allow it any upside.

FSLR Update

I don't believe I picked up on these charts or at least one of them when looking at FSLR so I'll add it, it's hard to say if it is still part of the current set up or just left over used up divergence, but it kind of reminds me of the longer base in AAPL that took a while to develop.

 FSLR Daily chart tells me this doesn't change anything as far as the primary trend that should develop goes, it still doesn't look good long term.

However the 60 min above and 2 hour (not seen) show what potentially is a much larger "W" type base in FSLR from late May to August, the second base in a "W" being lower is very common place now so don't let that throw you.

In either case, the fact it's positive on a 30 min chart gives it an edge over most other assets for an upside move.

We'll see how it reacts on an upside move to judge whether a larger base is in play.

Intraday Update

I'm going to post the long idea FSLR next, I see something I'm not sure I covered before.

First, the intraday charts went negative pretty quickly after having seen protection bid in VIX futures from earlier, this is all just follow through from later Friday's signals, they almost always continue the next trading day.

 DIA 5 min leading negative from weakness last week.

IWM is one of the stronger charts and it went quickly leading negative on the 1 min chart

QQQ's 1 min chart went quickly leading negative as was expected early this week.

QQQ 2 min chart just added for some perspective.

 The SPY 2 min shows the dramatic change in character this afternoon

 And the 5 min showing the negatives from Friday hinting we'd see this reaction early this week

Still, none of the 10-15 min timeframes that are representative of the bounce are damaged at all.

VXX 3 min continues to lead to a new high today.

It seems we are very much on track from Friday's analysis for this week thus far.