Daily Wrap

Today's a little more straight forward than you might think, if there were nothing going on in the middle east, today would be a much harder day to analyze, but as I said in my first post of the day, stocks were lower, precious metals and oil were higher and that was over a flurry of Reuters headlines that the US may attack Syria at any moment. The market built in risk premium because the market hates uncertainty, but it seems some of that uncertainty was taken out with "No boots on the ground", likely not going to be a no fly-zone, it's not a regime toppling attack, but a limited, likely 2-day strike, etc. Still, like they say, until the missiles fly...


It's not as if today's market bothered me because many of our core positions are set, I just feel there are still some short term gains to be had and some other shorts to be set up, but the Core equity only tracking portfolio did fantastic today.


Weekly Rank, Percentage Gain vs the SPX

Monthly Rank, percentage gain vs the SPX

I didn't want to jump to any conclusions based on price alone this morning and so far I'm glad we didn't, this can provide a great opportunity, but we still need a little more time for this to mature and harden or fall apart, a lot of good moves were made today, but like I said, "I wish we had a few more hours today".

I'm not going to cover every asset today as many I did throughout the day and honestly we may have a similar move overnight, it's still the data during the day that gives us the most information on probabilities and perhaps some fantastic trades.

Retail is as bearish as they can get, they're following price only and I'm not sure if they even know what the catalysts are that they are following.

Professional sentiment looked a lot different than retail today.

HIO vs the SPX.

I also saw some charts of someone who tracks dark pool accumulation that looked very similar to ours today.

As I showed earlier, Yields and the SPX reverted back to the short term mean so there's no tension on the market in that respect.

One of the more impressive closing charts was the skittish High Yield Credit...

That's a VERY bullish move today.

HYG didn't make a similar price move, but HY credit's price isn't part of an arbitrage scheme, however HYG did produce this today.

HYG's divergences yesterday and today, it still needs to solidify on 5 min charts, but that happened in other assets very quickly today.

I suspected VIX Futures were either going to see 3C grow or give out, the 5 min chart answered that today...

They seem to be giving out, the market moves opposite the VIX futures, remember yesterday we had a quick VXX long based on a 1 min positive, this is a 5 min negative, but not quite where I'd like it to be.

The charts made up quite a bit of ground, but as I said, they still need at least several hours to solidify positive divergences and to create the reversal process, I suspect if we do get one as I believe,, it will be sharper than normal.

Some samples...

 DIA 3 m

 DIA 5 min

IWM 5 m

SPY 3m

QQQ 2m

QQQ 5m

I'd be satisfied with strong 5 min leading , but I'd prefer to see longer timeframes.

As far as the partial SLV Put today, I often find that leveraged ETFs of the underlying move first, AGQ grabbed my attention.

 AGQ 3 min

AGQ 10 min

Then I found SLV looked very similar despite being a totally different ETF/

SLV 3 min

SLV 10 min.

Basically I could go on, but that's all that's really important up to this point, sentiment and credit were two biggies today, otherwise it's just letting those divergences harden, if we get that tomorrow, there are dozens of quick options or leveraged ETF trades that would be fantastic.

I'll check back in if futures start to look interesting.

MINERS and General Concepts

As far as Market Concepts go, which to me are more valuable than most anything we do here because you can apply them to all kinds of trades throughout your life.

This morning looked HORRIBLE, especially for those of us either in GDX puts or DUST long (or NUGT short).

I received quite a few emails before the open about whether or not it was time to give up on DUST/GDX,

I said the same thing to everyone which came from this morning's pre-market update...

"War is serious and these are serious premiums added, however at this point I'm largely core short, as far as the DUST long position that is suffering because of gold's elevation overnight, there's no chance I'm selling it here, especially with a limited strike and an overnight spike....I think it would be premature, emotional panic to close dust long on this overnight emotional panic."

I followed up with a second post just to be more clear, 

WAR Premium

"Buying when war starts is not about industry or GDP going up, it's about "UNCERTAINTY" BEING REMOVED FROM THE MARKET.

Right now there's an uncertainty, "Will the US strike Syria? Will Bashar Capitualte first? Will the Russians give aid as they have a naval port there? What will be Israel's response? How might Iran react? What could happen in Egypt as a result? What if the attack is a disaster?

All of these questions run through the markets mind, a panic starts and it snowballs like crude and gold did over night to the upside with equities to the downside, this isn't about anything else at this time.

I'm rather content to collect data of underlying trade action then make an emotional decision...

Are these assets being shorted at high levels?

Are stocks being accumulated at low levels?

That's what I intend to find out today and moving forward."

In any case, you've heard the phrase, "When the missles fly, it's time to buy" many times here in the context of "market uncertainty, not so much war, now we get to see it first hand.

I'll update the market in a bit, I'd like to see what futures do, but as for DUST long, it gapped down about -8% this morning, took it all back and closed up over +13% today, this is why I want to make decisions based on data, not emotions.

Some of you are interested in DUST today, as I said to many of you, I don't want to chase anything, it increases risk, but I think on a pullback or correction with positive 3C signals, DUST could make a great new position or add to, we have to wait until the market tells us. There's a hint that we will be seeing some slowing momentum on the upside, but just a hint thus far and out longer term charts suggest prices easily in the mid $30's.

 This is the leading negative 3C divergence in GDX 15 min, serious trouble.

The daily chart of DUST

The intraday gap down and thrust up for DUST

This 1 min chart was positive off the open, this is what I needed to wait and see at the open to start making a decision.

The 5 min DUST chart stayed leading so it looked good to me for a hold and I mentioned it earlier before the big run as a decent long today.

Ultimately this leading 15 min 3C chart suggests much higher prices so some of the positions entered today were in part based on this, a small part, but I think we can see some very respectable gains as long as we get out before distribution sets in and only buy pullbacks that have accumulation.

SLV September $24 Put

This is a really hard position to open with recent strength, but looking at some of the ETFs like AGQ, I think a partial position here is worth a shot, the probabilities look good, I'd like a little better, but I think it's just time and how much we have left today so I'll leave space to add to it tomorrow if that's the case.

A LOT OF TRADES

There are a lot of potential trades, I wish we had another hour or two in the day to see these mature a bit more.

Here are some that I'm considering, but on a truly speculative basis, as in half size a normal spec position and maybe I'd add to it tomorrow. REALLY most of these need a couple more hours to mature so really the best thing to do is to be patient, but these are high on the watchlist.

IYT (Transports) long/calls

DUST long (already at 10% gain) long

SLV short/leveraged short ETF/Puts

XOM long/calls

AMD long/calls

TLT hold long

PCLN very spec. long/calls

Possibly VXX short

any of the averages, BUT they don't have enough reversal process, BIDEN IS TALKING AND THAT ISN'T HELPING.

IF I went with one, probably DIA.

AAPL is getting close too.

GOOG Add-To

This is a very hard position to take because I love it so much as a short, but for the short term I'm going to add to the GOOG Sept $860 call position already started.

DUST

I emailed with a few members in the GDX/NUGT short / DUST long position this morning and with DUST opening at a gap down of over 8%, I said I wouldn't be selling on emotion, only data and the data didn't support the same so it was held. Now DUST is at a nearly 5.5% gain after taking back the entire gap and still has a great signal, I still like it as an equity long, although not so much as an option (call) right now.

Today's gap down was an emotional event, I always try not to make longer term decisions based on short term emotions.

AAPL Follow Up

I posted several days ago that "IF" AAPL pulled back, I'd be interested in it as a long. Today it's doing that, look at volume, stops and limits were hit at $495 and then again at $490, I think that large supply is being accumulated. AAPL charts are improving and I wish they were just a little further along, it's not that they don't look good enough, it's that they aren't mature enough.

However again as mentioned in the last post, things are starting to move so quickly now that I wouldn't be surprised if it was only a matter of another 2 hours or so until we have tradable bases.

VERY Close to Opening Positions

Earlier the 1 min charts looked great but we didn't go much further than that, now the longer term charts are going positive faster than I can get through a watchlist.

Here are just some examples, all the exact opposite of this morning's open.

 DIA 3 min

IWM 3 min

QQQ 2 min

QQQ 5 min

SPY 3 min

SLV 10 min

GLD 1 min

GLD 5 min

SLV 3 min

HYG 2 min

Things are moving faster now and back toward a bounce.

Closing Out a GS Core Short Position

This will just be for a little bit, I definitely would like to re-open a GS short, but I feel the market is basing here and this might be the best price I get for GS while I can use the assets from it in other places for the short term.

I'm gathering the tickers of any options strike/expirations I might be looking at in terms of calls and a few puts, I still think we are in the process of building out a base or rather a reversal process to take the market higher in the original bounce first noted with changes of character 8/16

Currency Indications - USD/JPY

I don't know of a good, liquid way to leverage up the $USD other than trading FX, but if I were trading FX I may very well be looking at $USD long or USD/JPY long.

This is a carry pair and it tends to move the market, for example, the USD/JPY is in red/green candlesticks and SPX futures are purple on this 5 min chart.

 You can see the overnight session USD/JPY was tightly correlated with ES (S&P Futures) as they both dug lower.

This 1 min chart shows from about 2 a.m. to present so you can see how strong the correlation is, but it looks like this currency (carry) cross may be working on a reversal which would have an effect on the market as well.

The 1 min $USDX chart is flying with a leading positive divergence, even the 5 min chart is seeing migration.
 

The Yen on the other hand which has been moving higher no doubt in large part to the carry being covered, is now leading negative on the 1 min chart confirming the $USD's signal.

Even the USD/JPY pair is starting to put in a 1 min positive divergence (possible) reversal signal.

 This is just another small hint of changes in character that are much different than the market's open.

GDX / NUGT / DUST

These assets had gapped against us pretty badly on the open, but as of now, they are below yesterday's close, giving up all of the gap.

Here's GDX, NUGT and DUST.

 GDX daily with a bearish engulfing candle thus far, just after breaking above resistance.

The 1 min intraday chart of GDX falling from the opening gap up.

The trend version of 3C, 60 min with a very clear neg. divergence

GDX 60 min neg. divergence

 GDX 1 min was negative on the open as mentioned and in line on the decline.

GDX 5 min leading negative

NUGT leading neg. 60 min

NUGT leading neg. 5 min

DUST 15 min leading pos.

DUST 5 min. leading positive.

It's a good thing many of us didn't react to the initial opening gap, it would have been the worst place to sell, also the most emotional place, there's a lesson there.