Trade Idea: JPM CORE SHORT

I had closed JPM as a core short, from what I recall it had been in the green, but I expected  a counter-trend bounce and I intended to add JPM back.

Right now JPM is at or near the second (last) shoulder of a Head and Shoulders top. This area, near the top of the right shoulder is the last place I'll short a H&S pattern until it breaks below the neckline and then bounces to shakeout new shorts that jumped in on the break of the neck line. This area now is the second best entry, the first is at the top of the head, but this isn't bad. The last entry (the bounce or shakeout move AFTER the H&S breaks the neckline) is a decent place, but it didn't as good as this area.

I'm going to add half of a fu8ll core position using JPM short.

If we get a bounce toward the top of the second shoulder in the >$54+ area, then I'll add to the position looking to bring it up to a full position size.

For now, half position size in JPM short as a CORE position (Position trade or Trending).

When shorting (not buying an inverse ETF-short exposure), keep in mind you are responsible for the dividend if you are short the asset when it goes ex-divy. That's not a big concerns for me, but it is something to keep in mind.

Trade Ideas: Gold / GLD Long

I mentioned earlier that the character of gold was looking better, this is still a very speculative trade for all the reasons that I mentioned already regarding the market, Syria, shorter term trades, etc. On top of that, since we don't have complete signals in GLD, it's extra risk and as such I'd treat and approach risk management from a very conservative place.

I'm going with some GLD Oct. $126 Calls, this in addition to GDX which means I have to reduce the size as I'm already overweight precious metals/gold.

For equity longs there's long GLD, but to add some leverage you have UGLD 3x long gold ETN, UGL 2x long Gold and DGP 2x long gold ETN.

Trade Ideas: Transports

I already have a short equity position from this week, IYT short that is at a gain. I still like transports (Dow-20) and IYT is one way of playing transports, although you'd need to open IYT as a short trade.

I'm not crazy about IYT's liquidity for option positions.

Trade Idea: Reiterating NASDAQ 100 short

I mentioned this already, but if I were to take a new position here for broad market coverage because as you know I already have IWM puts in place; the ETF for IWM short would be SRTY (3x short Russell 2000) long for equities...

I would chose the NASDAQ 100 / QQQ right now as far as a new position which I won't be adding because it's too much correlation with IWM puts already in place.

If you were interested in an equity (stock) short you could use QQQ short or QID long (2x short the Q's) or SQQQ long (3x short the QQQ).

Trade Idea: Energy Short (XLE/ ERY)

This is very speculative because of the Syrian situation and going in to a weekend.

However I do like ERY (3x bear Energy ETF) as a long here, I already have exposure so I'm not adding anything.

I will be adding XLE (Energy) Puts - XLE Oct. $86 (monthly) Puts.

This will be a smaller than normal position because of the fundamental risks.

Trade Management: CLOSING XOM Oct $85 Calls

I should have done this earlier today, lost quite a bit of the gains.

Trade Idea: NUGT / GDX

Since I already have a GDX call position for shorter term momentum bursts, I'm looking for something that can withstand some draw down and still capture a larger trend so I've decided to open the NUGT (3x long Gold miners / GDX).

This is a trading position so it will be 1/2 the size of a core position.

I do like GDX options/ Calls here as well for later expiration, at least October if not longer.

Entering XLF October $20 Puts and FAZ equity long

I'm going to open a spec XLF put position, October (monthly) $20 puts and on the equity side, a FAZ TRADING POSITION, this will be 1/2 size of a normal full size long so approximately 1% of portfolio risk and 7.5% portfolio position size before leverage.

Trade Ideas: Multiple

There's probably no need to say all of these are speculative given events in Syria, the weekend and of course the chop and probability of shorter term trades.

Here's what I like and what I'll likely be entering, at least some. I will let you know before I enter any new positions.

On the short side using either options or leveraged ETFs I like : QQQ (the short/inverse 3x leveraged ETF is ) / SQQQ long; XLF or FAZ (3x leveraged Financial bear ) long; I like VXX or 2x leveraged long version, UVXY.

I'll be adding some more specific trade ideas.

I'm also VERY close to entering NUGT long here as well.

PLEASE KEEP THE RISK IN MIND!!!

URRE Update (Long Core Equity Position)

The URRE calls were exited at the perfect time, but the URRE long equity positions were started because draw-down was apparent, there was just no way of knowing how much. What was also apparent is the fact that URRE is not like the majority of stocks that are just drafting the market, like several others it has legs of its own and will likely be a longer term long position that I'd like to keep in place as par of my portfolio structure.

When I'm leaning bearish in portfolio management, I'm never 100% short (or long), I may have a percentage in cash or "flight to safety" assets, perhaps some income producing high yield defensive dividend stocks or trusts like BPT have served me well in the past.

 I believe this may be what Carl Icahn is trying to do with AAPL (considering his plans and the timing) as Icahn must suspect the same thing as we do for the market. AAPL is a large enough stock that it could handle a large flood of institutional "long only" funds seeking to find positions that are not likely to see a lot more downside as AAPL  has already lost -45% in less than a year.

If Icahn is doing what I think, then it's genius, he would turn AAPL in to a flight to safety asset rather than the former momentum / risk asset it was just like the transition in MSFT from a full-on risk asset or momentum stock to a mainstay (I think MSFT pre and post 2000 is the blueprint for Icahn's plans) creating actual demand for a stock in a declining market. Of course he needs to get the larger dividend through AAPL's board, this is the income that would attract the large number of 401k style, "Long Only funds".

 I also like some longs that are positions that have their own legs and can rally despite the market being down, so I don't have 100% of a portfolio in one direction or "all of my eggs in one basket". URRE seems like one of those stocks.

I haven't called out URRE as a new long position or an add to position yet because the signals haven't been there, but I also have held the positions as I look forward.

 URRE 60 min 3C chart shows the distribution on the first parabolic move higher, note how parabolic moves rarely end well and URRE saw distribution at the top followed by price decline and it hasn't put in any positive divergences until just now as we have the weakest form, a relative positive and this is common as a first sign of accumulation. Although relative divergences are the weakest form, the fact that this is large and a 60 min chart means it is stronger than a typical relative positive.

The 3 min chart shows what I was just talking about, one of those "accumulation" events as URRE finds a range which is the perfect place to look for such a divergence.

This is a much stronger divergence type, leading.

 This is a daily chart of URRE, the colored candles are like this because I have this chart set up to follow the "Clear Method" swing trading (price based) analysis.

Note the triangle right before the considerable upside move, this wouldn't be unusual for a lower priced stock as they tend to track the expectations of technical analysis better than most assets do. Price has broken out of the triangle and returned to the apex, as of now there's no head fake move in URRE, but I suspect it's highly probable that we see one and I'll show you why. A head fake move on the downside would likely be the best entry you'll get in URRE as a long, I'll show you where it's most likely to occur.

 A wider view of the daily chart shows a large inverted H&S base or "inverse" H&S base.

We'd have a left shoulder, a head and the first half of a right shoulder which is often one of about 3 areas I'd buy in this price pattern, the others are too dangerous and we have a slanting neckline. One thing you'll find is real life price patterns never look like the cherry picked text book price patterns, that doesn't make them any less desirable.

The price pattern implied upside target for URRE is $9.60 on the conservative side and patient side, now you can see why I've been fine with the core long positions in place.

I'm using a 50-day moving average on a 2 hour price chart  and my Custom award winning (my first award of about 6) Trend Channel indicator to help out here as well.

If you click on the chart you can get a closer view. Do you know where the current breakout level is using the 50-bar moving average as the technical breakout level?

$2.92

The Trend Channel has held the entire short trend on this timeframe with no exceptions, do you know what the stop-out that shows a change in character of over two standard deviations beyond the current character of the asset?  

$2.92

Recently there was a Trend Channel "Channel Buster" (which is another one of our market concepts)
in the yellow box. The Channel Buster did not change the nature of the short trade or stop it out, but according to our market concept for Channel Busters, the move is like a head fake and more specifically like a failed breakout, the move below the channel causes shorts to jump in on the change in character to the downside and causes longs to capitulate, so for any effective Channel Buster, we need to see volume (shorts entering and longs seling or being stopped out).

Volume is obvious at the Channel Busters.

Typically what a Channel Buster does is breaks a channel (trend, envelope, Bollinger Bands, my Trend Channel, etc.) and that break which is a change in character creates volume which Wall St. can use to enter or exit new or existing positions. Then price moves the EXACT OPPOSITE way of the channel break in a very short time and with a lot of momentum, THIS IS WHY A CHANNEL BUSTER IS A TYPE OF HEAD FAKE MOVE.

In this case with the channel broken on the lower end, many shorts will take gains off the table, longs will capitulate and sell and this clears out all of the weak hands and opens the door to smart money entries as there's a lot of supply. Then as price moves up all the new shorts are taken out in a squeeze sending prices higher, the revenge traders (longs here) that were stopped out re-enter URRE long because of their ego, most traders want to make their money back from a loss in the same stock they lost the money in; it has to do with being right and this is why there's a popular rhetorical market question,

 "Do you want to be right or make money?"

 Because the two concepts do not always lead to the same outcome, for instance there may be a much better trade to allocate those funds too, but humans generally want to be right and that means making the money back in the same asset you lost it in and often at increased risks rather than in a new trade that has a better set up, probabilities and less risk. 

Finally the snowball effect kicks in and sends price to the opposite end of the channel very quickly.

What I find interesting is the stops in the Trend Channel and 50 day moving averages, for a long position, the psychological whole number area of $3 will set off numerous limit/long orders as well as short stop losses (conceptually). Thus a break above $3.00 creates momentum and makes URRE look like a much stronger trade  as well as following the "Channel Buster Concept" and moving to the top of the channel or above on the event that is the initial break below the channel.

I'm not 100% committed to NEW or Add-to positions in URRE, but I do have long equity positions in place and would not be opposed to adding to them with a few stronger 3C signals.

In other words, URRE is finally coming back to life.

Market Update: Fast Moving Intraday

The intraday divergences are moving fast right now and are moving negative.We already know that timeframes such as 2, 3 5 10 min, etc. are ALREADY negative so intraday divergences are really like the trigger on the powder keg.

The 1 min SPY is negative as are the Q's and DIA, the IWM is showing a fast mover a 2 min, the 1 min is in line or better.

Index futures are also showing fast developing intraday negatives in ES, NQ and TF.

I'm VERY close to considering adding that NUGT long, I just feel like I need to wait for something that screams "BUY", even though there's already good chart evidence.

THERE ARE HINTS OF A 3C DIVERGENCE / REVERSAL STARTING TO FORM IN GOLD/GLD.

I have felt that GLD wasn't going positive as a flight to safety asset yet because we were likely (in my opinion) to still remain in a choppy (tradable, but choppy) price range while larger distribution continues, it's as we get toward the reversal from the larger distribution that I see gold as coming together, but there are initial signs of it now developing.

 SPY 1 min, to the far right there's a deep leading negative divegrence intraday that developed very fast.

I doubt this is a steering divergence judging by how it is in all of the major averages, I think more likely that was a very specific distribution event. In other words, large funds holding large positions can't sell or short like we can with 1 simple order, they have to break them up in to many smaller orders and route them through multiple market makers/specialists, market ETN facilities like BATS which I understand is having trouble again today- interesting how much trouble the NASDAQ, BATS, COMEX (which also had trouble today) and other facilities/markets are having lately. It would seem almost as if they are seeing so much activity (much of it is quote stuffing) that they haven't been tested on this level before and are seeing breaks in the weak links of their systems which is an interesting insight given the kind of decline I expect and the circuit breaker rules. 

What I'm trying to hint at is the amount of chaos these systems would generate in the market as they are breaking down during a market declines.

Just think of the emotional panic among market participants when the market is crashing and you have no ability to place orders or even see quotes as these systems break down, you'd probably want to get out of the market all at once and as fast as possible creating a wider snow ball effect of panic.

 This is my CUSTOM TICK Indicator vs the SPY above, showing a clear negative in TICK data.

ES 1 min with that fast, nasty 1 min negative

However the 5 min has some support, is this hinting at increased volatility in a choppy /toppy range?

Back to my point... I think that was a distribution event, these are the kind of events that are short in duration therefore do not create an intraday trend, but they are numerous and as such, this is why I say., "When you can't make out a market's underlying trade, go to the longer term charts". The reason is simple, all of these short term distribution events show up on longer term charts in the form of a trend as they accrue on longer term charts.

***Remember, Wall St. isn't only fighting to get the best fill on their order by not flooding the market with supply or demand which would cause shifts in price that may take the gains away from their positions they are trying to close and they end up with losses instead.

Furthermore, when we want to trade and open or close a position, we just do it, there's no thought and by not understanding the difference between retail order fills and institutional, you miss a lot of reasons why the market acts as it does. IF a firm puts out too much of a signature that they are distributing or accumulation, there are actually predatory High Frequency trading programs that specialize in front running institutional orders, they are called "Iceberg Hunters".

As I try to get members to think about the difference between the way we trade and the way Wall St. has to trade so you can better understand why the market works the way it does, there's also HFTs Wall St. firms are trying to avoid. As mentioned above, the Iceberg hunters; when Wall St. firms have to sell a position, as we discussed, they can't do it like we can in 1 single order, they'd knock out 20 or more levels of the bid stack and end up getting 10% less for their shares than what it was trading at before they overloaded the system with supply. So these firms put out small chunks, they are called by the HFT community, "Icebergs" because just like with an Iceberg, only the top part is visible, but the majority of the structure is invisible under water so these HFT's will do what is called "Pinging", which would be similar to a submarine or a war ships active sonar where they send out a ping using underwater acoustics and if there's an object like a hidden submarine, the ping will bounce back off the surface of the hidden structure.

HFTs do the same thing, "Ping for icebergs", looking for that one order that stands out as being a fraction of as much larger order. Then because of HFT's speed, they can front run the trade, say an Investment Bank is selling all of their AAPL shares, but in small chunks, if an HFT can identify the iceberg, they'll front run and cause the firm to sell at lower and lower prices, the HFT essentiality short and front running the larger trade so they know they'll make money as they force the market lower and the institution that is selling has no choice but to take the lower price for their shares and as prices move lower it creates a snowball affect as they are more desperate to get out quickly and start putting out larger chunks, causing more predatory HFTs to gang up, again the snow ball effect.

This is not much different than the bear raiding parties of Jesse Livermore's time or what you might see at a bucket shop specializing in manipulation of penny stocks, just on much larger scale.


For now I'm content to sit with the established positions and only enter new positions on their flashing of signals that just can't be ignored.

Consumer Confidence Market Tops From CITI

This is exactly what it sounds like, CITI released this chart as U of M's Consumer Confidence came out this morning.

Former market tops using consumer confidence readings.

NOON Market Update..."The Closer You Look, The Less You See"

First off, do you notice anything special about today?

A 5 min chart of the SPY with today and yesterday in yellow, yesterday's close at the white trendline.

Yesterday I said that Thursday's close is usually very close to Friday's open as we saw this morning.

This is a market concept: The concept is that we have always known that monthly options expiration has typically seen a pin of the market (prices pinned to one area for most of the day) and that pin is usually at what most traders call "Max or maximum Pain", meaning at a level where the most open interest is to be found in puts and calls, therefore closing in that area causes the vast majority of option contracts to expire worthless. There are calculators available on line now in which max pain can be calculated, but rather than going by open interest which may indeed be high,  the calculators figure out where max pain is based on the value of the contracts, the highest open interest doesn't mean it's the most valuable position to see expire worthless.

The reason most options expire worthless is because most retail traders are buyers of options whereas most options are written by smart money. Writing options gives you an immediate advantage because the of the upfront premium, it's very difficult for an option contract to overcome the inherent bias toward the writer right off the bat.

Therefore, when options are pinned, they expire worthless and the writers of those contracts (usually smart money) are able to keep all of the premium.

How does this help as a market concept? As you can see price so far today has opened near Thursday's close (and these op-ex pins are not only on monthly contracts now, but weeklies as well) and has stayed well within the range from yesterday. One could write option contracts on a very short term basis, you also know what to expect of price going in to Friday most of the time so it may influence your trading decisions later in the week and you also know that most brokers want to wrap up contracts well before the close, my broker would call every hour after 12 pm on Friday to see what I wanted to do with any options contracts still open. Thus, around 2-3 p.m. Friday the market typically is released from the pin and then we see movement so as a day / intraday trader, you know that a range is highly likely for most of the day and the best time to get real movement is late afternoon.


So far not much is sticking in the market, at first the overnight Nikkei report that the White House will nominate Larry Summers to chair the F_E_D as early as late next week after the F_O_M_C meeting had an effect, but the denial from the White House this morning made it so any changes in the market didn't stick, remember that Summers is considered to be a hawk (the market doesn't like Hawks, at least not the QE-fed market).

Here's the movement as news broke via the $USD overnight.

 1 min chart of the $USD futures (UD Dollar Index) overnight they are rising on the Nikkei press release that Larry Summers will be nominated next week, then a negative divergence (I wonder if there was a leak of the WH press rebuttal?) and the $USD falls and loses all overnight gains as the WH denies the Nikkei news.

Since we have seen a moderate rally in the $USD with a negative 3C outlook intraday.

You may recall in my "Market Engine" update covering currencies yestewrday I said the $USD looked like a longer term base was being put together, but as far as immediate strength to move the market via the USD/JPY carry trade, it just wasn't looking probable.

This is a 30 min chart showing the larger view, price looks more like a potential base as the ROC declines in price trend, however still no significant 3C positive divegrence and that's not surprising as early as it would be in a new cycle. Distribution of the last mini cycle is clear to the left.

More importantly is the Yen because it addresses all combinations of the carry (AUD, EUR or USD)

 The Yen's 60 min chart looks like a more advanced version of the USD above, it already has a price patter that looks like a base that has started and may be more than half way done and 3C verifies the JPY base. With a rising JPY, there's little chance for any Carry Trade sponsored market move higher, at least not in any scale.

This is interesting, because my articles written in April, "Currency Crisis" (linked on the right side of the member's page) make the case that the JPY will rise significantly and be part of the US stock market's sell off.

This is a daily chart of the Yen for the year.

As you can see, just after the BOJ releases the Godzilla of QE (when the Bank of Japan put out the biggest Central Bank Bazooka of all with more than 500 Central Bank actions globally since 2007, the BOJ is aiming to DOUBLE their monetary base in two years or what we'd call QE on mega-steroids) 3C and the Yen starred building a mega base, this is about when I wrote the two articles called "Currency Crisis, linking the Yen's rally off this base with the US stock market's demise. The base and daily 3C chart are in place, as I have been saying for about a month now, "We are not close to the big picture, WE ARE IN IT NOW".

This is a 5 min JPY chart showing a short term positive divergence. The point here is that both the long term and right now the short term currency charts DO NOT look helpful as far as supporting the stock market via carry crosses.

Thus if the short term JPY chart keeps up like this with small positive and negative divegrences, as long as any one of the 3 carry currencies (AUD, EUR or USD) can get off their butt, the near term trade can stay rather choppy, BUT ALL SIGNS POINT TO EXPECTATIONS OF STRONG DISTRIBUTION AND A MAJOR MARKET TOP.

 THE USD/JPY cross on a 60 min chart doesn't look like it will support any significant upside move in the pair or the market, the $99.00 level continues to be support as we saw yesterday, a break below that and the market may be in trouble immediately.

 The same pair, just 1 min, again any attempt to gain a foot hold and lift market prices has been shot down.

I wonder if the Nikkei / Summers rumor was floated overnight to either gauge market sentiment or to try to ramp the market in the low volume overnight session?

This is a 1 min chart of ES (SPX futures), what is notable is even at the 8:30 retail sales miss, the market didn't have the normal "Bad news is good news" knee jerk response, in fact you'd hardly know there was an economic release at that time. U of M Consumer Confidence at 9:55 which was also an ugly report, didn't help the market either, although sentiment reports aren't treated the same as actual data as far as the bad news is good news.

Retail Sales

Released On 9/13/2013 8:30:00 AM For Aug, 2013 Prior Consensus Consensus Range Actual Retail Sales - M/M change 0.2 % 0.5 % 0.2 % to 0.7 % 0.2 % Retail Sales less autos - M/M change 0.5 % 0.3 % 0.1 % to 0.7 % 0.1 % Less Autos & Gas - M/M Change 0.4 % 0.3 % 0.2 % to 0.6 % 0.1 %

Retail sales miss at .2% on consensus of +.5% and a prior of .2% that was revised to .4% Released On 9/13/2013 9:55:00 AM For Sep, 2013 Prior Consensus Consensus Range Actual Sentiment Index - Level 82.1  82.0  80.5  to 85.0  76.8  University of Michigan's Consumer Confidence Survey at 9:55 a.m.  was the really bad miss, coming in at 76.8 vs a consensus range of 80.5 to 85 and consensus of 82 with a prior of 82.1, the actual print of 76.8 is the worst miss in CC since they started keeping records, yet the market didn't have that loving feeling. As mentioned before, the market looks a bit choppy in here with intraday 1 min 3C charts, this is often seen on Fridays as options expiration pins need to be maintained in a range so the majority of contracts expire worthless and we see this every Friday on the weeklies, at least until about 2-3 p.m. when most contracts are closed, then the market does what it wants.  SPY 1 min shows a negative divergence at the a.m. intraday highs to keep prices in the op-ex pin area, we have several positive divergences as well, I call these, "Steering divergences", meaning they aren't made for actual accumulation or distribution intraday, but rather to control the assets' price range during the op-ex pin.  This is the real important information and has been this way most of the later part of the week, the longer intraday charts like 2, 3 and 5 min have been clearly negative, suggesting that the strong rally we expected (and I believe we are in the middle of now), is seeing the strong distribution expected to be seen, first distribution of accumulated assets in the accumulation range (this is not large scale accumulation, but a purposeful cycle to cause the market to move higher so the real plan can be carried out and that is to sell short in to higher prices.Yesterday I quoted a line from a movie about magicians who were robbing banks and the line was referring to magic, but works great for the market too, "The closer you look, the less you see", essentially meaning while you are focussed on this bounce or rally, the crooks on Wall Street are sneaking out the back door as they sell and sell short in to the rally, which is why we wanted to do the exact same thing as we planned well over 2-3 weeks ago.  Here we have a 3C 10 min chart with the accumulation range present to the left/middle of the chart, this is small accumulation (meant only to create a cycle, not a reflection of bullish sentiment) meant to send the market higher, these shares have likely already been sold as the true meaning of the accumulation was to send the market higher to sell short in to higher prices, but retail alone couldn't lift the market without Wall Street as retail was 70% bearish before the move even started.  The 15 min chart is showing a clear leading negative divergence which proves there's a strong divergence of distribution as it migrates through longer timeframes showing increased strength and size.  Now we have clear negatives on the 30 min chart which is proving that the distribution expected is in play, the gap that was there is also filled, ever since the rise of High Frequency Trading, I've seen about 95% of the gaps filled whereas before, about 30% would stay open as break-away or exhaustion gaps, those were fantastic support and resistance and now they are nearly all filled as this one was. You can virtually predict where an asset will go according to where open gaps are, this is a useful tool for market analysis. This is a 60 min chart of the SPY and the price pattern I think we will see form, a head and shoulders top with a slanting neckline. The point of this chart is more to show the proportionality of a reversal, although many look to be "V" shaped, if you view them at the time, in context of recent trade, you'll find they are typically quite proportional. Bottoms tend to be sharper than tops meaning accumulation can be faster than distribution, we see sharper reversals at the bottoms and rounder ones at the tops. This current price pattern would be the top of the right shoulder, with a market like this, I'd expect volatility to be high and reversals to be more dramatic than typical. I still think we see a wide, choppy range, although I don't have the best evidence for that, it is what seems likely in the near term based on 3C charts, but as you see above, the divergence is progressing quickly so I'd be focussed on cleaning up short term positions and be looking at longer term plays you like, make sure you asset allocation in your portfolio is what you want (not too much correlation between assets) and the risk and cash or long exposure is appropriate to your risk tolerance.

VIX FUTURES Are BID

As you know, the IWM Put (short) and VXX Call (long, but an asset that trades the opposite of the market) that were opened Wednesday were initially suppose to be "HnR" trades, in and out and closed yesterday in which both were at double digit gains, I decided to hold both yesterday and I usually trade my plan and don't deviate, but the market signals were there so I left both open.

Right now VXX is looking very interesting as well (referring to GDX) and both have an inverse relationship to the market (,meaning if they rise, the market should fall).

Again, it's the actual VIX Futures that are catching my interest.

 VXX 2 min has continued to add to its divergence as well, this is not in scale, otherwise you'd see 3C flying in a leading divergence, but I wanted to show the indicator on more iof an intraday basis.

 This 5 min chart of VXX shows the indicator flying in an exceptionally impressive leading positive divergence.

VIX Futures also show a strong positive divergence.

I'm about to put out a market update for opening action. My thought is this, I see this in the market averages and VXX. The 1 min chart is in line or not really horrible for the averages, everything beyond that which would send the market down shortly as expected yesterday (still within a choppy zone) like 2-5 min, look horrible.

I think the market may have some time to chop around a little more before much happens, I'd try to use this to look at a long position in VXX on an intraday pullback, it could be calls or just VXX or UVXY long, they have the same similar 3C charts. I'd set an alert for a pullback in VXX/UVXY and consider them at a lower level (I don't think you'll get that big of a pullback), I'll continue to update as I see them moving, *remember if the market update looks like an imminent drop, typically VXX/UVXY are going to be ready for an imminent rally.

GDX Update

GDX is showing an interesting move, the signals have been there as I showed in yesterday's "I do not ignore charts like this" update, so I see no reason why it shouldn't reverse other than the reversal process, but if the signals are there, that'e what the reversal process is all about, giving the asset time to acquire those signals which is just a function of the size financial firms trade in.

So far...

 This is the 3 min chart, this was the key yesterday to whether I open a NUGT long (3x long gold miners) equity position in addition to the GDX calls.

I typically prefer options for trades I expect to be very short in duration or are just at excellent areas for that type of trading tool, I prefer equity, ETFs for positions I think will last longer and have the profit potential without the need for the kind of leverage options offer. If I think it's a reasonable chance the trade will  last long enough to acquire significant profits, I'd rather be long the stock or ETF than the options.


 This is a closer look at the same 3 min chart as above.

And of course the 5 min.

I don't need to update past this because all of the charts are the same or better than yesterday's update, it's only the shorter term charts that would have had time to change since the last update and they have done so in a positive way.

I'll still be watching the 3 min chart and its interaction with price to decide whether to open a long NUGT position today.

New Custom Leading Indicator

I've been fooling around with this for most of the night and have some interesting results. For now I've created the indicator to work with the broadest market index, the Russell 3000.

What I've done is created an index consisting of the top 3% "most shorted" component stocks within the Russell 3000. This indicator isn't perfect and it's not done, I'd also like to create similar ones for the SPX, NASDAQ 100 and maybe the Dow just for a quick reference because whenever you sort fundamental data such as "Latest Short Interest" or P.E ratio for an entire index as large as the R3K, it is very resource intensive, especially when you are running 3 or 4 other streaming data programs on two operating systems.

Here's what the new indicator looks like so far (I still have some scaling issues, but if you use relative points, i.e. - take one index and compare it to the other index at two relative points, one at point "A" so many bars in the past or at a former  high, low, etc. and compare that to the most current data, again comparing where each index is relative to the other now and at the past point, point "A") 

 In red we have a custom index I created using the top 100 or so most heavily shorted stocks within the Russell 3000. Right now this index is equal weighted meaning rather than assigning wieghting like most averages do according to market cap or stock price, this index counts each stock at the same weight and whatever their cumulative advance or decline is, is what the read out is.

In green I have the Russell 3000 Index.

Since we are above the range and above technical levels (or we were Wednesday)such as regional new highs, above important moving averages and such, it's highly likely there will be a short squeeze.

In fact I brought this pint up many times this week in saying, "All the market needs is an engine like one of the currency carry trades to push it up overnight or for a day, once the market passes technical levels that technical traders watch, they'll start to cover their shorts and buy"I explained this as part of the head-fake concept and did so so many times this week you must remember.

Looking at Wednesday the "Most Shorted Index" in red is clearly in a short squeeze as price moves nearly straight up with no pullbacks of any note (typical short squeeze behavior). This not only tells us what retail is thinking and what their sentiment is, we know how scared they are as they cover shorts and we can use this information and compare it to flight to safety assets like Treasuries or more recently gold and we can compare it to "Flight to protection" assets like VIX Futures or VXX / UVXY more commonly. 

IF 3C IS OUT SMART MONEY INDICATOR, THIS IS OUR DUMB MONEY INDICATOR.

There were numerous signals Wednesday telling me that a move down was most likely the next (and possibly the coming) days ; as you recall I opened an IWM Put and VXX call Wednesday, clearly short term bearish trades. However if we were to watch the Indicator above, we'd see that the most shorted names started underperforming relative to the R3K at the end of day (EOD) as they didn't participate in a VERY WEAK EOD ramp effort.

 This is Wednesday and Thursday, note the short squeeze Wednesday, obviously helping the market move higher, this is what you'll read about in my articles, "Understanding the Head-Fake Move" that are linked on the right side of the members' site. Wall St. knows exactly where and what levels Technical traders are watching and how they'll react at those levels.

For instance, the reason for the rally is so Wall St. can sell the small accumulated shares of the range and make some money-the same thing we did and are doing and then they can sell short in to higher prices, the exact same thing we planned on in establishing and filling out our core short positions for a trending trade (bear market).

A move above a specific technical level like a moving average or a clear resistance area can be created with little expenditure from Wall St., all they need to do is move the SPY Arbitrage or perhaps a Currency carry cross for a day or so, after the technical level is hit, retail will take care of the rest as you can see above with the short squeeze of the most heavily shorted stocks.

In to Thursday, look at the white trendline and note how the short squeeze ended as the green R3K made a new higher high and the most shorted Index made a pair of significantly lower highs. This tells us that there's no Wall St. support moving the market, especially when I confirmed that there were no currencies at the time that would support through a carry cross moving higher and confirmed in seeing that HYG/TLT and VXX were not going to activate the SPY arbitrage, this is another piece of the puzzle that had me opening short positions Wednesday.

After the most shorted index failed, the market saw a move lower as can clearly be seen. IN FACT, THE MOST SHORTED NAMES SAW THE BIGGEST DROP AS THEY MADE A LOWER LOW THAN THE R3K, JUST LOOK AT THE TWO RELATIVE TO EACH OTHER AT THE YELLOW TRENDLINE.

Looking at a much broader view, we can see many interesting details, in yellow to the far left we have a failure of the most shorted index to squeeze and makes lower highs vs the R3K and down the market goes, this was an even bigger failure than the chart above this one. I told you many times, at least 50 that the accumulation phase started 8/16, notice the most shorted index making higher lows vs the R3K suggesting a move higher which came in a small squeeze, NO SIGNIFICANT TECHNICAL LEVELS WERE BREACHED FOR A STRONG SQUEEZE.  

At the end of our accumulation range, again the most shorted acts better than the R3K and we get the clearest short squeeze this week as technical levels, new local highs, moves above psychological levels like Dow $15k and crossovers above significant moving averages all take place forcing a short squeeze. The EUR/JPY started the move and fundamental news from Syria exacerbated it.

I have been saying I think we get choppy trade in this are as the next short term trend and that's why I advocated "Hit and run" trades, like the options opened Wednesday, which I fully expected to close Thursday but didn't because of data suggesting there's more downside ion the coming days.

However, the Index (M.S.I.) is still at a reasonable level and not showing a strong negative dislocation like we se to the far left, there was one as you saw on the chart above this, but that is basically the chop I expected to see.

So this is another indicator, it still needs some work and there are some obvious disadvantages or imperfections in the data, but I think this will be a great tool to add to our tool box to get a lot of different information all from one screen.

If you have interest in how I created the indicator and what I plan to do to make it more reliable, just email me.

"TO MAKE MONEY IN THE MARKET YOU HAVE TO SEE WHAT THE CROWD MISSED"