Wednesday, September 18, 2013
What a Day
I'm still fooling around with the video software and my tablet hardware so I thought I'd do a little recap with that since my fingers are a bit sore, I "hunt and peck" when I type, so my 2 fingers get pretty tired, unlike Hilsenrath from the WSJ who was typing 65 words a minute while thinking and dictating all of the F_O_M_C material at the same time to publish by 2:11 p.m. today.
Honestly I just spent two hours putting together and editing a video and the words are lagging or actually leading the images by about 45 seconds so it's trashed, the gist of the whole thing was this event today was so out of character for the most transparent Committee in the F_E_D's history, that I really wonder and wonder if the market will wonder, "What the F_E_D is so scared of" and how bad is that event or reason.
I'm probably not going to go in to all of it again after that frustrating experience unless the video magically starts to work. You know what, I will post it as it's more commentary than charts and you can probably figure out what I'm talking about, the commentary is the most important part so you could even shut your eyes.
Tonight I notice the divergences we didn't see last night and they are in the Index futures as well as the Nikkei 225, all negative (actually I saw the Nikkei during market hours and thought it strange.
There are numerous other assets as well, maybe I should have faded (short) the IWM at the EOD. You may recall I showed R2K futures in 3 timeframes during market hours that were already negative, but now ES and other assets as well/
In any case, here's a quick look, but I'm going to give them several hours, check back on them and see where we are.
1 min leading negative ES / SPX futures
1 min TF / R2K Futures
$USDX positive divergence 5 min
Nikkei 225 1 min negative divergence.
There are many others starting, I want to give them some time to develop and see what we really have here, a true knee jerk today?
Here's the video, sorry about the quality.
Honestly I just spent two hours putting together and editing a video and the words are lagging or actually leading the images by about 45 seconds so it's trashed, the gist of the whole thing was this event today was so out of character for the most transparent Committee in the F_E_D's history, that I really wonder and wonder if the market will wonder, "What the F_E_D is so scared of" and how bad is that event or reason.
I'm probably not going to go in to all of it again after that frustrating experience unless the video magically starts to work. You know what, I will post it as it's more commentary than charts and you can probably figure out what I'm talking about, the commentary is the most important part so you could even shut your eyes.
Tonight I notice the divergences we didn't see last night and they are in the Index futures as well as the Nikkei 225, all negative (actually I saw the Nikkei during market hours and thought it strange.
There are numerous other assets as well, maybe I should have faded (short) the IWM at the EOD. You may recall I showed R2K futures in 3 timeframes during market hours that were already negative, but now ES and other assets as well/
In any case, here's a quick look, but I'm going to give them several hours, check back on them and see where we are.
There are many others starting, I want to give them some time to develop and see what we really have here, a true knee jerk today?
Here's the video, sorry about the quality.
Gold and GDX
Both GLD and GDX options were closed today, with the move in gold on the F_O_M_C policy statement, I wanted to take gains there before Bernie spoke in case he said something distasteful to gold prices, even though Gold went higher after closing the position, I have no problem with the decision and this is something we all need to do a little more often and not kick yourself because you didn't sell at the top, if you have an objective reason, that's the best information you have at the time to make the best decision you can, if you did that, there's no reason to be down on yourself.
GDX was closed as a Sept and December option position as well, NUGT was intentionally added as a longer term trending position and it was opened in equities rather than options so it can withstand pullbacks and corrections.
As you know, both positions saw some severe draw down, maybe around -40% as options have that leverage and theta (time decay), but so long as I have an objective reason to hold the position, I'll stick with it and this was the reason for GDX and NUGT, if I had a long Gold Equity position I would have stuck with that too.
With a leading 15 min positive like that which did nothing but get stronger, why in the world would I abandon that position?
The NUGT position is up +39% and I think with some corrections here and there, it can move higher.
As for the P/L for these positions, and this shows you how quickly these positions can bounce back...
GLD
GLD Calls came in at a gain of +32%
GDX September $27s (which needed to be sold because of the Theta/expiration, came in at a loss of -7%
The December $26 GDX calls came in at a gain of +33%
The NUGT long is doing well at a +36% gain.
GDX was closed as a Sept and December option position as well, NUGT was intentionally added as a longer term trending position and it was opened in equities rather than options so it can withstand pullbacks and corrections.
As you know, both positions saw some severe draw down, maybe around -40% as options have that leverage and theta (time decay), but so long as I have an objective reason to hold the position, I'll stick with it and this was the reason for GDX and NUGT, if I had a long Gold Equity position I would have stuck with that too.
The NUGT position is up +39% and I think with some corrections here and there, it can move higher.
As for the P/L for these positions, and this shows you how quickly these positions can bounce back...
GLD
GLD Calls came in at a gain of +32%
GDX September $27s (which needed to be sold because of the Theta/expiration, came in at a loss of -7%
The December $26 GDX calls came in at a gain of +33%
The NUGT long is doing well at a +36% gain.
IWM
I'm very itchy fingered as far as a parabolic fade short on the IWM, I'm not entering, I think it's smarter to be patient as adrenaline is flowing, but the R2K futures don't look good and you saw the IWM.
TF/Russell 2000 Index Futures
intraday 1 min
5 min
Even 15 min
TF/Russell 2000 Index Futures
Averages
This is more about intraday parabolic move, you know I don't trust them, they tend to fail as fast as they rise.
SPY is not as bad really.
The Q's look troublesome intraday, this to me is a fade trade.
IWM may look the worst, again until we have more data, at most this is an aggressive fade trade.
GDX Charts
As I said earlier, I'd close GDX before NUGT and this is because NUGT won't see profit draw down like the option GDX position.
It's not so much the GDX chart that bothered me, but the confirming NUGT chart, they are great for confirming each other.
GDX itself doesn't look that bad, but I want to capture the momentum, not wait for consolidations, NUGT is the position for that trade.
It was the NUGT intraday chart that worried me about GDX losing momentum, that's a deep intraday negative developing quickly.
It's not so much the GDX chart that bothered me, but the confirming NUGT chart, they are great for confirming each other.
Parabolic Knee Jerk
We may be getting close to a fairly aggressive fade trade, ever since the Government shut down and debt ceiling came up, the market started deteriorating, both in 3C and TICK data.
SPY intraday
NYSE TICK
Custom TICK
A parabolic fade is a very risky trade, I'm not taking it unless I get very good signals, but I think the parabolic fade is becoming more likely.
A parabolic fade is a very risky trade, I'm not taking it unless I get very good signals, but I think the parabolic fade is becoming more likely.
Gov't Shutdown
Watch the market carefully here, Bernie admitting this was a fear, it is in my opinion THE fear, now it's going to be the market's fear, watch the SPY intraday here.
And There it is...
Government Shout down and Debt Ceiling, the F_E_D was obviously very scared of something, I mentioned both earlier, this seems to be the very obvious fear the F_E_D has.
GDX Update
This is the reason, the sole reason for going long GDX calls and NUGT.
This is a huge 15 min positive divergence, GDX calls will be taken off first because as they lose momentum they'll start to lose profits, NUGT as an equity/ETF, does not have the same problems so it will be more of a trending position and that's the reason it was added.
GDX/NUGT
If I do close GDX/NUGT (longs), I'd take GDX off the table first, NUGT would be last. For now, I'm not touching either.
Intraday Averages are going negative
This includes the SPY, IWM and QQQ, this may be a parabolic spike that falls soon, I'll be watching and may take a position if we get more migration in longer charts.
Gold / GDX
These were not bought because of taper/non-taper, these were bought because of signals.
This is what we look like so far.
Earlier I thought GLD was a head fake move lower, because of the divergence not this price spike.
GLD 3 min positive, so there's confirmation
The 10 min, but I'll be ready to move out as soon as need be.
GDX 15 min. Beautiful.
This is what we look like so far.
4 min.s and counting...
I will likely be radio silent for the next hour as I watch the market reactions, especially at the 2:#0 Bernie Press conference, so I'll be watching that, this is how I determined the F_E_D was looking for an out on Sept. 13th when Qe 3 was announced, it was 2:24 p.m. when the question was asked, if I had not seen it live, I would have never been able to see it.
I can't Ignore This
I wish the set up was more obvious, it may simply be the long term charts are the set up, it may be the set up comes after the F_O_M_C, but I can't ignore these Index futures, even if I can't put them in to actionable context.
ES/SPX Futures 15 min chart leading negative divergence, quite strong.
This at least tells me if there is a knee jerk higher, Wall St. didn't buy in to it, but rather plans to sell in to it, otherwise we'd have accumulation or a flat or in line reading.
TF/Russell 2000 Futures, the same thing.
This is a strong negative divergence for this timeframe and this quickly.
This at least tells me if there is a knee jerk higher, Wall St. didn't buy in to it, but rather plans to sell in to it, otherwise we'd have accumulation or a flat or in line reading.
TF/Russell 2000 Futures, the same thing.
This is a strong negative divergence for this timeframe and this quickly.
Another Scenario
This one would force us to react VERY quickly, it doesn't have as much Wall St. intervention, but because of some of the intervention I see in currencies like AUD, USD and EUR, I think this is less likely.
The SPY is the example. I posted earlier the SPy (the only average) was (still is) showing a 1 min positive divergence.
TICK data has moved gradually, but methodically from negative to positive.
So I'm thinking in much shorter terms, but an initial knee jerk higher that is sold in to today, the only reason I'd go with this if I was the magic hand was if I thought I couldn't make it up to many of these breakout points, I personally think they can and that's why I asked you to become familiar with the concept in the FRP video. I don't think that move to breakout can be made later, it's now or never as the market will front run the end of QE like it has the last 2 times.
SPY 1 min positive, but only 1 min positive.
Imagine an initial knee jerk, perhaps it is strong and fast enough to create these head fake breakout moves today and turn them in the next 24 hours, making it a much shorter process, the downside for Wall St. is there's not as much volume and they can't put on as big of a position.
The 15 min SPY chart is clearly negative, it shows what they have been doing with higher prices, they aren't about to go bullish no matter what prices do, they'll sell in to them, but this would be a much more abbreviated form of the previous post.
Keep in mind though, there are few really strong indications other than the accumulation (late August forward to the move up last week) range and move thus far which I envisioned, originally to be stronger, so I could be way off and Wall St. may just have no clue what the F_E_D does, but it would have to be a surprise and if the F_E_D does nothing, up we go because Wall St. is prepared already to accept a $20 billion a month taper in Treasuries and down to $30 bn a month in MBS, I don't think the F_O_M_C will be more aggressive than that.
The SPY is the example. I posted earlier the SPy (the only average) was (still is) showing a 1 min positive divergence.
So I'm thinking in much shorter terms, but an initial knee jerk higher that is sold in to today, the only reason I'd go with this if I was the magic hand was if I thought I couldn't make it up to many of these breakout points, I personally think they can and that's why I asked you to become familiar with the concept in the FRP video. I don't think that move to breakout can be made later, it's now or never as the market will front run the end of QE like it has the last 2 times.
Imagine an initial knee jerk, perhaps it is strong and fast enough to create these head fake breakout moves today and turn them in the next 24 hours, making it a much shorter process, the downside for Wall St. is there's not as much volume and they can't put on as big of a position.
Keep in mind though, there are few really strong indications other than the accumulation (late August forward to the move up last week) range and move thus far which I envisioned, originally to be stronger, so I could be way off and Wall St. may just have no clue what the F_E_D does, but it would have to be a surprise and if the F_E_D does nothing, up we go because Wall St. is prepared already to accept a $20 billion a month taper in Treasuries and down to $30 bn a month in MBS, I don't think the F_O_M_C will be more aggressive than that.
Final Pre-F_O_M_C Update
This is a hard market to read, whether we get a taper or not may not be what the market really cares about, the size and pace of the taper seems to be more likely to be the subject and ANY guidance on rate hikes which I think the F_E_D will try to defer.
If the F_E_D announces a taper (F_O_M_C really) the market seems prepared for it with more taper in treasury purchases than MBS at first so there's going to be a whisper number on the street in which a taper could be announced and not as bad as the whisper number where the market takes this as a positive despite the taper being announced- a lot like earnings whisper numbers.
I suspect from what I see today (and there's no smoking gun, I really think the market doesn't know what to expect) I THINK AN UPSIDE INITIAL KNEE JERK REACTION IS LIKELY.
HOWEVER, REMEMBER THAT AS I ALWAYS WARN, KNEE-JERK REACTIONS ARE ALMOST ALWAYS WRONG WHEN IT COMES TO THE F_E_D, I ALWAYS WARN OF THIS.
The easiest way to sum up my current feelings (which I'll not be closing any positions, nor opening new ones unless I see something mind-blowing really soon) is knee jerk effect takes us to the FRP concept and I'll show you some reasons beyond the FRP video / concept (the concept being the most important) in other assets.
However if we split the market response in to knee jerk and correction of the knee jerk, then these two charts may best exemplify the market's reaction.
Intraday the SPY Arbitrage is on again, perhaps there is a known element or perhaps there's just a planned reaction despite what the F_E_D says and again that's the FRP concept.
CONTEXT -77 points, amazingly large disparity, this being representative of the correction after the knee jerk, after stocks like FRP make a head fake breakout high that is easily shorted in to.
What else suggests Wall St. may be preparing for an initial positive knee-jerk? Currencies.
The $AUD (FXA) vs the SPX, is seeing strength, so is the Euro and the $USD looks like a positive intraday divergence is taking over, the Yen doesn't look bad, but it looks stalled so if it stays where it is and the AUD, EUR and USD all move up, the carry pairs will all pressure the market higher, although they are truly dead, they can move the market for a day and in this case if they are being set up, then more.
As far as some examples along the FRP concept of "Make the breakout high, get retail to chase and short in to the breakout high / head fake", which is the concept I tried to pass on in the FRP video, I told you there are a lot of stocks ALMOST there, but not quite, this is the best shorting position we've ever seen and have always had good luck so long as the signals are there. Here are some examples.
XLF intraday isn't looking great here, I'd almost short it or put it out there, but more importantly is this...
XLF 30 min negative, this is where the probabilities are, but XLF is not a FRP style stock that is close to a breakout at the last highs so it's not showing the same signals as we see below.
NFLX 3 min positive is showing a different signal, this looks like the knee-jerk effect up.
Of course the longer term 30 min is distribution, but like FRP, NFLX only has a little way to go to a break out high that retail will chase that smart money can short in to heavily.
FAZ 15 min (3x short Financials) would be best to make a double bottom "W" and a head fake move below that and buy there (short financials), again, it would need an initial positive market reaction to get there, the FRP effect in reverse.
FAZ hourly? Do I want to be long or short FAZ in the Core positions? Long of course, but the entry is even better a bit below the last low.
PCLN is so close to that breakout, but it won't get there without the knee jerk up reaction, after it does, it becomes a high probability head fake and this is why.
Daily PCLN massive distribution, it's the head fake move that is the reason, it's what allows Wall St. the volume they need.
Now in addition we have a debt ceiling and budget fight coming up too, the market doesn't like that so beyond the tapering and initial knee jerk, things look good for the market to fall apart, we are really talking about tactical vs strategic (short term vs long term).
As for the averages and other stocks, VIX futures saw bidding, but that's normal, remember the 2-4 hour leading positives, that's where I want to be on core positions, any move down on a knee jerk is 98% going to be a useful head fake.
DIA 60 min, where do I want to be on core positions? Short.
IWM 2 min, doesn't look great as of the capture, but not horrible.
However the IWM hourly is nasty, this is where I want to be core short, but if a knee jerk can take us higher, it's a better entry, if not then established core short positions will do well and they can be added to on counter trend moves.
QQQ 2 min looks like distribution in to strength, what would be likely on a knee jerk higher? The same.
SPY 1 min as of the time of the captures was the only one positive intraday, however...
Look at the distribution in to higher prices, this is the point of a head fake move, except it generates volume which Wall St. needs in the size they trade.
I don't know because the F_O_M_C may surprise, but my guess is Wall St. knows the taper is coming and it's not good no matter what, but they need bag holders so even an engineered rally like SPY Arb and carry currencies look today, will benefit their short position, they may hate what the F_O_M_C says, but still NEED to move PCLN and other stocks like it above the breakout area to get retail to hold the bag.
Some stocks that just look horrible, that are core shorts.
GS 60 min on the bounce and look at the 3C divergence, but yet again, it's only a hair away from a breakout move that retail will chase, that gives Wall St. the ability to sell to that demand and selling short is selling.
GOOG which I closed as a short because I saw the counter trend move coming, but will add back, I'm not sure, but maybe a new regional high will give me the opportunity.
JPM 4 hour, a regional high above the congestion of the right shoulder is enough to get retail to chase and make JPM a great add to.
*I WILL SAY THIS IS MORE GUT INSTINCT THAN HARD, OBJECTIVE DATA ALTHOUGH THERE IS SOME IN THERE...
THIS IS, "THINKING LIKE A CROOK", IF I COULD CONTROL THE SHORT TERM OF THE MARKET WHAT WOULD I DO AND THE FRP EXAMPLE IS WHAT I'D DO.
When I look at how close a lot of these major stocks are to a head fake move that I'd want to short, I don't think I'd let the market determine the reaction to the F_O_M_C no matter what it was, I'd spin it, I'd support the arbitrage and cacarry trades and make the short term move I want, HAPPEN.
When you are talking about trillions of dollars, possibly years of secular bear markets, what does a week or tow change? NOTHING, but it gives you huge advantage.
***I'LL KEEP LOOKING RIGHT UP TO THE F_O_M_C, IF I SEE SOMETHING DIFFERENT, I'LL GET IT OUT RIGHT AWAY, BUT THINKING LIKE A CROOK, THIS IS WHAT I'D DO.
If the F_E_D announces a taper (F_O_M_C really) the market seems prepared for it with more taper in treasury purchases than MBS at first so there's going to be a whisper number on the street in which a taper could be announced and not as bad as the whisper number where the market takes this as a positive despite the taper being announced- a lot like earnings whisper numbers.
I suspect from what I see today (and there's no smoking gun, I really think the market doesn't know what to expect) I THINK AN UPSIDE INITIAL KNEE JERK REACTION IS LIKELY.
HOWEVER, REMEMBER THAT AS I ALWAYS WARN, KNEE-JERK REACTIONS ARE ALMOST ALWAYS WRONG WHEN IT COMES TO THE F_E_D, I ALWAYS WARN OF THIS.
The easiest way to sum up my current feelings (which I'll not be closing any positions, nor opening new ones unless I see something mind-blowing really soon) is knee jerk effect takes us to the FRP concept and I'll show you some reasons beyond the FRP video / concept (the concept being the most important) in other assets.
However if we split the market response in to knee jerk and correction of the knee jerk, then these two charts may best exemplify the market's reaction.
What else suggests Wall St. may be preparing for an initial positive knee-jerk? Currencies.
As far as some examples along the FRP concept of "Make the breakout high, get retail to chase and short in to the breakout high / head fake", which is the concept I tried to pass on in the FRP video, I told you there are a lot of stocks ALMOST there, but not quite, this is the best shorting position we've ever seen and have always had good luck so long as the signals are there. Here are some examples.
Now in addition we have a debt ceiling and budget fight coming up too, the market doesn't like that so beyond the tapering and initial knee jerk, things look good for the market to fall apart, we are really talking about tactical vs strategic (short term vs long term).
As for the averages and other stocks, VIX futures saw bidding, but that's normal, remember the 2-4 hour leading positives, that's where I want to be on core positions, any move down on a knee jerk is 98% going to be a useful head fake.
I don't know because the F_O_M_C may surprise, but my guess is Wall St. knows the taper is coming and it's not good no matter what, but they need bag holders so even an engineered rally like SPY Arb and carry currencies look today, will benefit their short position, they may hate what the F_O_M_C says, but still NEED to move PCLN and other stocks like it above the breakout area to get retail to hold the bag.
Some stocks that just look horrible, that are core shorts.
*I WILL SAY THIS IS MORE GUT INSTINCT THAN HARD, OBJECTIVE DATA ALTHOUGH THERE IS SOME IN THERE...
THIS IS, "THINKING LIKE A CROOK", IF I COULD CONTROL THE SHORT TERM OF THE MARKET WHAT WOULD I DO AND THE FRP EXAMPLE IS WHAT I'D DO.
When I look at how close a lot of these major stocks are to a head fake move that I'd want to short, I don't think I'd let the market determine the reaction to the F_O_M_C no matter what it was, I'd spin it, I'd support the arbitrage and cacarry trades and make the short term move I want, HAPPEN.
When you are talking about trillions of dollars, possibly years of secular bear markets, what does a week or tow change? NOTHING, but it gives you huge advantage.
***I'LL KEEP LOOKING RIGHT UP TO THE F_O_M_C, IF I SEE SOMETHING DIFFERENT, I'LL GET IT OUT RIGHT AWAY, BUT THINKING LIKE A CROOK, THIS IS WHAT I'D DO.
