Chart Examples

Being this is an op-ex Friday, I'm not too concerned with what price does the last hour as it hasn't shown any steady correlation to the start of the new week, but the 3C signals at the EOD have shown a strong correlation to market behavior for the new week.

In the last post I mentioned some names that just started moving in an eye catching way just around the time op-ex pins tend to end (2:30-ish), here are some of those charts.

I'm not in love with any as positions if we aren't already in them, but I do like what they say about underlying trade going in to a crazy start of the week which I personally think is a bit overblown.

 AMZN

ES 1 min

GOOG 2 min

GS 2 MIN

HYG 5 MIN

SPY 5 MIN

TLT 2 MIN

XLF 1 MIN

GDX 1 MIN

NUGT 3 MIN

GDX 5 MIN

Market ans specific asset update

It's usually around this time on op-ex Friday's that most of the contracts are closed and the market can start moving away from the pin and you see some character come out.

I've probably never seen such a narrow distinction between a short duration long trade and a long duration short trade set up, meaning in the VERY short term certain assets look like they'll pop to the upside, but you can literally (in some cases) go from the 1-5 min charts that look solid for a move up and then the 10-60 min charts that are near perfect for shorts, I think the message is pretty clear.

Some assets I've noticed that have changed character this afternoon (just recently as op-ex ends) to more positive stances or positives developing quickly include: GDX, GOOG, USO is borderline to making a much more positive stance, this would be a shakeout bounce, XOM has seen rapid change, URRE seems to be coming to life, AMZN, XLF,  FAS and ES as well.

These are assets that have  gone from mediocre or uninteresting intraday readings to readings that quickly turned around and catch my eye very easily.

TLT and HYG are also interesting, especially because of the arbitrage trade. 

PCLN is a position I'm very tempted to short here, I have a hard time justifying that though is we are to get a positive market environment for a short period as the entry in PCLN would be better.

I'm going to keep looking around

Precious Metals

I have had a lot of emails about gold and silver and what they look like, I'm not even going to post charts of them because in my view they give no actionable or even helpful information at this time.

The one take away I get from that is that any moves in the very near futures are much less about what the market thinks of QE and much more about either politics or running a cycle, the reason I say running a cycle is because this entire week the stage 1 of a cycle has been prepared. Treasuries have flipped their correlation 180 degrees like gold did about 3 weeks ago and rather than move in a "Taper-On / Taper-Off" manner, they are moving closer to a typical flight to safety, but probably even more so as a SPY arbitrage asset. 

The point was, gold especially and silver, don't seem to have a near term dog in the fight and they don't seemed to be worried about QE (as with the market in general).

The best I can scratch together is a few positives in SLV on the 3 and 5 min timeframes and a 15 min positive in Silver futures, but everything else that is needed to align timeframes is missing.

In gold's case, I can find even less. The case for gold "could " be made via its correlation with gold miners and the general stance we have toward gold miners, but on the other hand I have said the last 2 nights that I think the $AUD is going to see some upside and I could make the case that the $A?UD leads gold miners and they are responding to the Aussie.

I'm not including any charts because 3C is used to gain an edge in the market, I don't want any charts to be twisted or given more weight than they deserve to suggest any edge, there is no edge in either asset right now.

GS Charts

 The price trend and the 3C Trend version on a 15 min chart, I'm not looking for a core long or trend move up here, I'm looking for a counter trend bounce so the 15 min chart is plenty, especially on this version.

The trendlines and a very tight intraday triangle, I suspect there will be some head fake, intentional or not with a triangle this tight and mature,  however as far as trade possibilities, an upside channel buster may be the long portion of the trade, you know they typically fail badly so that may be where GS becomes a core short or add-to position if you are already short GS.

I don't have time to explain every nuance of each chart, but I tried to mark them, just check timeframes and remember the concepts.

60 min chart - there's no disputing GS is a core short, any short duration long trade is just hitch-hiking a ride to a better area to enter or add to existing GS core shorts for a longer duration trending move.

 I started at 15 min positive, but there's even some signs on a 30 min chart.

10 min

Now switching from the strategic view to the tactical and starting with faster timeframes and working to the middle. The 1 min positive at that tight triangle today

 2 min confirmation and migration


5 min positive as well

I'm not sure why the 3 min chart didn't load, but there's been a lot of strong positive action on 3 min charts all day and yesterday, GS is no exception.

Trade Idea: GDX Calls / NUGT long

I'm also seeing some interesting signals in GDX right now which I do like, this move has the potential of being a better options set up finally. The bull flag is seeing a shakeout and the 3C signals are going positive on it.

I'm not adding anything yet, but after I post the GS charts, I'll take another look at it and open exposure and make a decision, if I didn't have any exposure to it, I'd likely be opening a position here (long) GDX or NUGT.

GDX seeing positive divergences on the break below the bull flag.

Trade Idea: GS Long

This would obviously be for a short term trade as GS is one of the core short candidates and an open core short via equity so a call can even be used to hedge and if we are right, it's extra money as well.

I'm looking at adding a November $160 call, but it will be fairly small because of the exposure to XLF and FAS already.

I'll get some charts up ASAP, but this is one of the few that I've seen this morning that I feel comfortable with, despite what the probabilities say.

Market Update

I'm very seriously considering some leveraged long ETF, maybe SPXU, I already have financials though and the SPX has a lot of Financial components. I think the larger point is, there are a lot of things from the base to bear flags just under support of that base, 10-30 year treasury futures going negative right now, VIX futures not looking the best right now either, once again they are lagging even the basic correlation with the SPX meaning it doesn't seem like there's a strong bid or even the expected bid for protection, of course you know how I feel about the flight to safety trade (TLT) as I have an active put there. Sentiment has made a new high today (our leading indicator, not retail), the $AUD continues to build positive. The only slight negative is HY credit which made a slight low that is in to the 25/26th whereas it had remained above the lows of those two days, but the overall position is still positively dislocated from the SPX.

 DIA 5 min with an increased ROC as there's a small bear flag (possible head fake move) just below major support.

The IWM has a large ascending triangle, I'd think even for a head fake move (which is what I was explaining last night in that a head fake move above alone could be the extent of the bounce needed before it failed)  the likelihood of an upside breakout would likely make a leveraged long worthwhile, however as explained last night and all week, these are not strong signals and these are in my view, very speculative trades. I wouldn't blame anyone if they sat this out.

 IWM 5 min positive divergence, again it's just not as strong as it should be, but I suspect it's enough.

 Don't forget the larger picture and what I suspect via the 15 min IWM chart.

 These 3 min charts have been the interesting ones, I can try to explain the mechanics of this later, maybe in a video.

SPY 3 min with that small bear flag below support and an increased ROC on the 3C positive divergence.

I suppose the only thing holding me back from a specific position is finding one that looks strong enough to warrant a position, I'd be in the wrong to take a position that I didn't feel had high probabilities, especially in this environment when our main focus will be setting shorts, which I'm watching, most look like they still need a small upside move of maybe a few percent.

GDX / NUGT Update

Wednesday's afternoon divergence was small in scope (about 3 -4 hours max.) so as I said yesterday, the reversal process would be proportionate and probably not very long. We started seeing very positive intraday charts yesterday afternoon and this morning a gap up. If you had to have a position there, NUGT would have been the way I'd go unless you already had a GDX Call from before when we had an advantageous entry.

Here's yesterday's update as GDX and NUGT started going positive again and DUST negative as well as today's action with a gap up. When looking at the shorter term trades in GDX and NUGT I have to give them a positive bias because the intermediate term charts that are typically in the Swing range of a week to a few weeks are positive so until or unless those charts start falling apart, GDX gets "some" benefit of the doubt in analysis, which is still objective because the intermediate chart is there.

Action thus far in most assets still looks "guarded", however it's very difficult to say that with ANY certainty being this is the normal action for an op-ex Friday. We do however have a few hints, perhaps some targets that may help you with trade management and/or add-to or new positions, which in this case, I'd prefer to stick with a leveraged ETF like NUGT long, options have more leverage, nut the premium is pretty high right now.

 GDX 15 min leading positive divergence and the question I've had and asked here a few times, "Are we dealing with two distinct cycles, the first already completing the 4 stages or are the two individual cycles really one large one? The numbers, 1, 2, 3, and 4 correspond to the 4 stages of a cycle, accumulation, mark-up, distribution and decline.

A 1 min chart of GDX shows the Wednesday afternoon distribution and yesterday's accumulation and a current (as of this capture) "in line" status or confirmation.

DUST 1 min shows the mirror opposite as it should for confirmation.

If this is 1 large cycle, then we have some measured move targets that are usually exceeded. Note from left to right, the first bottom was put in by a dual candlestick pattern, a "Tweezer bottom" in yellow. The left portion of the "W" would have been a head fake bear flag that was expected to break to the downside, giving it decent upside momentum as it failed to break lower. The right side of the "W" is defined by today's bull flag which is expected to break to the upside. I suggested with some other assets that Wall St. may actually be using retail to help push assets higher, if that's the case, the bull flag should NOT fail and should move higher. The measured move for the next leg of the GDX bull flag would be about $.90 to $1.00 out of the flag or around ...

$26.30 and as you see, since I started this post, the 3 min chart is already leading positive so it looks like this is the most probable outcome, although I'm not of VERY high confidence, I will hold open GDX calls and long GM positions.

With the bull flag, watch for either a gap fill attempt and/or a small head fake below the flag.

Market Update

I'm going to skip the overnight futures because I don't think we need them thus far. We haven't changed our stance on this move in a week, it has either been flat and not gone against us or has moved in our favor, I see little reason to change it now without objective data suggesting we should do so.

Here are the interesting charts just from the averages this morning. As far as a.m. trade and Friday a.m. trade, it is the least reliable in my view as it has the most to gain from unnatural price manipulation, the regular pre-market order runs from the retail crowd placing orders before heading to work and on Friday the addition of options expiration, however the concepts that would suggests our analysis is correct and moving in the right direction are pretty clear like the head fake move that typically happens in a VERY visible area that technical traders watch and it happens just before an expected move (expected by us, not retail); XLF this morning did exactly what I suggested yesterday as an entry, we are yet to see if it pays off, but the fact that we even knew what it would do suggests we are probably on the right track.

QQQ

 I still don't love that the 3C divergences have not gained any real strength, but I'm not surprised either, here the Q's intraday is positive on the gap down.

 Here the 5 min QQQ 3C chart shows a stronger recent ROC in 3C as was seen in futures yesterday.

The SPY 3 min is also showing a much stronger 3C positive divergence ROC so there seems to be somewhat of an overall trend, this led me to suggest yesterday that perhaps Wall St. knows something about early next week's politics that they have suddenly grown more comfortable with.

SPY 5 min overall character in this range and a slightly stronger 3C positive ROC

The IWM is a great example of several concepts.

First we have the rectangle range that technical traders expect to break to the downside, but we saw accumulation on a downside head fake move which gave us a head fake move and reversal to the upside.

The measured move (using the rectangle) suggested a new leg's target of $107. Then a highly visible "Bullish" Ascending Triangle (very popular with Tech. traders) forms, I VERY much doubt it is coincidental and looking at some intraday charts I can show you the steering divergences that formed it, purposefully in my opinion. 

Tech traders expect it to break to the upside, since cycle accumulation  is so weak, I theorized that Wall St. would actually use retail to help them push the market higher, thus the ascending triangle. The measured move for the triangle on a breakout is $110.

Here's this morning's likely head fake move below support of the triangle with a positive 3C divergence.

Again, it's early so the data is not as solid as later and longer charts, but all of the concepts fit.

XLF Add-To / New Position

Yesterday I explained in this late day Financials post that there was only 1 place I'd consider XLF Calls/long or FAS (3x long Financial ETF) and that was right on the break of the bear flag where I'd expect volume to pick up. It's very early in the day so we don't have a lot of timeframes caught up for great confirmation, but I think the risk here is manageable. Most XLF stops are going to be at $19.93-$19.94 with another layer <$19.90 so I'd place my stop below those levels, the fewer shares you take on, the wider the stop can be, the more shares you take on, the tighter the stop is the general risk management basics of position sizing. You could of course go with a phased position, especially if using FAS rather than options which could be added to on a break above the bear flag as that would be likely to create an upside "snow ball" event as shorts are squeezed and longs come in.

 The Bear flag I showed yesterday in XLF and the break below which is the area I defined as a possible buy area late yesterday in the post linked above.

 Volume swells this morning as stops placed below support of the flag are hit and limits triggered, shorts enter as this is the move they expect from a bear flag.

So far the early timeframes that are up to date are positive, but the more stable, longer timeframes still need some time (maybe an hour) to have caught up for the new day.

FAS also showing the same positive on the move this morning.

So far it looks like a head fake move, more timeframes reporting in would give more confidence, but if you are interested, you may not have the time to wait for them, I personally already have exposure and for an add-to, I'll wait for indisputable high probabilities before adding risk.

For FAS traders, a partial entry can be made here with a add-to at a breakout above the flag (ON VOLUME) to show the shorts are covering, this should be around the $20.25 area, although you may see some initial covering at $20.15.

If I decide to add, I'll let you know.

Remember that there's not a whole lot of risk, but you don't want stops at obvious levels like $20 or $19.95, etc.

Blame it on D.C. and the Debt or Op-Ex?

As you can see, Index futures have slid overnight to our gap down, apparently the 30 second soundbite reason is the market's fear or uncertainty regarding a vote or several possible votes that may or may not result in a government shut down early next week (Tuesday), of course it's op-ex as well so who knows.

I'll bring you a complete futures wrap after the open, however right now almost all of the Index Futures have CLEAR 1 min positive divergences in them, suggesting they fade the overnight action with an early upside move.