Daily Wrap part 1

I have quite a bit for you and I hope it's not wasted on some fundamental surprise coming from the government that just reshapes everything in a painful moment of trying to discount unforeseen information in a matter of minutes (either way- up or down), there's very little that the market hasn't discounted, but this scenario has the potential for giving the market something it hasn't previously discounted.

The feeling I get is similar to what I already enunciated. When I say the probability of the long term or primary trend's bearishness is the highest and the short term trade as in a week or so is not as high, but still has good probabilities, I'm not giving two options in which only one will happen, we are talking about multiple timeframe analysis and some trends are simply much higher in probabilities to the point of near certainty.  The confusion comes in when people look at the market with a singular view, an example is the questions, "Are you bullish or bearish?"

As the question stands, it's impossible to answer because as I see the market right now with 3 likely trends, each is in a much different length timeframe and each is very different as to the direction.

How can one answer that question when out of 3 trends 1 is short term price negative, but market positive. The next longest (still short term) is price positive, but this is to set up a very market negative event. Finally the most probable (almost certain trend would be the primary trend or what people commonly identify as a bull or bear market, this is horrible bearish, however during a bear market we get counter trend rallies that are some of the strongest rallies you'll ever see. The Dow saw 5 counter trend rallies during the bear market that started after the Crash of 1929. However if you were to live the market in real time, you might not know how bad it was as a mere 2 months after the initial crash, the Dow Industrials rallied for just about 5 months with a gain of +52%. To put that in some context, the initial loss was -49% or almost 191 points. The counter trend rally gained back nearly 102 points. It's obvious the initial drop was worse, but if you didn't know the outcome, a rally of over 50% that lasted 5 months (3 months longer than the initial drop_, you might be forgiven for thinking the worst of it had past. As it turns out, that initial rally that took the INDU up to $297.30, eventually ended in 1932 at a value of $40.60!

In any case, there's some decent hints that the market pulls back a little, this is not as high probability as further upside gains over the coming days, but both can happen, it's not one or the other. The way I see it, there's a decent probability of a pullback from here for a short term, remember tomorrow is options expiration as is every Friday now and that often sees a price pin somewhere in the area of Thursday's close and often doesn't break free of the pin (that usually sees 90% of options contracts expire worthless) until 2:30 p.m. or so when most contracts have been wrapped up.

I still think there's a high probability of a move that could make a new high, as I said, Price would look bullish, but the cause for this move, much like the Dow Industrials 1929-1930 rally, would be very simply to set up bulls to hold the bag for the next neck-breaking leg down. The probabilities of a sharp down-turn that some might recognize early as the start of the market's first real secular bear market in equities is extremely high.  

I'd like to see something that looks like this...

Everything to the right of the vertical trendline is drawn in and represents a constructive intraday pullback that lifts the market to a new leg higher above the move from today.

As you already know, the ideal situation for establishing high probability shorts or adding to them is a new high...

We don't need much of a new high, it just needs to sway emotion which isn't hard with retail, they are price based and look for confirmation in price action, for example, they may see a great set up, but typically won''t get too involved until price confirms with a breakout like this one, this is what I call chasing price, luckily we have some tools that often allow us good foresight.


 We have the probabilities for each move, they increase as we move further out (which is often at odds with the nature of analytical statistics- for example, the further out a weatherman tries to forecast, the less accurate the forecast will be). 

I'm going to just keep an eye on futures before I upload dozens of futures charts that may have to be revised, but I think the simplest way to illustrate the short, longer term, but still short duration up-trend and the primary down-trend can be done with 4 charts of the Nikkei 225 futures.

Intraday, very short term corrective pullback

 The overnight 1 min Nikkei 225 futures went relative negative and then a stronger leading negative, while the leading negative is a stronger signal, because this is only a 1 min chart it doesn't represent any serious distribution, but could easily effect a pullback.

The 5 min chart has a strong leading positive divegrence, this divegrence alone suggests the Nikkei has more upside to go as there was a larger amount accumulated here than distributed to the far right at the small leading negative divegrence. If the current divergence gets worse then the situation will change, but what we know now suggests the most likely scenario is for a short term corrective pullback followed by a new leg making a higher high.

At this point, that takes care of the corrective pullback and starts us on the second trend, a move to the upside starting with a higher high.

 The 30 min Nikkei 225 chart shows a strong leading positive divergence with no sign of any negative at all, this is because the negatives above are so small they don't have enough underlying distribution to even show up on this chart, thus while the pullback move could be very probable, it is also very probable that it is a constructive (or you might say a bullish ) correction. The down trend to the left is confirmed, but there's no negative divegrence so the leading positive at the far right is the most dominant underlying trade on the chart. You can see what simple confirmation accomplished on the downside, imagine what a leading positive divergence can accomplish on the upside.

This should get us to the beginning of our final trend (for purposes of putting together and managing positions)... The primary bearish trend moving to significant new lows.

As I showed above, the ideal and most probable outcome should we get the up-trend I have expected would be to make a new high which sounds like very bullish price action, however if it is to set up distribution and a bull trap, it's certainly not bullish. This is why I often say, "Above all, price is deceptive".

This 4 hour Nikkei chart is the strongest of all the above charts, note there is no sign of the leading positive divegrence on the 30 min chart, just as the 5 min chart wasn't strong enough to show up on the 30 min, the 330 min is not strong enough to show up on the 4 hour.

We have 3 negative divergences on this chart, each stronger than the preceding divegrence. A move to a new high would set up significant distribution and make the current leading negative even worse, this would lead us in to the final bear trend or primary down trend.

This is multiple timeframe analysis, as you can see, the question, "Are you bullish or bearish" is totally arbitrary when dealing with multiple timeframe analysis as we can have 3 different trends all active at the same time depending on the timeframe you are trading. Are you trading the short term which should be both bearish and bullish or are you trading the longer timeframe that should lead to upside gains, but you have to know when to walk away or are you simply waiting for the market to move to the ideal area to put together high probability core shorts. All of these can exist at the same time.

After I check out futures a bit more, I'll post the charts I have gathered, I just want to make sure I'm not uploading charts that are already out of date.

I have some good stuff for you & on a FUNNY NOTE....

It's a little time consuming to capture and notate all of the charts, but hang in there, I'm getting it done and I think there's some really good stuff that is both conceptual and applicable. There's just a LOT going on, but it's still relatively simple, really not much has changed or deviated from our expectations, at least not significantly.

For the funny part...

First let me say that I'm not making fun of anyone, especially not my loved ones. I've never judged people by their accent or anything like that, but I know and worked for a lot of people who did. Here in South Florida it is a melting pot of cultures, I'd guess second only to New York.  I had a Cuban guy who defected to the US working under me when I managed a high-end custom intereiors shop, as in multi-million dollar jobs ($200,000 in curtains, $750,000 in woodwork, etc.). This friend of mine (from Cuba), Juan Carlos, started working for us for $5.00 an hour and spoke no English, my favorite phrase of his was "What mean dat?"In any case, my boss treated him like he was an idiot because he didn't speak English. Fast forward 2 years, he was my right hand man making $28.00 an hour for manual labor, he spoke great English and had moved from a trailer he lived in with his wife, her parents and sister and their new born, to his third home, a $350,000 custom build.

After he learned English he told us his story, at 30 years old, he was a professor at a university in Cuba and his specialty was a reactor that burned garbage at low heat in an atmosphere with no oxygen, they extracted gas from the reactor and created energy. He spent 6 months in Sweden working with an international team on a huge scaled up version of the reactor and that's when his eyes were opened and defected to the U.S. He now is the vice president of a company that competes with Kohler, he started there as a design engineer 3 years after I met him, so the moral of the story obviously is don't be too quick to judge.

That being said, about an hour ago my wife who is from Budapest, Hungary came in and told me the girl who lives next to us is "Crazy". I asked, "Why?" and she said...

Anna: "Don't you hear it?" 
Me: "What?"
Anna: "The land-rover"
Me: "What?"
Anna: "She's lawning the moan!"
Me: "What?"
Anna: "She's outside with the land rover lawning the moan!"
Me: "What do you mean?"
Anna: "The grass! She's lawning the moan in THE FRONT OF THE BACK YARD"
Me: "Oh, you mean she's mowing the lawn?"
Anna: (somewhat frustrated with me): "Yes! Why you don't understand me?"
Me: "The washer is loud, I can't hear you, so she MOWING THE LAWN?"
Anna: "Yeah, that's what I said, she's lawning the moan with her land-rover, look outside in the front of the backyard"

I had to write this down so I wouldn't forget. 

That's ok, when I was in Hungary I told everyone from flight attendants to family members like an 85 year old grandmother and friends, 

"Nice to meet you", except there's a very slight difference between: Uhr-doh-lok Howyg Meg-ish-mer-tem and what I was saying: Uhr-do-luck Howyg Meg-ish-mer-tem.

Roughly translated and slightly edited, I told about 30 people, "Sh*t to meet you" before anyone corrected me.

OK, back to work.

VXX Position

I think there's enough reason to maintain the VXX call (very short term move expected), but as you may recall it was opened as a very speculative play meaning risk management is tight on this one. I do not feel though that there's enough good reason to add to that VXX call.

If we do get the short VXX bump to the upside, rest assured the probabilities are VERY low it last long, there are VERY strong negatives on longer charts, there's the rare sell signal from my custom indicator last night, there are the other charts of the averages and Index futures that are all doing as expected and stronger than expected, the VIX ultimately I believe has essentially topped for now (except perhaps for our very short term move) and it should see some strong downside, the market trades opposite the VIX so the upside I have been looking for seems to be very high probability.

We have long leveraged positions in place as hedges and as trades, I will add to them under the right scenario, but the main job before us is to use price strength to finish up our trending short positions for a larger trend, likely primary, maybe even a secular bear market in the not so distant future.

Quick Market Update

I intend to get out an EOD market update as well, I just have to look at a few more things. We've obviously had an explosion to the upside, particularly in the Dow, right around 3 p.m. rather than that pullback, however we still have signs and signals for a pullback. It see,s to me that they'll try to keep the ramp up in to the close, but the TICK data has fallen off pretty bad from +1500 during the ramp to neutral now, that's a break of the TICK trend.

SPY Arb wasn't used, I have a feeling the NY F_E_D's trading desk was. SPY Arb is negative about $1.00 and ES has reverted to the mean and ES and the model are nearly exact with only a differential of $1.66!!!

So the market is in the right spot for a pullback, whether it gets it or not is what I'm looking at. The SPY 1-5 are neg. intraday and suggest a pb, the Q's had an inline 1 min which is very good , but it just started leading deeply negative quickly, the other intraday timeframes will allow for that p.b.

The IWM will allow for the pb as intraday charts go and as strong as the DIA charts have become, I think they'll allow for it as well.

Index Futures are ALL in line on intraday 1 min, but all are in perfect shape on 5 mins for a pb, so that's important as well.

I think it's still a good probability, although at this point the shape of the base will have changed and the most likely outcome will have as well for the ultra short term.

TICK is now trending negative after going back to ZERO so we may get some weakness in to the close, it depends on who the invisible hand is pulling the strings.

I'm looking at VIX futures closely, I may add to today's position , I'll let you know.

GDX Update (NUGT/DUST)

I've had a lot of emails today about the gold miners, GDX or the 3x leveraged ETFs, NUGT and DUST.

I went over GDX a bit I believe last night or Tuesday. Here's what I have so far with some open GDX calls and a NUGT long which is what I prefer and may even add to it.

 This is the price pattern I'm looking at now, an inverse H&S bottom, I'm looking for a breakout above the neckline, that's for starters.

Tis is the daily chart, you can see there was a defined range and that was hit with a run on stops, I believe it's a head fake move. The next day we have a solid bullish reversal Hammer candlestick and today is like a star so far, we'll see how it closes.

This is the same area on a 60 min chart, the red trendline is resistance seen above as former support and something like an Ascending triangle, although it's not a true Asc. triangle because of the lack of a preceding up trend. In any case, the short term is a little rough to determine, the charts aren't screaming there so I'm using the most obvious market behavior and looking for a head fake move just under the triangle's support before a breakout above the trendline, if there's a good time to start a new position or add, that would be it so long as there's good accumulation on the move, so I'll be setting price alerts looking for that move and a Break Out move above the trendline (resistance),

The white arrows are support (bullish hammers", the red is the run on stops; the others are the hypotheticals.

Here's the 5-day chart with a large complex H&S top. Technical Analysis expects at least 1 test of resistance once the neckline of the H&S is broken and technically that could be considered that little area around late March. However, as I explained the other night and a couple of times this week, there are only 3 places I'll short a H&S top, that's: 1) At the top of the head, 2) At the top of the right shoulder and 3) after everyone else has jumped in short on the break of the neckline and also at the failed test of resistance (March), then the most common behavior is for a shakeout of the shorts with a counter trend rally that moves above the neckline of the large H&S top which squeezes out most shorts. For good measure this move often bumps just above the far right shoulder to squeeze all shorts out and right as that rally is about to fail and turn back down for the real decline, that's the 3rd and last place I'll short a H&S top.

Look at the volume alone recently, it looks like huge capitulation over a long period, almost selling exhaustion, whatever you want to call it, if has offered GDX very cheap and in huge supply, two things Wall Street needs to accumulate for that head fake/shakeout of the shorts.

 As I said, the intraday charts are kind of "blah " right now, the 5 min is the first clear chart among the fastest timeframes and it looks like it could see that head fake move I suggested below the triangle just before a move to the upside as about 80% of reversals have some sort of head fake move just before a reversal. To understand why, see my two articles linked on the top right side of the member's siite called, "Understanding the Head Fake Move".

The 15 min shows the concept I showed earlier in the week in which the area (to the far left) where accumulation first starts) is almost always well exceeded by the time the upside move is done, even though accumulation in to lower prices reduces the average position cost, in my experience the following move up almost always far exceeds where accumulation first started as we can see above (to the left at the first acc. range). The current positive divegrence is leading and even stronger and this is how these divergences in larger patterns typically proceed.

On an important 30 min chart (larger flows of funds) we see the same accumulation move to the far left as the example above on a 15 min chart. Also the larger/stronger positive divergence continues to the right in an area that clearly looks like a bullish inverse H&S base.

The 2 hour chart is the largest flow of funds, the signals here are the most important and we have accumulation at the June lows followed by a rally in to August and a larger leading positive divergence now.

As I have said several times this week, the longer term charts are like the chest with the promise of a strong move and the shorter intraday charts are like the key to unlocking that chest.

I like GDX/NUGT long here right now, but I'd like them better ion a small confirmed head fake below the triangle for a day or so, I'd like to add, but whether I do or not, if I see the move I'm, looking for, I will post GDX/NUGT as a new or add-to position.

Here we go...

There are a lot of assets that can be traded intraday short and then should make for nice (longer than intraday, but still short duration positions).

For example, USO should see a decline, to play it I think you need leverage (there are some 2x short crude, the 3x are very illiquid) or you can use a put, but I think the wiser tactic is to let the pullback do its thing and look for the assets that saw the strongest accumulation of the pullback, "A Constructive Pullback".

I would say chances are VERY high that USO would be a constructive pullback/long, so there's a very short term short, a longer term, but still short duration long after that and that should set up a long duration/trend position short trade.

You could do the same with just about anything, but I think I'll leave it at the VXX position and just spend the rest of the time looking for the (best) next trade rather than spend a lot of time managing a lot of small moves, which is what was expected last night (a larger footprint to the reversal area which allows the market better support on a run higher). The higher we can get the market to run, the more longs will step in and set up downside momentum (as they step in to a bull trap) when the market makes that 3rd turn (down) and the more shorts that get squeezed, the better the entries on those trend shorts or core shorts, for instance, USO ABOVE it's range (it's below the range now).

I'm going to take a look at my Russell 3000 MSI (Most Shorted Index) and see what's transpiring as well as Leading Indicators, then I'll get some more trade set ups out.

AA Follow up and P/L Report

AA (Alcoa) was entered Monday because it looked like there was an earnings leak (earnings after the bell Tuesday). AA beat lowered expectations on Revenue and EPS and popped higher from there. Whether to hold AA and how long depended on the charts. I decided to use both The Trend Channel and my X-Over System to judge AA's pullbacks and to have a trailing stop in place.

Today AA was closed, below the P/L I have some charts that show you why, but I will be watching AA for a potential re-entry on the long side if the pullback is constructive, otherwise, AA was simply traded by the pros on an earnings leak.

P/L...

At a fill of $7.85, which was one cent above the lows of the day, and a fill of $8.32, AA's gain came to +5.99% which isn't bad considering it's a large cap and was only held less than a trading week.

The 30 min chart was one of 6 charts that were all in line and telling us something was going on here, note the flat range where 3C is leading positive, this is a typical accumulate range (in this position within the trend) or distribution area (if an uptrend had preceded the range) where market makers or in this case, specialists from the NYSE try to fill at VWAP or a designated price range that is typically low and tight, if the middle man (market maker for the NASDAQ and Specialist for the NYSE) can get that order together at the desired range, they'll get more business, if not...

It's not easy to fill large orders like the one we see here, besides the size effecting the supply/demand dynamic of price action, there are specialized High Frequency Traders who specialize in "Pinging for Icebergs", or trying to find large institutional orders being filled, the HFT's are so fast that once they've identified an "Iceberg", they can front run the order and often force institutional players to pay a lot more for an order than they want to or get a lot less for a position than they want and the difference is the HFT's profit.

The small negative divegrence on the chart above alone would not concern me, but....

 This 1 min chart is VERY obvious something is going on today.

Remember I threw this position in to my X-Over system which is a trading system itself, but I use if to judge the assets behavior against its normal character. Originally the system was designed to root out false crossovers.

 Above on the 60 min chart we see a short signal, a stop and a long signal. RSI is not making a higher high as it should be which is not reason to exit, but is a red flag. With this system, the first pullback after a new signal is almost always to the yellow 10-bar average, the second and subsequent corrections are almost always to the blue 22-bar average until the trend develops more and then I'd throw this in to a daily chart.

I also used my custom (award winning) Trend Channel, which automatically adjusts to each assets own volatility and can not only hold a trend, but can even hold corrections within a trend without stopping out. You'll never exit at the exact top or bottom with this system, but it will keep you in for a larger chunk of the trend rather than making arbitrary decisions about how much is enough. When the character of trend changes too much, a stop will generally occur and while there may be more gains after the stop, they are typically in the very volatile, choppy top of a trend, the channel keeps you in for the trend and gets you out before the volatility/chop and lower returns.

You can see from left to right a short trend with no stop out as price did not close above the lowest level of the top channel, around 10/4 it did stop out and that was it for the trend. On the upside, there was no stop as price did not close below the highest level of the lower channel, it still hasn't stopped out, I estimated where a pullback would meet the Trend Channel as it will continue to lock in gains almost every hour.

I'll look for a constructive pullback to possibly enter AA, if there's really something to this move beyond an earnings leak, then that gap is likely to be filled, I see NO reason to sit in AA and sit through draw-down in this situation.

Closing the Alcoa (AA) long for now.

I may look at re-entering the position , but for now I think it's best to take the gains and open up some availability to dry powder.

Market Update

So far everything is going well, we have very strong positive divergences and confirmation so any intraday pullback is VERY high probability to be just that, a short term pullback and should make for excellent long entries, but I'd wait to see a real pullback first and make sure the set up is there.


As for that pullback, here are the intraday signals.

 ES / SPX Futures 1 min, this shows a very good chance of an intraday pullback as there's a negative divegrence, but it's only a 1 min chart so not strong distribution.

The 1 min NASDAQ Futures have an even stronger signal...

First NQ has a relative negative divegrence like ES, then it moves to a higher high in price and a leading negative divegrence in 3C (the strongest type of divergence).

The Averages...

 DIA intraday 1 min from confirmation to a leading negative divergence.

 IWM 1 min with accumulation at yesterday's lows, a leading positive signal (strong accumulation) at the afternoon range and break/head fake below the range and then good opening gap up 3C confirmation with the same distribution / negative divegrence right now,

 The QQQ, like the NQ (NASDAQ 100 Futures) has one of the worst 1 min intraday signals.

 The SPY 1 min negative is not that strong and as far as what comes after this and what this is...

The SPY 30 min, the important thing is to the far right, a leading positive divegrence on a 30 min chart means significant accumulation, that won't be undone easily so an intraday pullback is likely to be just that as there's a lot stronger accumulation from yesterday so the probabilities beyond intraday are for the move to the upside we've been expecting.

Timing of the intraday pullback for the market....

Looks good here, I'm capturing charts now. Any trades taken on this move are highly speculative and likely of very short duration, a good probability they'll be day trades.

VIX / VXX UVXY / XIV Follow Up Charts....

This is a follow up for the last position, VXX November $15 Calls and the P/L report for the VXX Put position entered yesterday just after 1 p.m... and closed this morning at 10:45 a.m.

For the VXX Put entered yesterday with a cost basis of $1.90 and a fill of $2.66, the P/L came out to a gain of +40% for just over 4 hours of market exposure.

Being such a short term position I could have easily gone with a weekly like next week's expiration, but I always prefer to buy quality rather than a lotto ticket (and in the money)...

VIX Futures

 The 15 min negative developing this week in VIX futures along with last night's sell signal, really are solidifying the confirmation of an upside market move as we have been expecting.  This tells me any move in the VIX toward filling the gap, isn't likely to be much more than that and further confirms our short term expectations of market upside as the VIX trades opposite of the market.

The 5 min VIX Futures went negative yesterday (this is more of a timing timeframe than probabilities for a strong move), so this fits very well with my custom Demark Inspired Buy/Sell indicator that gave a sell signal in last night's Daily Wrap. The leading negative distribution is pretty bad here and is migrating to the 15 min chart, but short term (intraday), the leading positive in white suggests some move to the upside which fits my expectations for the market to see an intraday pullback.

 VIX Futures 1 min intraday, as you can see, the VIX futures made a new lower low on the day as I suggested as an entry point in today's VIX Call post.

Right now we have a relative positive divegrence there. This divergence is starting to improve as I write.

I'll compare VXX (VIX short term futures) to UVXY (2x leveraged short term VIX futures) to XIV (VIX inverse short term futures) as well as VIX futures above. We have several different timeframes, all different assets trading unique volume and all different management companies for each of the assets except the actual futures.

Yesterday's distribution saw a head fake move confirmed by the leading negative divergence/distribution which is something we see about 80% of the time just before a reversal, thus the reason I mentioned it as an entry for today's position.

As you can see, price did break to new intraday lows as I suggested, again as a lower risk entry for a new position.

 UVXY 1 min from negative at yesterday's highs to the gap down and a relative positive at today's new intraday lows.

UVXY 2 min intraday confirms the distribution at the head fake / false breakout yesterday as well as a leading positive divegrence today at the presumed head fake run on stops to a new intraday low (the suggested entry area)

Even now these charts are improving suggesting accumulation of additional stops hit below the former intraday low.

XIV 2 min is the inverse of VXX , thus yesterday's head fake was a stop run rather than a false breakout, you can see the 3C accumulation of the low confirming the head fake.

Today we have what looks like a false breakout and a negative divegrence confirming all of the charts above.

This chart has improved since its capture.

I still like VXX calls or long or UVXY long.

This looks like a good, low risk entry, a stop can always be placed a standard deviation or so below the normal daily range or wherever you chose.

Opening New Position: VXX Nov. $15 Calls

This is a VERY speculative trade, likely a day trade and that's why I need the leverage.

I suspect the market will pullback intraday at least some, maybe a gap fill although I don't think that a gap fill is necessary as the gap would be filled eventually on the way back down.

I think you could use UVXY (the 2x leveraged version of VXX and there are numerous other ETNs that are variations). I didn't like the liquidity for the UVXY calls so I'm choosing VXX.

I fully expect this will be closed by the end of today. If you are going to enter this trade (or long UVXY) know that it is very speculative AND MAKE SURE YOU UNDERSTAND WHERE YOU STAND REGARDING REGULATION "T"

For me this position will be about half the size of a normal options or speculative position, it's just for an intraday market pullback.

***To lower risk, you might consider ONLY entering the position if VXX were to make a stop run under intraday lows of  ($15.18) which lowers your risk and gives you a better entry with lower premiums for options (most likely). For UVXY longs, the intraday low would be $35.95.

I don't have the time to watch it for these moves so I'll enter now, I will get some charts up momentarily so you might want to wait and see what they look like, JUST REMEMEBER THIS IS A VERY SHORT TERM PLAY.

Market Update: Initial Impressions

First, there's EXCELLENT 3C confirmation, however as to that pullback, there are some initial intraday signs in the averages, the Index Futures, the VIX of course and the TICK (intraday).

This isn't going to change any of my positioning,, but it may very well open up some great opportunities on the long side (short term duration trades of a day to several days), first thing first though, we have to see what a pullback looks like and where the opportunities are.

I continue to hold the trading positions in both URRE as well as AA.

Closing Yesterday's VXX November $17 PUT

A.M Update

I'm back, late as usual from the doctor as I had to fill out a lot of paper work as he merged with a new practice, surprise, surprise.

I'll be updating soon, the only thing I'm looking at immediately is yesterday's new VXX November $17 Put, it's at a nice gain and I have a feeling it's going to lose momentum as it breaks under the a.m. lows, I'll likely be closing that position very soon. Of course I'll post it before I do, but it could be any minute.

Pre Market Futures

It looks like the Carry's have gone crazy, USD/JPY and the AUD & EUR vs. JPY crosses as well have all been on a tear since Tuesday's lows of the week... The story is of course that Obama is willing to negotiate and has a meeting set with Republicans this morning. In any case, those 5 and 15 min positive divergences building in the carry crosses and Index futures all week finally have a headline that  is kicking them in to second gear...

USD/JPY 5 min showing the week's lows on Tuesday roughly 5:45 p.m. to present.

There's some question in my view whether this will hold without a decent correction...

1 min USD/JPY looks like it wants to correct.

ES is up about 17 points as of right now 7:15 a.m. which is ironically just about in line with the Capital CONTEXT's model which was between the high teens and low 20's, that's based on things like Credit outperforming ES/SPX futures as well as Carry trades, and other institutional assets.

I seem to remember a Goldman recommendation I believe Monday to short the USD/JPY, remember I never claimed they were dumb, I claimed they were trying to buy USD/JPY and reminded everyone that Goldman isn't in the business of giving out free advice so whatever they rec'd, do the opposite as this makes something like the last 8 rec'd failures as this particular one is set to stop out any moment now.

The short term Debt Ceiling increase that's being discussed (4-6 weeks) seems doable, but it will be attached to framework for a longer negotiation and I believe the Democrats in the Senate said they won't accept framework that puts Obamacare on the discussion list so this small step still has to span a very wide gap, I'd just say beware of volatility.

As far as other assets...Those 5 and 15 min positive divergences that have been growing in Index futures look pretty good, the NASDAQ which looked the worst of all now looks like this...

NASDAQ 100 futures (NQ) looks to have strongly accumulated the lows yesterday which was a theme seen broadly across the market.

However looking at the intraday 1 min overnight, it too looks set for at least some correction.

NQ 1 min

Although the R2K and ES 15 min futures look great and look like any correction will be short lived...

TF 15 min also very strong...

Both ES and TF 1 min charts also look set to correct soon.

Also on the correction bandwagon, 10 and 30 year Treasury futures which been heading down all night look set to correct to the upside with positive divergences building in.

Crude looks like a bear flag, it has made up ground overnight, but I suspect it at least corrects a bit before moving higher, again it needs a bigger base/footprint for any sustainable upside run, but the news that I talked with some of you about is that crude went up with the USD overnight so long as the USD went up as part of a carry trade which it did.

Gold and silver didn't get hit as hard as I would have thought, in fact silver is a little bit, "all over the place".

So we have an interesting start to the day, but regular hours are really what I'm most interested in.

ES 15 min chart leading positive which is good for the near term outlook, but price does not need much of a correction to widen that base or footprint which would be best in my view for a more sustainable upside bounce as we have been looking for to set up some final shorts.


I have an 8:15 Dr. appointment, it's a short one, but he always seems to run late, in any case I should still be back before the open.

I might look at taking some profits on call options if there's strong early momentum, watch the TICK for signs of the momentum fading or RSI or even ROC applied to price. We can always re-enter calls at a lower price if the market looks set to correct.

See you soon...