Chop Continues

Wide market chop was the forward looking forecast or highest probabilities which is actually one of the most difficult calls to make because it's not a clear trend, but when using multiple timeframes, we can get pretty close.

 I said that these kind of choppy zones remind me of a child's scribble with a crayon, sort of like what we see above on the SPY 15 min line chart.

The EUR/JPY was the scam of the day overnight as the Yen was smashed lower on no news whatsoever, sending the Nikkei 225 up 1% in about a minute. More importantly, it lifted all of the JPY crosses and all important EUR/JPY cross for the market.

We do have a negative divegrence in the EUR/JPY pair right now.

I showed you earlier how the headline news regarding "What the ECB was likely to do tomorrow" sent the Euro higher and thus the EUR/JPY and futures with it.

This is the EUR/JPY (candlesticks) vs SPX futures (ES) in purple, I showed you this earlier and how ES fell off and refused to hold the gains with the carry cross.

I'll have more as soon as I get to get together some charts, but I think we did get good information today regarding "How" the market reacted to such a ridiculous manipulation. 

The Dow had the best gain, if you look at a daily chart of the Dow, can you guess why? The Dow is the only average that hasn't cleared a very obvious range.

I think we'll have some good directional movement and the Leading Indicators to make the multiple timeframe analysis easier to understand.

MCP is also looking like an awesome long, it's just a matter of a little timing, but I'm glad to have opened a partial position yesterday.

Thanks again today for all the thoughtful emails, I'm still at the hospital waiting to hear from the doctor, the surgery seems a little longer than anticipated.

Closing Market Update

The 1, 2 and 3 min IWM charts all look like it will see near term upside, but those intraday positives stop at the 5 min chart.

The QQQ has also seen intraday positives in what most would call a bear flag intraday, it's just a consolidation though. In this case the positive stops at 3 mins, as mentioned earlier, the IWM looked the best early today.

The SPY intraday charts are the opposite, they are largely bearish and only have a broad positive around the 5 min chart. Most of the intraday charts shorter than 5 min actually look bearish.

The TICK has been fairly even today for the most part.

HYG has had the shape and look of a positive divegrence since Monday, the positives are there to add more upside, but the hints of distribution in to the move on the upside that has started, are already there, I don't think this will be supportive for long.

I'd expect some more upside, but overall it looks like a lot of distribution in to any price gains.

MCP Follow Up

As you may recall, I opened a partial position in MCP yesterday.

This is yesterday's update fir MCP

You may recall the position entered was half size with a risk management plan that would allow be to "Phase" in to the position, the second half of MCP only added if MCP makes a head fake move which I thought to be pretty likely, mt price alerts have gone off (only the $4.70 alert ahsn't been triggered yet).

So far I have no concerns about the partial position, however I'm also not quite ready to add the rest of the position yet.

 The only low of the year not hit is the $4.70 intraday low.

This level was hit, note the stops hit as volume increased, this is one of the signs of a head fake move we are looking for, it's a big part of the reason for one.

The 10 min chart is in line and looks good, there's no trouble for the position opened yesterday as far as I'm concerned.

MCP 2 min looks great, but I'd like to see the intraday 1 min go positive to indicate the head fake/shakeout/stop run is over.

This is the 2 min chart viewed intraday

And the 1 min chart intraday in line with price.

When I see this chart go positive, I'd feel very comfortable entering the second half of MCP long as a position/trend trade.

I'll let you know if the second half is entered, this is exactly what we suspected we'd see yesterday and the reason for a partial entry with wide risk management leaving room to add on a head fake move.

GLD/GDX...

If I were to take profits on GLD and GDX December calls from yesterday, this morning would have been the time while we were seeing double digit gains, this is why I like taking profits with options BEFORE momentum dies. As upside momentum dies and became lateral, the gains dissipated as well from double digit gains down to single digit gains. However I chose to hold both for a longer term position and a larger upside move, although these were always considered to be short duration trades, I just think there's more than just this.

GLD and Gold Futures charts....

 GLD showed initial profit taking this morning sending GLD in to a lateral trading range as is common with a 1 min only negative divergence. Since, the divergence and underlying trade has improved as I suspected it would based on longer term charts.

 2 min overall trend, but intraday it stayed fairly in line or maybe positive, this suggested that the highest short term probability was sideways/lateral trade, if the 2 min had been clearly negative than a pullback would be high probability and I would have taken profits earlier today.

3 min positive yesterday which is one of the reasons the calls were entered yesterday. 

 GLD 15 min shows the negative leading to a pullback that I think will ultimately continue, but before that happens, a weak positive divergence suggested an upside move.

The hourly chart also has a fairly positive divegrence for the short term which is what these positions were meant for. 

Gold Futures

 5 min positive and leading positive which is typical progression of a positive divergence.

15 min gold futures are positive and the range is well defined.

30 min gold futures have the pullback signal and shorter term positive for an upside move before we continue lower and eventually get to a strong, long duration GLD long.

GDX-gold miners...

 intraday we have the flat range and negative divegrence on the 1 min

However the 2 min is largely in line which puts intraday probabilities at a lateral consolidation.

GDX 5 min shows a leading positive divegrence so I think there's enough gas in the tank to make a larger upside move probable.

GDX 15 min shows the initial positive, the pullback negative signal which I think will eventually continue for a deeper pullback before making GDX a good looking, low risk, longer duration long position.

As you know, I decided to give the December GLD and GDX calls more time.

Market Update / Trading Positions Update

I'm back, I've been looking at the major average as well as some manipulative assets like HYG and trading positions which include SRTY, SPXU and FAZ long (3x short R2K, SPX and Financials respectively).

First, my gut feeling of the market's strength or lack of it on such a blatant manipulative move overnight has by and large been confirmed. I suspected that if whoever is pumping the market had to resort to a tactic like that, the pros would feel what I felt, "This is a weak market" and they'd sell in to any price strength.

This is above and beyond my analysis in the Daily Wrap from last night. What I mean is that my analysis of the market yesterday/last night was that there were several things in place like a negative divergence in the $USD, positive divergences in Treasury futures and positive divergences in gold that told me the probability for risk assets was for a bounce, I believed gold, oil, miners and Treasuries would very likely see that bounce as most have today and the atmosphere would be conducive to equities seeing a similar bounce and that it would likely be short in duration, but probably last several days.

Today, thus far it seems that this mini-cycle has been totally changed by what happened overnight. My gut feeling thus far from what I've looked at is that any price strength is being sold in to faster than I would have expected based on last night's analysis and I suspect it's because of the "seeming" desperation in resorting to such obvious tactics as we saw in last night's ramp.

The weakness is apparent in the SPY and QQQ, however the IWM is different, it actually is showing some intraday strength. I'll put those charts up. Additionally, I looked at the trading positions in SRTY, SPXU, FAZ and TECS (long) which is like a 3x leveraged short position and while there are signals for short term pullbacks, it seems to me from the charts that the damage is so severe that it's not a wise idea to close these short positions. After all, the distribution in to the overnight ramp's is more extreme than I would have otherwise expected had the bounce come from things like $USD weakness and HYG strength.

Some market charts...

SPY

 Intraday weakness as mentioned, 1 min

Intraday weakness at the a.m. highs, 2 min

Same a.m. weakness in to a.m. highs 3 min

SPY 5 min negative

SPY 15 min chop zone and a leading negative divegrence at the highs of the zone

QQQ

 Same intraday weakness 1 min, distribution in to s.m. highs.

QQQ chop and negative divergence 3 min chart, same as the SPY's theme

QQQ 5 min distribution continuing at the top of the range today

 QQQ 15 min leading negative, this is a more serious divergence

 QQQ 30 min should be obvious.

IWM is the one showing a little different near term action

 IWM 1 min distribution at highs with accumulation at the lows intraday

IWM 2 min also showing intraday lows with a positive divegrence.

The 3 min defining the chop and associated divergences.

5 min chart showing overall trend turning from positive (for the chop) to negative

IWM 15 min clearly negative.

IWM 30 min leading negative on a serious timeframe.

The IWM obviously has some better looking intraday charts, but when looking at the short exposure trades like SPXU, SRTY, FAZ, TECS, I felt the short term charts don't compete with the mid-term charts that I really have been judging these positions by, in other words any short term IWM positives do not compete with everything else so I will maintain these short oriented positions and not be thrown off by very short term data that is really more in the IWM than any where else.

Schedule...

I'm in pre-op with my mother for about 15 more minutes and I'll be back

EUR/JPY vs. ES

Earlier there was a momentary spike in ES about 10 minutes to 10 a.m. EDT. This was based on a headline that the ECB would not cut rates tomorrow which spiked the EUR/JPY and ES with it, however ES couldn't hold on.

EUR/JPY in red and green candlesticks and ES (purple) you can see the spike in the carry pair, but again weakness is apparent in SPX futures as they make their way to an overnight low post the JPY smack-down/EUR/JPY ramp.

The point is simply that even on all of these ramps, the initial reaction has not been to take it and run but more to take it and sell in to it.

Market Update

As suspected in the earlier market update, they were selling in to the pop, the SPY is holding the best, but you can see even it's distribution.

SPY and the DIA look the same, they are feeling the same distribution off the open as QQQ and IWM.

I'm not rushing to any judgements this early, but it does seem that interesting bit of information that we would glean from such a blatant overnight manipulation  is coming thus far loud and clear, the pros are using it to sell so far or short.

I'm still undecided what to do with GLD/GDX just because their cycles looked a little bigger and stronger, as I said last night... It was the risk assets like gold/GDX and oil that really had signs, I thought equities would benefit from the same atmosphere, but their signals were not the same as GLD, GDX and USO.

USO Quick Update

USO is up and I will hold on to the USO calls here simply because the USO divergences are large and through out many timeframes including some pretty long ones. I just don't think the USO cycle for a bounce could be unwound that fast even if they wanted to, in essence I'm saying the positive divergences for a USO bounce cycle are large enough that I think it would take a lot more upside to unwind the position even if they wanted to do so very quickly, it's cycle was set up a while back and it's much larger than GLD's or GDX's.

GLD / GDX / NUGT (long / call) follow up

Yesterday's long NUGT is up over +4.5% and the GDX and GLD calls are in the double digits (near mid-teens) which is not bad for a very quick position.

Early action seems to be that of selling/distribution.

I'd usually take gains with double digits this quick and signs of selling in to this strength, but there are longer 5 min positives that were the reason I felt safe taking these positions on yesterday, I just feel like there should be more upside on the bounce, however I have to tell you that early action looks like selling in to GDX and GLD.

I'm going to stick with them a bit longer, but I wanted you to know what's going on early.

I have to wonder if it weren't for that overnight ramp if the early selling in to the pop higher in GLD/GDX would even be happening or whether the original cycle that was laid out would unfold more naturally over a longer period of time before selling was apparent.

Early Market Update

So far at least for the market's sake and for fairness' sake, I'm glad to see this.... And if this keeps up, this will give us a crucial piece of information, the answer to what pros do with such a garbage ramp, right now it seems they're selling it although I acknowledge it's early in the day and not usually the time I'd be looking at these indications because of the opening games that go on, but so far...

 SPY 1 min with the positive divegrence at yesterday's intraday lows, distribution at the intraday highs and this morning no confirmation of the ramp job, this 1 min chart has had enough time to confirm the SPY, it hasn't

The Q's with yesterday's positive 1 min divergence at intraday lows, a negative in to afternoon highs and ZERO confirmation this morning

The same is true for the IWM.

And to give some Breadth proof of the signals above...

 The TICK opened at an extreme of nearly +1500 and quickly dropped to ZERO.

Even the HYG ramp being put together which is not very big compared to the distribution at the top of the preceding cycle....

Is seemingly taking this opportunity to lighten the HYG load in to higher prices early on.

A Sad Day for the Market

There's something I love and I think a lot of us love about the market that I'd sum up as, "Do your homework, pay attention and find that one thing everyone else missed and you'll be rewarded" .

I think today and overnight, we see just how weak and pathetic this market is and not just the US, but the global market including the Nikkei.

I expected risk assets to see a rise and that could and probably would have included equities, but there was a reason why I thought this was a probability and I went to great lengths to discover that probability.

I even it last night and yesterday, "I think this market has no organic strength left, just manipulation tricks".

In fact I named them, Arbitrage schemes, HYG ramps, VIX smack-downs and Carry trade crosses.

This...

 10 point ramp in ES that sent the Nikkei up 1% almost immediately, is a disgrace and very sad to see.

The ONLY reason this happened was due to this...

 A ramp nearly straight up in all of the JPY carry trade crosses like EUR/JPY above.

And this was the ignition...

A smak down in the Yen.

There was no reason for this, no news whatsoever.

THIS IS MIDDLE OF THE NIGHT, LOW VOLUME MARKET MANIPULATION AT ITS WORST. 

I think this just shows how weak the market is that they have to ramp it so obviously on no news. It's like pure gambling, bet on red or black, whether they ramp the market or not.

Yes this ramp sent our MCP long up thus far, our GLD long, our GDX long,  and some others (likely our Treasuries trades)... But is this how you want to win or lose?

I suppose every dark cloud has a silver lining, even this disgrace. It would seem if they need to resort to such blatant tactics without even trying to disguise it behind news, the desperation is palpable, I think that's worth knowing and seeing what the pros do with this because at some point when retail is fully vested as they are at record margin levels and pros have had it like Dan Loeb, there's nothing left to hold these ramps up, in fact I'm interested to see how they use this one and how long it holds.

Until then, today is simply a sad day for those of us who love the market and not this blatant manipulation. 

Tuesday's Wrap, Short Term Risk Asset Bounce Likely

We saw early weakness Tuesday morning as futures steadily slid lower from about 3 a.m. as it became clear that the Chinese/PBoC recent tightening (withholding of reverse repos and buying up $USD's) looks more and more like policy as an interview with China;'s new premier confirmed what we suspected Oct. 18th, the day after the first withholding of PBoC liquidity injections via regularly scheduled reverse repos operations. A Better than expected early ISM print didn't help the market either early on as "Good news is bad news" for QE tapering.

Also early in the session, the F_E_D's President of the Boston F_E_D, Rosengren also warned of the consequences of QE, it was slightly hawkish, but more just a common sense comment that the F_E_D must consider the costs of QE.

The market bounced off early lows on what most presume to be a POMO operation, but still all of the major averages closed in the red from -.13% (Dow) to -.42% (Russell 2k) with only the NDX closing green at +0.12% while the momentum heavy transports closed down -0.53% after a solid run on the upside.

Some things I've been paying attention to include the $USD which has been up since the F_O_M_C policy statement in what would be considered a "Taper on" reaction ($USD up, Treasuries down and gold down has been the theme), however this looks likely to change shortly which would likely support our new GLD/GDX long position as well as our USO long and general equity risk on as the historical legacy arbitrage of a lower $USD typically helps these assets (gold, oil and equities).

$USD moving up since just before last Wednesday's F_O_M_C with a 30 min negative divegrence in place now.

See my last post and the 30 min Gold Futures chart for the positive divegrence there as well as the positions entered Tuesday in GLD/GDX.

And the Treasury Futures also look set for a bounce higher...

10-year (30 min chart) treasury futures with a positive divegrence, this should benefit the recent TBT short (essentially a TLT 2x long position).

 TLT's 30 min chart and longer probabilities with a leading negative divegrence favor more downside and I'm looking for a target of $100-$102 for a possible core TLT long position, but before that pullback continues lower to an area where TLT becomes an interesting long, as seen above in the 10-year...

The shorter term 3 min shows a clear positive divegrence like the 10-year futures.

This bounce probability is similar to the GDX/GLD bounce and $USD pullback, I believe it to be short term before reversing, but still a high probability.

This would suggest equities make a move higher as well, I have seen a few signs suggesting the same.

 While the 30 min and 60 min HYG (High Yield Corp. Credit) chart shows HYG finally breaking with the 3C in line status and moving toward a deep leading negative divegrence suggesting real market damage as we have seen on charts such as the following IWM 30 min....

IWM leading negative on the last cycle from the 10/9 lows shows serious structural damage in the market and the path of least resistance to be to the downside, yet like other assets in the very short term such as GLD, GDX, $USD and TLT... HYG's short term chart...

shows a 5 min positive divegrence and HYG is typically part of the effort to lift the markets in blatant manipulation, but there's just no organic demand, thus we are seeing more and more of these scheme whether carry trades, VXX slams or Arbitrage schemes such as HYG up and VIX down.

I'm also starting to see a reach for protection, even as I expect short term  risk asset upside, USO is a great example of a risk asset I expect to move up, especially on $USD weakness. VIX futures are seeing accumulation and while I'm not ready to call a long in VXX short term, there are positive divergences building.

15 min VIX futures seeing a strong leading positive divegrence.

USO is already a long position, but if you haven't checked it out yet, I'd consider doing so soon.

 The longer term 60 min USO is positive, see recent USO analysis ...

Shorter term 5 min building and looking very much like USO is finally ready to make a move, a falling $USD will be helpful.

Also supporting near term upside is Tuesday's Dominant Price / Volume Relationship among the components of the major averages, Tuesday saw a dominant theme of Close Down/Volume Up, which is most often associated with short term capitulation and a move to the upside off what some might call an oversold condition.

However, even with conditions pointing toward a bounce in equities, many indications are still very damaged including Credit's lack of enthusiasm, it has diverged from the SPX/market and credit most often leads and equites follow so I still would be unwilling to close the trading leveraged shorts put together including SRTY and FAZ.

HY Credit was less enthusiastic on the closing ramp EOD in the SPX on a VXX smack down.

Sentiment indicators remain bearish and especially in to the closing action as the SPX made an attempted closing ramp, sentiment indicators went the other direction.

Yields also remain firmly negative and are a great leading indicator.

Yields over the entire last cycle were positive at the cycle lows and very dislocated negatively at the top.

While I'd expect some bounce in commodities on a USO and PMs bounce, I don't think there will be enough to undo this leading negative signal in commodities vs the SPX for the same cycle.

Commodities are leading positive at the lows of the cycle and deeply leading negative at the highs of the cycle.

We'll take a closer look at the averages tomorrow, they are not clearly positive and are probably among the weaker of risk assets of all listed above (Gold, Miners, Credit, Oil, etc).



For instance, among futures, while the 5 min charts are in line and consistent with upside gains...

 TF 60 min cycle divegrence with a lot of distribution/damage...

The daily for the year with a lot of distribution/damage.

Even if I had decent signals in the averages, I'd be very hesitant to play any long as we saw futures get knocked down pretty good just on fundamental Chinese monetary policy news that we already basically new since 10/18. In other words, there's so much damage that even with decent signals, the chances of a collapse because of all the longer term or larger flow chart damage is just too high.

Just as important, it's the Leading Indicators on several timeframes that are standing out the most, they do have some short term positives along the lines of what has been covered in gold/GLD/GDX, but the cycle shows significant damage and the longer trend for 2013 and even since 2009 shows SIGNIFICANT damage.

I'll post those in the a.m.

I'll be working from the hospital waiting room tomorrow, but I don't anticipate any disruptions.