Wrapping it up...

Yesterday it was clear, there was no strength in the market, I even ended the daily wrap saying I thought we opened lower today which we did by almost 10 ES points, that's a drop.

The trend I have been noticing is the assets used to float the market in the past are working less and less or not at all. I chronicled the shameful smack-down of the Yen to ramp the market in the low volume overnight session about a week ago, I wrote about it, A Sad Day for the Market. The reason it was really sad or pathetic was because they had to resort to something so blatant on no news, not even a thinly veiled smack-down, just wide out in the open, no apologies, but that told us something about the organic demand or lack of strength in the market.

This week that same trick was tried, it may have worked a little for an hour and then failed.

HYG Credit which has been used effectively for cycles almost all year (although being long term severely disconnected) all of the sudden starts accumulating for a cycle, the rounding process was almost complete and in a day it utterly failed and down HYG went.

Even the VIX, which was smacked down at 11:45 today, just 30 minutes after this post of 3C showing exactly that, however looking at VIX compared to the cycle, VIX has held up much better.

The Carry trades aren't consistent, they're falling apart and are falling way behind. It seems the only thing left to move the market is central bank jawboning, but as I showed earlier, even that lasted for an hour or two for the ECB, EVEN THEIR SURPRISE RATE CUT DIDN'T HOLD FOR MORE THAN A WEEK!

I'd almost say there's a change in QE perception.

This chart of the IWM is what the market's charts, Leading indicators, etc. are all in line with...

IWM downtrend and even the "Channel Buster" (as they always do) which initially looks bullish, tend to be one of the best head fake moves out there (bearish), look at the leading negative in 3C.

So I was thinking of putting together all of the charts as usual, but I don't know if the Yellen comments for tomorrow's Senate confirmation hearing were leaked on purpose, if they were known in advance, I don't know if today's move was based on a leak of this information whispered on Wall St. I just don't know, but what I do know, is what happened today doesn't seem to have much relevance to what happened after hours with the Yellen Leak.

If there is a change in perception re: QE, there are a lot of interesting articles by ex F_E_D members going as far as apologizing for QE.

What I do know is Futures don't look right considering Yellen's comments. In low volume overnight markets, it would be VERY easy to ramp the market on her comments, even if they were only used as cover, but something else is developing and I showed it in the last post starting.


It's true that I usually have little respect for 1 min charts overnight, too much can happen, but I'm wondering if these will shortly hit 5 min charts (it's just a matter of 5 min bars passing or "Time").

Here's an updated look and in fact, some of those 5 minute divergences are there.

Index Futures

 ES 1 min is even worse, but

It's the 5 min that can last the night, it didn't take long to get to this leading negative divegrence.

 NQ 1 min negative

NQ leading negative 5 min

TF 1 min negative now at a new leading lower low.

Other QE sensitive assets, the $USDX

 The dump in the $USD is seeing a leading positive divergence

And Treasuries...

 The pop in the 10 min is seeing a leading negative divegrence

 And look at the 5 min!

This is the 30 min 1 min leading negative

Again, ES 5 min, that wasn't there earlier.

Something is going on that makes everything that happened today irrelevant until we better understand this, but for now it was a slight pop on Yellen comments and huge distribution after or accumulation in the $USD.

Very Interesting

Mini Wrap

It's hard to believe that when I was drinking my coffee this morning, the prediction made last night in the Daily Wrap, that it was likely the market would open lower today was not only true, but by about 10 ES points from the 4 p.m. Tuesday print, that's a pretty substantial decline.

Then it didn't take long for positive divergences to start showing up in HY Credit (used for arbitrage manipulation or as an institutional risk asset) and distribution in VIX futures which put together create the market supportive SPY Arbitrage and I wasn't the only one to notice, a couple of members who are good with 3C saw the same.

In fact, it seemed that from looking at when the divergences started and considering how bleak they were yesterday, it looked probable that the ECB interview (European Central Bank) published in the Wall St. Journal today was almost certainly leaked or otherwise known of in advance.

While the ECB tried to knock down the Euro with last week's SURPRISE 25 basis point rate cut, it didn't last long, although the initial move was worth a couple hundred pips. Suddenly the ECB finally went where the ECB never went before and mentioned something that apparently is AGAINT their charter, "Asset Purchases". The ECB is prohibited from financing and E?U government, but when buying bonds, they are doing exactly that. In any case the QE statement from the ECB was market moving and ES which was down 10 points before the close, closed 19 points higher from intraday lows to highs.

The initial goal of the ECB was met, they jaw-boned down the Euro and raised the $USD without making a single move, just talk...

 The $USD rises on the WSJ ECB QE article and then the $USD gives up those gains much to the disappointment of the ECB, what a miserable failure! This is the second failure because their surprise 25 basis point cut only had a knee-jerk response before the Euro lifted again.

The legal ability for the ECB yo intervene in this way is highly suspect, this is why we haven't heard of it as a possibility until now.

Some very smart people thought that the F_E_D may be getting ready to taper, while the ECB steps in with the liquidity spigot. However, an early release on Janet Yellen's comments for the Senate Confirmation hearing tomorrow (leaked early again?)  sent the $USD in Taper _off and QE on mode, unlike the last week and after the NFP!

The Euro dropped as the ECB hoped as the WSJ article hit the wires, but had a half life of just about, (um, carry the 6, move the decimal point, divide by two, uh...) Half life of almost NOTHING sent the Euro higher.

After market, Yellen's early , pre-released comments sent the Euro even higher, Draghi will have a hard time out-jawboning the F_E_D.

As a result, gold which we were already expecting a bounce in, bot an extra bounce from Yellen's pre-released comments.

 Gold ran up all day, but as of yesterday and actually earlier, we've been expecting a bounce in GLD and that's why the GLD December calls were just added to.

30 year treasury futures ran on the Yellen news

And 10-year treasury futures ran on the Yellen released comments, with the $USDX down ALL QE SENSITIVE ASSETS ARE ACTING AS IF IT'S TAPER OFF/QE ON.

However, slow down before jumping to conclusions... there's more.

First though, here's a summary or bullet points of Yellen's prepared remarks-she's not dressing up as a hawk as a dove underneath.

-"supporting the recovery today is the surest path to returning to a more normal approach to monetary policy"

- "A strong recovery will ultimately enable the Fed to reduce ... reliance on unconventional policy tools such as asset purchases"

-"have strongly supported this commitment to openness and transparency, and will continue to do so"

- " I am committed to using the Fed's supervisory and regulatory role to reduce the threat of another financial crisis"

- I believe the Federal Reserve has made significant progress toward its goals but has more work to do

For good reason, this was taken as universally dovish, however has anyone really expected anything other than that from Yellen? Could we be in a buy the rumor / Sell the news situation?

I don't know, but I'm hard pressed to explain this after the Yellen release.

 The ES 1 min negative leading divergence was the worst and developed fast, it's well below the area when ES was down 10 points this morning. Since it's new, it won't have made it to the 5 min chart, but I'll be looking at that later.

NQ futures were just behind

And TF is borderline, but ES is pretty darn clear as is NQ. THIS LOOKS LIKE CLASSIC "BUY THE RUMOR/SELL THE NEWS", too bad we don't have more market's and tools available to us.

The 30 year Treasury futures are in there too.

 After being in line all day, suddenly on the pop on Yellen there's a negative divegrence?

And the Euro that popped on Yellen, maybe Draghi gets the last laugh?

I won't pretend I know what all of this portends except I know what deeply established trends show and this is the exact reason I took the time to try to anchor expectations of the market with this chart...

 The point was the 2 month rally in the middle of a turbulent market and then a downtrend following it with 21 down days and 20 up days. The link can be found here for the complete picture.

So I'll look and see if regular hours had any surprises that didn't belong there (PRE_YELLEN) and then see what happens with futures tonight, but the ES and NQ charts are not normal and I have the strangest true feeling of Deja-Vu. 

IWM / SRTY Follow Up & Market Update (#1)

I can't add to the SRTY trading position (3x leveraged short IWM/Russell 2000), another trading position just in the green and one I'd love to add to, probably right here, but this is already at 2/3rds full size and above the normal trading position size.

Since we have talked so much about "Channel Busters " recently with PCLN and this is a concept we have been tracking and using for years, I thought you might find this interesting.

I think this also has market implications as well.

 The IWM was in a downtrend making lower highs and lower lows, but for our purposes, more importantly it was in a channel and this now marks a "Channel Buster". These may seem very bullish or bearish (depending on which way they break ) at the time, however this is a price pattern considered to be a head fake that has one of the best records of QUICKLY reversing and swinging down to the bottom of the channel and OFTEN RIGHT THROUGH THE BOTTOM.

I ONLY NEED 1 MORE CHART...

The 5 min chart of the IWM tracking the trend, however it is showing a significant leading negative divergence at the "Channel Buster", which is just more probabilities stacked up on this reliable pattern.

I think, considering it's the Russell 2000/IWM, you can't ignore the implications for the broader market.

Will Wait on PCLN

As everyone here knows, I'm not a big believer in sudden reversals or "V" reversals and considering the daily chart in PCLN...

 With this candle-if it holds in to the close, I'd have to expect a pretty tight "V" reversal and reversals just aren't (or VERY rarely are) events, they are a process. I'd think at least 1 or 2 days maybe to form a reasonable reversal process if it started tomorrow, if it started today and ended the day with higher volume and an extremely long upper wick (price falling in to the close), then that would be a totally different story.

 My Trend Channel automatically set to PCLN's own distinctive character/volatility has not had a single stop out through the entirety of 2013.

The current stop is $1018 on a closing basis. Although I'd like to be in at better prices, when considering the big picture, it wouldn't be so horrible to wait for the violation of the Trend Channel.

 This is the intraday 1-3 min positives I showed today about an hour before PCLN broke out and a negative since then, but it's not enough for me yet.

 I also checked the Trend 3C version which lacks details but gives a solid trend picture, this is intraday so the idea that a false breakout would see distribution through it is what we expect, that is what we are seeing above.


The 15 min chart and note the 3C trend since the Bull pennant that I mentioned this morning, this just gives you more information about what this move was about, the exact thing I said over a week ago and every update since including this morning's expectation for the breakout to occur today.

Financials, XLF, FAS, FAZ

I posted Still Love Financials Short on Monday.

I'm still holding a trading position of FAZ long (3x short Financials) which is actually still at a gain, this is why I'm a little myopic about entries, sometimes they make all the difference.

For now I'm going to leave this position alone and not add to it, although I still do like it. As I said Monday in the post linked above, my triggers for adding to FAZ or opening XLF puts would be...

"If we were to get a move in the market with XLF >$21 and FAZ <$25, I'd be very interested in either XLF short or XLF puts depending on how it happened and/or FAZ long, my preference is really FAZ long as it has some leverage, but it's the kind of position that doesn't need as much maintenance as a put and I feel there's enough duration or profit potential to make it worthwhile."

Although after looking at the FAZ charts, I'm really tempted to add, but I have thresholds for a reason, especially if I'm going to be looking at adding to a position that I had not initially considered in risk management, in this case it would be averaging up, not down as the FAZ position is green, but I'll hold on.

You however may find the charts interesting.

 It's really the longer charts that carry the high probabilities, it's the short and or short, intermediate and long term all coming together that provide the timing cue.

In this case a 1 min negative on the open sending FAZ lower with a much larger intraday positive building in to the pullback.

 The 3 min intraday is very strong and is confirmation that the divegrence is migrating through longer timeframes which means it's improving and getting stronger.

 The 5 min chart is a good all around  chart, you see the previous leading positive and today's as mentioned earlier before is even in better leading positive position which is what I'd expect to see in a healthy situation.

About that longer term, this is the 60 min, that's a fairly large leading positive in a fairly flat zone (where we often see accumulation in this case  or distribution when they are proceeding uptrends and flat).

Bottom line, I still love Financials short and specifically FAZ (long) as a longer term trading position.

Adding to TECS Long

This is a trading position so it's not meant to be the size of a full core position, however I figure this will bring it to about 2/3rds full size.

Here are the XLK (Technology ) charts, TECS is 3x leveraged short Technology when bought long.

I checked TECS and TECL for confirmation as well. You may recall I just featured XLK yesterday with the following comments

"The tops are almost always quite a bit larger and rounder. I "USUALLY" look for something like an "Igloo with a chimney. The Igloo is the rounding top (although it can take other forms) and the Chimney is often off to the far right rather than in the middle and that represents the head fake move or in a case like this, a false breakout which is typically an excellent marker for timing as they tend to occur right before a reversal for numerous reasons, one is starting initial momentum as new longs sell at a loss quickly."

Today would give us the scenario described above from YESTERDAY!

 Daily XLK/tech from the 10/9 cycle, if you look at yesterday's post you'll see the "Rounding Igloo", today providing the far right "Chimney". Volume is atrocious for a day like this on a breakout.

 Since I covered the larger charts and TECL/TECS yesterday, today I'm just more interested in timing and when it looks like underlying character of the asset is changing, it seems to be.

This is the 1 min intraday going negative.

The 2 min never even confirmed so there wasn't much strength at all as you can see by volume

And the 3 min with ZERO confirmation.

QE-Jerk reaction

Today's movement is all knee jerk reaction based on the "hint" in an interview by an ECB member, given to the Wall St. Journal that "No options are off the table, including QE or Asset Purchases" which would have some legal road blocks.

Either way, it's parabolic and knee jerk, however...

I have said the last week that with now what has become a 2.5 week clear range, I was surprised we didn't get a shakeout move above it, many members yesterday wrote about the retail bullishness and suggested a bull trap may be in the works.

The SPX cycle and almost 2.5 trading weeks of range/chop.

What is an interesting question is whether this was leaked before the WSJ article came out or not, there's a lot of money to be made for those with that information. The reason I mention it is because of this earlier post...

Market Update: Trying for SPY Arbitrage

Things are starting to move faster so I have to keep updates short as things move before I can finish them and I don't want to miss opportunities.

 As part of an Arbitrage manipulation, VIX has to be smashed lower, we saw signs of that earlier in the post above and this is VXX intraday, but...

We are also seeing signs of positive divergences suggesting this knee jerk move and VIX smash lower may be starting to end.

The price move is too parabolic for me anyway and they usually don't end well.

 HYG is in line intraday as Arbitrage requires and as we saw earlier, but FAR from supporting the SPX (green), today is in yellow.

 The earlier positives in HYG that gave rise to the early Arbitrage activation post are now going negative in HYG as well, it is because of these early signals that I would have any suspicion that the story may have been leaked before its release.

Any mention of more QE, even in Europe is going to send bulls in to a tizzy.

Sentiment intraday so far is not keeping up with the SPX.

And CONTEXT is bouncing above and below, no trend there.

It's just time to watch assets carefully and the market to make sure. I may provide additional updates as they come in if they are helpful.

URRE Long Term Core Long

The last time I updated URRE was late October, our previous trade in it made +20%, however I like it as a longer term position rather than a trading position so I decided to just hang on to URRE.

It's very ironic because a member had just emailed me about  URRE today and I had told him the charts were improving even more, there were a couple, especially in short timeframes that are difficult to read because they get spotty, but just the look of price alone looked like it wanted to head higher, that may have been an hour or so before it popped to the upside for a daily +19.5% gain thus far.

If you are like me and holding which it seems many of you are, I do like what I see, I prefer not to try to trade around this position because of the very short term charts being so spotty and this is a stock that was on our radar quite a while ago so we've had a lot of experience and patience with this one.

Like I said, I don't intend on letting it go.

URRE can take some time building a base, but when it decides to move, it moves. I'm truly more interested in what appears to be a very large, primary bull trend base.

Here's today's move on a daily chart after the recent range was shaken out.

 Here are two "Rounding-like bottoms that I suspect are one larger double bottom, not textbook, but...

This is where there has been some resistance today on the move, but we've cleared that  and volume is excellent thus far.

This is the daily 3C chart and the two accumulation zones, the fact the second one is leading is part of what makes me think this is actually 1 big base. Typically accumulation or distribution gets stronger as it moves, if it were tow separate bases, I wouldn't expect the second to be leading.

 This is the 2 hour chart, a very strong timeframe, you see accumulation before the last move and in to this move, but this time it has been leading more than the first area.

 There was a shakeout that we looked at when it happened in yellow, but note how the divergence just got stronger at that area, that would be because price is cheaper and the shakeout provides the supply large institutional orders need.

 The 30 min chart looks great

The 10 min with another little shakeout in yellow, we see these shakeout moves almost all of the time before a reversal, they are often on scale or proportional with the timeframe.

Intraday the 3 min chart shows a decent divergence, I wouldn't have called it a screaming divergence popping off the chart, but there have been so many more important, longer, stronger positives that a move  like this could take place at any time.

Watch for intraday volatility or even over the next several days, they'll often try to shakeout any tag-amlongs and this is another reason I just prefer hold it and not try to trade around it.

Congrats to those of you who have been patient, I'd really like to see this move to stage 2 Mark Up.