The Week Ahead

I hope everyone had a relaxing, safe weekend.

Now, to work!

First here's the schedule for the week, I think you'll notice in addition to a number of F_E_D speakers again (and I think this is not a coincidence), we also have the F_O_M_C minutes from the last meeting, these can be every bit as exciting as the meeting itself because it's where we hear what they were really saying and thinking. The point is, looking at the schedule, there are a lot of events that can create market catalysts.

Right there on Wednesday at 2 pm, we might even see a leak before then.
What's interesting here is Friday I showed quite a few indications that look like we see a short duration bounce.

This is fine, because we prepared for it with some hedging longs, some call options, etc., but what is especially interesting is that it's short in duration from the information we have, Wednesday's F_O_M_C minutes, while no different than any other F_E_D event in that they typically create an initial knee jerk reaction that is more often than not... faded, is just about the perfect time for a reversal of that expected bounce which is one of the major reasons I kep short trading positions open and only hedged them.

This would mean that if the minutes are indeed a market negative event, the timing dovetails almost perfectly with the duration analysis of the move (thus the use of options).

From the actual close on Friday though, it "looks" like early activity tomorrow morning could be negative.

 In to the close on Friday some of the averages didn't look too hot and 3C often picks up right where it left off, so this negative activity intraday may produce a negative morning session, which is typical that we see one to three different intraday trends.

 While overall not in good shape, the IWM 5 min has enough positive divergence for the bounce we prepared for, but since the overall tone is so negative, I decided to hedge the trading shorts, not close them because this market is ugly enough that we could have an AAPL moment and just have the divergences rolled over and I want my short exposure in place.

As I showed last week, a number of averages (especially the SPY) saw 15 and 30 min 10-day negative divergences that were incredibly strong, so a short term bounce is of little concern, actually my only concern is that the long positions opened for it might get rolled over as this 60 min IWM went very negative, very quickly like the SPY and others.

All in all, I think our game plan will be fine though.

Here's what's going on in Index futures

 ES 1 min which I rarely trust overnight looks a little positive, but I doubt this holds the entire overnight session. NQ 1 min is in line and TF 1 min is negative.

The 5 min ES chart makes sense with the post above from Friday and the reason we opened some hedging longs and call options. However, nQ 5 min isn't this positive and TF is only in line, so once again, it's a divergence that should hold up in to tomorrow and put our longs at a gain before closing them likely around mid-week.

As for the bigger picture or what happens next or actually what is happening now, you saw the SPY 15/30 min 1-day leading negatives and the IWM 60 min above, the Index futures are no different as you can see by the ES 60 min chart.

Price/Volume Dominant Relationships are all over the place so they are consistent with a transitional week rather than a strong bounce through the week or a strong decline only through the week. The NDX is dominant Close Down/Volume Down (60 stocks) which is most often taken as, whatever is going on, there's nothing that is standing in the way and shouting, "Major Change", at least not yet.

As for the Russell 2 and 3 thousand, the Dominant Relationship is Close Up/Volume Down, This is the most bearish of the 4 possible combinations (745 and 1143 stocks respectively). This is saying, we had stocks close up, but rising in agony, both the relationship and the lack of a market wide dominant relationship that is the same, both bode well for our game plan.

As I showed Friday and above on ES 5 min charts, the probability that our hedging/trading longs and calls are going to do well is also backed up by VIX futures which trade opposite the market.

 VIX futures 5 min negative, this makes sense with a short duration bounce.

Rally big picture, this weekly chart of the VIX futures is getting out of hand on the accumulation side, remember the market trades opposite the VIX so this huge positive is a huge negative for the market.

As far as the Carry Trades, they are one of several items I've been harping on to keep a close eye on, they have a lot of very useful information that few retail traders even have heard of more less understand.

 The EUR/JPY has taken another hard dip since trade opened up for the new week as you can see above.

A 15 min chart shows that this is one of the strongest downside moves since just about 14 months ago when they were opened, other moves turned out to be small consolidations, but this is looking to be a lot more than that, we have the signals to prove something is going on and just after publishing them, Bank of America admits to closing their USD/JPY carry, which is probably the signals in 3C we were seeing.
Of course the easiest place to see this is in the Yen assuming the BOJ doesn't intervene, but I think we have some time before they would do that as the USD/JPY would probably have to break under $100, so for now, it's all very useful information.

Rather than watching the carry trades themselves as in this case they are lagging the Yen 3C signals, we just go straight to Yen futures.

 The 1 min chart is in line and the Yen started off the new week with a move higher, this is likely some more institutional money closing their carry trades as the last step in doing so is to buy back the Yen which sends it higher and the carry lower.

however just for a very short duration period, like the market signals we have, this 5 min chart has a slight negative divegrence, nothing bad, but it fits with the positions we put on at the end of last week.

The NKD futures (Nikkei 225) are interesting as well, I've said, we need to watch Asia and China especially as there's probably a good trade set up coming our way in China.

Speaking of China, just about 2 hours ago, after their Manufacturing PMI missed, they released their Services PMI which not only missed, it hit the lowest level since 2011 and the SECOND LOWEST PRINT SINCE THEY HAVE BEEN KEEPING RECORDS! Big trouble in little China so to speak.

I've mentioned China and their troubles in numerous circumstances, but beyond analytical value, there's a trade that looks like it will come to us, I've been talking about FXP/FXI.

I LOVE when trades come to us on our terms, we get the best pricing, the lowest risk, the highest probabilities and we act like true wolves in stalking our prey intelligently rather than wasting energy and resources just wildly chasing anything that moves.

Here's a first look at the trade set up in FXP long (Ultrashort China 25)...

 All you have to see on this daily chart is the change in character of the China short leveraged ETF, it's clear, also a stage 1 base is clear and a head fake move in yellow. For all intents and purposes, if I was trading like I use to before I had the tools I have now, I'd probably go ahead and buy this hear and now expecting a big picture move up to $25 minimum and quite possibly up in to the $45 $50 area and that would still be conservative if China really fell apart with the market, so this is a beauty that we need to take seriously.

The 60 min chart of FXP is showing nothing but good stuff for our longer term long position in the leveraged Ultrashort.

Note the accumulation and distribution areas and note the yellow trendlines I drew, both are head fake moves right before the reversals.

 This 15 min chart is intermediate timing, so I think this isn't a move that's months off, I think it's close, thus as I've been patiently waiting to feature it, now's the time to really pay attention and look for that entry if you like it which I do.
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You may recall in talking about it, I've said, "I'd like to see a pullback", well a market bounce might helpp, but this 10 min chart and the gap below are also good indications that we can be patient and let this one come to us on our terms.

 Look at the volume on the charts! The orange areas are gap areas that I think are reasonable, especially if the head fake move is already in place, that makes the timing just about right with a little pullback.

This is the opposite, the long version, FXI, the 60 min chart here is LEADING NEGATIVE, so we have excellent confirmation of what I would have suspected any way.

As for Nikkei

The 1 min chart looks to me like it's going to see a bounce too, but as you know, I'm not impressed by 1 min alone so there are 5 and 15 min positives which fit well so that's helpful for our new positions, but Asia overall looks to be getting in some hot water.

The best part is the 60 min, 4 hour, daily and even weekly Nikkei charts, here are two...

 4 hour negative

1 day negative, remember the 60 min and weekly are also negative so it's virtually a full house on the charts, works out well with the US markets.

Right now I don't see much in gold futures near term as they trend to move opposite the market, the 5 min is perfectly in line, but NOT leading and the 1 min is starting to go negative, remember I opened the Gold / GLD short Friday as a hedging position because of the leverage and the correlation. As far as GLD, it looks fine, otherwise I wouldn't have opened the DGLD long, but the larger point is the inverse correlation with the market and the short nature of the divergence.

GLD intraday 3m looks like a pullback, that means the DGLD leveraged short (long position) should do well, but it also tells us something about what to expect from the market since they trade nearly opposite. This is also why I didn't just short GLD, I think the trade duration is too short and profit potential not there without some leverage.


I had been waiting on a pullback in oil and instead got a long consolidation, but it did finally pullback, it looks like it may be getting an early toehold, if so that's another trade I'd want to pursue as I've been patiently stalking that one for months now.

The 2, 5, 10, and 15 min charts are now positive in to the pullback which is EXACTLY what I want to see, the big picture (long trade -which is fantastic to buy in to a strong / healthy pullback) looks like this.

The accumulation, stage 1 base is very impressive here and look at the head fake move before it popped higher, this is why we have concepts that we use, they aren't from a book, they aren't guesses, they are things we see over and over again and we'd be foolish not to use them to our advantage. If you want to understand the psychology behind them and WHY WALL STREET NEEDS THEM, then check out my two part article on the members' site, "Understanding the Head-Fake Move" and once toy understand, you can put the concept to work for you in any asset in any timeframe or type of trading style.

As I said, I originally expected a pullback in USO/crude, instead we got a long sideways consolidation and either way, through time or price, it's still a correction, but 3C said a pullback through price so I'm glad to see it and I'm even more happy that the positive divegrence in to the pullback is migrating quickly through multiple timeframes as mentioned above, that gives us a low risk, high probability entry at an excellent price, because I missed the initial entry.

One other thing we want to watch , ESPECIALLY AS THE MINUTES COME OUT THIS WEDNESDAY, is the 10 year yield. Right now the short term is murky, but I suspect as we near Wednesday, it's going to clear up and I can't see how the minutes aren't going to send that yield above 3% again and in to the red zone for the economy, especially housing and mortgages, so we might look at some home builders.

As far as the 20+-30 year treasuries, I've long said something is going on there, bullish. I haven't taken action other than some small positions, but I haven't forgotten about it either. if the market gets ugly, where do you think money is going to flow to as a safe harbor asset? 

Considering we know for sure that some of the biggest hedge finds have been in their own words, "Selling everything that isn't nailed down for the last 15 months", as of 3 months ago, not only do the extreme 3C signals make sense, but so do the TLT (20-30 year Treasuries). This is another trade I think will be opening soon as a long term position, but TLT doesn't have enough Beta for me, so I'm thinking of shorting TBT (20+ year leveraged TLT short), in this way I'm shorting a short ETF and essentially going long TLT, just by shorting TBT which gives me the 2x leverage I need to make it worthwhile.

Take a look at the long term trend in both the actual 30 year futures and TLT (you'll see why I've been so interested so long)...

 This insanely positive divegrence is on a daily futures chart! And look at what just happened.... a HEAD FAKE MOVE!!!

This is TLT's 4 hour chart confirming what we see in futures, this is why I've been following these two for so long, but I haven't made a move because I didn't think timing was right, I thought the trade idea was right, but not timing. Now we are getting close to some nice timing indications.

Speaking of which, the 30 min 30 year futures has recently gone leading positive, THIS TOO FITS WITH OUR MARKET ANALYSIS. Assuming we are 100% correct and we get that bounce, our short trading positions are protected via the long hedges opened late last week which should make money in their own right, then we just close those out and the shorts are already in place (we can add or establish new positions if things look good) and assuming the charts are speaking to us the way I think they are, then the market sees major downside. THERE'S ALREADY EVIDENCE THAT MONEY IS FLOWING OUT OF EQUITIES AND IN TO US PERIPHERAL BONDS AS WELL AS EU BONDS, A FLIGHT TO SAFETY WHICH IS EXACTLY WHAT THIS 30 MIN CHART IS SAYING.

The interest in the 30 year has been there for good reason, it's been a timing issue, but now we have intermediate charts positive as well as a head fake move. What I'd like to see is the short term intraday go positive over the next 2/5 days and at that point, shorting TBT will be a likely trade (essentially creating a 32x leveraged long TLT trade).

I think that covers it for now,nothing has changed in futures, it's the short 5 min positive that matters to me, not the 1 min intraday in an overnight situation. My best guess is we get some downside in the a.m. and that flips later in the day and perhaps runs until the minutes on Wednesday.

What will be most interesting is if we see what looks like a leak of the minutes, the F_E_D got caught red-handed sending the minutes out just several months ago to 154 private equity and hedge funds (as well as investment banks). They sent them a full day and a half before their release and I don't know how they can claim it was a mistake when they EMAILED them to the firms, not one of which came forward and said, "Uh, I think you made a mistake", but the real smoking gun is the email. The information is suppose to be released to you, me, them all at the same time so why in the world would the F_E_D be emailing data that is released on their site at the same time for everyone? As I said back then, "I sure wish I knew how to get on that email list!"

So, ;ets see if the F_E_D "maybe" leaks the minutes again, just doesn't get caught Red-handed! How there wasn't an investigation in to such BLATANT cronyism is beyond me, that's trading on inside information, usually not only the traders but the leakers would get a jail sentence, but no one said anything except it was a mistake. A MISTAKE? 154 WALL STREET FIRMS ARE EMAILED THE DATA A DAY AND A HALD EARLY? THE EMAIL LIST ALONE IS PROOF POSITIVE.

I feel bad for the retail traders who can't see what we can, I feel bad that they don't even know what's really going on and that they spend so many hours looking at useless indicators and moving averages that have nothing to do with what's really going on other than to set them up, making them believe they are on to something as Wall St. has had their game pegged for two decades.

HAVE A GREAT AND PROSPEROUS WEEK! LETS GET THIS YEAR STARTED ON THE GOOD FOOT!