Daily Wrap

First thanks for the comments on the last few posts, I'm glad you enjoyed them. Second, I'm going to try to make this as brief, but useful as possible, honestly, I'm burnout today, it was a tough day and if there's one lesson to walk away from over the past week or two considering we just had a 4-day move that was the most powerful in 2 years, that is THE HEAD FAKE MOVES ARE REAL, THEY AREN'T AN ACCIDENT OR COINCIDENCE, THEY ARE PLANNED AS YOU SAW EARLIER, WE HAD CALLED IT OUT A WEEK AHEAD OF TIME AND HAD THE TRADING PORTFOLIO POSITIONED LONG FOR IT.

The second thing to keep in mind is the SPX-200day moving average, for Wall St. this is the ultimate area to stage a head fake move and while I don't know what it might look like, I'd say there's a very high probability we will see one when we reach the area and it should be pretty intense.

It seems the gold/SPX correlation that was so easy to trade with options for short up and down moves, for now, has morphed and until I understand what it's doing, I've stayed away from positions there.

There is no Dominant Price/Volume Relationship tonight which is a bit surprising, there are a few co-dominants, but that's not where the indicator is effective.

I'm going to throw some charts out, hopefully in some semblance of order.

First, last week we were pretty clearly negative to 5 min charts, that caused me to take 1 bearish position, but it wasn't enough for me to close the trading long positions that I started closing more yesterday as the negative divergences started getting worse which made me take them more seriously and as of tonight, the trading portfolio (which I never intended to move) is now leaning strongly short (keep in mind this is for near term trades, not longer term).

As for the P/L for closed positions...

TNA= -3.7% 
I just rather take a small loss here than what I think would be a bigger loss in a few days.

URTY= -5.5%
The same goes for this and all longs closed today.

MCP February $5 Calls= +6.6% 

MCP March $5 calls= +30%

While I love MCP long and hold the equity longs still, I didn't see a high probability of significant gains worth taking the risk here, I like to get in and out of options as they are rigged for the House to Win the longer you stay. Trying to turn this in to a triple digit gain would have been about ego, not what has worked for me consistently with options.

BIDU Feb. $155 Calls= +1.8%
Again this wasn't about trying to keep gains as much as avoiding losses and that afternoon pop looked like the perfect place to unload BIDU.

As for the averages and the reason the trading portfolio went from long to short over 2 days when I had no intention of changing anything, the divergences just got worse. As of Friday we were dealing mostly with 5 min negatives which I could have sat through with long positions, but as they started hitting 10 and 15 min charts, things got more serious and it would not have made sense to sit through the drawdown those charts are implying in a trading portfolio.

Index futures were negative to 5 min charts which is good enough for me, but now 15 min in ES

15 min in NASDAQ 100 futures.

15 min negative in Russell 2000 futures.

  I didn't expect on Friday that we'd be looking at a 10 min leading negative divegrence in the SPY.

 Much less it migrating (gaining strength) to a 15 min chart which is very close to the 30 min positives that I'm now thinking may be a part of a 200-day moving average scheme.

QQQ 5 min isn't even so much about the timeframe as it is the depth of the leading negative and where it is, the short squeeze area and take a look at the price action, that diagonal line with almost no pullbacks (usually on lighter volume) is a hallmark of a short squeeze.

 Again, I didn't expect that 15 min QQQ charts were going to be on their back. The only concern I have for the very immediate future as in probably the first half of tomorrow (best guess) is a bit of a reversal process, I don't think it needs to be big since the distribution occurred on the entire way up and because it's parabolic and these tend to end badly in a sharp reversal with a move to the downside just as strong or stronger.

IWM 5 min saw a lot of intensity today.

The 10 min chart is falling off now, it's obviously not on the same level as QQQ and SPY and that's probably why I didn't chose it as a short trading position.

Closer to home...

 QQQ 1 min today

QQQ 3 min

IWM 2 min

IWM 3 min, there's that intensity I was talking about today especially.

As for some other important indications, I love the way VXX/UVXY have held their ground when they should be much lower.

 VXX / UVXY held well (relative performance) and popped in to the close, as I said, I would have picked up either one today on the signals they were giving.

VXX 2 min intraday, this is the kind of leading I like to see in VXX's short term charts.

UVXY 5 min with several relative divergences, as it develops they should get stronger and in the area I showed you today that looks like a clean Igloo/Chimney (fractal)  we get a very strong leading positive at those lows just below support.

UVXY 10 min leading fits with the averages and Index futures getting worse.

This is HYG / High Yield Corp. Credit which has been used to ramp the market so often, it with VXX and TLT form the SPY arbitrage model. This is yesterday's attempt to break SPX $1800 which fell 6 cents short.

The same asset today looks like it lost its legs. We've seen this several times before a move, they'll use HYG, but when things get close, they don't stick around long.

HYG's intraday leading negative

 And the overall 5 min negative which is why I suspected it was very thin support to ramp the market only, the Arb model doesn't depend on the breadth/strength of the move, just prices. Still even with HYG's move, neither today nor yesterday were they able to activate the SPY arbitrage to support the market because VXX and TLT holding up better than their correlations suggested they should which in VXX's case has been a sign of true market demand which you don't see often anymore in price alone.

 TLT (20+ year Treasuries or the flight to safety trade) holding up better than it should vs the SPX with its price inverted so you can see the correlation which is usually almost exact.

TLT's 15 min chart with a leading positive as well as a mature reversal process in place.

I have been looking for a TLT long term long entry, I don't think we are there yet.

One of the reasons (besides the obvious technical predictability of the 200-day ma) I have thought there would be a strong head fake move there is because although I think TLT pops, I don't think it's done with its pullback.

This 60 min TLT chart is the kind of evidence I'm talking about. When this goes positive I think we'll be in a good area to look at TLT as a long term trending play, I may use TBT short to get 2x leverage on TLT.


FX-Yen

 This is the Yen 5 min, it's looking like its ready to make a move higher which would likely send the USD/JPY yo a new low for the year. This would also pressure the market lower, I have suspected that by the time that finishes the FX pair will be near $100 where the BOJ has to probably step up and defend it, the SPX would likely be near its 200-day and the defense of the Yen, (even though the half life has not been good) would be a contributing factor to a stronger market head fake move based on the 200-day moving average.

I just can't imagine Wall St. letting such an obvious Technical Icon go unchallenged without some sort of games.

Yen 15 min leading positive, note it's positive at the same time last week we first noticed the market showing negatives.

 The same is true of the Yen 30 min chart, yet this is a stronger divegrence in a very compact area.

This is the Yen (FXY) vs the SPX with the SPX inverted as the two move opposite each other, you can see the correlation has been near flawless until the last few days, the Yen is stronger which makes for a weaker market.

 The USD via UUP is positive as it should have been at last week's "W" bottom, but since then, not a good showing, thus the 35 or so point difference between ES and the USD/JPY.

 This is the flat range in USD/JPY today since noon time I mentioned, it has lost ground since the close as of this chart, it's bouncing around a bit right now. What happens hear will be very interesting as last night it floated the market higher, but lost a good portion of that in pre-market.

I have been expecting downside in the Nikkei 225 (these are the futures), the 5 min chart is looking like it's nearly ready

And there a sharp negative drop off in 3C on a 15 min chart, that's some pretty intense underlying action to make it dive like that.

This is NQ 1 min as of my last capture about an hour ago, it looks about the same now.

TF 1 min, also similar right now.

And ES which is also similar.

Breadth indicators don't reveal anything we didn't already know, mostly big picture except maybe that there was more of a move in momentum stocks the last two days as well as the most shorted which makes sense.

My DeMArk inspired custom buy/sell indicator on 60 min setting is giving sell signals on the SPX QQQ and DIA as well as buy on VXX.

There was a noticeable difference in the market as the pros have been trading the last 30 minutes, today it broke the short squeeze trend line.

I'm going to check futures again in a couple of hours, I'm looking for NKD weakness, Yen strength, USD/JPY weakness. VIX futures only trade during market hours (pre as well) so we won't see anything there. Treasuries may give some hint.