FAZ, XLF , THE SPX AND BIGGER PICTURE.

This post is exactly why I posted this last night, 1929 Analog Insanity.

If I wasn't clear enough last night then let me say, I am as bearish as they come with regard to the Primary trend (what we'd call a bull or bear market), but there are at least 4 trends (short, sub-intermediate, Intermediate and Primary).

What I was trying to point out last night was not that the market wasn't bearish, not that it wasn't as bad as 1929, in fact I think the market is worse than 1929, it wasn't even to say that this chart making its rounds everywhere may not actually be correct. My point was, everyone is looking for surety is a very dynamic and unpredictable market, this is why to be a market guru you don't need to know anything about the market, you just need to sound like you have 100% conviction in what you say and millions will follow you (like Cramer) no matter how often you are wrong, people crave that certainty in an uncertain environment and isn't that the root of fear? Uncertainty about the future?

We all want to be as certain as we can, but the best you'll get in the market without breaking laws and going to jail is probabilities. For some people this isn't enough, not everyone can be an explorer of a new world and forge ahead in to uncertainty, it doesn't say anything bad about you if that's not you. My ex-wife came from a country that was behind the "Iron Curtain", for them certainty was a necessity, it was born and breed in to them, their entire society revolved around it so she didn't like me trading at all, it physically repulsed her; her view was that you work for the same company your entire life, you don't make waves, you keep your head down and you keep that job until you retire.

Unfortunately those days of pensions, 401ks and job security are long gone, I think to survive what is coming, you have to be ready to dive in to the unkown and forge your own path. Watching The US vs. Europe or China over the coming years will be an interesting case study in this particular topic. I'm not even sure the US has that "American Dream" spirit anymore, we'll see.

I'm just trying to point out, "It may not happen like that chart, be careful in taking it too literally".

Financials are an interesting case study. I know for sure that market dynamics, correlations and character are going to be flipped upside down, this is why I have always said, "IT will be the people who figure out how to trade in the new environment first that will be rewarded", I think we have the tools and edge to be among the first to figure it out.

In any case, here's FAZ/Financials.

 Short term (from the head fake rally), the Trend Channel has FAZ at a stop at $22.40, above that and the downtrend in FAZ, up move in the market the last 4 days looks to be done, that doesn't mean choppy volatility won't dominate before a clean downtrend emerges, but it seems to me that the market is shifting away from "Time" and toward intensity. On the head fake move I wasn't sure if it needed to create a new high to get the retail bears bullish or if it just needed what looked to be an exceptionally strong move, yet one that doesn't alter the technical landscape, it turns out it was the second as retail was bearish last week, they are bullish this week, I said it only takes about 3 days to switch them, they are fickle which means they are just chasing price and have no edge.


 On the 60 min X-Over chart, I'd prefer there were enough lateral market movement to allow FAZ to give a buy signal here, again though, things are changing and moving away from duration and toward intensity.

Look at the last FAZ move up and the size of the base vs now on a 60 min chart with RSI 10.

If you look at the SPX daily, I have a custom "ATR-based" indicator and you can see intraday volatility has more than doubled since the start of the year, just look at the price candles in the white box.

As far as Financials, lets go back to the SPX-200 day moving average conversation.

 My initial theory is that we get an intense move down and below the 200-day moving average as the more cautious of traders will wait for a break of the 200-day before entering and I suspect Wall St. will give it to them. This is such a juicy target for Wall St. because retail technical traders are so enamored with the 200-day moving average, thus it has been my theory that this will be used as the last and most powerful head fake move yet. I can't confirm it yet and the only information I have pointing toward it are the 30 min charts, we'd need to see accumulation in to the move down or as we breach the 200-day, that's where the most supply will be available at the cheapest prices and where we'd see the most accumulation if there were accumulation which would indicate they will run one last head fake move.

The yellow arrow in my opinion would be some kind of bearish consolidation pattern, it is really serving as a reversal process, but it need to keep bears interested and with a bear flag, the last head fake coming out of the reversal process just needs to move below the flag and all new shorts will enter and give the market that kick to the upside just as we saw during the last week.

I'd guess we'd see a move well above the 200-day, knocking out shorts and forcing another squeeze, but I don't see any viable head fakes of consequence after that and I'd guess that's pushing it as far as how much time this market has left.

I reviewed that so we can look at Financials and the bigger story.

 This 4 hour chart looks like a large double bottom with the first bottom in place, I don't think we have time for a proportionate second bottom, but I think something would need to appear, forget the short term, I'm talking about primary trend. What I'd be looking for is a move a bit lower and then sideways, I don't think we get that move unless we get an upside head fake move coming off the break of the 200-day moving average.

This is a lot of "Ifs", but looking at the charts, it looks to be pretty decent probability.

60 min FAZ with a big accumulation zone, much bigger than the move up and the distribution at the top was minor, just enough to send it lower.

The same with the 30 min chart, the question is where will this end up  and what kind of accumulation zone will it build. It seems clear there's something much bigger and longer term going on in FAZ, Home-Builders were under a year and a half of accumulation almost 2-3 years before their big rally.

 The 10 min chart

And the 10 min chart close up, this is a pretty decent positive for a near term move up, but no where near the chart above.

 5 min chart looks decent.

XLF (Financials) would basically need to do the same thing as the SPX, break the 200 on the downside, put in a reversal process and a head fake move on the upside, that would give FAZ a chance to accumulate that second bottom and I'm talking about a trade on a primary trend basis, I might even be more interested in XLF short rather than using FAZ's leverage.

Note the 4 hour XLF chart is the mirror opposite of FAZ's 4 hour so something long term is going on here and it looks to be a trade worth stalking.

As far as short term, if you are interested in FAZ long for a market downside reversal, I wouldn't enter it here, I'd look at it near today's intraday lows around $21.70, I'll set price alerts to remind me to look at it if it gets to that area.