FAZ

FAZ (Financial Bear 3x leverage) is a long trading portfolio position at full size, it's how I want to play Financials short initially, first I want to be in place with the sector move, then I want to look more specifically at individual stocks because I'd hate to be right on the Financial sector and wrong on the specific stock selection, plus this gives 3x leverage over XLF, except inverse meaning XLF moves down and FAZ moves up. The FAZ long right now is down about a -4.5% which is no big deal to me considering the market chop and the 3x leverage, if I could add to the position, I would 
(at the appropriate time, but that's why we are looking at these right now)...perhaps options.

Since this morning's post, Time to Start Looking at Trades... USD/JPY Update in light of the set-up and positioning of the market, I've been furiously thumbing through watchlists and I can see the difference between the signals last week in which I thought, "These aren't ready" and what the trend among the watchlists looks like now, there's significant improvement toward entering positions.

FAZ is one of the positions I like because Financials look so bad (XLF).

At the end of April the F_E_D 1-day fixed rate reverse repo had the second highest amount ever at somewhere over $200 bn on April 30th. Why is that important? Because it's month's end and banks were obviously borrowing the 1-day loan to prop up their cash position/balance sheets in an attempt to make their financial situation look better than it really is for both investors and regulators, that's called "Month End Window Dressing" or "The Art of Looking Smart", the money goes back to the F_E_D as soon as the month's end reporting period passes, but THE SECOND HIGHEST AMOUNT EVER? AFTER 5 YEARS OF NEARLY RISK FREE POMO PROCEEDS, THE BANKS ARE STILL IN BAD SHAPE?

It has been my opinion that ONE of the reasons the F_E_D engaged in QE was because the banks needed re-capitalization and as you may recall around 2008/2009 when they were getting it, it was deeply unpopular with the American VOTERS. However, POMO or Quantitative Easing is an easy way to give the big money center banks, most of which are Primary Dealers and participate in POMO, risk free profits and this was done for nearly 5 years.

Outside of the US, China's biggest banks are raising cash through new offerings, this isn't just a US situation which is important because all of these banks interact and counter-oparty risk is what made 2008 so volatile and destroyed so many banks over a period of a couple of years including the nearly century old Lehman Brothers. In any case, that's just some thoughts and I don't base analysis on thoughts, here are the charts.

 This is the 4 hour XLF/Financials chart, the white area is the February 3rd cycle, this is the one we saw coming as early as Jan. 28th as accumulation built, t ran a bit higher than expected, but it had a large short squeeze to help out. You can see that things have turned even worse since then.

 This is the 60 min XLF chart, negative at the same area in to Jan which is around the time of December Window Dressing when I was saying, something doesn't look right here and the market lost ground after Window Dressing for the year and quarter were done.

Again you can see the Feb 3rd cycle, this time because it's a shorter chart and thus less underlying flow (but still very significant), you can see a positive divegrence in to the Feb 3rd lows and a negative divegrence in to stage 3 and a leading negative that I didn't draw on as it took something away from the chart.

I included this 5 min chart that is the first REAL sharp leading negative divegrence because it matches up with another 5 min chart and the timeframe is significant because of timing/entry/exits.


FAZ-3x short XLF/Financials

 This is FAZ's 4 hour chart, quite a bit different than XLF's.

I didn't think I needed to draw in the leading positive divergence.

 Here's the 60 min FAZ chart, leading positive in this area, the red negative is Feb 3rd.

 Again on a 15 min chart, Feb. 3rd is clear as it should be being this is an inverse or "short" ETF. The positive divergences in MArch are interesting, but what is really a great example of a word I type more times than any other word, "Divergence".

To the right look at the direction/trend of price marked with a green arrow and the direction/trend of 3C marked with a white arrow, that is a PERFECT example of a divegrence, this is the edge that we are looking for and then use multiple timeframe analysis as well as concepts that are tried and true to find the best entry with the lowest risk, highest probabilities and best timing.

Starting from the intraday 1 min charts...

 FAZ looks like it is set for a pullback which would make sense if we got the USD/JPY test I expected from this morning's posts, thereby giving us a better entry in to FAZ long, this is not a bad negative, just an intraday.

The 3 min chart shows the recent trend of a positive and a move to the upside and a smaller negative as this is a longer timeframe.

Remember that XLF 5 min chart I included above?

XLF's 5 min had a unique leading negative 5 min that hasn't been seen in a while, it is confirmed by FAZ's 5 min leading positive, thus with all of the longer term charts and this as well, a small pullback (1 min/3 min charts) should offer an excellent entry in to FAZ long.

You might want to set some price alerts to remind you.