XLF / FAS / FAZ

One of the areas I was most concerned about last week (Friday) for a market bounce was financials which is why I decided to close the FAZ long position (3x short Financials), Closing FAZ Long however I didn't enter any Financial long trades like FAS long (3x long Financials) or XLF calls because it was about protecting the position at the time and then seeing if there was something strong enough to warrant taking on a long position or just waiting it out to re-open the FAZ long.

XLF has built the stronger "W" base and in addition has run stops with volume increasing just a mere penny below Friday's intraday lows (stops under short term support and shorts entering on a break of short term support). These kinds of head fake moves are what give reversals momentum and reduce premiums in options which is why I often like to use them for entries (especially for options) as long as we have good confirmation.

I have thought the market would bounce this week, I just thought it needed a stronger base and as breadth revealed yesterday, that wasn't the bounce we were looking for as breadth barely moved.

Here's XLF , FAS and FAZ...

XLF creating a wider "W" base with a head-fake (stop-run) move.

Volume surged intraday just a penny below Friday's intraday lows.

This is the 1 min chart since Friday with a stronger positive divegrence now as I'd expect to see on building a larger base.

The 2 min chart is leading positive today in to lower prices in XLF

Ultimately we have about a 15 min positive (leading) divergence, this still is not a huge base and that's why I prefer the leverage of options while keeping the position size speculative again for the same reason, this is still not a very big base.

As for the FAZ long closed Friday, Closing FAZ Long, FAZ is showing confirmation as are most of the inverse ETFs like SRTY (short term).

FAZ seeing intraday distribution on a move higher.

FAZ 5 min negative divergence was definitely worth closing the partial FAZ long with the intention of adding back a full size position as a bounce nears the end and moves to a downside reversal process.

The big picture probabilities for FAZ are represented on this 60 min chart with a huge leading positive divegrence, none of the recent shorter term negative divergences have even touched this chart which tells us any bounce here is not a game changer, just an oversold correction.

FAS-3x long Financials

Much like XLF and inversely like FAZ, FAS is leading positive in to lower prices which is the confirmation I'm looking for.

FAS's 10 min leading positive at the "W" base and a head fake move.

Ultimately though on a 60 min chart, like XLF or inversely, FAZ, the big picture probabilities are still very firmly anchored to the downside, that doesn't mean we can't hitch-hike a ride up  before entering or adding to shorts we like.