There are many ways to see what the market is up to

So we use 3C a lot, it's my signature, award winning indicator, but this is just one tool in the tool box. "3C" is a constant reminder to "Compare, compare, compare", that's literally what it stands for.

If you know your correlations, then you can put together a case with great confirmation or you may find things are in the air and it's not time to come off the sideline.

I wanted to briefly show you several ways you can use different assets and indicators to make that case, but always beware of bias, your analysis is of no use except to make you feel better emotionally for a short period of time, if it is biased.

In addition to the assets alone, you can apply any number of indicators to them from something as simple as a Rate of Change to 3C, to a MACD of indicator.

 SPY's intraday divergence makes it clear that we have a leading positive divegrence, it looks like we even have a bigger "W" base, although there was very little accumulation in to the second part of it formed today.

VXX which trades opposite the market also gives us a clear signal, if you know your correlations you'll check HYG and TLT for the SPY Arbitrage scheme as well, which is even more confirmation.

A closer intraday view of VXX, of course we can check UVXY and / or VIX futures to confirm, but as we saw last night in spot VIX futures, the closing candlesticks of the last two days made a reversal highly likely, just that chart alone.

The Dominant Price / Volume relationship yesterday of Price Down, Volume up was in itself a strong indication of a short term oversold condition.

 VXX compared to the SPX (price of the SPX is inverted) shows the VXX underperforming, another signal.

HYG as mentioned before has no reason to move higher except in an arbitrage scheme and with VXX moving lower this alone is used by many Wall St. firms as a model.

The movement in High Yield Credit is another signal.

How about professional sentiment? It's not telling us we have a major reversal, but it is saying we have a reversal.

The TICK Index is another simple breadth indicator that can be used.

I created a custom TICK indicator using the SPX's linear regression vs the TICK's LR to come up with this histogram that gives a clear picture of intraday market breadth which is much more positive than price, but price is positive as we know, but few other recognize in the fact that it is lateral or rangebound, especially when we have 3C signals confirming the range is being used for institutional activity.

We know what Gold's correlation has been vs the SPX so the 3C negative divergences on short term gold and silver charts give us another form of confirmation that is completely different than anything above.

 Understanding the Carry Trade makes this Yen chart useful in understanding what we should see in the carry and the market.

And there's the USD/JPY carry, it's not likely that it's going to save itself here, but it is bouncing already.

As I say EVERY Friday, "It doesn't matter what price does in to the last two hours, but the 3C signals will almost always pick up where they left off on the next trading day, (Monday).

Lots of ways to skin a cat so to speak and there are dozens of ways to look at each one of these charts above with different indicators or just a keen eye toward changes in character.

Adding to DGLD trading Position

DGLD was entered yesterday in the trading portfolio as a hedge, I needed something with more leverage than the AAPL long that was put in place and since gold has been trading opposite the market, a gold/GLD short would make sense with a market bounce and DGLD gives me the ability (long) to get 3x leverage. Please beware though that it is an ETN and it is lower volume. In this case it's working mostly as a hedge, but if things go the way they should, it will add gains while protecting the portfolio from draw down, and allow those short positions to remain in place, which in a short amount of time will take over as the main trade.

MCP Update

This is more for anyone who may have calls or a short term trading position (long).

As I have said consistently, for core long positions, I see no reason to change anything, just let it be and it will be fine.

 1 min looks like it may be able to add a little bit more on the upside as a recent positive divergence formed in to a pullback, but keep in mind this is a 1 min chart, this is not a big, powerful or very reliable divergence.

 The 2 min chart has seen some migration so it could be worth taking a shot on, I would not even consider opening a long position for this divergence unless it was positive out to 5 mins which it is not.

3 min shows the concept I was just elaborating on, short term positive (you might even think of it as a market maker pushing prices higher to be able to fill at the best area knowing if they try to fill without some upside momentum, they'll be filling in to lower prices and they rely on business from Private /Equity, Hedge funds and banks as they specialize in one or several stocks, they know it better than anyone, know how to move it and as such are paid for their services in filling orders for the above mentioned.

 As I said, at 5 mins this is not positive, it's clearly ready to pullback shortly, I have been asked if MCP is a good short on the pullback or perhaps a put position.

While I don't disagree that money could be made, I think it's a bad habit to trade against an asset that you know is strong. I think I've used the example of an army platoon leader coming across a mine field and deciding the best way to navigate the mine field was to close his eyes and walk across. If he's successful, it sets a dangerous precedent as he encounters mine fields in the future and says, "Well, closing my eyes and walking across worked last time". I think you get my drift, while you may be successful in your endeavor, it sets a dangerous precedent that given enough time will almost certainly come back to haunt you.

Trading is often about developing good habits and procedures and they are only effective over the long haul if you are consistent.

This is not to say that all counter trend corrective moves should be treated the same, we just happen to know that MCP is an exceptionally strong asset.

 For instance, the 60 min chart, it's not just the divegrence, it's not just the "W" base, it's also the ultimate size of the round reversal process, remember that they are usually proportional so a rounding reversal process that takes 2.5 months to create is not likely to produce a move up on only a week, it is likely to produce a move up (in this case of at least another 2 points bare minimum and just about as likely to produce a longer term trend that moves well above $12.50-$15 so an easy double.

Hopefully the short term signals will be useful to some of you who may have a trading position or an options (call ) position.

Market Update

It looks like we should see some upside ignition soon, the averages are back in the positives after the op-ex pin, the hour has pretty much passed, most contracts are closed.

Remember that price action from late Friday rarely matters much going in to Monday, however 3C divergences from late Friday often pick up the next trading day (Monday0, so it would be my opinion that any upside move that may start today would likely carry in to Monday.

As you know, as I have posted, there's very serious deterioration going on in very long timeframes on an intraday basis, meaning what use to take weeks to move and then days is moving the equivalent amount intraday, it would be similar to us opening short term long trading positions while at the same time opening long term trending shorts. We would generally not do that unless there were specific signals that we were following, but we are not trading in blocks of 10k shares at a time to fill out 100k share orders, it's a different perspective that is alien to us because we don't have to worry about moving the market with our orders, we don't have to worry that we may only have a limited number of days to finish positioning a portfolio because of its size (in some cases the shares of their positions may exceed the total daily shares traded, so it's not possible to move in to a position in a day like we can which is one of greatest advantages over Wall St.), you have to understand the market from the perspective of those that move it.

So while some signals may seem contradictory, they really are not and the separation between a 3-5 min positive divergence (smart money long position for a short duration trade of a few days perhaps) and a 30-60 min leading negative divegrence (smart money building or taking apart a large position that may take a month or longer) are really not inconsistent, in fact the short term positive divegrence may in fact be needed to exit a large position (or short it) as they need demand and higher prices to exit as their orders are so large they will move the market by just placing them. 

The point once again is something that seems illogical to us is actually not only logical, but often necessary to large position holders, we just have trouble relating because we haven't had that experience and we often assume all experiences are similar to ours when in fact they are very different.

Ah, here we go, I see TICK is trending in an upchannel now and just busted through +1000.

SLV Charts

Here they are, mind you the longer term is VERY reminiscent of GLD, I just have a little cognitive bias against SLV because of the years of manipulation by one Ms. Blythe Masters who works for one, Jamie Dimon, who were hauled in to court for blatant silver manipulation after they did the F_E_D a favor in 2008 and absorbed Bear Strearns and with that, Bear's large silver short.

Of course the case was dismissed, JPM has friends in high places, namely the Treasury and the F_E_D so they got away with it, but I can't imagine nearly 5.5 years later they haven't managed to cover that position.

 I'm sure you can guess what this is, GLD has one too, although there's slightly different price action the last two days. The orange arrow represents a sort of churning/capitulation event at support, on significant volume, the pop from there has been on declining volume and these are the first two days of the New year so they aren't the low volume environment of pre- New year's. Also note the candlesticks of the last two days, yesterday's is more or less a star (reversal candle) with a longer upper wich (higher prices were rejected) and today is a total loss of momentum, imagine a roller coaster sppeeding up a vertical incline until it slows to a stop and reverses back downward like Superman (roller coaster I believe at Six Flags).

1 min chart, no notation needed.

Intraday 1 min chart, just pointing out the flat range.

2 min 3C chart, again no notation needed.

2 min closer view.

10 min, it looks like SLV will likely be a decent long position, but probably not before a quick move toward the lower end of the range and if concepts/market behavior remain consistent, then a move below the range as a shake out of any early longs would be likely as a head fake move and a source of momentum to breakout of the range.

I would be careful, there are nice divergences, but this is not a chart that is gravely ill, they are short term indications of the most probable move toward the downside which is indicative of a larger , more bullish view. Be careful, very speculative.

Trade Idea: SLV Feb $20 Put

I'll post charts right after this.

This is a play on a SLV pullback/Gap fill, it's a super short duration trade, so I don't have to say it is very speculative in nature, I would not enter such a position unless I was able to watch the market, watch the updates and act on them very quickly.

Market Update: 2 PM Actionable Assets

The Friday magic hour is approaching, the charts are improving including PCLN and AAPL, GLD is deteriorating. I "may" take some additional action such as adding to AAPL/PCLN longs/calls and/or adding to DGLD long.

I must warn you though that there's another side to this coin which was posted last night very clearly with SPY 15/30 min charts if you recall. So in that spirit, in the spirit of careful consideration and back-up/contingency planning if we are about to have another moment similar to the AAPL mistake I made by covering a well positioned short to try to catch a bounce with the intention of re-establishing the short at higher levels to only see AAPL BREAK and lose 390 points or -45% from the top, it is in that spirit of caution I present the following charts for your consideration.

 AAPL 30 min

PCLN 30 min

SPY 30 min

From what I understand (thank you Tina) the SPY's max-pain (op-ex) was $183, that's where I've drawn the trendline so I think we were right about that, but it shouldn't matter much in a few more minutes.

Consider the charts above carefully. We do have the short term signals for the PCLN long/call or AAPL, but we also have another side of the coin that is a significant red flag.

UNG is moving in the anticipated direction as well.

UNG and EIA Nat. Gas Inventories.

Thursday's typical Nat. Gas inventories was pushed off until 10:30 a.m. today, they came in as follows...

Released On 1/3/2014 10:30:00 AM For wk12/27, 2013

Prior Actual Weekly Change -177 bcf -97 bcf

There was a draw of 97 billion cubic feet, this is below consensus of a draw of -115 to -120.

UNG reacted to the data right away, not how you might expect, but also not very strongly compared to normal volatility on the EIA report.

The charts for UNG are a little surprising, they are very new, but this is why we pay attention to what's going on.

If these charts hold, then I'll be looking for a UNG retracement of a lot less than originally expected, a DGAZ bounce of less than expected and if the charts are not just transitory, then I'll be looking to wrap up the DGAZ long position.

 This is the intraday UNG 1 min chart, it went positive at 10:30 on the release of the EIA report and since has lost momentum due to some distribution intraday, however...

There are several charts up to this 15 minute that show UNG is changing, at least it has started to and if it holds, UNG "should" pull back a bit from here and form a reversal process which makes the pullback much more shallow than originally anticipated, but right on target with the typical X-Over screen's second pullback target area as you'll see below.

DGAZ for it's part (3x short Nat Gas) pulled back on the EIA report as it moves opposite nat gas/UNG, and has a confirming intraday positive signal suggesting it move up from here, this is perfect confirmation with UNG above.

DGAZ 3 min also suggests that it moves higher, meaning UNG pulls back, however with the initial new 3C readings today, the UNG pullback would be more likely to start forming a reversal process back to the upside rather than pulling back more as initially expected. As I said, the signals are brand new (today) so I'd typically take them with a grain of salt, but they are on some fairly strong charts, out to at least 15 minutes.

Long term UNG (long) is one of my favorite long core positions for the long term, the DGAZ trade is exactly that, a trade and not a long term core position as UNG is. 

If this plays out according to today's new signals, this is a perfect example why I am careful not to put too much betting against the strongest 3C probability which is bullish UNG, in this case that means while I'm willing to play the counter trend correction, I'm not willing to go so far as the kind of leverage that UNG puts would provide.

DGAZ for its part today is showing a similar (mirror opposite) confirmation signal of the UNG 15 min positive chart with a 15 min negative. This shouldn't keep DGAZ from bouncing and UNG from pulling back, but it would tell me that the target has to be recalculated and the position likely wrapped up sooner than thought.

This is UNG's Daily X-Over chart. This layout was initially designed to weed out false crossovers or what is known as being whiplashed , it requires 3 signals rather than just 1 (the moving average cross-over that most traders use). However over the years of using it, I have noticed it can also be used as a trading system on its own as the first pullback after a new signal (in this case a new long signal) is almost always to the yellow 10-day moving average as seen at #1 and the second and subsequent pullbacks are to the deeper blue 22-day moving average. So long as all 3 signals stay long, you can treat this as a trending system and either trade around corrections or use them to take profits, add to positions, etc. so it has become a useful trending trade system.

We'll see what the charts do, I don't want to over react, but I suspect even if they are a new dynamic in play, the DGAZ long should still be either profitable or exited near break even.

Market Update

So far this morning price has been consistent with the intraday 3C signals, especially clear on Index futures, but as I said, there's still solid evidence for the move that was first uncovered yesterday, but yet to really materialize.

I'm assuming that the action thus far this morning is more pin related, as we get closer to 2 pm though the market becomes better able to act on its own as contracts are mostly cleaned up by then.

Some of the hints include HYG holding yesterday's gains in a consolidation. VXX gap fill behavior this morning, but that's all it looks like so the arbitrage effect can vert easily and very quickly be put in to play with downside in VXX and upside in HYG, I'm not even counting TLT at the moment.

Charts are also largely consistent with the general tone I've briefly summarized above, take a look as they show it better than I can say it.

 NYSE intraday TICK Index, the channel for TICK activity is very much in line with market activity, I think it's likely op-ex max-pain related.


 SPY 5 min TICK chart shows a wider trend of that negative channel above trailing off.

TICK 1 min, this is where I think the TICK will be heading shortly which will start to change the price trend intraday, this is all intraday/short term based on yesterday's findings and positioning.

SPY 5 min shows a loss of downside momentum which is also reflected in my custom SPY/TICK indicator above.

When volume increases in this situation, it means we are most likely moving toward a reversal in this case, intraday.

The IWM is probably the clearest example of what I think is happening and what should happen.

IWM 1 min has been negative this morning like the general trend in the market, again likely more based on op-ex pins than anything, what is useful to note is that there doesn't seem to be any intraday accumulation of lower prices in the averages, which means that it doesn't appear to be a widening base, adding on to yesterday which means the op-ex theory is more plausible.

IWM 2 min however is still in position from yesterday''s activity and I think the signals given yesterday are still on deck.

IWM 5 min, be sure to compare the IWM's signals to ES 1-5 min below.

IWM 5 min expanded view is to show that while there is that short term divergence and rounding /reversal process from yesterday, that it is within a larger negative positioning of 3C, viewed through the lense of multiple timeframe analysis that would be taken as a smaller move to the upside as expected yesterday, but it is capped as the larger theme is deterioration. This would mean that the market is acting pretty normally, more so than say the last 4 years which may be a reflection of what of the market believing the Bernanke Put has effectively been removed and as speculated and probably proven last week smart money views tapering as a tightening policy tool which is very different than how retail would view it and it's likely very different than the way Bernanke would like to have it viewed, THIS IS WHY I BELIEVE THE 10-YEAR YEILD HAS BEEN BOUNCING BACK AND FORTH ABOVE THE KEY 3% LEVEL.

VXX 1 min shows the same activity, remember it trades opposite the market so weak intraday market average downside activity and divergences are confirmed with weak VXX gap fill activity and divergences.

VXX 2 min still in line, it may not be for long

 VXX 3 min gives a glimpse of the short term weakness, which is equal/opposite to the market.

VXX 30 min of course is a totally different story, there's a massive reach for protection and what we see in yesterday's activity is really minutia in a way, but if we can use it, it's worth following, however this is where the trend probabilities lay.

HYG 2 min as I said is in place still in a bull-flag-ish position, largely in line or a holding pattern, waiting to be called upon to activate the SPY arbitrage which is likely simply on hold as op-ex plays out as there's a lot of money even in the weekly premiums so Wall St. wants those to expire worthless and get to keep the premium, this is why I ALWAYS try to get out of options as quickly as possible, the longer you hang around and more you use them, the greater the probabilities are that the "House" wins, just like Las Vegas, options are set up right from the get-go with the premiums to put you at an instant disadvantage, the longer you wait around, the more the odds shift in Wall St.'s favor.

HYG 5 min however also shows that there's no larger divergence there, there's no real risk on move there, it looks very utilitarian, useful for a cause, not an expression of shifting sentiment.

ES intraday 1 min shows the trouble mentioned earlier, very much in line with price activity, one again note that the lower prices HAVE NOT been accumulated, the importance here is distinguishing the difference between a base being widened out with a larger footprint for a stronger move and what is very likely a reflection of op-ex activity.

ES 5 min is one of the reasons I believe we are still on track with yesterday's divergence/set up, which is more tactical than anything as far as its usefulness.

Since starting this post, TICK has started moving the way I thought it would as we move closer to the 2 pm hour.

Current TICK.

To sum up, I think yesterday's divergence/set-up which is small and short term in nature is still in play, it has just been interrupted by op-ex pin activity and that should fade off more and more in the coming hour or so.

Also I don't have any evidence to suggest that this morning's lower prices in many asset have been accumulated to form a larger basing process.

I'm going to check around and see if there's anything management wise that needs to be done and if there's anything trade wise that may be of interest.