Quick Update

It's pretty easy to take the temperature of the market via HYG, unfortunately we look at present experiences through the filter of our past experiences and this is not helpful in one of the most dynamic organisms on the face of the planet, the stock market, a colony of millions upon millions of entities making up this one large emotional heap, it is dynamic and that's why I don't like the charts that compare the price action today to 1989 or 1929 (if we followed those we'd already be in a bear market), if we believe in those we don't leave room for immagination of how bad this can actually be, we see 1929 as the golden standard for crash, we have a lot worse scenario now than back then.


In any case, when I say, "W" bottom, accumulation, there's an automatic assumption that a huge move to the upside is coming, but look at the trades I'm entering, WEEKLY calls? When's the last time you saw that? Or calls, but not equity longs, everything has leverage because the profit potential is not there without leverage meaning from what I'm seeing a bounce is likely, but a bounce that is worth trading with a straight SPY long? No, not at all, so throw away those filters from the past, understand that the market is ever changing especially as it moves from stage to stage as it has been.

In any case, HYG is the algo lever that has been used to manipulate the market , I showed it last night just holding on to keep the market holding on until this "W" base can bounce, but there's big trouble under the surface in HYG and that speaks to the entire market.

Take a look...

While HYG's price seems fairly stable, look at the 3C charts which I've warned about.

 HYG 2 min, bad, but...

the 3 min is worse and just to show you this is not intraday only...

look at the leading negative at new lows on the 5 min chart, HYG's guts are spilling out while it tries to smile as it holds up the market, this HAS to tell you something about the nature of the market's divergence and what to expect from it. That is why I won't lift a majority of even short term short positions, there has to be very good reason such as the GLD or GDX/NUGT charts, otherwise, I'm not risking losing the big move to chase a small move that has no real support anywhere.

I'll have more for you shortly, I still think this is largely about accumulating VIX futures which have been stubbornly persistent, a market bounce could send them lower, but even the Feb rally didn't do much to them. I've waited about 3 weeks now for the VXX long call position I want to post, but we are not there yet, when we are, the market shorts will be there too, the thing is, as we have seen numerous times, while it has been 3+ weeks, it can happen in 3 hours.

MCP Trade Idea

I can't enter anymore MCP long, I'm at full position size and a profit, not a lot, single digits, but green.

MCP is a long term favorite meaning I think it can make a move to a primary bull trend despite what the market is doing, I want to be extra careful to pay attention with Chinese problems, but thus far I think it's still a great looking basing stock with a huge base capable of a long stage 2 primary bull run.

I'm not going to get in to all the longer term stuff as I have covered it hundreds of times, just run a search at the top left corner of the site and sort it by date.

As far as recent activity, it looks like it may be ready to make at least a swing move and form there who knows where it leads, but I've been trying to maintain long exposure there no matter what recently.

 MCP daily triangle, there's a decent chance for a head fake/stop run, if that happened it would be even more attractive as a long, it's hard to say though whether it will or not.

The 60 min chart gives you some long term idea of the trend

 But recently we have a leading 15 min

A leading 5 min at the triangle seen on the daily chart

And now a leading 2 min, this looks awfully close to launching so I'll maintain my long here.

If I didn't have exposure and liked the idea, I'd probably enter a half position size and enter the other half if there's a head fake break below the triangle or if there's a break above, as long as you have price alerts and can get in early, I wouldn't be opposed to adding the second half there since we are at a narrow apex of the tri., but that would have to happen quickly, not wait until it's gone.

I think I'll be adding that IWM April Call Soon

You might recall the conditions for adding the IWM April Call to the March weekly already entered today (at half size)?

It was a head fake move below $116.19 and it looks like that's where we are headed as today has been a carbon copy of yesterday in many ways, but you'd expect that if it is making a second base of a "W" base.

Here's the IWM and what I see both good and , well potentially good for that add to.

 The IWM 5 minis now looking good and leading.

The IWM 2 min is leading positive as well...

Intraday you can see we are seeing the same negatives as yesterday, on the open and in to the afternoon, in this case that could lead the IWM to hit stops and short sales below the $116.19 level (round-abouts) and open up even better positioning for us, this is why I only went with half a position (weekly calls) which are right at breakeven, but with a better entry, lower risk, lower premiums, I'd gladly add to the position.

My Custom TICK chart also shows more and more stocks pulling back which is fine.

Just keep in mind this is still not a big divegrence even as a complete "W", it's not a game changer, it's really not something I'd even feel inclined to react to except for the fact that it's an opportunity to add to portfolio gains.

I have price alerts set, I'll let you know if I intend on opening a new IWM call before I do as always.

GDX / DUST / NUGT

It's amazing what a difference a day makes, yesterday I thought GDX and miners would come around, but they weren't there yet as far as confirmation, today they are looking amazing.

I may even add GDX calls (April in the money) to the NUGT trading long (swing trade).

NUGT is the 3x leveraged version of GDX (gold miners), DUST which I just closed at a nice profit is the 3x leveraged opposite of GDX or NUGT.

DUST Core Long position closed at 15.75% gain, I'm sure I'll be back in it within a few weeks.

For confirmation, the signals in NUGT should be positive and DUST should be the opposite and negative.

 NUGT 3 min doesn't need any notation, the divegrence is clear to see and the flat range we often see these divergences in is also in the right place, better known as the reversal process.

Look at the leading positive on this 5 min NUGT, this is why I decided to take action now, even though a head fake move is a distinct possibility, but in the larger picture (if I don't use it to add), it means nothing with these divergences.

This is a 10-min positive, that's already a significant timeframe so we seem to be looking at a swing + move.

And the 15 min, that's impressive enough for me.

Remember DUSt si the mirror opposite and should have opposite signals.

3 min DUSt

5 min DUST leading negative, also intense.

10 min DUST

And the 15 min

As far as the long term and why DUSt was a CORE position rather than a trading position when I closed it is because of this next chart...

DUST 60 min so even though I think we get a strong move up in GDX/NUGT, eventually the larger trend trade is back in DUST long, NUGT is essentially a counter trend swing trade, but worthwhile.

Trade Idea: Closing DUST Core Position and Opening NUGT Trading Position

Reiterating GLD / UGLD

Yesterday I covered GLD and opened UGLD for a bounce play before I re-enter DZZ after a bounce.

For now, I like UGLD long quite a bit for a short term bounce, but worthwhile.

 GLD's 5 min positive is gaining even more on the leading divegrence in a flat range.

Don't forget though, this is a bounce...

We should be back in DZZ next week...

Trade Idea: IWM Long Options or leveraged ETFs

After looking at the support levels and the 3C signals, I decided on my plan, I'm leaning toward the IWM for reasons mentioned earlier ( a lot of components of the R2K got knocked around good yesterday) and where support (obvious) is.

 This is the SPY's best looking divegrence right now, 2 min and it's not bad, not what I consider the best, but not bad either.

The 2 min IWM is looking good, it is leading, it has a nice area for a head fake move where I can add to a position or if you are very patient, wait for a head fake move to enter a position, you don't have to trade everything that comes your way and having a head fake move makes the trade a lot more attractive.

I think a move below $116.19 (support from yesterday's intraday lows) makes sense as a shakeout of stops below that level, that's likely the best short term long trade here.

This is the QQQ 3 min, it also looks decent, I just prefer the IWM, but depending on where you have exposure, for instance a lot of tech exposure, you may want to go with the SPY to bring up financial exposure, etc.


The 3 min positive doesn't mean a lot more to me at this stage.

As far as capping this move, the short divergence of only a day and a half or so is a cap on its own, you can only go so far on a gallon of gas, however HYG very short term is holding the market together and also capping it.

HYG's higher move and range is telling algos there's institutional risk on sentiment and they'll buy that, however 3C is showing us even more distribution so I'd think a move to the upside would be capped because of this as HYG will fall due to the continued distribution and the market won't be too far behind it, for now though it's acting as support.

This is why this is a short term trade position, I wouldn't even call it a swing trade and this is why I think some leverage is needed whether that be options or leveraged ETFs (long) as mentioned in an earlier post today, UPRO, URTY, TQQQ, etc.

I'm going to go ahead and enter a half size weekly IWM $116 call position and set an alert for a break under $116.19, if we get a head fake move below $116.19 in the IWM I'll look for head fake confirmation in a 3C positive divegrence and enter an April $115 call (monthly) that will also be half size, the two positions taken together will be the size of 1 normal option position.

I'm spreading out my time decay in case that's a problem, allowing for momentum and being able to act on it and giving myself some breathing room with the monthly option which is a more quality position, although maybe not as big of a potential gain.

I'll be entering that IWM weekly call now.

Looking Toward New Trading Positions

As I watch ES moving toward the lower band of the VWAP channel, even though we aren't quite near the area I'd expect, I'm starting to watch the weekly SPY $185 call bid /ask as well as the April monthly, I may look to split a position between the two.

The other option is the QQQ or IWM so I'm watching those as well as they may be better choices.

I do think you can get away with a leveraged long ETF for a quick trade once a "W" bottom is in, it wasn't really a great choice yesterday because of the probability of a "W" bottom forming, but if one is in place, then you might consider UPRO (3x long SPY) long, SSO (2x leveraged long SPY), UWM (2x long Russell 2k), URTY (3x long Russell 2000), QLD (2x long NASDAQ 100) or TQQQ (3x long NASDAQ 100). There are also Ultra and UltraPro ETF's for the Dow, but I's just assume stick with one of the 3 above.

With the beating momo stocks and biotechs took yesterday, I lean toward the IWM or QQQ a bit more, but that's going to have to depend on the stronger signals for me.

ES since regular hours moving toward the accumulation zone of the VWAP channel.

So I'll be looking for premiums to come down a bit more and as I said, may split the position (assuming I open it which is looking more probable) between the shorter weekly for initial momentum and the longer April monthly calls as that's my typical m/o for option positions (going with longer, in the money options).

I did want to point out that I think leveraged ETFs of the averages will work as long as there is a "W" base in place as it is just a bit bigger, but should allow sufficient profit potential to be worthwhile if you don't like trading options, which would be my first choice as this would still be a small base of only 2 days and not much in the way of strong divergences (as in 5 min+ charts).

There are some other assets like FXP and JJC that I'm also liking, JJC is an open long in the trading portfolio and of course GLD and its leveraged ETFs.

I'm going to pick through these a bit more and see if there's an advantage turning toward the IWM or Q's over the SPY.

I'll also update additional assets we have been watching. Continue to look for a ROC of the averages to turn sideways as that's the bottoming process and beware that any strong support levels created over the last couple of days are highly probable targets for head fake moves and as such, that's where you'll likely find your best entry so you might want to set price alerts for a move under any such level.

I have been considering taking a 10+% profit in SRTY (3x short IWM) as it was meant to be a longer swing trade type position, I just can't bring myself to close that based on some 2 min positives over 2 days when SRTY has enormous positives in the 10-60 min range.

Market Update

So far so good.

Patience is what got us that nice gain yesterday and patience is what we need to show for a bit more today. I initially suspected that we'd form a "W" bottom when the intraday charts went negative right at SPX's future's VWAP, so far price has responded in the manner which we expected and thus far, although we are not really in the range of a "W" bottom low yet and haven't seen that turn from down to sideways like yesterday, initial signs of a "W" bottom are in place and it's looking probable.

 SPY 1 min with yesterday's afternoon negative divegrence and the first part of a "W" base in place, it needs to head toward the yellow trendline and put another base together in that area. Keep in mind these "W" bases or what some might call a double bottom will often have a head fake move, that would mean this second base in the area of yesterday's lows would likely run stops under yesterday's intraday lows before making a move to the upside.

That move to the upside, while we can't be sure until we see a strong divegrence develop and that can't happen until price is in the right area (lower) to be accumulated, would have a positive effect on the accumulation process in VXX, which is what this has all been about since we spot it 7 trading days ago (Friday).

The Q's are also showing initial signs of a positive divergence

As is the IWM, so ... so far so good, it's just patience right now and verifying.

I'm going to check some other assets.

Let me reiterate, there's nothing strong about this area beyond some 1 and 2 min charts, no 5 min divergences, not even 3 minute divergences so it's not something that has much heft to it, thus a lot of short positions will be left in place and only moved if essential or there's strong advantage to it as the negative divergences are in place and they are overwhelmingly strong.

Market Update / SPY Call Follow Up

Yesterday's SPY weekly call (which I haven't messed with weekly calls in a good long while) Options Trade Idea: Very Speculative, SPY $185 Weekly Call @ 1:37 p.m. afforded me a nice gain as it was bought at the right place on weakness in price, but some short term 3C strength which is why I used the weekly rather than an April monthly.

This is the goal in our transactions, it's emotionally challenging to buy what looks like price weakness, but we have an edge in seeing the true underlying tone of trade. In this way we can get the best prices and lowest premium on options while also lowering our risk profile, even though it feels wrong to buy weakness, it's not JUST the weakness we are buying, it's the 3C strength that MUST accompany the weakness.

This 1 min 3C chart of the SPY is backed up to 10 a.m. this morning to show yesterday which started off strong and quickly faded, but as it was fading (price weakness)  we saw a strong underlying short term accumulation signal in the rising 3C signal,(underlying strength), this is the ideal entry for a call position.

We also match our trade and use the right tool for the job, April monthly options would not have given the return that weekly calls gave and considering the set up we had in place, the right tool or the most optimal tool for the job was a weekly call.

Here's the P/L for a position that was only exposing us to the market for a mere 3 or so hours, where can you make a gain like this on your money in 3 hours?

The P/L...

At a fill of $2.04 and cost basis of $1.32, this 3+ hour position made a gain of +54%, where are you going to make 54% on your money in 3 hours legally?

I closed the SPY call position after watching this morning's gap up to see if there was any 3C confirmation, as you know, yesterday one of the things I was looking for was early weakness in the market like yesterday, a fade of the initial strength and I suspected that weakness would create a second small bottom or a "W" bottom, that's where I'd add or in this case start a new SPY call position, but we need verification first.

Yesterday's early SPY strength on the open quickly faded.

 This was yesterday's accumulation of the lows, that's smart money buying, that's where we were following them and buying with the SPY weekly option/call.

This morning to the far right on the gap up, you can see there's no 3C confirmation, I gave it a little bit of time to develop and it didn't so I decided to protect those gains and close the call position, wait for a pullback in price and see if we get more accumulation, if we do...WASH, RINSE, REPEAT.

 The longer 2 min SPY chart still has strength so a "W" with yesterday's lows being the first base of the "W" and today's expected pullback from last night's Daily Wrap post seemingly on tap, it was time to take those gains before they disappeared.

As you know, with options I don't want to hang around any longer than need be, as soon as we start to lose momentum on the trade, I want to be out of there before time decay starts eating away at the gains (especially on weekly options).

As you know from yesterday, this hasn't been a strong underlying move thus far, this 3 min SPY/3C chart shows nothing other than in line status, no accumulation.

As far as the other averages, the Q's and IWM are still lagging like yesterday, although they've improved significantly, the SPY still leads the pack and this is still a VERY minor divergence.

Because it took some time to put this post together, we are lucky to see the results of the market and that we were correct in following the 3C signals and expectations from yesterday.

I closed the SPY Call position at 10:18 this morning after it was obvious there was no 3C confirmation of the gap up in the SPY, nor was it there in any other average.

We took gains on the position at the very top and bought yesterday near the very bottom, it's not the easy thing to do emotionally, but if you have an edge, not just buying weakness, but knowing that weakness is being accumulated, you have to move past emotions. WE GET PAID TO TAKE RISKS, NOT TO GAMBLE, BUT TAKE CALCULATED RISKS.

As far as expectations, as you know yesterday as soon as I saw intraday distribution in the afternoon I suspected a "W" base, that would be where I'd add to the call position or now enter a new one IF we have the same 3C confirmation, in this case if that happens I may go with an April call instead of a weekly.

This 1 min chart of the SPY from yesterday since the open to present shows the outline of what was expected to be a "W" base, the first bottom is in, the reaction / pivot high or the middle of the "W" is in (where we just took profits) and we are moving down toward what could be the second bottom of a "W" base.

If we see accumulation at the second bottom we'll move ahead with some new short term trades, until then we have no edge and need to wait for the signs of institutional accumulation of the price lows.

As mentioned, the NASDAQ 100 and Russell 2000 (QQQ and IWM) both confirm the SPX/SPY.

Congratulations if you pulled some money out of the market this morning, I know that weekly call wasn't an easy trade to enter.

Closing Yesterday's Weekly SPY Call Position

For the gain