MCP Update

I know there's a lot of excitement about MCP because I probably get more emails about this one than any other and I understand why, with a large stage 1 base with a 3C chart like this...

MCP 60 min, I don't want to miss this either , although we've had plenty of decent little trades here.

 With this descending triangle I asked the question earlier this week, "What is most probable?" and a lot of you knew a head fake move below support. Once we had that in place, I asked again yesterday, "What's most probable?"

And that's a reversal process. I can't give you a formula for what "Proportional" looks like, but to me, this isn't a proportional reversal process, I drew in a wider base in yellow and a guestimate of price, making a "W" that makes a lower low than the low of the 27th as we get head fakes on all timeframes before a reversal, to me... that's more reasonable.

So unless 3C charts were flying, I'm inclined to be patient even with a hammer in place on the daily, it's missing the volume though.

The 15 min chart since the move below support is in line, to me this needs to go positive.

There was some positive work accomplished today, the problem is it is off that same small 1-day 5 min positive yesterday that was market wide, even though the closing chart today looks better than most so I'd give this one the nod on the day, but I wouldn't jump in with both feet and if not with both feet, why jump in at all?

When looking at intraday action, this is what I call, "Scribble", there's no real trend there and as a short term timing chart, I didn't feel any pressure to open a long position here.

Patience...

Monday

From the 3C charts of the averages themselves (which were working on 1 min intraday positives that I said were likely going to fire in to the close), those 1 min charts are positive or more positive and some have reached 2 min positive, NONE are at 3 min positive, so my first inclination is another PUMP and DUMP Monday morning.

We'll see what else there is when I can dig in to the internals.

FXP Looking Good

Earlier today I detailed exactly what I was looking for from FXP, the 3C charts are in good shape so I'm not even going to cover those right now.

This is from the earlier post today

 I drew in the closing daily candlestick I'd like to see and the increasing volume above yesterday's...

Right now....

Look at that hammer, nearly EXACTLY what I drew and check volume, beautiful.

Opening XLE April (Standard monthly) $90 Put

I'm more looking for initial momentum on this one, but if it gives more, I won't look a gift horse in the mouth.

Market Update

Yesterday at toward the EOD in a Market Update I posted the following...

"So after a week of divergences that were in place for 2-3 days, but none beyond 2-3 mins., today we transform from a slow signal environment to a suddenly increased signal environment in which we have many market averages with at least 5 min positives and some even with 10  min positives, yet I have not been running around crazy throwing positions out there... I did close a some that I felt were not going to gain any more or not much more that would make the risk I'd face a reasonable proposition.

So why not add long positions like 3x leveraged ETFs or Call options?

Remember the market is not controlled by supply and demand, they are a function of price discovery and in some instances they seem to rule price discovery, but what really moves the market are emotions, FEAR and GREED with fear being the stronger of the two....

So I conquered my fear in many ways, probably not all, but in many.

THE SECOND EMOTION IS GREED, while not as strong as fear, it can be a close second.

On a day like today with divergences building and some building to quite long timeframes, it's hard to keep your finger off the trigger, but just like I had to conquer fear, I've learned over the years, "IT'S OK IF YOU MISS A TRADE, THERE'S ANOTHER BUS COMING". 

If I don't feel that the situation is as favorable as I can get, sometimes I'd rather let go of greed, take a chance and possibly miss the trade, I think it's far better than taking what might be considered a sub-optimal trade."

With what I'm seeing today, I'm happy I closed the XLF Put position and protected that gain. I'm also happy that I wasn't throwing leveraged longs out there and kept both the core net short bias and trading portfolio net short bias.

Yesterday's divergences were fast and apparently they were meant for today (I'm assuming op-ex max-pain pin), but the footprint just wasn't big enough.

From what I see, it's still time for patience, there aren't too many assets screaming buy, sell, short, etc. In fact since the open with HYG's distribution on the gap up, things really haven't been that impressive. The minor divergences that looked like we'd lose upside momentum set in and worked as they should have, now we have some other signals and they just aren't at a place in which I'm in any rush to enter new positions or to change the net directional positioning of the tracking portfolios (net short). I think you'll understand after looking at the charts below.

"If you don't know what your edge is, you don't have one"... ANYTIME your money is in the market, no matter how low the beta or how safe it might seem it is at risk and to put your hard earned money at risk, you better know what your edge is (I bet MBS sounded like a rock solid, safe investment when being pitched, "Backed by a diverse portfolio of tangible property, housing boom, etc, etc..." but it was far from safe). 

 SPY 1 min has deteriorated all day, but looks like it may try to bounce in to the close.

The 2 min went positive fast yesterday, actually out to 5 min, but I couldn't pull the trigger with 1-day of accumulation in front of op-ex, the foot print was too small to lead to anything significant in my view.

Now the 2 min is in line so the 1 min positive looks (if it holds) like an EOD bounce only at best.

Remember the 5 min charts going positive in a single day when we had a week of 1 and 2 min charts positive, but nothing beyond 2 min? It seemed like a stronger day and maybe it puts in a "W" base and accumulates a larger footprint, but we make decisions with the information we have now and what I'm seeing is nothing better than in line and there's no edge there.

However the 60 min chart has a very clear edge, this is why the trading portfolio and the core/trend position tracking portfolios are all positioned net short, this is the largest edge/probability, this market IS coming down and the VIX is key to the timing of that, that's why it has been so important for me the last 3 weeks to see it accumulated on a decline with those flying leading positive divergences we JUST started seeing today.

Honestly... Would you have wanted to take the risk of being long a 3x leveraged ETF like UPRO today for this?

 IWM 1 min also looks like a possible EOD bounce...

But not much more as the 2 min is in line only from a positive yesterday.

As I said, this may develop in to a "W" base and a broader foot print and stronger divergences, but that's a bet, we don't have objective data telling us that yet and I don't bet in the market.

 The stunning 5 min positives from yesterday are no more than in line today.

However the IWM long term chart has a clear edge doesn't it and right at a flat trading range that is in stage 3 position or better known as a top.

That's an edge I'll trade.

 QQQ 1 min intraday is perfectly in line.

The 3 min positive from yesterday is now in line, lost all of that.

However once again, the long term, strongest underlying trade has a clear edge, THIS IS WHY PORTFOLIOS ARE POSITIONED NET SHORT.

As for HYG, as I've been saying, other than some quick 1-day accumulation yesterday to get the algos following and buying the averages for the pump, Credit is being distributed and if the guys in credit are running for the hills, I'm right behind them.

And those signals we have been waiting at least 3 weeks for in VIX futures (VXX) , here they are finally, not where they can be and should be yet, but that's just a matter of time.

3 min flying divergence

The 5 min was already there and as mentioned the longer charts were already there like...

This 15 min.

That should explain why I'm not looking to throw out a bunch of short term trades right now because the edge isn't there, but as far as the shorts I'm holding open, there's a clear edge there.

We'll see what the last hour gives us, I'm going to check Leading Indicators too.

GLD / UGLD / GDX / NUGT Reiteration

I can't add any more to the trading positions in UGLD (3x long Gold) and NUGT (3x long gold miners).

If I had the room I'd add to NUGT today despite it being up a bit. UGLD I'd certainly add to today as well.

I like both of these as swing type trades (long)

FXP Update

As you know I've been watching FXP for an opening as a short play on China all year and it wasn't giving much until recently. Yesterday I put out this trade idea for FXP (long)  and I opened it in the trading tracking portfolio.

I may very well add to the FXP long at some point not too far off today.

Here's where we stand and what I'm looking for as it starts to move a bit faster.

*In fact things started moving so quickly, the things I was looking for to add or start a new long position here were already developing before I could even get these charts loaded for the post.

 This is the daily chart, all of 2014 we didn't get a single deep pullback until recently as China is in big trouble, FXP is one way to play that, but despite what the PBoC has already made very clear, "Do not expect stimulus", the market expects it any way and FXP fell below the 2014 trendline which made for an interesting long pick-up to play China short on what thus far is just market fantasy. 

You have to realize that the F_E_D's timeframe for policy action may be a year out or so, China and the PBoC think in terms of decades with policy actions, it's much, much different than most other economic policy across the world. Thus... FXP makes a lot of sense as a long and the recent discount on the break of the trendline is what I've spent 2014 waiting for.

*This chart was captured BEFORE the FXP long/add to post, what I was going to say I'd be looking for today on the daily is for the bearish candle to turn in to a bullish hammer with prices lifting intraday to expose a longer lower wick and a bullish upside reversal candle and the other thing was increased volume, above yesterday's as that makes the reversal candle 2x more effective.  Before I could get this post together, those things started happening.


Yesterday I mentioned that FXP is a Channel Buster of sorts...

This is not the best example of the Channel Buster concept, but the idea is shorts entering on the break of the trendline are going to place their stops just inside the channel and above the former support trendline. We typically get a reversal on the Channel break (either way, in a descending or ascending channel), so the first move is akin to a head fake and when prices move back up toward the bottom trendline (former support, now resistance), technical traders are going to look for price to fail there and sometimes Wall St. will let it fail there at first to draw in more shorts, but then it crosses back in to the channel, hits the Buy to Cover stops and squeezes sending price above the channel in many instances, so as always, PRICE IS DECEIVING.

 This 15 min chart shows the long term trendline as well as a flat range where we often see underlying trade increase, but what I failed to consider was the obvious support level which makes a head fake move all the more probable and I believe that's exactly what we got today, likely getting shorts to chase it lower.

This was the original chart BEFORE I put out the FXP Add-To post, what I was going to say was I'd be looking for a rounding/reversal process intraday and increasing volume and I drew in yellow what I'd be looking for which would give us the Daily Hammer candlestick I wanted to see as mentioned above.

Since then...

The rounding bottom taking shape as 3C charts suggested it would and higher volume picking up, that gives me the candlestick/volume combo on the daily chart that is very effective as a reversal signal.

Here's the 3 min chart of FXP (intraday), we have a long relative positive which is interesting, but needs to see migration of the divergence from stronger shorter timeframe 3C charts.

Now the same chart since then which was only 30 mins. ago...

And just like that the 3 min is leading positive as I expected it would be based on shorter intraday charts, I just didn't think it would move this fast which tells me today's move down most likely is a head fake move, thus it makes for an excellent entry (lower prices and lower risk with higher probabilities and timing).

This was the 1 min chart as of about 30 mins ago, it was leading positive and I thought, "This should migrate out to longer timeframes, I'm interested in this and I better get the post out quickly".

So now we are heading in the right direction, we have the deep discount on the trendline break, we have the high probability Channel Buster move, we have a head fake move today on a stop run or limit tag and the 3C charts to verify it all, thus I increased position size there to full size position, but I can't go any further.

I also have JJC (copper) which has been hammered in China as banks make cash calls and the physical commodities that secured the loans are being sold hand over fist,  but I figured JJC was due for a bounce and the PBoC rumors didn't hurt. I need to take a look at that position which is in the green and see if it is still viable.

Trade Idea/Management : FXP (long)

I'll follow up with charts, but right now I'm going to add to the FXP long position as much as I can within my position size rules.

I'll have charts out shortly

Market Update

INTERESTING, as you know on most op-ex Friday's (which is every Friday now with weeklies) we have a max pain pin that "typically" opens right about where we closed Thursday, that's apparently why we saw such strong divergences yesterday, but in such a small footprint,  which is why I said, "I'd rather miss the trade than take a sub-optimal trade", you have to watch out for fear and you have to watch out for greed, those two will take you out of the market feet first.

Yesterday I noted in this post XLF, HYG, Market Update that (beyond taking the gains on the XLF put being a good idea), that...

"HYG 2 min all of the sudden is leading positive, this wasn't there yesterday so there's some attempt to engage the Credit/Risk on following algos to drive asset prices up."

HYG (High Yield Corporate Credit) being the lever that it is, especially as part of the SPY Arbitrage with VXX down and TLT down- both of which are down today (remember yesterday I posted I was seeing distribution in 30 year treasury futures as well as TLT) was key to moving the market today as the algos chase what they interpret as institutional risk on as retail doesn't trade credit much. With the SPY Arb. going you also have the flight to safety (Treasuries) and the flight to protection (VXX-VIX Futures) down and algos interpreting that as a risk on posture, like I said several times, they aren't that smart, they are meant to do one thing, that's why they were all just shut down on the F_O_M_C as the USD/JPY carry trade flew on a strong dollar and ES flopped, the algos were shut down and the correlation was reprogrammed overnight.

In any case, this is what HYG looked like yesterday and what's happening today...

 This is a 2 min positive divegrence so it was pretty clear yesterday that we were going to move up (as I said though, probabilities are not the same as a high probability/low risk trade) as they were pushing or accumulating enough HYG to make it pop today, but it's really not much at all, beyond the pump, I'm not sure it will be able to do much more and it's already under distribution as has been the trend in HYG since the Feb rally petered out.

HYG intraday seeing distribution.

The market itself right now seems to be seeing some steering divergences because they are there in the SPY ands ES, but not in IWM or the Q's, I think this is probably max pain related...

 SPY's 1 min chart with yesterday's triangle (symmetrical which has no directional bias except that of the preceding trend, unlike the right angle triangles).

You can see some small negative in the SPY intraday, again I think they are just steering divergences .

 ES intraday, look at that small leading positive divegrence right before the pop on the open.

 At 2 min there's not much going on that's out of character, this is why I think the 1 min divergence is steering and max-pain op-ex pin related.

I think we will get some good data after 2 p.m., it seems most contracts are closed by then and the pin is lifted, as usual the market does what it wants with price action the last 2 hours, but the 3C signals are very useful as the market tends to pick up the next trading day (even over a weekend) right where the 3C signals left off so I'll be looking for those after 2 p.m. as the last 6 weeks we have predicted the next week's action with a lot of accuracy just on the last 2 hours of Friday.

As you know, I have been looking for a bounce in the market like this or better, but unlike past bounces that were head fakes to create demand or change sentiment, this one in my view was going to be about dropping the stubbornly high relative strength of VXX/VIX futures (remember yesterday I mentioned the forward month and May premiums were collapsing?) well today's move sent the VIX futures lower and the reason why I want to see them lower?

Because we already have the larger positive VIX divegrence in place, the smaller ones or that last bit of accumulation is like a timer telling us a trend change (major) is coming which as you know I have expected to be down.

There's only 1 asset that gets these leading "Flying" divergences and that would be the VIX assets, I suppose because fear is the strongest emotion, when people are accumulating VIX they have good motivation. In any case, it has been those flying divergences (positive) in a VIX/VXX pull back that I have been looking for for 3 weeks now, well take a look at VIX Futures today...

 Accumulation on the drop lower, not confirmation or a negative, but the accumulation I've been expecting and waiting for, we have a start.

Moreover, even more importantly...

 Look at that VXX 1 min leading divegrence, that's a flying divegrence and will likely only get bigger. Better yet...

The 3 min chart has it too now, so the VIX futures and the short term VIX futures are all not only seeing accumulation on lower prices which is exactly why we were looking for a move to the upside, not a strong move, just a move to lower VIX, but they are flying divergences! EXACTLY WHAT I'M LOOKING FOR.

So, thus far we have some really interesting developments that are what we need to have happen before we can get to a major primary trend change.

I have some looking around to do, but if we can get a bigger reversal process /  footprint on the VIX futures and keep building these leading positive divergences, it's going to likely tell us to the day when to expect a nasty decline, allowing us plenty of time to get inn to the right areas of the market, even though most of us are already set up.

TSLA Update & Possible Trade Set-Up

TSLA is one of the big 5 momo stocks, it looks exactly like the broad market yesterday with the symmetrical triangle which Technical traders have been taught over a century to interpret as a bearish consolidation/continuation with the directional bias coming from the preceding trend, which means we know there's a VERY high likelihood it gets gamed (these patterns did use to work by the way before discount online brokers and the flood of new traders embracing Technical Analysis which was like Voodoo analysis previous to the Internet revolution).

In any case, we were expecting this upside breakout yesterday just because technical traders would see the market wide triangles and expect a downside continuation, I just had hoped they might drop prices below the triangle first to draw in some new shorts and then reverse it to give us more upside momentum on a squeeze, plus it would have allowed for a bigger base footprint (bigger than a day), but all of that tells us something about the market (I'm leaning toward yesterday's accumulation being more about the weekly op-ex pin and of course the VIX Futures scenario we've been waiting on for 3 weeks now I believe?

OK, here's what TSLA looks like on the charts and where we might have a couple of potential trades.

 This is the daily 3C chart, one of the strongest underlying trend timeframes we use. To the left you see a YEAR long accumulation period, remember I showed you the homebuilders being accumulated for a year- a year and a half right as the Tech Bubble was popping, then housing leads the next bull market with many of those stocks making 2500%.

In any case, we have stage 1 base/accumulation during 2012, stage 2 Mark-Up/confirmation during most of 2013 and we are in to distribution in to the higher high through 2014. Like I said, there's a lot worse out there, but if you recall my analogy about "Waves and the tide" in explaining a bit about Dow Theory, the tide is probably the biggest factor in what TSLA does moving forward, I'd say the market's overall direction is responsible for about 65% of the gravitational pull on TSLA on any given day with the Industry group coming second (in a healthy market it's a lot stronger influence than in this market). This is where most traders go wrong, they look for stocks to buy or short, you start with the market and what it's most probable direction is, then you look for assets, not the other way around.

Point being, there is some distribution here, not as bad as many of its peers, but enough to send it lower when it comes to primary trends.

I double checked several longer timeframes and this is the 4 hour which as you know is a very strong timeframe for underlying trends, you can see clearly distribution in the same basic areas, we have a little more detail, but the higher high was definitely used for the demand it creates to sell in to- again, institutional money are in a tough spot filling orders compared to us, we can get in and out and barely budge the market for more than a few seconds and we don't have predatory HFT's on our butts either (the Iceberg hunters), they can easily drive a position against themselves because of their size, thus a breakout to a new high gives them demand they need to sell in to.

Again, point being it looks like distribution in to demand and higher prices.

 The 60 min chart alone is more than enough to trade an Intermediate trend so it's very strong as well, you can see a smaller accumulation area in white with a positive 3C divergence and then there's NO confirmation on the run to new highs, more evidence that run was used to sell in to. We also have a relative negative divegrence at the red arrow which is telling us the same thing.

The 15 min chart is just a more detailed picture of what we see above, but to the far right, even though 3C is in a leading negative position (distribution), there's a small relative positive divegrence at the white arrow. Here's a closer look...

 Here's a closer look at the same 15 min chart, distribution at the top, in line at the green arrow on the downturn and a relative positive divegrence at the white, this is a bit bigger than what we have seen across the broad market so TSLA may be more than the 1 -day accumulation we saw yesterday, otherwise I wouldn't have brought it up as I'm not chasing assets trading roughly with the broader market.

 This 5 min chart gives us more detail, you can see the same triangle yesterday as the market/averages and most assets had in place and a leading positive divergence so I think there's more to a TSLA move than just a quick op-ex pop (or whatever this turns out to be-possibly the VIX futures move we were looking for).


So the set up...

 The 3 min intraday was flying in a leading positive yesterday at the sym. triangle, I'm surprised they didn't head fake it and wonder if they might still with a move below the apex which would be a gap fill as well, in any case they knew the market was going to pop early today and were in place for that short term on the 3 min as that's a strong leading divegrence yesterday.

The 2 min chart...

We have pretty good confirmation of the move up, but there are some intraday negatives forming now, if TSLA is just going higher than I'm not chasing it and I'll wait for these charts to go negative and short it at higher prices and less risk, but if it pulls back to at least a gap fill, maybe even a head fake move below the triangle and we still have strong accumulation on that pullback, I'd enter TSLA long or with calls depending how deep it pulls back.

I'd set price alerts if you are interested in the possibility of the trade (I will) and double check 3C if we do get that pullback in to the gap at minimum.

Otherwise, we'll let it do its thing and look for a short entry as the 15 min positive turns negative. The positive divergences are pretty nice here on a swing basis, but the problem is the same as the market yesterday, the footprint for the reversal process is very small, you can't stack a bunch of blocks really high on a small base, it's the same with the market, that footprint in the reversal process counts.

For now, it's patience and setting alerts, double checking underlying action, either way we'll get this one.

6th Pump... Dump?

This is the 6th day in a row of overnight carry trade driven levitation (the pump) and on the open, even more so...

ES pumped overnight, even more on the open.

The last 5 consecutive days have seen a dump shortly after the pump either pre-market or just after the open... Is today different? We were seeing some things yesterday so I'd think it is, it's also an op-ex Friday so this may be the max-pain pin for the weeklies.

In any case, so far we have what looks to be a little loss of upside momentum coming up, but we have good confirmation of the move up this morning across all the averages.

 IWM 1 min with a VERY slight negative, it may slow momentum to a more lateral pace.

However at 2 min, we have confirmation all the way around, we haven't had that the past 5 previous days.

QQQ 2 min confirmation

SPY confirmation.

Both GLD and GDX are up and looking decent so far, there looks to have been a little head fake in GLD, this is why I kept reiterating GLD and GDX long the last 2 days.

SO FAR, VXX is doing what I wanted to see for the past several weeks, it's down, but more importantly there are already hints of accumulation starting there, that's what we need for a real, serious market pivot to the downside, but that is unlikely to happen today and certainly not before the op-ex pin is lifted around 2 p.m.

More in a few minutes as trade data is coming in and looking good thus far.