UNG Update

I have been trying to get this update out for so long, I decided to just sit down and do it now.

First for newer members, UNG (Natural Gas) has been one of my favorite LONG term primary secular bull trend plays out there, I think it has a lot of upside over the next several years so while we have been trading with and against it and have done well for the most part for well over a year, it's still in a stage 1 base. I don't know how the market knows what they do, but during the 2000 tech meltdown Homebuilders were under about a year and a half of accumulation. AFTER THE TECH REVOLUTION, WHO WOULD HAVE EVER THOUGHT HOUSING WOULD LEAD THE NEXT BULL MARKET?

Someone knew because they were accumulating stocks that I have shown here several times that went on to rally around 2003 and make 2500+% the next few years, BORING, 2-3% a year appreciation, HOUSING!

The UNG/Nat Gas trend looks like it will be more than a primary bull trend, but a secular bull which is much larger.

This was the first thing that grabbed our attention and got us looking at UNG.

 This is a 5-day chart of UNG, apply this concept to any asset in any timeframe you wish, "Changes in character lead to changes in trends" and you can see the change in character in price very clearly above.

This is a 1-day chart, UNG went from stage 4 decline to a large stage 1 base, larger than I initially anticipated.

We DO have members who have been in UNG since our first major buy back in April of 2012 and they have about a 75% gain on the position while it's still in a stage 1 base! I have tried to maintain a core long position there, but have traded in and out based on signals mostly for some +25% gains, a few shorts here and there just because it's one we pay attention to.

 We're in an interesting spot for UNG, I opened a short via DGAZ which has been beaten down pretty good so it's a bit of a dichotomy for me as I want that position to work, but I also love this asset and want to reestablish a full size core long position.

The triangle here looks legitimate, volume is right, size is right, it has a small breakout which I think is Putin/Gazprom related as I can pretty much tell you without reading the news that Russia will cut off gas supply to the Ukraine and the supply that runs through the Ukraine to Europe which depends on Russia for about 1/3rd of their natural gas will likely be shut off to spite the EU/NATO , but be done under the guise of, "The Ukrainians were syphoning off gas meant for Europe so we shut it all down", when in reality it's Russia's trump card to shut the EU up about Putin's ambitions which extend far beyond the Ukraine, apparently right to Finland which a close advisor (former) says Putin feels is Russian territory that was ceded illegally under the czars and he wants "Historical Justice".

This is the weekly 3C chart of the base area with a leading positive divegrence, that's the underlying trend inn UNG over the last few years, once again Wall St. knows something everyone else doesn't just like with housing, they were in place bout 3 years before retail ever caught wind of it. THAT'S HOW FAR OUT THESE GUYS PLAN!

THIS IS THE DAILY 3C CHART, NOTE THE NEGATIVE DIVERGENCE AREN'T VERY STRONG, JUST ENOUGH TO KNOCK PRICE DOWN AND KEEP IT FROM BREAKING OUT SO UNG CAN BE ACCUMULATED AT A LOWER AVERAGE/TARGET PRICE.

Also note the positive divegrence of some size at the lows of "B", this is what I'm always talking about, smart money doesn't chase, they let or make prices come to them.

 The Daily Bollinger Bands are pinching right now indicating a highly directional move is coming soon which the triangle is also implying as it nears its apex, but a strong triangle breaks out about 2/3rds of the way through the pattern and before the apex is formed.

The symmetrical triangle we see right now has no directional bias like an ascending or descending triangle, it depends on the preceding trend for it's directional bias and that trend was up so the triangle is considered a "Consolidation/Continuation" pattern, but these are head fakes often because traders look at a triangle and see a imminent breakout, however most won't enter the position until the breakout on what they call "confirmation", I call it chasing and it usually puts you in a bad position with a lot of risk. 

Point "A" looks like a head fake move with this ""Shooting Star " bearish candle and with all that volume, there's also an element of bearish churning (strong hands handing off shares to weak hands), whenever price moves very little from open to close (small bodied candle) in an area like this on large volume, you have to consider/suspect bearish churning. Point "B" which is today also has a bearish look to the daily candle as the upper wick is quite long meaning higher prices were rejected during the trading day and on increased volume, another sign that is similar to churning, not exactly the same, but still bearish short term, especially as price is trying to break out of the triangle, it should have strong volume and a strong, large bodied candlestick closing near the highs of the day.

This is the intraday action today, I bet you can guess what caused the move just by the time... The EIA Natural Gas inventories which come out at 10:30 a.m. every Thursday, there was obviously a weak build below consensus, I checked Bloomberg and found the following about today's EIA report.

Released On 4/10/2014 10:30:00 AM For wk4/4, 2014 Prior Actual Weekly Change -74 bcf 4 bcf

Highlights The injection season begins! Natural gas in storage rose 4 billion cubic feet in the April 4 week to 826 bcf. An injection of about 10 bcf was expected. The key was an injection of 10BCF was expected and the actual was 4, that sent Nat Gas up, but why didn't it hold the gain and why all the volume on the downside other than the fact that some intraday stops were hit? Lets look closer... First lets look at the big picture...  This is the 4 hour chart, it's obviously strong and in line. This is the 60 min chart. I don't feel good about either of these being I'm not loaded up with UNG longs and I have a DGAZ long (Nat Gas) short on right now in the trading portfolio. However, this is not the end of the story...  On the 30 min chart we are seeing something VERY different in the area of the triangle, a leading negative divegrence which suggest that an upside breakout in the triangle will be a failed head fake move or bull trap, this doesn't effect UNG's long term prospects, but it may be the window we or I was looking for. The 10 min chart's trend is the same, leading negative through the entire triangle, if this was ready for a true breakout it would be accumulated, not distributed. Look closer...  UNG 5 min UNG 3 min trend... Both charts show what looks like VERY clear distribution in to a horrendous miss of consensus today that should have sent UNG sky-rocketting, and we now have a pretty good idea what all that red volume was about, not stop runs, it appears there was a major distribution event in to stronger prices on the initial pop on the weak inventory build, they sold in to higher prices, if they are selling in to higher prices they obviously are not expecting prices to move significantly higher at this time (consider the timeframe as well, it's shorter term, but still in the swing or better category), so UNG may actually be a decent short TRADE, which I'm already neck deep in via long DGAZ, but if it comes up and there's good positioning and good signals, I'll put it out and on any pullback we'll be looking for accumulation to know where we can safely enter UNG long. Finally the intraday action on a 2 min chart, it shows the EXACT same thing. 2 min UNG intraday, distribution in to higher prices and leading negative where the volume really picks up on the downside. So I think we have a pretty good idea of how this VERY obvious triangle is going to resolve, it's a bullish triangle and traders will buy the breakout, but this is what I'm always going on about, Wall St. uses traders' predictability (as this is a century old technical price pattern) against them and in this case, looks to be setting a bull trap which creates downside momentum. The idea would be something like this... The more volume they can get on a breakout, the more likely it is that we are close to the head fake resolving to the downside and since it's a triangle, most stops are right below the upper resistance line of the triangle or just below the apex of the triangle, that means momentum with additional stop selling creating supply and sending prices lower should send UNG lower, I'm just not sure if we are already at that point as volume was up, just not in a huge way and the more bulls they can trap, the stronger the head fake move down will be, "From a failed move comes a fast move". We'll keep an eye on this one to see if we can get a decent trade on the downside, more importantly a good entry on the long side on a pullback, that would be ideal and the charts look like that's a VERY high probability.

EOD Market Update

I've looked around quite a bit, I still have more looking to do, but I've decided (especially with an op-ex pin tomorrow) that I don't see a decent swing trade, the only reason I took the options trades was because they were strong signals I felt good about. I feel like taking a trade right now is just trying to keep a streak alive or be a busy body and try to force something to happen and that's no reason to enter a trade.

Here's basically a snap-shot of what I'm seeing...

 SPY 5 min, there's a divegrence there, but it's not screaming "Buy" to me and there's what looks like the start of a reversal process, although the bottom reversal (to the upside) are typically tighter than the top reversals (to the downside), it just doesn't look mature to me. I wouldn't be surprised if there were some spike based on the parabolic move, but I don't feel comfortable that if there was one, it would have enough juice to analyze it, see if it has anything and get out before it pops.

QQQ 5 min with a small positive, also an incomplete reversal process, the best thing that probably can be said about today if you are interested in playing a long is that most of the averages caught down to the double bottom area.

 QQQ 10 min is interesting, but not for me yet, I think the best place for a reversal process is under the trendline on a head fake move.


IWM 1 min, that's just not enough

And the 10 min, again, below the trendline is really the best place for these to carry out a basing process so I'll be patient and wait for the screaming set up

NASDAQ Biotech Index- IBB

I'm not even sure if I should post this, it's not a trade that I'm interested in right now, but some background might be helpful as there are qualities to it that could make it a trade pretty quickly. One of the defining features I've noticed is comparing the underlying trading vehicle, IBB to the Ultra BIB and UltraShort, BIS. Usually there's pretty good confirmation between the 3 if there's something solid going on, this looks a bit like chaos which is not surprising with an approximate -20% decline, the media's official definition of a bear market although that really is silly.

In any case, there's definitely a longer term core short play here, just not at the moment and there may be a volatility shakeout/dead cat bounce play here as well, but once again, I don't want to let cockiness or greed influence decisions when in this time of increased volatility (which means increasingly larger surprises as well), we really need to be demanding more from the trade set ups.

The charts...

 Here on the Daily chart I',m pointing out the deceptive nature of price as it sees an increased ROC to the upside just as it transitions from a stable stage 2 mark-up trend to a stage 3 top, I want to point these out every time I see them so you get use to seeing the concept and you know to be careful when that change in character appears as it leads to changes in trends.

We do have a H&S top, it's in the right place for the trend, it's about the right size, I confirmed it with volume analysis and while at first it was shaky, it fell in to line and looked as it should where it's most important (around the top of the head).

Remember the H&S VSO- Volatility Shake Out, this is a concept I've mentioned several times this week, technical traders short an asset like this as it breaks the neckline which they consider "confirmation".

I'll only short a H&S at 3 areas, the Head, the top of the right shoulder and then ONLY AFTER a break below the neckline and a VSO back above the neckline, ideally I want to catch the reversal of that shakeout of new shorts and that';s the last place I'll short a H&S top.

So this one does look primed and in the right spot with the right performance for a Volatility Shakeout of new shorts.

This is the 30 min trend, we "might" have a break of the chain of lower lows and lower highs, that remains to be seen.

I checked the daily 3C as well as MoneyStream and it looks like there was fast distribution out of this one, it wasn't like the typical longer distribution which is probably why it has fallen so hard, too many large funds trying to exit all at once just like AAPL when it lost -45% off all time highs.

The 4 hour chart offers more detail and is a bit cleared on distribution at the H&S head which is the ideal place for them to do it.

 This is where things get whacky, the 5 min chart looks pretty good for a swing or options trade, take a closer look.

5 min chart, it also looks like it may be putting in a small stage 1 base with a head fake move below "support" if we can call it that, which is the obvious and expected play as if it were a double bottom shakeout.

Around the 10-15 mi charts the asset is in line, I looked at the leveraged versions and BIB was in line as well while BIS was negative, which is what I'd expect, but for confirmation both IBB and BIB should be positive rather than in line and the reason I say this is because of the 30/60 min charts which are positive, I don't know how you jump from a 5 min positive to 30/60 min positives without the 10 and 15 also being positive, I suppose some weird accumulation on certain days could do it, but the Ultrashort, BIS is the only one making sense in that regard, the other two are not so I'm a bit put off by that.

 As for intraday, this is the 1 min, there seems to be a nice rounding process in place on a positive divegrence.

 There's migration on the 2 min and 3 min above and you already saw the 5 min positive so it's a bit interesting, but I'm just not completely sold, maybe a phased in entry or a speculative size position until things become more clear if you really like these beaten up stocks.

We'll keep an eye on it and see if there's any solid opportunities, we really only need two charts to show some changes and we have a full house across all timeframes.

Market Update: Patience Is Still the Name of the Game

I have some interesting charts forming pretty fast in the NDX/QQQ and what makes them a bit of an unusual situation is the parabolic move down this morning, again, I don't trust parabolic moves up or down. Let me get to the charts, this will specifically be a QQQ update as proxy for the broader market since it is looking the best right now.

 This is the 15 min QQQ, the move down this morning was very parabolic, the NASDAQ Biotech Index was slammed, down over 5% today alone and that's the index..

In any case, the Q's are close to a "W" and are showing accumulation, more so and faster than the other averages thus far.

Here's a closer look at the QQQ 15 min and where the "W" support would be and...

This is the same in the IWM which seems to be holding up a bit better as far as rrelative performance and letting the other averages catch down to it. You should be able to make out the "W" pattern, although FAR from textbook.

This is the QQQ 1 min as of just a little bit ago, it has since made another leading higher high

The 2 min chart is seeing migration as a normal healthy divergence should, this has also improved since the capture ...

And the 3 min is extremely impressive this fast.

 The 5 min chart is now seeing migration to the timeframe so it appears this is a solid, real divegrence, but is it part of a wider divergence as we suspected it may be...

Looking at the 5 min chart with more perspective (as well as the 10, 15, 30 and 60 on an intraday basis), this looks like a separate divegrence NOT connected with the initial positive divgerence/base that was used up in to the knee jerk on the minutes yesterday.

We had two very good trades the last two days, the QQQ Call closed Wednesday for a 45+% gain and the IWM put from yesterday closed today for a nearly 62% gain, I don't want to get cocky/over-confident.

My problem with this area is the lack of a reversal process in appropriate size, but then again the parabolic move down tends to the following make reversal process tighter. It's not the ideal situation for a Call position in the QQQ or say a leveraged long QQQ-based ETF and that's because of the size of the footprint.

I do think I'd have any short term shorts from yesterday (meant for the move down we already saw today) wrapped up by now, I don't see the edge in holding them as TRADING positions, as longer term probability trend positions, that's a different story.

If today's action (poisitve) near the lows was part of the larger "W" base, I wouldn't have that much of a problem with it, but as it appears it is distinctly unique, I'm a bit worried about it.

So I think the best course is to be patient, see if this gives us a larger footprint which would have even better 3C signals and go from there. Remember tomorrow is a weekly op-ex max pain pin so it's hard to say what this divergence is about, perhaps moving the Q's to the max pain level before tomorrow or by tomorrow around the open or is this something else? I don't think the question is as important if we have the larger reversal process.

I'm going to take a closer look at the NDX Biotech Index and see what might be available there.

Market Update

I'm probably going to be a little quiet with posts and emails for the next hour or so, I have a lot of charts to look at.

Here's where we are with the market, and I know we have been talking about a "W" base and that's still a good probability, however the market is the most dynamic organism (I consider it an organism as it's a collective of millions of emotions) I think I've ever seen so we don't want to get hung up on theories, we want to have an idea based on evidence and see if that is confirming based on evidence and as of right now (which is still early in the day as far as the ability to effect another trend intraday) we are very transitional and a lot of that has to do with relative performance between the averages as the SPY and DOW have been in stage 3 while the IWM and Q's have broken clearly to stage 4 and even have lower highs/lower lows so what is a "W" in the IWM is not in the SPY, but relative performance rotates from average to average so we may see the IWM start holding up better as the SPY/DIA catch down to it.

This is one of the reasons I want to look closer at Carry trade and FX performance and signals and especially leading indicators. As I think has been pretty clear with the gains in yesterday's calls closed out and today's puts closed out, we need to be patient and wait for the set up and then use the right tool for the job, I don't particularly like options to be honest, I'd rather swing or trend trade, but if we didn't use options or some kind of leverage, I'd have a hard time saying, "This trade has enough profit potential in such a short duration to take the risk".

As for the charts...

QQQ

 The 1 min QQQ is looking stronger than anything else right now as far as intraday 1 min charts go, it's actually kind of interesting and may be a position in the very near future if this migrates.

QQQ 2 min so we are starting to see some accumulation, THIS IS NOT ENOUGH ACCUMULATION TO CONFIRM A LARGER BASE.

And the 5 min chart which hasn't seen enough accumulation to move it at all.

IWM

 The IWM 1 min is going positive here as you can see and a bit more lateral as far as price, we need a reversal process before we consider any longs and stronger divergences so this is a time for short management and patience. This is why I have kept the bulk of positions short and traded around with options on the shorter moves that have good signals.

 IWM 2 min looks like there's been a little accrual from some earlier positive divergences in the day.

 The 5 min is in line. What I'm trying to show here is the accumulation to the left, it could have been a smaller "U" shaped base and just wore itself out on the release of the minutes in which case I'd say 85% chance they were leaked late last week.

SPY

 This is roughly the area the SPY would have to catch down to for a "W" bottom, there's no rule that says a bottom has to be a "W" formation, it's just a common one to see because it's easy to head fake on the second low and it's usually proportionally the right size for a reversal process.

 This is the same chart, I just found all the drawing on the chart above distracting so I put the same one with only the support level so the divergences were clearer to see.

As for the 1 min, from in line to a positive divegrence.

I definitely took gains too quickly, but you only know what you know at the time and what I knew was the TICK dynamic was changing so I don't beat myself up about making a call on objective data and neither should you, it's the emotional calls that I don't like.

SPY 3 min, AGAIN, THIS IS NO WHERE NEAR ENOUGH EVIDENCE TO SUGGEST A LARGER BASE, BUT IT'S ALSO EARLY IN THE PROCESS SO PATIENCE ...

Index Futures...

 ES/SPX Futures have a positive divergence intraday 1 min, TF and NQ (R2K and NDX futures) were in line at last check making ES the leader thus far, this is obviously not a chart captured 1 min ago so the market has moved a bit since, the divergence is roughly the same though.

 As far as the 5 min, I felt great about the Put position last night after seeing 5 min negatives like this in ES and others, but this more important timeframe is showing a relative positive, it is the weakest form, but it has to start somewhere.

 This is the 5 min NQ with a relative positive and TF looks the same, again not enough proof to say this is accumulation for a larger base, it may be just for an intraday move, it may just be there trying to halt the decline a bit as in PPT interference (trying to maintain an orderly market).

 The TICK data is interesting though, even though it is skewed heavily to the negative at -1250 it is much more lateral, just extreme volatility.

My custom TICK 1 min vs SPY is showing a bit of positive action building .

So I'm going to look around some more, also check on some other positions that are open and see what we have.