EOD---

Really simple bottom line, I think we have a base developing, not much has changed today perhaps due to options expiration, but there's still not enough for me to jump in yet and thus I'll wait it out and see what Monday brings.

AAPL Interesting

There are several charts for AAPL (long) that look interesting, I would not enter more than a partial equity position at the moment as there's a bearish triangle that could be used for a stop-run/head fake move and that's where I'd really want to enter or enter options/calls.

Here's that triangle I mentioned, a perfect head fake set up with a downside break, creating a bear trap.

 The 1 min chart during the triangle gives us good reason to believe any downside break would be a head fake move.

 3 min AAPL

 3 min intraday

5 min leading positive

10 min leading positive...

I think I'll enter a 1/2 size trading position (equity LONG) and wait on the other half or possible option/calls.

Market Update

Still siting on my hands...

Strangely it's pretty quiet, there are some indications in Leading Indicators but nothing too stunning.

For instance as far as the market, we aren't very far from where we were yesterday or this morning.

SPY intraday is still in line...

The 5 min positive that was there earlier today and yesterday is the best we have to go on at the moment, but that's not much of a change for the day.

As for Leading Indicators, nothing Earth shattering, but a few signals...

Yields which I love as a predictive indicator were negative before the market lost ground (left) and have since reverted to the mean allowing them to move to a new trend, but they are not leading yet to do that.

One of the more interesting Leading Indications is High Yield Credit, this is thing so it gets jumpy, yet here it is leading the SPX.

This is bullish, but still not a timing indication.

Sentiment (professional) intraday looks pretty good, positive.

The longer term indications in the same indicator show a good leading negative and right now a large leading positive so it looks more and more like this is a sustainable base, just no great set ups on timing yet.

This is a longer view of the same, all in all it is leading negative as it should be, but there is a relative positive divegrence of some size recently.

Commodities aren't the Leading Indicator they were in 2010-2011, but they still give signals as you can see they were positive long before the February rally started and they are still positive on the break to stage 4 in the averages.

Let me keep watching and see if there's anything worth making a move on or whether we should just stay patient until Monday.

VXX / VIX Futures Update

As many of you know I have been waiting I believe 4 weeks now for a nice entry in to VXX long which is a tracking ETN that is essentially a rolling long position in the first and second month VIX Futures contracts (SP-500). VXX moves opposite the market so for the market to put in a nasty crash, VXX will generally show these amazing divergences that seem to fly vertically like no other asset I've seen, I vcall them flying divergences.

In any case, that's one of the things I';ve been looking for in VXX as well as a good entry place. There has been some very good progress made (consider this is a rolling contract for the 2 forward months), but we can see the difference between how traders "were" behaving and how they are now, essentially how much fear there really is and when the divergences fly positive, there's a lot of fear and that''s the reason I suspect the divergences are so sharp in VXX when the timing for a large market downturn is there.

For the VERY short term, I'm "CONSIDERING" either a VXX Put position or perhaps a XIV or SVXY long position. XIV and SVXY are the inverse of VXX, in other words they move with the market so if we get a bounce, the VIX should drop and SVXY/XIV should gain and they can really move.

Volume in both SVXY and XIV is plenty for our purposes as opposed to some other similar VIX futures tracking ETNs. The main difference as far as I can tell is that XIV is NASDAQ listed and SVXY is NYSE listed, given the choice between two identical assets on two different exchanges, I prefer NASDAQ over NYSE every time (XIV), the reason being is the best actual bid/ask sets the open for the NASDAQ and it opens all assets at 9:30, the NYSE is different in that the specialist gauges the book of orders and determines the opening and they have the ability to delay the open, I learned this lesson the hard way when I was long some SKF (UltraShort Financials) and had a nice gain as Financials were tanking on the open, but I couldn't sell my SKF because they had not opened it for trading (the rest of the NYSE was open, it wasn't an exchange meltdown), the specialist didn't open SKF for about another 45 minutes and by that time, my gains in SKF were gone.

In any case, this is what VXX looks like...

 The 15 min VXX chart is transitioning from an inline status formerly to a leading status as lows are hit, this is why I felt a move up in the market was important because I doubt there's going to be much chasing of higher prices, the evidence is right above.

 Here's the 30 min chart, note the last positive that sent VXX higher and how small it is compared to the leading positive now.

Most impressively the 60 min chart, again a huge difference between the last accumulation area before an upside move and now. These are starting to look like the divergences I'm looking for, but we need them in all timeframes. The shorter timeframes are looking a bit more like the market is putting a base in and can/will bounce in the near term.

 This is the 2 min VXX chart, it went from an intraday negative to a pullback that was confirmed by 3C at the green arrow and then as we see the most recent semi-parabolic move, 3C WILL NOT confirm the move which it could have easily done by now on this timeframe.

The VXX 5 min had some accumulation areas before this semi-parabolic move, but again there's no 3C confirmation of the upside move which looks like there's going to be a pullback in VXX which should help with the accumulation and would also mean the market is likely to bounce.

 At 10-mins we have a positive and a relative negative divegrence, remember the 15 min chart is where the accumulation has started to accrue and the 10 min chart is appropriate as it's more or less in line with divergences in the averages as they aren't moving past 10 mins (if even that).

Inrtraday 1 min I see no entry for any VXX puts or XIV/SVXY long as the 1 min chart is confirming price action nearly perfectly so far, that would have to go negative first and then we'd need to see what the other timeframes out to 10-15 mins look like.

As far as actual VIX Futures (/VX)...

 The 60 min is looking great, like the VXX 60 min as it leads positive and in a short space.

However at 15 mins there is a relative negative right now, relative divergences are the weakest form, but since it is a 15 min chart it deserves some attention.

 The 5 min chart has some recent softness in it as well, if I were considering trading the futures though, this would not be enough for me to trade short.

The 1 min intraday in the VIX futures though looks pretty bad, if you are wondering why it looks so different than VXX's 1 min chart, consider this is the April VIX contract whereas VXX is April/May so there can be more action in the May contract (accumulation) that causes the imbalance between the two.

I'll be watching,  we are past the 2 pm hour and it appears the Op-Ex pin has been pulled, this is where we usually get some of the best data for the coming week so if I'm a little quiet it's not because I'm not working hard, it's because I'm working harder.

Closing SQQQ (long) Trading Position

There are some charts that make me a little nervous of course as SQQQ is a 3x Short NASDAQ 100 or QQQ. Since this is a Trading (tracking) Portfolio, I want to preserve the gains and create some room or dry powder to enter new positions on a trading basis.

 This is the 5 min SQQQ chart, today it's seeing a leading negative divegrence while the rest of the market is seeing a more positive tone.

The 30 min chart though is what made up my mind, these longer timeframes don't have all the detail, but they reveal underlying trends well and this looks like SQQQ is going to come down which would be expected on a QQQ bounce.

I'm still leaning overwhelmingly short, just consider that this was meant to be a TRADING position, not a trend position.

I'm sure I'll be back on a SQQQ pullback, take a look at the 60 min chart, just SPECTACULAR!

This is a HUGE base, excellent leading positive divegrence, there's no hint of a negative divegrence out this far at 60 mins so that tells me that a market bounce would be just that, a bounce otherwise the distribution here would be very heavy and show up on a 60 min chart, it's not that heavy to show up here.

So on a pullback, SQQQ will be near the top of my trading list, but for now, I'm going to protect the gains and create some dry powder.

Market Update

So far, nothing "seemingly" unusual, it looks like a normal op-ex pin. However there are some interesting developments in both the shape of price (reversal process) and the divergences building beyond simple intraday steering currents which are in effect, this makes me VERY happy that we didn't enter any options trades like Wednesday and Thursday, the signals weren't there to start with, the reversal process wasn't there and with an op-ex Friday, the probability of the market moving much away from yesterday's close is very low as the Max-Pain pins tend to open on Friday and linger right about the same area as Thursday's close.

 SPY 1 min intraday with the positive divegrence on the gap down this morning and what appears to be an op-ex pin steering divergence at the intraday highs, essentially keeping the averages in the range of Max pain so the most dollar amount of option contracts expire worthless as retail are typically buyers, not sellers of options.


 However on a longer chart, 5 min of the SPY, we see the initial positive divegrence at what would be the first bottom of a "W" and the run up to what would be the middle / high of the "W" and then the obligatory head fake/stop run which creates supply to be accumulated at the second bottom of the "W" pattern.

This is now looking MUCH more like one cohesive base rather than two individual events.

My custom TICK v SPY indicator on an intraday basis is showing essentially the same thing, it looks like a simple, typical max pain pin that should last until about 2 p.m.

However, there's an added advantage which I'll show you on an IWM graphic below.

 The 1 min QQQ is giving the same intraday signals, positive on the gap down this morning and a slight negative along the lines of a "Steering" divergence, not actual accumulation or distribution, but just moving price down when it gets too high or up when it's too low so it stays in the area of Max-Pain.

 The QQQ 2 min chart however reveals that there's more going on under the surface than appears as it is starting to lead positive, we didn't get this kind of action yesterday and that's why I wouldn't consider an options trade. This is also happening in the "right" area as far as a "W" base goes.

Here's the IWM graphic I mentioned, you'll probably recall the post last Friday AFTER the op-ex pin was removed and we get valuable 3C signals for the next week, if not, here's the post... The very early signals from that Friday afternoon suggested that we build some kind of base, it also said that Monday would not be an up day, there was more work to be done building a base before any upside was seen. We did build that base Monday and did see some upside which we captured with QQQ calls because the size of the base (small) suggested a short duration move meaning it needed leverage to make the profit potential worthwhile. There's no way we could have known that Friday afternoon that we might build a bigger base as we were coming in to brand new signals, unlike if there had been a 15 min positive in place, we'd know that a larger base was going to be completed for a larger duration move that required less or no leverage to be worthwhile.

It's not just the "W" formation, it's the head fake move under support that draws in shorts which creates supply and stops out longs which also creates supply.

When a base like this reverses to the upside the shorts are squeezed providing upside momentum as demand is created by their covering which runs across the tape as a "buy", we also see the retail crowd chase prices higher, they'd likely do it on a break above the $116 area on the IWM.

Interestingly our resident sentiment watcher and I figured out that it only takes 3 hours to change retail sentiment from bullish to bearish or vice versa. Also interestingly, they were SUPER BULLISH at the April 9 highs when we entered the IWM put position, they are simply chasing price, thus it doesn't take long to flip their sentiment, although strangely despite a series of lower lows and lower highs in several of the averages, they are still ultra bullish, which would be useful in setting a bull trap for a move down once this base moves and fails (assuming it moves...I have no doubt it would fail).

I posted this earlier in the week, but I'll do so again, this is my "Guesstimate" of a QQQ upside target. Now that every average is in stage 4 and below obvious support, shorts have likely stepped in and one of the first events to occur on a break to stage 4 when new shorts enter (think about the H&S concept of the 3 areas I'll short a H&S, the last one being AFTER a move below the neckline and an upside shakeout of new shorts) is the volatility shakeout, this needs to be a believable move for it to work and be worthwhile. Wall St. doesn't set up a cycle like this week's for no purpose, everything they do has a purpose and in this case they not only make money on an upside squeeze of shorts, but they set up a strong bull trap to create strong downside momentum on the resulting move down after the rally/head fake has completed-this is where we want to enter or add to shorts.

Potential Targets (this is assuming we keep building on the course we are on now)...

 Forgive my trend lines... this is the QQQ, for a move to be believable and flip sentiment to wildly bullish, which is a means to an end... price would have to break above the upper downtrend channel, above the neckline of stage 3 former support and probably above that high in early April as that would negate the lower lows/lower highs and the downtrend, putting traders in a bullish mood, absorbing a lot of supply/creating demand which makes it easy to sell in to or short in to.


This is the IWM, but the concept would be exactly the same. Believe me, after tracking these cycles for so many years, there's always a reason that they build them, there are VERY few random events in the market and when they occur they are on surprise news that the market had no way of discounting. Remember last night I was talking about the accumulation of Home Builders  around 1999-2000 and tp my recollection, property prices didn't start to get bubbly until about 2003, I believe the HB's topped around 2005, well in advance of the bubble popping in 2007.

 Back to intraday, this is ES/SPX Futures on a 1 min chart with a 1-day VWAP (Volume Weighted Average Price), this is used by institutional traders to judge a fill of a large order, at VWAP is the standard, if you can fill at the lower standard deviation and sell at the upper standard deviation, you as a market maker or specialist will likely get a lot more business from large institutions placing orders.

Note how prices are hovering at the lower standard deviation of VWAP.

 On a weekly VWAP of ES...

 Note the selling at the upper SD of VWAP and where we are now...

Now, lets overlay 3C...

Distribution at the upper standard deviation, accumulation at the lower...INTERESTING!

USD/JPY Update

And what of the Carry Trade, USD/JPY which was a big part of any potential base after it broke down hard when stops were triggered under $103 on Monday, losing 281 pips since 8:30 Friday morning?

We know the Carry correlation algos were shut off to keep the market from following the USD/JPY lower, but something strange happened this morning, I suppose around the time the head FX traders wandered in to the office...

 USD/JPY in the green/Red bars has been slammed and the correlation Algos that keep Es and one of the 3 Carry trades (usually USD/JPY) in lock step, nearly tick for tick, were shut down and remained shut down all week, I checked all 3 Carry trades, all were shut down.

Until... around 7:30 this morning...That's ES in purple trading nearly tick for tick with the USD/JPY which is something I was looking for as they may not want the market to fall in a disorderly manner so early and thus shut down the algos. but I had a pretty strong gut feeling they'd turn them back on to help lift the market if there were to be any kind of bounce off a "W" base, THE MARKET NEEDS EVERY LEVER IT CAN GET TO PUSH UPSIDE MOVES AT THIS POINT.

 Remember we were looking for a lateral base in USD/JPY, this 30 min chart shows just that.

As far as analyzing the pair, we get much better signals looking at the single currency futures of the components (USD and JPY)...

 The 30 min Yen chart is showing distribution which has migrated from 5 min to 15 min to 30 min this week, meaning the divegrence is getting stronger as the pair bases laterally. With the pair USD/JPY, any downside in the Yen pressures the USD/JPY pair to the upside and any upside in the $USD also does the same so we would want to see $USDX confirmation in the form of a positive divegrence...

Here's the 30 min $USDX with a leading positive divergence, exactly what we were looking for to occur.

Meanwhile intraday the $USD is seeing a little steering distribution, likely to keep it in the range and if the Index futures are now plugged back in to the carry trade moves, they'd likely want to hold those flat as well until about 2 p.m. on an op-ex Max Pain Pin.

This is starting to get interesting and looking like we may have some trade opportunities worth more than just 3 hours.

Opening Indications

Yesterday's EOD Market Update said the following,

"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.

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...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...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".

After an ugly overnight in Asia and Europe (with the "Flight to Safety Trade" on, German Bunds yielding a 10 month low below 1.5%)...

ES going negative and losing ground right around the European open...

the U.S. gets its gap down as well, but this is interesting in light of what my feelings were yesterday based on the charts to some degree, but based on our concepts that come from the charts in large degree (more market psychology and behavior)...

 This is the Feb cycle, ALL averages are now in stage 4, but for near term trade as mentioned yesterday, the move below recent trendline support looks to be the defining feature going in to next week.

Don't forget even though its weeklies, today is still an op-ex day and we still see the Max-Pain pin until the 2 p.m. area, that's when we get our best signals for the next week from 3C as price will do whatever it wants, but 3C will give signals that almost ALWAYS pick up where they left off on the next trading day, even over a weekend on Monday.

 As far as my comments from above, there's still a "W" pattern, but unlike the textbook "W" or Double Bottom that you'll find in the Holy Grail of technical trading,"Technical Analysis of Stock Trends", we have found that these concepts that are followed sp predictably by Technical Traders have been altered by Wall St. just enough to use these predictable price formations against them. For instance, what could or should have been support now looks like a lower low when in reality most of the time this is a head fake move that hits stops and knocks out longs and sucks in shorts to later knock them out when price moves back above the former support line.

This is why I said yesterday, "The best place for a reversal process to occur is under the trendline" as it is also effecting a head fake move that creates the kind of supply larger institutional money needs to accumulate their large positions.

 Thus far on the open, that concept "seems" to be on target (or it could be the op-ex pin or both), note the positive divergence on the gap down.

ALSO NOTE THE VERY SMALL MOVEMENT, NOT WORTH THE RISK OF AN OPTIONS TRADE AT ALL IN MY VIEW.

 This would be a 3 min SPY chart of the second bottom, the head fake, lower low. There are signs of accumulation thus a reversal process becomes more likely and we have to start looking at the possibility of the "W" formation being legitimate which would set up some nice swing-type trades.

This is the 5 min SPY, we do have accumulation at both bottoms of the "W" pattern with a head fake late in the pattern as is the case about 80+% of the time before a trend reversal (from down to sideways to up).

 The IWM also confirmed with a positive divergence on the gap down this morning...

As did the QQQ.

One nice thing about the overnight Asian weakness is it may be kick-starting our FXP long position which I'm excited about, it's up +3+% this morning.

Also JPM missed earnings on top and bottom lines, that is one of our core shorts and it's down -3+% this morning.

I'll be keeping a close eye on the NASDAQ Biotech Index, I saw some things I liked yesterday, but it wasn't quite there.

AHHH HAAA HAA ... NEWS OUT THIS MORNING THAT BLYTHE MASTERS, THE INFAMOUS EX-JPM SILVER MANIPULATOR IS UNDER INVESTIGATION FOR ENERGY PRICE RIGGING IN CALIFORNIA!!! I LOVE IT!