No Fill on May QQQ $84 Calls, That's Fine

I was looking at a spec. size position anyway, if this is a nice "W" base we won't need spec. size positions.

In any case, here are the charts I'm looking at and why I think it's likely we have time, plus I still have to see leading indicators and update to see internals.

 This is the NASDAQ 100 futures, NQ on a 1 min chart. As I said/suspected in the 2nd to last post, "price will likely bounce off the lower VWAP Standard Deviation and head toward VWAP for the close which is pretty common, as you can see there wasn't much, really any positive divegrence at the 1 min NQ bounce off the lower channel, so the fact the order didn't get filled is not a big deal.

 As mentioned earlier, I do like this 5 min chart, but it certainly could be more impressive as far as a leading divegrence.

The 15 min chart looks good, however what is still important is the cohesiveness of two individual base/accumulation areas which aren't good for much on their own, but as 1 larger base , are worth trading. So I looked at the 30 min NQ chart...

And here we see the initial positive divegrence, like I said in the second to last post, the second base is almost always much stronger than the first, so we are not there yet, but I suspect we are in the area that this could happen in a matter of several hours, although I've learned over the years that it's best to take whatever "seems" reasonable and double or triple that estimate.

If we get a strong leading positive divegrence at this second base area, then I'd say we have 1 singular base worth trading and not on spec. positions.

 As for the QQQ, the 1 min chart put in a positive divegrence, that is what should happen at the lower SD of VWAP, but it didn't migrate to the next timeframe at 2 mins and I'd expect that we'd migrate out to at least the 5 min chart.

2 min QQQ with no migration of the 1 min chart's divegrence.

I'll let you know what I see in leading indicators as well as other indications and the carry trades.

Do my best to open half size QQQ May $84 Call Position

Index Futures Update

I think one of the best indications we have right now for a larger "W" base (other than the fact they'd likely need to make it larger just to get the same mileage out of a smaller one from several months ago because of the increasingly bearish nature of the market) can be found in the Index futures themselves.

You may recall some of these charts, the VWAP ones I posted Friday, Market Update .

 This is a 15 min chart of SPX futures, ES. I'm using ES as an example, but TF and NQ look the same.

Note the positive divergences in the same areas as the averages, the second one is stronger than the first as is often the case when we have 1 single base rather than 2 smaller ones and the distribution at the area that would be the middle or the high point of the "W" is very small, as mentioned earlier it does not look like the kind of distribution we see when there's a risk off sentiment of, "Sell on any price strength", it looks much more like a steering divegrence meant to keep prices in a range until the accumulation/reversal process is complete as smart money will try to fill at the lower end of the range as I demonstrated Friday with the VWAP charts which I'll show again.

 This is a 5 min chart of ES, the positive divegrence alone to the far right suggests "something" is up as we use to trade these alone for short term trades.

C signals that are very useful and show up after 2 pp.m. when the max-pain op-ex pin is lifted as most contracts are already closed by then.

 This is the WEEKLY VWAP for ES, I pointed out in the post linked above from last Friday that we have 3C distribution at the upper standard deviation of VWAP which is where we'd expect to see it and a positive divegrence at the lower standard deviation where we'd expect to see it. VWAP is an institutional investors tool used to determine what kind of fill they received from a market maker or specialist who is filling the order, for a buy they want to come in at VWAP or lower, for a sale or short sale they want to come in at VWAP or above.

Since we have a new week, this is the weekly VWAP for ES thus far on a 1 min chart...

Note the distribution early today as we are at the upper SD of VWAP and now we are approaching the lower standard deviation, , it looks like the SPY just bounced off that lower S.D. of VWAP as well, they may be trying to close right around VWAP which is pretty typical.

I'm going through Leading Indicators right now, I'll have those out shortly

Market / SPY Update

I think we were right Friday to remain patient, sit on out hands and let the market continue to move along and tell us what it's up to. My feeling Friday was there was more basing or what I'd call a wider foot-print that needed to be done at least early this week based on what I could see late Friday, in that case, I'm glad we didn't take on any options trades as we did have 2 nice ones last week, but they had very clear signals.

I'm starting from the longer charts and working my way down, some of this is theoretical, as far as what I suspect is happening and for the sake of any long trades we might look to (quick trades, not ANYTHING resembling a bullish market), I'd hope this is what is happening otherwise I'm content to just sit on the short positions built and manage those until some new entry areas present themselves.

So Friday afternoon's expectations for the new week, EOD--- , were very simple... in fact this is the entire post...

"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."

The charts look pretty simple too, in fact so much so that I haven't trusted them and I've spent so much time looking around for something I may have missed, but I think they are just this simple...

 This is another 60 min chart that's just destroyed and there are worse than this even in the SPY timeframes.

Note the rounding top and proportionality compared to the preceding trend (the February rally/short-squeeze). Also note the top description we usually look for that comes with its own head fake move just before a reversal, "The Igloo with a Chimney" which you see above before the downside reversal that has already retraced the entire rally in NASDAQ 100, most of it in the Russell 2000 and has pushed the SPX and Dow in to stage 4 of the cycle.

I suspect the "W" formation I have been talking about (it doesn't look exactly like a "W" because the second base or low almost always has a head fake move which is a stop-run/shakeout in this scenario) will fill out the yellow reversal process I drew in, this is what I meant last week when I said a "larger "foot-print", a bounce or rally can only go so far and there's a direct correlation to the size of the base.

The SPY 15 min chart shows the accumulation for the February cycle which was fairly large, Jan 27-Feb 6th and it came with a strong -2% down head fake move as well. Then the clear distribution of stage 3/top and the decline in to stage 4 with a lower low/lower high. Even though the 15 min chart's defining feature is a leading negative divegrence, we can still see a smaller relative positive all the way to the right, this is what we have been watching as our "W" base.

On a 10 min chart you might look at some past positive divergences within a leading negative trend and get a feel for how far they moved. I'd say the current one ...if it holds, is larger than the others and therefore more likely to make the targets posted last week (Tuesday and Friday).

Again in yellow I've drawn in an approximately proportional reversal process.

 SPY 5 min leading negative as well, this is one way to tell you are in stage 3, the range is another and the head fake move on a failed breakout is the last thing that typically happens before a reversal or transition to the next stage, however as I pointed out many times last week and showed you in the IWM and QQQ as they broke to stage 4 first, there's the H&S top neckline-break volatility shakeout of new shorts and since the SPY and DIA just joined the Q's and IWM in stage 4, this would be the appropriate time to see such a volatility shakeout which for me is good as it is, like the H&S top, the last place I'll enter new or add-to short positions.

 A closer view of the SPY 5 min chart with the "W" process from very late on Friday April 4th through present. I drew in the smaller reversal processes , I did not draw in the larger one that you see on some charts above that would make the accumulation on the 7th/8th and the positive at the 11th one cohesive base rather than 2 distinct events. I just don't think the downside negative divegrence on the 9th is enough negativity in 3C to suggest anything more than a steering divegrence rather than true distribution... the same could be said for today.

And today on the 1 min intraday starting with non-confirmation of the gap up and a clear intraday negative that is leading.

We'd need to see this go positive as the SPY came down and started to turn sideways finishing this particular reversal process from today's highs and the broader process drawn in on the longer term charts above.

Watchlist Destruction

I'm going through numerous watchlists looking for any interesting signals that are close now, NFLX is one for a quick upside long trade I like, but that's already been put out there.

What is ...well I don't want to say surprising because we've been watching this develop for some time, maybe somewhat shocking, is how bad so many assets look and on long term charts, but they are not at the start of a divergence on a long term chart like 60 mins, they are pretty mature.

I think the real trade, the best looking trade is to be able to short some of these on any price strength.

It's to the point now that the "bounce" candidates really need to show something beyond simple 5 min positive divergences because a few charts away they look sooooo bad.

Here are just a few examples as I'm going through numerous watchlists... ***By the way, NFLX has a bit of a triangle, a move below that triangle on a short term trading basis would almost certainly be a stop run/head fake, I'd be interested in adding there if I had room which I don't, maybe I'll come back to that one, but the area would be around $325 and then NFLX is likely set up for a nice bounce with low risk. Any way, back to the point... *These charts are so bad (mostly in the 60 min to 4 hour range) that I don't think it would be useful to notate the divergences, I think it would take away from seeing the charts as they are.

 PCLN 60 min.

BIDU 60 min

NFLX 4 hour

FB 60 min

AMZN 2 hour

GS 60 min

JPM 2 hour...

I'm still looking around for anything that might be looking good right now.

FXP Follow Up

FXP, UltraShort FTSE China 25, is a position I've been looking for an entry area in all year. Things are going south in China, from GDP, Imports/Exports, Credit Defaults, numerous bubbles and just the last several days some of China's largest banks are issuing $13 bn ($USD) in preference shares to try to raise capital as a buffer for rising credit concerns as default after default hits the nation which had until very recently, been covering interest payments so there would be no defaults, they obviously felt it was time to let bond investors figure out there's no such thing as a risk free market or a free ride anymore.

In any case, I have FXP in the trading portfolio and if I had the room, I'd be looking at an add-to position or a new long position in FXP, especially on a slight gap fill (but really anywhere in the immediate area I'd be fine with).

The charts...

 This is a daily chart of FXP, earlier in the year it was trending up in a channel, not really giving us a low risk entry until a recent channel buster on the downside. While Channel Busters have a lot of unique characteristics about them and make (in my opinion) for great trades, we only need to know that most of the time, what seems like a clean, clear break of the channel and an obvious short is VERY RARELY THE CASE. 

More often than not, these are some of the most deceptive price patterns in the market and they typically not only move back inside the channel, stopping out any traders who followed price on the break of the channel (up or down trending channels), but they often shoot right through the channel and exit on the opposite side, above the top channel in this case.

We'd need 3C confirmation to make sure it is the large head fake move we call "Channel Busters" and not a real break of the channel...

This 60 min chart that shows distribution inside the channel just before it broke through the support channel is now in a strong leading positive divegrence on a very respectable timeframe so I have no problem with FXP long in this area.

The 30 min chart shows the same two events, distribution ;leading to the break and a large, clean, clear positive divegrence under the channel.

On a VERY short term basis, 3 min., we do have a gap up right after what looks to have been a head fake shakeout which we see commonly just before a move or reversal starts (they tend to be proportional), so there's a chance FXP may fill the gap between April 10th and now, that's likely the last chance we get at an FXP long before it takes off with lots of momentum to the upside.

You might want to set an alert if you are interested for the gap area, although if it were me I'd probably phase in to the position, taking some here and adding the rest if FXP fills the gap below from last week.

I REALLY like FXP long as a longer term position trade.

GLD / GDX / NUGT /DUST

Last Tuesday (April 8th) I closed the UGLD (3x leveraged long gold) and NUGT (3x leveraged long gold miners), partly because I saw them as underperforming based on signals and partly to create some dry-powder for other positions such as last week's call and put that were both in the mid to high double digit returns.

I took a quick look at GLD, GDX, NUGT and DUST today and I don't find them to be in a particularly interesting area in which I might consider re-opening any of them.

Lets start with GLD as it moved the most since then, GDX barely moved at all.

 GLD 1 min intraday doesn't look good on this gap up, plus the market has been diligent about filling gaps since HFTs entered it which is a shame because gaps with candlestick charting were some of the best indications of true support and resistance.

 GLD 3 min chart isn't exactly inspiring as far as a long or even holding it as a long, at the same time I'm not particularly impressed with it as a potential short either, remember Im still expecting more of a counter trend bounce and then a deep pullback in gold and GDX to a lesser extent.

 GLD 5 min shows a rounding base of some size and this is why I think it has what it takes to make a decent counter trend rally since the pullback from mid-March.

GLD 10 min chart, so while that base is still sitting there, it's hard to justify a short position here, especially on gap filling, but while there are negative divergences on 5 and 10 min charts as well as shorter timeframes, it also doesn't make much sense as a long.


GDX-Gold Miners

 The 10 min GDX chart is similar to GLD's

The shorter term like 3 min is also similar, so I don't really see a reasonable trade here with high probabilities and low risk, especially since GDX has barely moved since it was closed last Tuesday.

NUGT 3x long Gold Miners

 With GDX not looking that impressive for a trade, there doesn't seem to be much use in looking at the 3x leveraged long version of it, NUGT, but sometimes the leveraged ETFs will show signals earlier than the underlying so I checked them anyway, as you can see the 3 min chart of NUGT is in line with GDX and therefore nothing new.

DUST- 3x Short Gold Miners...

 So if there's no interesting signals in GDX long, how about short? I checked DUST, there is a positive on a 1 min chart...

However my minimum divergence for a trade would have to reach at least the 5 min chart and DUST doesn't do that.

In other words, the "dead money" look GDX/GLD had about them last week (thus part of the reason they were closed) still persists, I just don't see an edge here worth the risk yet, although I suspect we will see one soon and I'll be setting alerts in GLD for a pullback, likely GDX as well, mostly around gaps that are below current prices.

Quick Market Update

As I already mentioned, Friday I just wasn't sold on entering even a short term call position because of the way the charts (3C) looked, they looked like there was more work to be done in the averages before a call / options was a reasonable choice.

This morning I showed you the early non-confirmation in the averages, it looks like they'll pullback as they'd need to in order to get that extra work done that I suspected Friday afternoon. The Index futures are a quick way for me to show you what intraday probabilities (a pullback) are looking like.

ES=SPX Futures, NQ=NDX-100 Futures, TF=Russell 2000 Futures...

 ES 1 min leading negative intraday

NQ leading negative intraday

TF leading negative intraday.

We should see a pullback intraday any moment.

Options on the Radar

A couple of times last week I posted what I though were likely "Minimum" upside targets based on a full "W" base and what a cycle set-up like this would have to hi to accomplish its goals as Wall St. rarely does anything without a reason.

Tuesday I posted them in this Quick Update and the most recent, which is the exact same concept (just different areas because of the trendlines moving) on Friday in this post, Market Update.

While I'm initially looking to capture upside momentum, I'm also interested in some positions that can capture more of a swing, I don't usually like options for a move like that and I'll post some ideas, although a decently timed leveraged ETF of any of the averages would work fine (I prefer to use a broader asset like a proxy of the averages as we are in earnings season and I wouldn't want to be right on the move and wrong on a specific asset because of an earnings surprise going against me, unless I see something that's really standing out).

I just wanted to give you some idea of what the 4 major averages are looking like and I'm posting them in order of my favorite first (as of right now). For options (Calls), I prefer to be in the money slightly and at least out to May monthly expiration.

QQQ

 I'm leaning toward the QQ for a call option position, I don't see the need for redundancy with multiple calls in multiple averages. The QQQ has a 15 min positive that's well formed and there's an interesting positive to the far left I assume has been all used up, but it still looks interesting.

I also wanted to show you where these are capped on the upside, typically it's the very next timeframe. in this case 30 min.

 QQQ showing the 30 min chart which happens to show the entire February cycle from stage 1 to stage 4 which has retraced just about the entire cycle.

3C is in line here meaning it's confirming the stage 4 downtrend, the 15 min chart suggests the bounce I  posted targets for above, but this tells us which way the market/QQQ should continue to move once that is over.

The SPY and DIA are both close seconds, I probably prefer the DIA because of its timeframe at 15 min, this is a 10 min chart of SPY, it doesn't have the same kind of positive at 15 min as the QQQ does, thus the reason the Q's are my favorite as of now.

 As far as a cap, the next timeframe, 15 min shows a leading negative divegrence that is doing more than confirming the recent downside, it's leading it which is a big difference between the SPY and QQQ. I assume this has something to do with a deeply "oversold" condition in certain areas of the Q's like biotechs and probably relative weakness in banking which the SPY has more exposure to.

 The DIS as I said is about neck and neck with the SPY, this is a 15 min chart that looks pretty good so I'd probably have to give a slight edge to the DIA, but we have to see what these look like when the process is mature which should be soon, possibly today.

 The cap on the Dow is at 30 min with a clear leading negative divegrence through the February cycle, even though it hasn't retraced all of it like the Q's or the IWM.

There's a very small relative positive within the leading negative at both bottoms of the "W".

IWM 5 min chart looks impressive, but this is only 5 min, this is a bit surprising, I thought the IWM would lead as it usually does in a risk on move.

At 10 min the chart is almost unremarkable.

At 30 min it is actually leading negative which means it should easily retrace all of the Feb. rally, in reality after any bounce the market will be set up with a stronger bull trap and a much larger chance of stronger downside momentum which means the Feb cycle lows should be easily sliced through.

For now the Q's are my first choice for any call/option based trades at the right time.

I'll post some others that are not options and are more suitable for a longer term hold without having to do a lot of trading around losses of momentum.

A.M. Update

Good morning, I hope you had a fantastic weekend and are ready for this holiday shortened trading week (Markets closed Friday in observance of Good Friday), which could introduce some volatility, especially with geo-political events in Ukraine coming to a boiling point again.

As of Friday in the EOD--- post what I saw was VERY simple, summed up as (actually verbatim)...

"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."

To give you a VERY simple bird's eye view of the situation in which I believe we are building a larger "W" base that was started last Monday...

Last Monday/last week's "W" base is now looking more cohesive as 1 unit rather than 2 distinct events. We also see the typical shakeout or stop run of the double ("W") bottom base that is used so often as traders are so predictable in what they see as price patterns and how they respond, right now, this is probably one of the larger bits of evidence suggesting one base, the shakeout which would mean that it is close to completion,  however as of Friday afternoon I did NOT feel it was complete.

It's pretty simple to get a feel for what's coming simply by looking at the futures, but there are two stories, one of the base and one of it likely not being finished, thus we are still being a bit patient, we'll look at both.

  The VIX 5 min Futures look like there's some rotation out of safety and in to risk, although I think it's not quite done.

The 10/30 year Treasury futures have the same look on a 5 min chart.

The leading negative divergence on the 10 min / 10 year Treasury futures also looks like a rotation out of safety and toward risk on sentiment.

We'd need to see confirmation in risk assets like the Index futures.

The 5 min ES chart shows that confirmation with a leading positive divegrence in the area that would be considered the head fake/stop run of a double bottom or the larger "W" pattern, this is only the right side and to me looks like it's not finished and likely to come down a bit more to widen the foot-print which I'll show you on the opening indications below.

 ES 15 min chart also shows confirmation. I'm not cherry picking, I'm using ES as a proxy for all the Index Futures as they all look almost exactly alike and all tell the same story.

As far as opening indications, after a fairly flat overnight session partly in response to events in Ukraine as the government issued an ultimatum that has come and gone (for Monday morning) to pro-Russian armed separatists who have occupied government buildings in Eastern Ukraine, to disarm or face full scale Anti-Terrorist operations by the armed forces of the Ukraine, which obviously raises tensions with Russia and gives Russia a pretext to intervene as they'd likely have planned already being the Duma has adopted laws allowing Putin to protect ethnic Russians wherever they may be (as in the Ukraine).

I think the rest is simply what we were seeing late Friday as 3C signals tend to pick up where they left off on the next trading day...

The 1 min ES futures overnight were relatively flat and then got a push to the upside as some small 3C indications showed Friday, not nearly enough for me to enter a call position as I said above from Friday, however that early strength looks to be seeing 3C non-confirmnation which is what I suspected and the reason I decided more patience is probably the best course until we have solid short term signals.

As for the market averages, they too are showing the same which is what would be needed to develop that larger base/foot print on the right side of the "W" or small double bottom base.

 SPY 1 min showing no early confirmation of the gap up, this is what I suspected and the reason I felt it was too early Friday to enter calls or longs for a hitch-hiking trade (long).

The story is the same with the QQQ

And especially so for the IWM.

However looking a bit further our like the Index futures above...

 The SPY 5 min in the area of a "W" with a shakeout already complete, we do have two distinct positive divergences with VERY LITTLE distribution at the high between them suggesting one larger short term base.

On a SPY 10 min chart we have a reversal process of the larger "W" base, but the 10 min chart is not yet showing a divegrence that suggests it is a cohesive base, which I think is one of the prerequisites we'd be looking for before entering any trading positions (calls or leveraged longs would be my preference.)

So I think we just need a little time to let this business wrap up, for price to come down to the lower end of the most recent small base and widen the foot-print out a bit, I'd also look for a SMALL head fake move below support (if it develops at an obvious place like last week's lows) right before any upside move.