Index Futures

Just taking a quick look and my how fast things have reversed since Monday morning, Index futures are not looking good tonight going in to tomorrow, this is ES 5 min...

ES 5 min leading negative, but not just ES, TF and NQ and not just 5 min charts, but 15 min and moving out to even longer ones.

Perhaps the Only Charts That Matter

Last week we saw the divergences that made it clear the psychological level of $102 in the USD/JPY would be hit, all of the stories as to why the market did what it did can now be looked back on as just that, quick 30 second sound-bites to explain the market so people feel better, but none were right, the charts didn't lie though.

Soon after $102 was taken out, those same charts that forecasted the move up in USD/JPY and thus the market, flipped and went negative, forecasting the fall of the FX carry pair and the market with it.

Here's what we have, right now it's not so much the Yen, but the $USD.

 USD/JPY 5 min up through $102 and the recent price movement has not been very constructive for the pair. A break back below $102 and we should be in a very different environment, especially if the pair fell quickly and couldn't hold $102 for very long.

Intraday Yen 1 min positive

5 min Yen positive

15 min Yen positive

USD

 intraday 1 min leading negative $USD.

 5 min leading negative

15 min

30 min and what I suspected might be the key to timing a reversal, the $USD 60 min which was very positive up until today....

60 min $USD.

It does look like something is moving and really it hasn't been very much time, this is why I was so interested in whether the negative divgerences that started migrating to a stronger negative would continue today, they have, albeit at a slower pace.

MCP Position Update

Normally with a drop like MCP took after earnings (even though we exited an MCP long on a breakout because it had not done precisely that before the breakout), I'd normally expect a much larger reversal process, but this falls a lot closer to the, well it falls right in to the "Parabolic move" category and I never trust parabolic moves whether up or down as they tend to reverse just as fact in the other direction. With MCP holding on to its positive signals, I suspect there's something beyond earnings that has someone big interested, much like the RIMM earnings trade which went almost exactly like this and ended very well for us.

Here are the charts for MCP as the parabolic drop has put in a reversal process that would be symmetrical in size considering a parabolic move.

 intraday 1 min

Intraday 3 min with very interesting recent activity.

The 5 min chart in the area that would be considered the "reversal process" for a parabolic move of the size it saw.

The 10 min really still positive as if nothing ever happened.

The same is true of the 15 min chart

And very true of the 60 min chart.

There has been MORE than enough time for the 60 min chart to confirm lower price action and move down to a new low, it hasn't, this is one of several reasons I keep MCP as an open long trading position.

A Lot of Movement In VXX/VIX Futures Today

As I have been thumbing through watchlists (I believe as mentioned already), it's the leveraged ETFs that are showing a lot more excitement than the averages or underlying assets and this is often the case, the leveraged products will get in or get out first.

Although the VXX / VIX Futures have been giving consistently positive signals on every move lower (again the definition on a divergence) as shown in an earlier update, there's something about today that I'd probably be looking at something like VXX calls if there were better confirmation in the averages and everything that isn't leveraged wasn't so flat today.

In any case, I'm not quite sure what to make of this, if VXX is reaching the point of saturation as far as the amount accumulated or if tomorrow we should expect a move down in the market (I'm not saying a USD/JPY break below $102, but just in general a move down as VIX would typically move up). The point is, if a few more things were confirming, I think I'd be looking at putting out a Trade Idea.

 Daily spot VIX and support broken yesterday, today hanging around the same area, no real VIX slam as we have seen recently.

 Intraday there's an ascending triangle pattern, not a true ascending triangle because of the preceding trend, but there's certainly a lot of action in it intraday that is picking up.

 The same is seen out on the 5 min charts, as shown earlier the trend here is stunning.

This is the kind of VXX / UVXY flying divergence I look for.

 We are seeing it in VIX futures as well such as the 5 min

15 min (unfortunately the charts here don't have enough history to show you the trend).


This is very interesting action, I'm kind of thinking I need to be paying very close attention to the averages and their signals during the last hour today.

Leading Indicators

We've used this set of leading indicators for a while because they are quite useful, especially when they are giving consistent and strong signals. For the sake of time, I'll update some verbally as there's not much to see and show some charts as there is a lot to see.

As for HYG (High Yield Corporate Credit) as credit often leads the market, "Credit leads, stocks follow",  HYG has become a market manipulation tool, one of three assets that are used including the VIX smack-down and TLT, the three used together (HYG up and VXX/TLT down) is used to push the market higher , but as a form of manipulation causing algos to think there's a risk on appetite, but it's really just a lever to manipulate the market short term like the VIX smack-down we often see EOD. This trio is called the "SPY Arbitrage".

In any case, HYG is pretty much in line and not telling us much, HYG itself as an asset does have negative divergences, especially since the move above $102.

High Yield Credit is slightly negative vs the SPX, this is a market negative, but not a screaming signal right now, however these often make large moves at the EOD.

VXX is pretty much in line with the normal SPX correlation, however, again, VIX futures have been under constant positive divergences/accumulation for some time as I showed in an earlier post this morning.

5 min VIX futures showing accumulation again today.

Other Leading Indicators...

 As for near term pro sentiment, it's turning more negative.

Our second sentiment indicator is also turning negative vs the SPX,

However, the real tell for the market is the trend of the sentiment indicators...

 This shows how very negative the pros have gone, especially recently through April

 This is TLT vs the SPX (SPX prices are inverted to show the normal correlation) intraday. You can see the divergence in TLT that caused me to post this TLT, 30 year Treasury Futures & TBT Update yesterday and we were right on, not that it made any difference to our position if you read the update.

 Yields are one of my favorite Leading Indicators, this intraday negative typically acts as a magnet and pulls price toward it, but on an even larger scale...

 Like sentiment, Yields are calling for a large turn to the downside which fits with what we've been seeing, not the least of which includes the multiple trend analysis which is rare to have 3 trends all in different timeframes line up.

This should be a different post, but because I just mentioned it a post or so ago...

 This is an intraday negative in USD/JPY and as far as the component currencies...

A negative in the $USDX as I mentioned and a ...

leading positive in the Yen, that would have the effect (once prices followed the forecast of the divergences) of pulling the FX pair and market lower.

Quick Market Update

Just as the averages are VERY dull today thus far, the underlying signals in the market are "just about" as dull, a very flat day, however there are  a few leveraged market correlated ETFs starting to show some interesting signals and I'd say we are seeing more in the way of migration of the divergence (negative) that started yesterday, although at a much slower pace.

As for the driver of equities last week and this week, the USD/JPY, there aren't many interesting signals there either right now, but we have plenty of time left in the day for something interesting to pop up.

As for the component currencies (futures), the Yen intraday is posting a positive divegrence (meaning as Yen price is moving down, 3C is moving up forecasting the Yen to make a move up- a divergence) while the $USD is posting a negative suggesting the USD/JPY see some intraday downside and the market should follow in like manner, although these aren't huge.

There are some interesting intraday VIX futures signals, they keep seeing positive divergences, my gut feeling remains the same, they are in the know and they are picking up protection against a downside move or a position for it in size.

ES intraday looks a bit positive, but both NQ and TF (NASDAQ and Russell 2000 futures) are either in line with price or slightly negative (leading position) on the day.

SPY has a slight intraday negative and the longer term charts or migration of that divergence keeps moving out to longer charts suggesting that it is seeing distribution of this move which is what we'd expect anyway as the $USD and Yen divergences flipped once USD/JPY moved above $102 as was expected as well.

Intraday QQQ looks more positive which doesn't match up well with NQ charts, but the longer term migration process is looking uglier in the Q's than the SPY, so the longer charts are the more important to me.

The IWM 1 min also has a positive, however it has not seen 3C pivot up and lock it in which "may" explain the positives here and the negatives intraday in the futures, but more importantly is the migration of the negative divegrence starting yesterday almost immediately after the break to the upside with USD/JPY above $102. Take a look.

 IWM 1 mi intraday is in leading positive position, but 3C needs to pivot up to lock that positive divegrence in, it "could" keep moving lower and move to "in line".

However, the above chart pales in comparison to the one below.

This is the 10 min IWM, note how much migration of the negative divegrence has occurred just since yesterday, it's on a 10 min chart and leading negative to a new low locally. This is what REALLY matters.

The DIA continues to look the worst of the bunch.

I saw some interesting developments yesterday in leading indicators so I'm going to check those out quickly while it's still rather quiet.

 

UNG / DGAZ Update

As I have been running through our watchlists I came across UNG which has not been updated for a while.

UNG or rather Natural Gas as a primary trend (long term) trade looks like it will enter a secular bull market, which is not surprising considering how long we have been following it. DGAZ is a 3x leveraged short Nat Gas ETF that we opened a long position in for an expected Natural Gas (UNG) pullback that never materialized.

UNG is in an interesting place right now and before it breaks out of its multi-year stage 1 base, I'd like to move the long to a Nat Gas stock, but one that is primarily nat gas, not all kinds of energy and/or infrastructure that doesn't relate to Nat Gas and I'm still looking around at a few ideas to see which might be the best play as we move closer to a stage 2 bull market primary trend.

For now, I suspected UNG was going to pullback and left the DGAZ position open to see how far that position will come back to us (trading position).

Here are the charts and just like the recent exit from MCP on a breakout from a triangle, UNG also flashed very similar warning signs as our "Head Fake" concept, which occurs just before a reversal or breakout, breakdown, etc (just say a significant move). Because UNG did not follow our concept which is really just born out of Technical Analysis being so predictable that it is used against its practitioners, a downside reversal there became much higher probability.


Charts...

 Long term it's not only the base, but the 3C trend that I like, you can see why we have been interested in Nat Gas for sometime, there are also regulatory reasons that were passed not too long ago that gives Nat Gas a huge edge over coal in the production of any new US power-plants.

 This daily chart of UNG shows a symmetrical triangle, it has no directional bias except for the preceding trend as it is only a consolidation/continuation pattern. Because the preceding trend was up, Technical Traders expect the triangle to breakout to the upside and put in the next leg higher which should be roughly the same as the preceding leg in to the triangle, thus the description, "Consolidation...Continuation" pattern.

However, from our head fake concept which is something we see at least 80+% of the time in situations like this in any timeframe and any asset, BEFORE the reversal , breakout or significant move comes, we should have seen a downside run of the stops or a false breakdown below the triangle BEFORE it broke out to the upside. This means the upside breakout is suspicious being this concept DID NOT occur.

Otherwise, the triangle is a perfect technical triangle with a preceding up trend, lower volume as the triangle matures, the price pattern is perfect.

Now you can see the upside breakout did fail as price crosses back below the apex of the triangle, however, we had a heads up this was likely to occur as far back as  far back as April 10th as this chart was posted in the post, UNG Update

This chart is from the April 10th update linked above with the following comments below it...

"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."

 Here's the current 30 min chart with not only the negative within the triangle, but a leading negative divegrence on the breakout of the triangle, the "Failed breakout" we anticipated.

This also suggests that while there may be some bouncing along the way, UNG has more downside to go.

This is the 15 min chart with the triangle in the area of the white arrow and a leading negative divegrence on the breakout from the triangle, a failed breakout as it was distributed.

The lack of the head fake was the first hint, the 3C charts were confirming and the actual move confirmed.

As for DGAZ, the 3x leveraged inverse of UNG or Nat. Gas...

Here's a leading positive 30 min chart confirming UNG's leading negative so upside in DGAZ looks like it has more to go, actually as if it just got started.

This is the DGAZ 15 min chart positive leading as well

And the 10 min chart.

As I said, we will get some bouncing around which is normal as almost nothing in the market moves in a straight line...

 The DGAZ 1 min chart is leading negative suggesting a near term pullback, maybe some gap filling or just consolidating.

The 3 min chart is still largely in line so we'll see what a pullback looks like, there may be a trade opportunity in DGAZ for those interested, just send me an email if you are interested, but the larger opportunity will be to enter a Nat Gas (UNG) long on the pullback as soon as we start seeing accumulation of the move lower.

Daily GDX/NUGT Update

I still love NUGT, as you may recall last week I opened a partial position in NUGT (3x long gold miners/GDX), I've just been waiting for the charts to all sync up to fill pout the rest of the position.

A brief synopsis of GDX/ Gold Miners is that we have a large Inverse H&S base ...

 GDX on a daily chart with the large inverse H&S bottom, the area of "H" would be the head, it's also an area we identified earlier as a likely stage 1 base, even as it is likely part of a larger base which would support a very strong upside move.

If you look closely, the left side of the pattern has several shoulders, this is known as a "Complex " H&S pattern (rather than only having one). In T.A. textbooks, the examples of H&S tops and bottoms almost always show the right side having the same number of shoulders as the left, in real life there's a tendency toward that kind of symmetry as well, but it is not a prerequisite, it's not seen in every H&S top or bottom.

There was also a trading range which you might be able to make out as the bottom of the far right shoulder, the 10 and 15 min GDX and NUGT charts (with DUST confirmation) told us to expect a break below the range and for accumulation to pick up there and the 10/15 min charts to be repaired there and go positive, that's essentially what we are waiting for as the longer charts are already positive and ready to go.

GDX

 This is the 10 min break below the range 3C was forecasting and the repair of that timeframe after price broke below the range.

The 15 min chart also repaired so this looks good, but I'm always looking for confirmation, thus we look at NUGT, the 3x leveraged long of GDX...

NUGT

 The 15 min chart also repaired here below the range as expected in numerous updates, but the problem I see right now is this...

The 10 min NUGT chart hasn't repaired like the 10 min GDX chart so which to go with?

For that I used DUST, the 3x leveraged inverse or short GDX ETF.

The 15 min DUST chart confirms the 15 min GDX and NUGT positives by making a negative as it is the inbverse or opposite of GDX and NUGT, but when it comes to the 10 min chart...

DUST sides with NUGT as it has a positive signal on the 10 min chart, confirming what NUGT is showing.

I don't mind having exposure to NUGT or GDX long here, but as I did recently, I left the position at speculative or half size until all of the charts resolve and confirm.

Thus we're waiting on the 10 min NUGT and DUST confirmation, that this has resolved to a positive divegrence.

There is a gap just below in GDX and NUGT, that may offer an opportunity to get these charts all in a row. Otherwise, I'd either consider a partial position or be patient, I would NOTT enter any options trades at this point.