Today's Closing Charts

We know how the market got where it got and why, here's how the day ended, distribution through the entirety of the day.

 QQQ intraday

IWM intraday

SPY intraday

Usually 3C picks up right where it left off, even over a weekend, so these negative divergences should be interesting Monday considering it's the last day of the quarter for Window dressing.

Window Dressing At a Whole New Level

Ok, we'll look at some of the week's important events, but as far as window dressing, "The Art of Looking Smart" in which I previously mentioned , funds buy the best performing assets so it shows up on their quarter end statement, however, today's late day events are hard to believe, you won't want to miss it. However, for now lets use a better , succinct definition from Investopedia...

Window Dressing

Definition of 'Window Dressing' A strategy used by mutual fund and portfolio managers near the year or quarter end to improve the appearance of the portfolio/fund performance before presenting it to clients or shareholders. To window dress, the fund manager will sell stocks with large losses and purchase high flying stocks near the end of the quarter. These securities are then reported as part of the fund's holdings. Performance reports and a list of the holdings in a mutual fund are usually sent to clients every quarter. Window dressing may make a fund appear more attractive, but you can't hide poor performance for long.  Window Dressing this week is for the end of Q2, the new quarter starts Tuesday, but there are settlement rules called "T+3" that often front load Window dressing to earlier in the week, "T+3" means trade plus 3-days to settle. Often funds will unwind positions they bought or buy back positions they sold for window dressing on the first day/week of the new quarter as no one will be the wiser for another 3 months. As of 3:30 p.m. today, the NASDAQ was the only average that was in the green for the week... So we had a VIX SLAM to try to change that, maybe to accomplish an attempt at a new high in the SPX which would look favorable for funds trying to retain clients or attract new ones... Right around 3 p.m. the VIX was monkey Hammered to send stocks higher, presumably to try to end the day with a new SPX high... although the monkey hammer sent the SPX higher, MISSION NOT ACCOMPLISHED...  In fact, interestingly at the red arrow we have a bearish Doji-Star, often a reversal candle, but a complete loss of momentum or sometimes called indecision. The next day at the orange arrow we have a bearish Engulfing Candle, often serving as bearish confirmation of the preceding Doji-Star. Note how the last 3-days have not been able to move above the range of the bearish engulfing candle for the SPX. The exact same is true for the Dow-30. While the CBOE's VIX was monkey hammered, the actual VIX protection that can be bought via short term VIX futures (VXX) in this case, made no lower low on the day unlike the VIX index which is unusual, it seems protection is in demand. Oddly we didn't see any migration out of bonds and in to stocks either as TLT stayed flat the last hour while the VIX hammering was occurring, typically Treasuries would be sold and stocks bought in a situation like this, thus their normal mirror/inverse correlation. Although the VIX was responsible for most of it and having TLT down on the day (but seemingly nothing to do with the last hour) helped the market via SPY arbitrage... Note when the Arb model picks up, in to the afternoon. HYG which is one of the main assets in SPY Arbitrage was used, but not to the extent we usually see as HY Credit looks a bit defensive. First earlier in the day as stocks took their first dip, HYG was already selling and negatively divergent vs the SPX, however, after that... HYG moved up to help the SPY Arb and market move higher, however, it closed unchanged and did not venture above 0% on the day, again, defensive looking action from the risk on HY credit asset. Of course the Most Shorted Index was in there too as most of those are momo stocks. MSI was actually weaker on the day just before the 1:15 dump, then it pitched in the last hour. This you have to see to believe (how many levers do they actually need to get the SPX to close up 1/5th of a percent?)..  The USD/JPY was used to help ramp stocks, 3C was showing distribution in to the move and after the task was accomplished... WOW, talk about being USED! Look at the USD/JPY to the far right with a huge red negative candlestick . SPX closed +0.19%, Dow a mere 0.04%, NDX +.46% and R2K +0.71%, that's some odd dispersion between the averages but it has been going on for weeks. It's pretty clear the NASDAQ and R2K outperformance were due to Window Dressing buying the high flyers and the Dow's poor performance likely due to dumping some of the blue chips that don't have the "momo" performance. *Heavy volume at the close was due to Russell rebalance. HOWEVER, THE BIG ONE WAS FROM NANEX... "On Friday, June 27, 2014 at 15:50:00 - 143 stocks suddenly moved at least 2% (with some exceeding 10%) in just a few seconds. There were 678 stocks that moved 1/2 of a percent or more.  This explosion of trading activity dwarfed even the closing seconds of the day, when the annual Russell Reconstitution process occurred (changing of symbols in the Russell Indexes). In the one second at 15:50:00, approximately 400 stocks had NBBOs (National Best Bid/Offer) that were crossed (best bid price greater than best ask price) and more than 1000 stocks had NBBOs that were locked (best bid price equals best ask price)." L Look at this explosion of activity... "Each line represents one of 678 stocks that moved 0.5% or more." Each line represents one of the 143 Stocks that moved 2% or more in a few seconds at 15:50:00. Value scale shows percent change from 15:50:00. Now that's taking window dressing to a whole new level, they don't even have to own the stock for a week, it can be done in 5 seconds! What exactly happened at 1:15 p.m. today is still a mystery, but we saw it in advance through 3C as I posted this a good 15 minutes before... Friday, June 27, 2014 Quick Intraday Update I'll get some charts up, but SPY, IWM, DIA as well as their Index futures are all negative intraday and adding to their negative divegrences. The Q's have been in line on the 1 min chart for the last 2-days, this is the first time they have even started to turn negative so I suspect they'll all be coming down shortly. I'll get charts up, I'm considering a quick fade trade for a downside move, but I'll let you know for sure if I do make that move beforehand as always. Charts coming. In addition, the Yen had it's largest gain in 14 weeks, that's why USD/JPY was pounded overnight, the US Dollar Index had its worst week in 14 weeks (helping the USD/JPY lower) and European stocks had their worst week in 14 weeks. When the week's action is viewed in totality, something feels very dangerous about this market as I had said yesterday when adding short exposure via SRTY. The 4 major averages, big sell dumps on a quarterly window dressing week (NASDAQ blue, SPX green, DIA white, R2K yellow).

Futures Already Starting to Slide...Why?

Today is June 27th, the last day of the 2nd Quarter, what happens the last week of the quarter? Window Dressing or, "The Art of Looking Smart" in which all of the winners for the past quarter are bought the last week or so , thus they show up as hedge fund/institutional money holdings and make it "appear" as if the fund had chosen well for the quarter when in reality all they did was buy the best performing assets of the quarter the last week of the quarter so their quarter's end positions reflect they own that position. This is why Window Dressing at quarter's end (this week) is called, "The Art of Looking Smart"

Likewise, they dump the worst performers, even if they like them a lot moving forward, they'll just buy them back Monday, JULY 1st as the 2nd Quarter is in the books and their positions are locked in.

Market In to Next Week

Earlier today I said that this bear flag-type pattern looks like a typical Wall St. set up as there was minor accumulation to get it started, I don't think they counted on the Bullard comments which distorted the flag pattern, but I do think they had a top end in mind and I think that's what we are seeing in to the close which is reforming the flag...

Bullard's comments out of nowhere distorted the flag, but it looks to be back on track as they'd want technical traders to see it. However, there continues to be negative ' in to higher prices, something we didn't see at all the first two days because you simply can't sell in to higher prices if they aren't yet higher which was the case the first two days.

Overall although EOD action looks bullish, I have little doubt that this is a distribution pattern and they are moving out , there's no confirmation at all and the sell-offs have been at TICK extremes.

I'm not sure what the head fake move would be if any early next week and I have a lot of other indications to look at, but I don't suspect this ends well... misdirection.

I'll add to this as I get to go through some of the breadth, Leading indicators and other charts.

GDX / NUGT Follow Up

This was the most difficult choice as far as asset management by far, especially considering how good these look (big picture) and how close they are to a stage 2 breakout, but my analysis and decision wasn't based only on GDX / NUGT, it was based on the shorter term SLV and GLD charts as well.

A big part of the decision was not only preserving profits, but not to let these hard won profits disappear in to a pullback that I'd almost certainly buy when the gains can be taken now and the pullback can be bought again with the only exception being gains of 40 and nearly 50% are preserved.

 This cluster of candles tells us nothing, but there is a clear range if viewed on an intraday chart, it's about the right size and place for a reversal process and the gaps below look like they'd likely be filled before a breakout to stage 2 mark-up.

 The deterioration in GDX intraday today looks like it's getting ready to come down early next week.

We see similar signals on the 2 min which are confirmed by DUST.

And of course this 5 min has to be taken seriously.

The longer term 15 min is right in line with a reversal process and confirmed by DUST, even though I would not take the risk of trading DUST long here.

And the 30 min now looks like a divegrence at least the size of the positive at the far right shoulder that sent GDX up, there is a much larger positive in GDX, we are only looking at the right shoulder of an inverse H&S bottom.

The 60 min is in line which is what I'd expect to see for a pullback move that is constructive so i'll be setting alerts looking for the next entry in NUGT long and really hoping this was the right call.

Possible AAPL Call Set-up

AAPL was one of the stocks I expected to bounce last week, it hasn't done so. There are some divergences that look like it will, but better yet there are some near term divergences that look like AAPL will come down first, offering us a much better call entry and so long as we can confirm short term positives in to a pullback, that would set up a nice call options trade, I wouldn't personally go too much beyond a call, I think you'd need the leverage as I don't see it as a big move that can be captured with an equity long position alone or at least to me it's not worth the risk of putting that much dry powder in to a trade that may not have that significant of a return.

Here's the set up...

 The intraday charts look like they'll pullback, this is where confirming positive divergences in to a pullback is what makes all the difference between AAPL being a great call set up and AAPL simply deteriorating as the deterioration would start on the earliest timeframes such as we see here.

 AAPL 2 min

AAPL 3 min

AAPL 5 min negative, that's usually enough to get an asset to move. I'll set alerts for a move below the range and down to and just under recent support, if positive divergences in to the pullback can be confirmed, we have a nice call set up, if not, then AAPL is simply deteriorating.

 The 15 min chart is one of several that made me thing we'd see a bounce in AAPL last week, it still has a decent positive divegrence so a short term pullback (as long as the charts hold up) should see a bounce to the upside which can be captured with the leverage of calls.

 The 30 min chart has a more recent positive divegrence, the question is will it remain or are we seeing negative deterioration migrating through the faster timeframes as is the case with changes, they start on the fastest timeframes.

However with this 60 min, although it's not huge in duration, but good looking and seems to have a stop-run/head fake already built in, the probabilities favor a bounce.

If interested, I'd set alerts. The call trade could be taken here, but with the intraday charts deteriorating, I'd want to make sure that it's short term in nature and not going to migrate to these longer charts.

Market Charts

As per the last post, here are the associated charts. It is starting to look pretty clear that this has been about selling in to higher prices, the bear flag type pattern that was disrupted by Bullard yesterday, seems to have been put in place (there was accumulation to start the move) and sell in to higher prices or short as we had virtually no signals at all the first two days as it would not be worth selling in to something that was not yet higher prices.  There may have been an options expiration (weekly) pin, however based on the timing of the last intraday sell off, it was pretty close to the time when the pin is usually lifted.

Here are the current charts, intraday, the main theme is there has been no confirmation of the recovery and in many cases, the signals are worse which would indicate more selling in to the recovery bounce from the last intraday sell off (-1300).

 DIA looks even worse on the intraday bounce from the intraday lows.

The IWM 1 min (fastest chart) has not moved to confirmation of the bounce off the sell-off, it remains in leading negative position suggesting there's just more distribution in to the recovery bounce.

We see the same thing out on the 3 min chart which would suggest it's heavier activity as this is a longer timeframe that shows heavier flow.

And the 5 min chart would seem to confirm that as it remains leading negative.

The QQQ looks even worse than the first divergence sending it lower, it's now leading negative vs what was a small leading negative or almost a weaker relative negative divergence.

The QQQ 2 min chart is following suite with a deeper leading negative divegrence.

At this point, I'd almost consider fading the move with options, but there's still that support in the area.

SPY again, a deeper leading negative divegrence, not even an attempt to confirm the bounce.

I see it looks like the next move down is starting already

Closing the Rest of NUGT Long Position

I'm not a huge fan of going long DUSt considering how NUGT has been able to defy past divergences, but this one is too much for me to hold. I'll have charts up shortly.

May get another intraday slam

I'll get charts out because that's really where the signals are coming from, but the TICK chart is a quick way for me to show you in the meantime.

Since the last push to -1300 we have bounced as there were multiple support areas, the channel is clear on the recovery from the last intraday move down, but look how it just failed to hit the top of the channel.

Really though this is based on intraday 3C charts, I'll get them up as something interesting seems to be brewing.

Market Chart's update

As I'm capturing these charts, I see I'm already too late, that's why I put out the last post warning of a decline without charts as it needed to be timely.

The DIA has clearly been the worst looking intraday 3C chart and it has responded with price weakness to the divergences.

 This is the DIA intraday, you can see price has responded to the negative divergences which have as mentioned, the DIA has seen the worst during the last 2+ days. This "could" get very interesting as there's support at the psychological level of $167 for the DIA, 16,700 for the Dow, which also just happens to be the upper trend line of the large bearish Ascending Wedge top pattern I put out a couple of days ago for each of the average (IWM with a beautiful H&S top).

This is what I'm talking about, support at $167/16,700 is a psychological magnet, but also where the upper trendline of the wedge is, the move above that trend line would be considered a typical head fake move that we have been seeing with ascending and descending wedges for 4-5 years now where as according to 100 years of technical analysis, the price patterns normally break to the downside right at the apex of the wedge (where we are now). So I don't think this is a fake top pattern, I think the two bumps on top are likely the head fake moves that would cast doubt on the larger pattern for any technical traders following the bearish ascending wedge.

RSI is divergent here as well. I say it could be interesting because with  wedge this well formed and mature, it doesn't take that big of a decline to be on the bottom side of the wedge (under support), which gives the chart a VERY bearish feel and these patterns, although head fake for the last 4-5 years, still tend to be real price patterns.

The way the price pattern is drawn on the Dow 30,  it is within the wedge so a small move down puts it below the wedge, not inside it like the DIA.

See the difference? The two humps are inside the wedge, not above it. Although yesterday's close was a hammer right at trendline support of the wedge, looking at 5-day Heiken Ashi candlesticks, there's a big loss of momentum and a look to the chart like a reversal candle (these are delayed on Heiken Ashi charts) is imminent.

DJ-30 Heiken Ashi, at the yellow arrow, there's a loss of momentum with each candle smaller, remember each candle is 5-days. This data cannot be taken alone, for instance you have to consider the trend of falling 10-year yields ever since the F_O_M_C which is with in a larger trend of falling 10-year yields that is already at least the size of the same signal given at the 2007 top.


Back to intraday trade...

 This is what alerted me to post the last post warning of a decline coming intraday.

The 2 min chart is seeing migration as are others so it's distribution at higher price levels as suspected earlier and that's likely why we had no signals the first day except in to the close which gapped us down the following day.

As for the SPY flag, kind of ruined here.

 IWM 1 min was a strong giveaway, it's leading negative now and at first support at yesterday's close.

This is a wider view of the same 1 min chart so you can see the amount of deterioration taking place after 2 days of virtually no signals which as I said before only makes sense to me if there was no point is distributing/negative divergences as prices were still low, the point is to sell in to demand, sell in to higher prices for smart money, it's a necessity because of the size of their positions.

 IWM 2 min also taking a pretty good hit, you can see the accumulation (small), just enough to get the move started to the upside, typical of market makers trying to move assets to VWAP or the fill zone.

IWM 5 min also taking a pretty good hit in a short period of time.

As for the IWM flag, I'm not sure if support is from yesterday's close or the flag support or both, RSI was very divergent at today's range.

 The QQQ has been closest to "in line" the longest, so today's 5 min chart going negative at a range-like are where divergences are seen often was a signal that got me looking at everything as it is a short term, but sudden and important (considering the timeframes) change of character.

This is the 1 min chart at that same range where there was so much damage in the 5 min today.

And the 2 min chart with quite a leading negative divegrence at the exact same place.

 This is a 3-week range in the QQQ's that has seen a total gain of 0.51%, that use to be a mediocre day in the market that was barely worth mentioning pre-2009, a range this long is definitely of interest.

And I'm noticing that TICK has been VERY mellow, most of the range today is in the +/- 600 area, but when sell-offs come, they are strong, this one was -1300, earlier this week I saw a -1700 which may be the largest sell-off I've seen. The NYSE TICK is all NYSE stocks that are advancing per tick less those that are declining, so if we had half of the stocks advancing and half declining the TICK would read zero, at -1300, we have 1300 more stocks falling at that moment, that's an extreme reading, anything above or below 1250 is extreme.