The Daily Wrap and the Week Ahead

Yesterday I had mentioned that this morning's Non-Farm Payrolls would set the tone, but perception is everything and how price acts immediately after the report is released, is perception so as I was saying yesterday (as we expected more gains today), it's not hard in pre-market to move Index futures and create a perception, one of Cramer's best videos ever was on the Street.com talking about how he'd manipulate the market by manipulating perception when he was a hedge fund manager, yes t took some money, about $8 to $10 million in the morning, mostly in options, but it was well worth it.

There's now universe in which bulls will applaud or like a strong Non-Farm Payrolls print, it just gives the F_E_D an easier and faster exit from accommodative policy altogether and the only thing bulls care about is whether or not or how the F_E_D has their back. The F_E_D never had their back, they enjoyed the effects of policy, but it wasn't the F_E_D covering them, it was the F_E_D giving banks a stealth bailout.

In any case, the market did as we expected yesterday for today, as the internals and Price/Volume Dominant Relationship suggested, as 3C suggested and Leading Indicators.

The closure of SQQQ and SRTY (I closed these in the tracking portfolio and my own personal account) on Wednesday late in the day, Thursday they were already green and today just added to that. Other than the gains from SRTY and in my personal account, SQQQ, we made additional gains switching late Wednesday afternoon from new short with SRTY and SQQQ to net long with URTY and TQQQ.

Here are the gains for just the long positions held 2 days and also at half position sizes...

URTY made 5.85% for the two days and TQQQ made 3.25% for the two days.

As you know, these two positions were closed near the close as the pro come out and switched back to SRTY and SQQQ (net short), which is fine no matter how this plays out because I'm in line with the path of highest probabilities. Even if I had decided to ride out any bounce and hold SRTY/SQQQ, I'd be fine and not concerned, the ability to add a few percent gain to the portfolio in 2-days is just a cherry on top. While it's difficult to track gains in tracking portfolios as they are really meant to track each individual idea, my own portfolio added +5.66% for the week thanks to SRTY and switching to a more active trading stance.

Earlier in the afternoon I posted a quick update that there were some significant intraday IWM divergences and I expected some downside, interestingly the max-pain options expiration pin for weeklies is usually pulled around 2 p.m., but today almost seemed like it was held all day, those same divergences I posted about today around 1:15 p.m. in Quick Market Update, continued through the close and then started to take effect in to the close.

 While the end of day decline on those divergences doesn't look like much, given another half an hour, they'd be quite a lot more effective.

I didn't change positions back to net short in the late afternoon today, Changing positions , on a whim, there were good reasons which I'll cover.

However for the week, all of the averages closed lower except transports not seen above.

As for the stats on the week, the Russell closed lower for a 5th straight consecutive week.  Also as has been the norm, the $USD closed higher on the week, the most in 15 months today alone for the 12th consecutive week, but as I posted earlier today in the Energy post, there does seem to be some distribution starting in the $USD.

As for Gold and NUGT positions, I suggested a head fake move in GLD today and the volume was right as was the divergence, Gold also closed below 1200 so the psychological level was right too, I think we have an interesting position there.

I said yesterday and today that we have some strong positive / bounce divergences, but we don't have a very big base and the question of whether we'd see a wider base with a pullback was one of the things I was watching all day today.

As many of you know, despite what the market does, 3C divergences almost ALWAYS pick up where they left off the next trading day, even over 3-day weekends so a sample of these intraday divergences which would be near term trade, will give you a better feel for why I decided to get back on the short side, not only to try to make some extra $$$, but to align with the highest probabilities as that's my default position. I'd much rather let price pullback, let the base prove itself and re-enter the net long positions as I still feel we are in for more upside next week after an pullback Monday.

Pullback divergences...

 SPY 1 mi leading negative, this suggests weakness right off the bat Monday morning so SRTY and SQQQ should benefit.

Here the divergence reaches out to a 3 min chart suggesting more than just a simple intraday pullback.

 The QQQ 1 min leading negative confirms easily and suggests lower prices Monday morning.

And we have a divergence out to 5 mins which is in line with either making a larger overall base as the "V" shaped one now is not very broad, or resuming the downtrend so either way, the probabilities are on the side of SQQQ and SRTY over TQQQ and URTY, although I still believe in a decent bounce next week so I wouldn't have been to upset if I couldn't or didn't change the positions around.

 IWM 1 min leading negative implying immediate weakness next week on the open.

And a 5 min negative divegrence, implying a more serious pullback than just an intraday jiggle.

 HYG was also showing the same with a 2 min leading negative here and

all the way out to 5 mins.

Using the Ultimate Oscillator it too was suggesting a negative divegrence at afternoon trade,  which looks like a day long max pain op-ex pin.

Here it is in the IWM showing both our bottom and the afternoon trade and this is a 15 min chart so it's fairly substantial.

Additionally in Leading Indicators, we did have a mixed bag which isn't too surprising...

 My VIX Inversion and Custom SPX/RUT Ratio shows a current negative divergence, also the VIX inversion dropped to a low level, last seen was at a pullback area.

Here's a closer look...

 We have a positive divegrence at the low in the indicator and a negative in to today's afternoon,  this indicator has been 100% since we started using it!

 HYG on a longer term basis has led the market both lower and higher and still remains leading although you saw the 3C divergences above.

On an intraday basis, these two were glued yesterday, today HYG peeled away from the SPX in to the close, again I suspect a pullback is highest short term probability making it worthwhile to book the URTY and TQQQ 2-day gains.

 Our Pro Sentiment indicators are still calling for a bounce, here's the first vs the SPX...

And the second vs the SPX.

TLT was interesting in that it was moving up with the market, flight to safety or... I think perhaps this may be part of the risk off to risk on rotation mentioned earlier, they're always going to try to sell in to higher prices so we may be seeing TLT funds moved in to the market as it pulls back early in the week, so long As for the stats on the week as we can verify accumulation in to the pullback, we know we have a larger base and a larger move to the upside.

HY Credit is also calling for an overall bounce,

As for 3C signals still calling for a bounce and a stronger one...

 SPY with a 10 min positive now...

and QQQ reaching out to 15 min positive, if we just get a broader base, it can support quite a nice swing trade,

And don't forget about earlier Index futures and Leading indicator update, Futures and Leading Indicators which shows leading positive divergences in all Index Futures to 30 mins and one to 60 min charts.

So it should be pretty clear why I made the switch, but also had I not, I wouldn't have been too concerned, the probabilities favor a bounce and then of course a leg much lower.

As for internals...

We did have a Dominant Price/Volume Relationship in all 4 major averages with the Dow at 19 of 30, the NDX at 72 of 100, the R2K at 792 and the SPX at 275 of the 4 possible relationships, the dominant one was CLOSE UP/VOLUME DOWN,  WHICH IS THE MOST BEARISH OF THE 4 RELATIONSHIPS AND USUALLY SEES A CLOSE LOWER THE NEXT DAY ON A SORT OF STALL IN MOMENTUM.

Of the 9 S&P sectors 8 of 9 closed green! Healthcare led at +2.06 and Energy lagged at a mere
-0.16%

This too is another short term 1-day overbought signal. As for the MS groups, of the 238, a whopping 214 of 238 closed green, again another 1-day overbought condition, usually closing red the next day.

It looks like we're in good shape moving in to next week, if you didn't get positioned late today I wouldn't worry about it, you'll have time and I think there will be several opportunities connected to this area we are in now as well as the new position taken on today as I do believe gold made a solid head fake move today.

Enjoy your weekend.

Changing positions

I'll get in to more detail, but I believe we pullback early next week and broaden the base, I'm moving out of URTY and TQQQ longs and back in to SRTY and SQQQ shorts for that process and will likely move back to the long positions after I see the base formed.

I believe there's a high probability of a strong upside move next week, especially on a stronger base, but for now, I'll trade the downside and be on the side of highest long term probabilities.

GDX / NUGT

There are at least 7 different assets I use to confirm GDX, multiplied by 7 timeframes for each so I can't write an entire post here, I think you remember the UGLD 50% position and my desire to add NUGT for the other 50%. I believe today was a head fake move in GLD and likely GDX as they are so closely correlated and as you may recall, we see head fake moves about 80% of the time before a reversal in any timeframe and almost any asset. We want to confirm a head fake move and if confirmed, these are some of the best entries so while it looks like a strange place to be buying, it should be a excellent, low risk entry.

First GLD's probable head fake move...

 GLD likely stop run...

Accumulation of stops hit today on large volume in GLD

 GDX'x expected pullback with a continuing leading 60 min chart, hard to believe, but there's confirmation.

The GDX 30 min chart doing the same.

GDX 15 min positive

GDX 10 min positive

Very intense GDX 5 min positive

And very intense leading positive 1 min GDX

The 3x long, NUGT 5 min leading positive

1 min leading positive, a good timing timeframe

I like to use the inverse leveraged ETFs as they give faster, stronger signals, This is DUST, 3x short GDX, the 60 min chart is confirming GDX's 60 min
'

 As is DUST's 30 min

 DUST 15 min negative

Sharp DUST 5 min leading negative

DUST 3 min negative

GDXJ is junior goldminers...

 15 min positive

1 min leading positive

JDST 3x short junior GM's, 3 min sharp leading negative

 JNUG, 3x long junior GM's, 15 min leading positive

1 min leading positive. Lots of confirmation in many timeframes, but a very sharp move today on a probable head fake move.

Trade Idea: (Swing Plus) GDX/NUGT

Remember the half size GLD / UGLD long position and hoping to open the other half in GDX/NUGT (3x long gold miners)? Well I see just enough that I'm going to open the remaining 50% in NUGT right now. Charts to follow.

MCP Follow Up

After yesterday's 13+% move, today looks like a bit of consolidation. I don't see anything serious here to be concerned about. Here are a few charts.

 MCP's near term rounding base pointed out, although no "Chimney" or head fake. MCP still hasn't broken out of this area which is right below a clear support region that would be an excellent stop run which is what I suspect this was.

On the 60 min X-Over you can see the last confirmed signal before our most recent buy, it was a sell/short and it had its first bounce through the 22 bar which is unusual. After the 3 confirmed long/buy signals in MCP (white) the first pullback is the more common pullback to the 10-bar moving average, with subsequent pullbacks deeper to the 22-bar (blue).

So thus far nothing that strange after a 13% gain and a Friday, a consolidation here makes perfect sense and that's what it's acting like.

Longer term on this daily Money Stream chart, I still think there's something bigger going on in MCP beyond short term funding or a high short interest making a short squeeze a possibility that would have an enormous upside move.

 Te 5 min chart didn't see any damage today .

And the intraday 2 min

As well as 3 min charts are nearly perfectly in line, not divergent so again, I suspect this is a consolidation of some of yesterday's move and expect more upside next week.

Energy Sector/Oil Update

I've had a number of requests for both crude (USO/Brent) updates as well as the energy sector more broadly, XLE. I'm going to try to cover what I think is significant because there are more than just trade ideas (or not) apparent in what we are seeing, there are broad macro-economic concepts that will have an effect not only on the economy (which is what they are reflecting), but the market as the economy goes. So please forgive all of the charts, but there's a continuity between them and there are some possibilities, although I'd say nearly all are extremely speculative.

First, I'm going to show you XLE, which is the S&P Energy Sector which broadly includes oil, gas as well as services such as exploration, pipelines, drillers, transportation, storage, etc.

XLE (Energy Sector)

 Fist on this weekly chart one of the themes you'll see over and over whether we look at the entire sector, the services side or the oil/crude side is this channel through 2012-2014 and a type of  head fake move called a "Channel Buster" which , as usual with transitional areas, looks very bullish as the upside ROC increases, but they are red flags telling you that you are transitioning in to a stage 3 top, thus this is a great time to tighten up stops, take partial profits, etc., but understand that what you see and what you'll eventually get are two very different things.

The failure of the Channel Buster to maintain above the channel (which almost always happens), leads to stops that are just inside the channel being hit as price comes back down, which creates a rapid sell-off usually piercing the bottom of the channel, "From failed moves come fast reversals", and again it's a type of head fake move that is specifically there to generate a momentum move (down here) without having to get too involved in selling large quantities of shares , you just let the stops do the work just like a short squeeze.

You'll notice this pattern is common in Energy related issues. *This also looks like a double top, commodities tend not to see the same level of head fake moves (on the larger double top) as individual equities and I think that's because there's true fundamentals that move price, real supply and demand.

Here's a closer view on a daily chart of XLE breaking both the Channel Buster, the decline through the bottom of the mullti-year channel (talk about a change in character) as well as the resistance/support of the long term double top.

However notice the last 2 days' candlesticks, bullish reversal, hammer like candles.

These carry no target or duration estimation except to say if you saw it on a 5-day chart, you'd expect the reversal to last at least 1 bar, a week.

 The daily XLE 3C chart shows the channel pretty much in line, but horrendous distribution in to mid-2014 with a leading negative divegrence on one of the strongest charts we have-DAILY.

The 60 min chart is clearly confirming the daily chart.

Everything between that 60 min and this 5 min is negative, in fact the 5 min is probably the best looking as it is in line or confirming the price trend and not leading negative, but I don't see anything worthwhile beyond the candlesticks if there's not even a 5 min positive divergence.

DJUSEN- Dow Jones Oil & Gas Index...

 Again on a weekly chart, the first thing that jumps out is the channel, the red flag Channel Buster and its failure, if nothing else, this is a textbook Channel Buster, which is one of our concepts, not particularly a technical analysis concept as they look for the downside break first and miss the head fake part and how and why the head fake generates its own momentum.

 Here's a closer look on a daily chart, the yellow arrow representing the head fake Channel Buster, as soon as it fails, there's a strong downside move that penetrates the lower channel.  Also note the two days' bullish candles right below former support, now resistance.

This is about the best trade signal I can see and I think the probability is up for a short term move, but there's a difference between a probability and a high probability/low risk trade with good potential returns.

The daily 3C chart looks a lot like XLE's, CLEAR distribution on a huge scale as a daily chart is one of the largest signs of underlying trade.

OIH  Oil Services...

 And once again on a 5-day chart, the trend is your friend until the end when it starts to bend.

And the multi-day (3) 3C chart, again with the same heavy distribution.

While Energy the above Energy 3C charts don't look good, at some point demand will come back unlike an equity that could just go broke, but this is a strong sign.

What this tells me is that all of the ISM and PMI manufacturing and services data are on target, there's less demand for energy as there's less demand for goods and products as seen in manufacturing and services economic data, thus the probability of a European Triple Dip recession is high. The probability of China seeing a bubble explode and go through the first significant change from a growth story to a country facing the problems every one else has (as China is not outsourcing labor due to higher wages in China).

My point is simple, this one chart is telling you a lot about the global economy which in turn, in the absence of F_E_D free money, is telling you a lot about the stock market and all of the potential spider web cracks that we always fail to imagine.

 A closer look at OIH on a daily chart shows the same two day, bullish reversal candlesticks, they are in a good area for a reversal as short stops will be triggered on a move inside the channel and a squeeze is likely, IF it can get going that far.

 OIH, 60 min chart with distribution and enough accumulation to create more distribution in to better prices.

USDX-US Dollar Index.  The Historical Legacy Arbitrage relationship between $USD and $USD denominated assets has been gone for almost 6 years as the F_E_D devalued the $USD with money printing, ironically, doing the most damage to the people who were the most responsible, savers. Not only did the F_E_D cut the value of their savings through dilution / printing, but then forced them to seek some yield as the F_E_D has set Zero Interest Rates for 5 years, causing many to chase assets they have no idea how to trade including Junk Bonds/Credit, thus further endangering the most responsible people while the scam banks that are "Too big to prosecute"
 (Holder should have been fired that day) have been giving BILLIONS in near risk free money.

In any case, as POMO/QE winds down and ends this month, the $USD historical relationship is ever increasing, higher $USD should mean lower oil, gold, silver and stocks while a lower $USD means the opposite.

The daily $USDX chart shows a new high not seen since June of 2010 as F_E_D policy begins to normalize.

However there is a 60 min negative, I don't think it's ready to fire off yet as we don't have solid multiple timeframe confirmation yet.

This is the 5 min chart still in line with a recent positive divegrence sending it higher today.

Intraday there's some distribution, but this isn't useful beyond today.

If I see the $USD negative on 5, 15 and 30 min charts, then I would say, we'd probably have a sizable base in Energy related issues and a solid chance for an upside trade, although I would view it as a trade only, not a long term position like UNG.

USO-WTI Crude

 Here we have a similar Double top as seen above on a daily chart.

 Here's the daily downtrend and a recent break below what looks like a head fake area .

Also increasing volume suggests there's going to be some change in trend shortly.

USO Daily 3C chart shows the cycle of accumulation and distribution, but this is a different cycle than a stock, this is an asset that has fundamentals based on supply and demand, not accounting gimmicks, buy backs, insane fP/E multiples and largely moving on sentiment. So the accumulation and distribution here is not part of a wider pattern, it's just the season for oil demand and the season when it dissipates.

This is a hard trend to trade against long.

 BNO-Brent Crude (USO is WTI)

 The BNO 30 min chart is perfectly in line with the downtrend, confirmation.

The USO 30 min is the same after distribution.

I don't see any charts that are strong enough to risk a long position here.

I can see the chance of a larger base being made and within that base those hammer candlesticks may be a part of creating the base and perhaps they do fire off to the upside, but I don't see any support for anything sustained beyond a couple of days based on the candlestick ONLY, no 3C support.

And Finally...

CL...Brent Crude Oil Futures

 This is the 4 hour chart, perfectly in line with the decline

 The 15 min chart is the first place I see any possible positive divergence and it's short, maybe along the lines of the Hammer Candlesticks creating a reversal, but again there's no target on a candlestick reversal, it could be a single day.

 The 5 min chart shows NOTHING, this is my minimum chart for a long and there's nothing there.

Intraday 1 min, also nothing other than downside confirmation.

At best, from my perspective, unless you want to try to trade the candlestick probabilities, the best we can hope for in the near future is some lateral trade and a base being built for a pop to the upside, I think it would be an oversold bounce, but although we may be oin oversold territory or we may not, I don't see any support anywhere in the energy complex other than Natural Gas.

I'd stay away personally. However, I would consider what these charts are telling you about the global economy and how that impacts the stock market as well as our businesses, our homes, our every day life.