Daily Wrap

There are so many charts here, so much research, confirmation, etc. this will serve as the Daily Wrap and anything I may need to update later like the SKEW Index which CBOE tends to release later at night or any futures movement, I'll update at that time. I would encourage you to look over the charts, you think there a job to look over, imagine collecting them all and commenting on them. The point is, you'll see some interesting things, learn some interesting and useful concepts, see how smart money works, understand 3C a bit more and more than anything, GET A FEEL FOR THIS MARKET WITH YOUR OWN EYES, NOT CNBC'S. 

This market is in a very dangerous place. I personally do and would want to have my short positions in place. With the thin liquidity, the sudden drop in volatility and breadth falling apart, this is ripe for one of those massive gaps down that take out weeks of longs.

Earlier I said that I'd like to see a Dark Cloud Cover candle or even a Key 1-Day Reversal in the IWM, instead because of weakness in Biotechs (down -5.20% on the day), the NASDAQ put in a Dark Cloud Cover bearish reversal candle with a loss of -.33%, it was the laggard among the averages which is interesting as the 3C charts have been tagging the NDX/QQQ as showing the worst relative strength in 3C or the strongest relative weakness I should say, thus yesterday's QQQ/Tech Looks To be The Worst and TECH / QQQ as well as today's, I like QQQ Short Here.

 Forget the -.33% move while the Dow rags the psychological magnet of $18k on a +0.38% gain, it's the candlestick formation that's more interesting as well as the break down in Biotechs.

Here's the XBI Biotech Index

Note the positive 15 min divegrence quickly and strongly turn negative.

The Biotechs (XBI) have given back all of their post F_O_M_C knee jerk move already, dragging the NDX's relative performance lower, but then again it has been showing us that over the last 2-days.

As I said, the Dow hit 18k on a mere +0.38% move, but because of the initial strength of the short squeeze created by the first half of the Crazy Ivan below the range setting a bear trap, the market now has the best 5-day performance in 3 years while the week prior the Dow had the worst weekly performance in 3 years...interesting huh? Especially as volatility has died. For example, as I said the Dow hit a major psychological magnet in which you'd think there would be strong follow through, but it was only a +.38% move, the SPX at +0.17%, the RUT almost flat at +0.07% and the NDX down -0.33% while transports shined at +0.75% amidst higher oil, USO + 3.06% and looking like we are going to see our move higher as I already mentioned, it has been under accumulation higher in the stage 1 range the last 2 days.

 A 5-day USO chart shows heavy volume paired with a Tweezer Bottom reversal pair of candles, thus the short squeeze move in USO looks to be already getting some legs and beginning, I wonder how transports, which I almost called out as a short today ) will fare on higher oil prices in a squeeze?

 USO's main trend at 15 mins showing 3C confirmation of the downtrend until that gap which may be a short term exhaustion gap followed by positive divergences and a nice, solid base to run off.

Again, I do NOT see this as a significant trend change, but a short squeeze, I do however expect prices to move ABOVE the gap area.

 With more detail, the 2 min 3C chart of USO shows accumulation in the lower end of the range at first, trying to get the best prices, but now it is occurring in the higher end of the range, I suspect just trying to get anything to fill up the position before lift-off. We still maintain January monthly calls in USO.

The Trend Channel has this part of the trend which hasn't stopped out once in the Trend Channel, even with a 2+ week lateral consolidation, with a stop out of the downtrend at $23.00

I'll be looking closer again at Trannies tomorrow, they were very close to a short call so I suspect in the coming days, especially on a strong oil SS, they'll be ready for some serious downside action.

TLT seemed to have been hurt today by the GDP print at 5%, best print in 11 years! I suspect Treasuries (as I have mentioned many times in the last week that I may revise my longer term outlook for TLT and may close the trading position in TBT short=TLT long 2x leverage) are getting hit as the F_E_D which already painted itself in to a tighter corner last week literally is just about without choice as "Data Dependency" just fired one over the bow with +5% GDP revision for Q3. On the other hand, it has been my contention for well over a year and a half that the F_E_D is desperately looking for an exit from accommodative policy. I thought this before they even mentioned ending QE3, in fact the same day they announced QE3. Policy is always much harder to unwind than it is to enter and remember the F_E_D has share holders too, they are a FOR PROFIT/Quasi private/government corporation. I would not be surprised if the F_E_D not only had the GDP revision in hand when Yellen spoke on Wednesday warning that rate hikes could come before the second meeting next year if the data suggests it, with a caveat to be fair that the reverse could be true. AGAIN, THE F_E_D IS TELLING US WHAT THEY ARE GOING TO DO, JUST AS THEY DID WITH ENDING QE LONG BEFORE THEY EVEN MENTIONED IT BY CHANGING THE YEARD STICK FROM QUANTITATIVE GUIDANCE TO QUALITATIVE GUIDANCE, ONE OF THE LAST MAJOR SHIFTS BERNANKE MADE ALLOWING FOR THE F_E_D TO BE AS AMBIGUOUS AS THEY WANT AND HAVE FULL COVER OF PLAUSIBLE DENIABILITY.

In any case, I suspect the print in GDP backing the F_E_D in to a corner had everything to do with today's TLT performance, although unless the data was leaked well over a week ago, I have been seeing intermediate TLT charts causing me some concern for their uptrend even though the 60 min chart still is confirming the trend. This may be because of new market discounting for earlier rate hikes than currently envisioned which I believe we will see.

While we are on commodities (USO/Oil), the closed out GLD short yesterday I believe was the right move. I suspect we are going to see a near term pop in GLD, if it looks tradable, I'll put it out there. GLD and SLV were virtually flat today (+.20% and +.33% respectively), glad I closed GLD short as it was dead money without an edge and Dr. Copper saw a stronger move, down -.43% which is just a reflection of the Global macro-economic theme-weakness as Pickens screamed on CNBC today as he's the expert, Oil prices are low because of weak demand.

Intraday breadth is extremely thin, there's very little moving.

 I showed it earlier, the last two days intraday breadth has been very poor, we are now in a range of about +/- 250, about the narrowest range that can be reasonably measured. There's no trend here, just like there has been no trend in the market today other than lateral chop with a little spike in downward and upward volatility in to the close.

The trend in TICK that I showed going in to the F_O_M_C move (improving) and immediately coming out (deteriorating) has continued, you have to look a bit closer.

This is today's intraday, it has deteriorated to an even narrower range that can't be seen clearly above.

VXX is outperforming still like yesterday. The Pro sentiment indicator that I showed yesterday just falling off a cliff yesterday at the close is getting ugly again and actually pulled another sharp sell-off at the close (not pictured below) and the second one we use for confirmation is confirming.

 This is our second Pro Sentiment indicator weakening as the market progresses in a rounding top since Wednesday's move, this actually closed weaker than this chart before the close depicts as well.

Here's a longer term trend moving down for quite some time and leading the market, even leading the upside move and now leading to the downside again.

I actually was wrong about HYG not giving support, it did, just not like yesterday, this has been almost exclusively USD/JPY as shown in the last post LENDING SUPPORT TO THE MARKET WHICH SIMPLY LOOKS LIE A PINNED MESS WITH SOME THREATS TO BREAK TO THE DOWNSIDE TOWARD THE CLOSE. I suspect before I have finished this, USD/JPY will have broken lower, likely Index futures with it.

 HYG support (blue) vs SPX, yet even as this pushed above the morning highs at the close to ramp the market, the market closed lower in to the last minutes (except for the IWM), which I'm still thinking is not quite done.

 HY Credit is weak on the trend, even though it led to the downside t the far left and even led to the upside (white), it is seriously dislocated and overall was weak today relative to the SPX.

Here's an example of the intraday HY Credit vs SPX trend.

My custom SPX/RUT Indicator (red) and my Custom VIX term structure, which both gave positive buy signals (at the white bars) are now not confirming the move in the SPX over the last several days,  this indicator has been very good and the VIX term structure has been perfect.. In any case, no market support here anymore like last week and before.

 The SPY 1 min saw weakness early in the day, but pretty much closed close to in line as USD/JPY carried the market today with some HYG help.

The key SPY chart is the 5 min with a sharp leading negative divegrence and look when it occurred... mostly today. Remember it's the SPX futures and SPY that have had the best underlying 3C charts, even though not good and NDX the worst, this move today changes things for ES/SPX.

The 15 min chart clearly shows the accumulation area and the distribution area. Sometime it's good to take out the details/noise with longer charts and just pay attention to what is really going on.

 As for the QQQ, this 2 min chart, like SPY 1 min looked mostly i line today which would not be surprising considering price actions thin range and low volatility.

However, this is why I encourage looking around, multiple assets, multiple timeframes and in this case, the same chart with a wider view...

 The 2 min chart perfectly depicts the accumulation we saw pre-F_E_D and distribution now,  as I was saying above, sometimes you need to step back away from the noise, especially emotional noise and see what is really happening. If doing what we do were easy, everyone would be doing it, it's not and it requires you think outside of the box and like a criminal often.

 This recent QQQ 3 min probably reflects what we have been seeing in QQQ relative weakness vs the other averages, that's a sharp negative already below the accumulation area, it closed even worse!

 The 5 min shows how very little real support was behind this move and how much real distribution was as well, it is exactly as we predicted for the exact reasons.

The 10 min confirms.

As does the 15 min

and again, removing the noise, the 30 min confirms both trends in 3C.


1 min IWM looks to be in line with a slight negative bias intraday. I suspect the HYG ramp at the close was used to keep IWM from closing red which is where it was when HYG ramped in to the close.

However we are interested in the bigger picture such as this 3 min trend represents very clearly.

 As does the 5 min

The 10 min

And again, removing the noise, the 30 min.

But what are we to expect as the shorter term charts show us a downside reversal? Take a look at this IWM daily chart...

At 1 we have a negative divegrence and pullback, at 2 we have in line upside confirmation, at 3 some weakening, but not outright full on distribution, at 4 we have heavier distribution and the uptrend is over, a lateral trend starts which has closed the R2K red for the year numerous times and at # 5 we get a look at just how bad the damage is, just how much money has fled the average and with that, it's no wonder that less than half of the NYSE stocks are above their 200 day moving average and just about half above their 40-day.

Breadth wise, we had another overbought condition today in all of the averages except the IWM, which I suspect is still up to something short term, as in half a day, maybe open like I expected with a gap up and Dark Cloud Cover close.

All of the other averages were Dominant in their P/V theme at Close Up/Volume Down, the  most bearish of the 4 possibilities and heavily dominant with 25 of the Dow 30, 61 of the NDX 100, 316 of the SPX500 and 1273 of the Russell 30000, the R2K had no dominant feature.

Of the 9 S&P sectors, 8 closed green with Energy leading and health care lagging on an Ebola story today.

Of the 238 Morningstar industry groups I track, 178 closed green, this qualifies as short term overbought and with these negatives in place, that's not a good way to close out.

As for futures, I'm going to give a quick look and check again later tonight and post anything that may be different. 30 year Treasury futures are seeing a positive divergence after being down today on the GDP data including TLT.

USD/JPY hasn't moved from its perch yet, however I expect it will, maybe in time for the open.

$USDX negative divergences are still growing as is the Yen's positive.

 $USDX negative

Yen positive. I don't think USD/JPY will be able to hold out until the open with these kinds of divergences in the currencies making up the pair and that has a dramatic effect on Index futures.

Not as an update, but as a reminder, this is how bad things have got in a few days since the F_E_D.

 TF 7 min

NQ 7 min.

OK, don't run yourself ragged wrapping presents, I'll check in if there's anything that has developed. otherwise, I think we are right on track for a sharp move down.

Happy pre-Holidays.

IMPORTANT MARKET UPDATE

I'll have charts for you in a moment, however I am now seeing just about everything I could ask for including the ES and 5 min charts, which I said could change very quickly.

While signals can grow stronger, with the shape and position they are in now, I can't say that I'm waiting for anything at this point, I'd expect the market to reverse severely to the downside at any time now, we are no longer waiting for a few charts to confirm.

USD/JPY Support

Here's the support apparently tangling the index futures/market averages up, USD/JPY, remember what I said in my last post as they look like they are being pinned.

 USD/JPY's own divergences earlier today before the GDP release and after, a sharp negative divergence.

Price there looks a lot like the tangled up Index futures...

 No wonder, Es (purple) SPX futures vs USD/JPY in candlesticks.

Thus the 3C chart of USD/JPY above is meaningful as well are the following charts with confirmation and higher probabilities of a USD/JPY decline.

$USDX negative divegrence and pretty sharp, this would pressure the pair lower with a move lower in $USD.

And the Yen with a positive divegrence, again, a move higher here would pressure the pair lower and it looks like index futures are tightly tangles up with USD/JPY.

As for the charts of NQ and TF... the intraday charts are of virtually no interest with no significant signals.

 NQ 5 min

TF 5 min

NQ 7 min looks like Wiley Coyote about to drop off a cliff.

TF 7 min

 TF 15 min with 3C making a consecutive series of lower highs/lower lows in its leading negative divegrence


 NQ 30 min from the divegrence leading to the previous week's worst performance (weekly) in 3 years to the positive divegrence we saw for this move, best 4-day performance in 4 years.

NQ 60 min mostly in line with the trend, although there are some smaller and accurate divergences, the current negative is off the charts as would be expected for a Crazy Ivan head fake move with everything considered starting with the IWM range and the original Mass Psychology.

Quick Update

If I didn't know otherwise, I'd swear today was an options expiration pin day the way price is acting and very short term charts.

Interestingly,while I haven't finished my "Update" analysis, the pin-like action is in short term timeframes such  as 1 min like yesterday, however unlike yesterday, assets like HYG are not being used to hold the market up or as in yesterday's case, rescue it from lower prices as HYG was accumulated on the 1 min chart in small size (shown earlier today) right at yesterday's intraday lows, effectively stopping the downside bleeding. Today that's not the case.

 The more important timeframes like 5, 10, 15 mins. see continued damage which I'll show you as well, this is the most important thing for the downside reversal, while the short term intraday 1-3 min charts are the most important for the timing of it. However as I did mention QQQ short earlier, it is a chart that just does not look good, I would not be surprised in the least if it were to see a very ugly gap down in the a.m. or even in to the close.

As for USD/JPY which got a big boost this morning on USD strength/Yen weakness and initially lifted the Index futures until they realized less than an hour later that the GDP print was exactly the kind of economic developments Yellen was talking about in saying interest rates could be raised before April (implying April by saying "A couple of meetings" and defining a couple as "two", meaning the April meeting, with the caveat that incoming data could cause them to act sooner. I'd say 5% GDP and the best Q3 GDP print since 2003, qualify, thus the move in Index futures did not last, however the move in USD/JPY has lasted, but I don't think for much longer, whether that be before the close or not is hard to say, but I don't think it will be too far one way or the other from the close.

USD/JPY has a VERY sharp negative divegrence, DX has a sharp negative divegrence and the Yen futures have a very sharp positive divegrence.

Seeing these, I doubt the USD/JPY holds up much longer.

As for Index futures, the best looking is ES, but NQ and TF literally look like they are about to fall off a cliff, their 5 min, especially 7 min and 15, 30 min and beyond are so ragged, they are worse than they were yesterday.

I would have to say, that I'd have little problem entering shorts in either QQQ or IWM based assets at the time.

Typically the large caps are going to be the last to fall and hold up the best so I have less interest in the Dow , ES does have better 3C relative strength right now, but this can change ina very short time.

Like I said, and I will show you, IWM and QQQ look to be in imminent danger of falling off a cliff. Perhaps USD/JPY gives them a push?

BABA Update

BABA if nothing else is a picture perfect example of a head fake move, why they are run, what the warnings signs are, what the probabilities are in the near futures, etc. While we use the term "Head Fake" loosely, it's generally a concept in which price does one thing that sets up the exact opposite reaction so during the actual head fake, that's when smart money is taking action and when we want to be as well as the resulting outcome will be emphasized and benefit from the head fake move- a price move that is above all, deceptive and convincingly so.

BABA's particular kind of head fake is a concept that works very well and is very dependable, there are other concepts that tie in to forming it so there's a lot you can use even if you have no interest in BABA itself. This particular head fake move is one of the first I discovered before I started using 3C, The Channel Buster.

Here's our first post on BABA,  from Monday November 10th, Alibaba (BABA) In this post you'll find not only our forecast for a channel buster, what a channel buster is, where we expect the highest probability pullback in BABA to end up and whether or not BABA would be a buy to continue its uptrend or if something has changed in BABA in a larger sense. There must be an additional 30 posts covering BABA since.

 BABA was in a nice clean channel after putting together some early accumulation/base in early October. In yellow, it made a move to the upside with an increased rate of change, what we called on November 10th, a "seemingly" bullish move, but in fact it was a red flag. Just as we have talked about volatility in recent days regarding the market with the worst weekly performance in 3 years followed by the best 4-day performance in 3 years the very next week, volatility like this is a warning sign of a change to come.

The general concept of a channel buster (from either direction, below or above the channel) in this case is like a type of selling climax. The day after we posted our first post ever on BABA and it being a Channel Buster that had a high probability reversal and the most probable target being below the channel quickly after the reversal started, the very next day, the channel buster in yellow made it's first significant move down at the first red arrow and quickly proceeded to our most probable target at the small red trendline, a gain of nearly +10% for anyone entering it as a short.

Our other reason for watching this move in BABA was to see if there was any strong accumulation once the target was hit and if BABA stood a reasonable chance of being a nice pullback long entry at that point once our downside target was hit. Or... if something had perhaps changed in BABA and it possibly becoming another trade (short), although I warned if that were the case, we'd likely go through a lateral chop period forming a top before any significant move down.

 At the time because BABA is a rather new issue, we didn't have enough daily bars to apply our X-Over system, but we have just about enough now and we have 2 of 3 signals solidly on the sell/ short side with the 3rd just moving in that direction, Wilders RSI 14 below 50 (bottom).

Note also since our downside target was hit, we didn't get a new move to the upside, but a rather large, choppy lateral range. So far much of this suggests BABA may have flamed out and its uptrend is ended.

Also lacking to enough data as a newer issue, we can't use very long3C charts with BABA, but as you can see at the time we posted the first post above with our expectations, we could already see distribution in the move above the channel,  thus the "seemingly bullish" caveat to price's move.

This is the entire history for BABA since IPO with stage 1 base/accumulation to the far left, stage 2 mark up in the channel and at the green arrow, stage 3distribution and top at the red arrow which is exactly where our first post was published November 10th. Since, this being the longest, moist useful chart at 15 mins., it looks like BABA is seeing further deterioration to the dar right as it is starting to lead negative.

 On a 3 min chart that has more detail, we can see the distribution at the Channel Buster increased rate of change in price to the upside,  it was being sold by pros while retail was chasing price higher as it broke out of the channel...A HEAD FAKE MOVE.

Since hitting our initial most probable downside target, BABA has fallen lower with 3 min accumulation and a head fake move below support at the yellow arrow marking the start of a move to the upside on minimal accumulation which as you can see has turned to a negative divegrence.

I don't see any strong evidence that BABA has or will accumulate for a new leg higher as we were originally interested in finding out once our downside target was hit.

 The 10 min chart is more of an overview again like the 15 min with stage 1 accumulation to the far left, stage 2 mark up/ rally and stage 3 distribution right at the breakout of the channel, a positive divegrence attempting to get some upside going and that turning negative.

I have to give the 15 min chart the most weight right now and while this is not a perfect set up for any trade, it looks like a much better short than long, I'd just prefer see a move to the upside with sharper negative divergences on shorter timeframes joining our longest 15 min chart.

The very near term 1 min chart shows the accumulation to the far left, an attempt at stage 2 that moved to a negative divegrence and is in line with lower prices.

I prefer not chase anything lower as a short position, but I'd put this on your radar, it may be worth a partial entry, leaving room in case some better upside prices materialize in to distribution allowing you to fill out the position at better prices or just have alerts for any such move as that would present an opportunity, if it comes, GREAt, if not, nothing lost.

If you need an update for BABA, just let me know, but I suspect it has flamed out already for the time being and will likely see lower prices.