Next, everyday Chinese as we have posted before including the illiterate, grandmothers, street side fruit vendors, farmers and just about anyone (at approximately the rate of a million new trading accounts created a week), with very little knowledge of the market or risk were encouraged to leverage up and send the Chinese indices sky high.
However when that started to fall apart, China and the PBoC took just about every conceivable and some inconceivable actions to halt the decline including:
-Ban on Major shareholders, Corporate Executives and Directors from selling any stock for 6 months
-Reducing Equity Transaction Fees
-Blocking Fund Redemptions
-Halting IPO's
-Providing daily liquidity to the Margin Lending authority
-Reducing Margin Requirements
-Banning Public Funds from Selling
-Banning the Financial Media from reporting negative stock market stories
-Halting more than HALF of listed companies from trading
It seems the threat of being labelled a "Malicious Short Seller" with imprisonment did the trick and sent Chinese markets up the most since 2009.
The late day positive divergences we saw yesterday were seen as a start, but not quite enough to take additional risk on/bounce positions, the gap up overnight on the Chinese threat of imprisonment didn't help anyone who was accumulating as I nor most of you would enter risk positions on a gap up. This is what we spent a lot of the day watching as our early Opening Indications said,
"My initial take on this was yesterday in the late afternoon we saw some accumulation, as I mentioned we didn't get the normal signals I'd like to see and that was a matter of lack of time, but if we had, I'd fill out the partial positions in IWM and SPY calls.
My initial take until we get more data is this is the same concept for Pros, the gap up didn't afford them the time to fill out positions they were opening late in the afternoon and they are bringing prices down to finish that process.
That's my interpretation of the open thus far until we get some different signals that would suggest otherwise so for the moment I'll continue to hold the short term bounce positions, UVXY short and 2 partial positions in IWM and SPY calls as well as leaving the primary trend core shorts in place."
While I can hardly deny that the Chinese threat of imprisonment for short sellers was certainly most probably the catalyst for overnight gains, still the concept of 3C charts picking up where they left off was once again seen today. For all we know, the Chinese authorities actions may have been known in advance as yesterday we saw a marked change in the tone of the market during the last hour, also the time the NYSE came back on line...
Yesterday's afternoon accumulation/positive divergences leading to today's gap up. We don't know what smart money knows, but we can often see what they are doing.
The open put in a rather minor negative divergence sending stocks lower most of the day leading to the 10:30 a.m. quote above from the Opening Indications post.
While the normal safe-haven Treasuries were sold today as some would make it out to be specific news from today, we saw this days ago on Tuesday as we closed our TLT 2x long trade, Closing TBT Short - Essentially TLT 2x long.
Numerous timeframes in near term TLT /20+ year Treasuries were showing distribution well before today which led to our closing the 2x long TLT by shorting the inverse 2x leveraged TBT, again Closing TBT Short - Essentially TLT 2x long. Today was the second worst day for 30 year Treasuries since November of 2013 with a 13 basis point gain, so I think we were probably right to take this divergence seriously.
As for the larger TLT trade idea, I'll update TLT in a specific post tomorrow.
While we had a much better set of signals coming in to this week which was mentioned last Friday in the The Week Ahead and while our forecast for a move below the SPX's 200 dma which would not hold and would return higher causing a short squeeze came to fruition on Tuesday,
The daily SPX chart with the SPX breaking below the 200-day moving average and then sharply moving higher to create a Hammer (at the white arrow) on Tuesday. Everything about the forecast went exactly as envisioned except the accumulation usually seen at a head fake move which is why we have been patiently waiting on the sideline before adding any new bounce/long (short term trade) risk.
Remember, all core/trend shorts remain open despite any impending bounce, the reason is they are trend trades, the right tool for the trade.
Since our April 2nd Forecast calling for a head fake/false breakout above the 2015 range before any credible downside would hold, we have seen the head fake/failed breakout (yellow) and a series of primary trend lower highs and lower lows. This is what we opened core shorts for. While it's up to you whether you want to trade around them, this is the path of least resistance, the big picture's highest probabilities as ween join a daily SPY 3C chart.
SPY 1 day (strongest 3C signal other than multi-day charts) showing a steep and very distinct leading negative divergence through 2015.
that said, I have no problem reading counter trend or bounce moves, so long as we have the objective evidence that shows the bounce trade is a high probability/low risk trade, which was much better looking coming in to the week than it was as of the head fake /stop run on Tuesday.
I do believe the probabilities still lay with a short term bounce and VIX based assets have had some of the strongest signals, but there are others, such as Financials which are a core short and I'd love to see a nice bounce to short in to as a second chance opportunity or an add-to position.
XLF/Financials 3 min chart show the probabilities of a near term bounce with a decent positive divergence.
The 5 min chart shows the last distribution area and decline with the most recent positive divgerence out to a 5 min chart. Thus it looks probable that we see a near term bounce from here, but while I don't have a problem trading it on the long side, I also don't want to forget to put it in to perspective and remember where the larger trade is in to any price strength...
The 60 min XLF 3C chart's strong distribution, thus any upside in Financials looks like a beautiful second chance short opportunity to me.
As mentioned, VIX based assets seem to have some of the best signals as they move opposite the market, thus our recent UVXY short and today's additional speculative Trade Idea: VXX Short/Put Position and the charts, VXX / UVXY / XIV Follow Up-Charts.
As is often said, to gain an edge in the market you need to see what the crowd missed. The SPX's daily chart doesn't look fantastic by any stretch of the imagination, however a 2-day chart...
shows a near perfect candlestick bullish reversal Tweezer Bottom with 2 penetrations of the 200-day which hits stops and allows smart money to accumulate the stops without anyone asking "Who's on the other side of the trade". While this is FAR from an upside reversal, it is a decent enough signal for a bounce.
I want to be EXCEPTIONALLY careful about adding any bounce/long risk here without strong objective evidence and it certainly shouldn't be anywhere near the size of core short positions in my opinion.
However, the charts seem to be cleaning up. You may remember my standard for Index Futures, at least the 5 min chart divergence in the direction of the trade, even for short term 2-day trades...
The ES/SPX E-mini Futures 3 min chart have moved away from the extreme "V" shaped moves earlier in the week with CLEAR negative divergences and have moved to an in line/price / trend confirmation position (green), this makes it very easy for the charts to move to a leading positive position, even overnight and beyond that...
We still have the stronger 10 min ES chart in a leading positive position just as we expected going in to this week.
It seems there's more stirring with regard to Greece whose deadline seems to be Sunday/Monday of next week to present something to the Troika. As was predicted a day before it happened, the IMF which was the tip off and their demand for a haircut reflected the US's concern about a Greek pivot toward Russia/China for funding, after all the US and NATO have spent the last 17 years boxing in Russia by cozying up to former Soviet states. To lose Greece to Russia with a naval base in the middle of the Mediterranean is something Washington definitely has an interest in and while the EU has their own interests like not encouraging more breakaway leftists movements such as Spain, Italy or France to preserve the EU as a debt write-off for Greece would do exactly that, it seems Washington has brought some influence to bear in the whole situation.
In any case, it seems Greece has a new/old proposal, apparently the same one which was rejected on June 26th and the same one the Greek referendum roundly shot down, so this may be the risk on catalyst and may be why we've been seeing late day sudden positive divergences like yesterday and in all honesty, no different than us, smart money would bring prices dow to accumulate on a gap up day like today so I don't see that as a negative in the bounce scenario, but this is the first time in quite a while in which the market seems to be changing its mind on a near daily basis as we watch underlying flow. We still look to be pointed toward a bounce, but I think I'll need exceptionally strong objective evidence(charts) before adding any more long risk for short term bounce.
That said, the market tells us what to do and we just watch for that message.
While the normal safe-haven Treasuries were sold today as some would make it out to be specific news from today, we saw this days ago on Tuesday as we closed our TLT 2x long trade, Closing TBT Short - Essentially TLT 2x long.
As for the larger TLT trade idea, I'll update TLT in a specific post tomorrow.
While we had a much better set of signals coming in to this week which was mentioned last Friday in the The Week Ahead and while our forecast for a move below the SPX's 200 dma which would not hold and would return higher causing a short squeeze came to fruition on Tuesday,
Remember, all core/trend shorts remain open despite any impending bounce, the reason is they are trend trades, the right tool for the trade.
that said, I have no problem reading counter trend or bounce moves, so long as we have the objective evidence that shows the bounce trade is a high probability/low risk trade, which was much better looking coming in to the week than it was as of the head fake /stop run on Tuesday.
I do believe the probabilities still lay with a short term bounce and VIX based assets have had some of the strongest signals, but there are others, such as Financials which are a core short and I'd love to see a nice bounce to short in to as a second chance opportunity or an add-to position.
As mentioned, VIX based assets seem to have some of the best signals as they move opposite the market, thus our recent UVXY short and today's additional speculative Trade Idea: VXX Short/Put Position and the charts, VXX / UVXY / XIV Follow Up-Charts.
As is often said, to gain an edge in the market you need to see what the crowd missed. The SPX's daily chart doesn't look fantastic by any stretch of the imagination, however a 2-day chart...
I want to be EXCEPTIONALLY careful about adding any bounce/long risk here without strong objective evidence and it certainly shouldn't be anywhere near the size of core short positions in my opinion.
However, the charts seem to be cleaning up. You may remember my standard for Index Futures, at least the 5 min chart divergence in the direction of the trade, even for short term 2-day trades...
It seems there's more stirring with regard to Greece whose deadline seems to be Sunday/Monday of next week to present something to the Troika. As was predicted a day before it happened, the IMF which was the tip off and their demand for a haircut reflected the US's concern about a Greek pivot toward Russia/China for funding, after all the US and NATO have spent the last 17 years boxing in Russia by cozying up to former Soviet states. To lose Greece to Russia with a naval base in the middle of the Mediterranean is something Washington definitely has an interest in and while the EU has their own interests like not encouraging more breakaway leftists movements such as Spain, Italy or France to preserve the EU as a debt write-off for Greece would do exactly that, it seems Washington has brought some influence to bear in the whole situation.
In any case, it seems Greece has a new/old proposal, apparently the same one which was rejected on June 26th and the same one the Greek referendum roundly shot down, so this may be the risk on catalyst and may be why we've been seeing late day sudden positive divergences like yesterday and in all honesty, no different than us, smart money would bring prices dow to accumulate on a gap up day like today so I don't see that as a negative in the bounce scenario, but this is the first time in quite a while in which the market seems to be changing its mind on a near daily basis as we watch underlying flow. We still look to be pointed toward a bounce, but I think I'll need exceptionally strong objective evidence(charts) before adding any more long risk for short term bounce.
That said, the market tells us what to do and we just watch for that message.
Remember tomorrow is an options expiration Friday which means it's likely we get a max pain price pin somewhere near today's close, usually until about 2 pm at which time the pin is released and we get some of the best 3C data of the week through the last 2 hours of the day.
Index futures are pretty much in line right now, I'll check in on them later tonight and if I see anything really standing out, I'll post it.
Otherwise I hope you enjoyed the Farage video and I'm wishing you all a peaceful, relaxing evening for tomorrow we'll be back at the grind looking for that which the crowd missed.
Index futures are pretty much in line right now, I'll check in on them later tonight and if I see anything really standing out, I'll post it.
Otherwise I hope you enjoyed the Farage video and I'm wishing you all a peaceful, relaxing evening for tomorrow we'll be back at the grind looking for that which the crowd missed.
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