Daily Wrap

I'm as honest and transparent as I can be with my market analysis, if I don't know, I'll tell you I don't know , but I'll sure as heck try to find out. That's the difference between myself and a guru, a guru always knows even when they don't and a lot of people need that. That's not what I do.

As you know, yesterday there were numerous smaller indications that led me to close the AAPL and QQQ puts because something just didn't fell quite right, it looked like a bounce and if so, these options with only a week and a half would suffer even in a consolidation as the time decay ate in to them so it made a lot more sense to close them, look for a potential bounce and re-open them at a more appropriate strike and a longer expiration. As far as core short positions go, yesterday and today have no effect on my management of them, they are meant as rending trades and I'm not moving them all over the place to react to small 1-2% moves of a day or several days, had I done that at NASDAQ 5000, they would have been closed at exactly the wrong time when the Dow is 650 points lower just after the new high was set.

Yesterday as I explained, there weren't great 3C signals and most of my analysis of the market came from different aspects like price action, VIX divergences, etc . Today, especially after such an overwhelmingly 1-day oversold market (breadth) from last night, I expected either a bounce or the base to widen out and I expected divergences to show up and give that objective analysis that was somewhat missing yesterday.

Well it doesn't happen often, but when it does, after the fact I usually find out there was a good reason and avoiding the whole scenario was the correct move, so today as you might have noticed, there weren't too many market updates as I post them when I see a market edge, that usually means a strong divergence. Like we have seen in the past and only realized after, there was a noticeable lack of credible and confirmable 3C divergences today. What that has generally meant in the past is standing aside was the right choice although there's really no choice at all because if I don't see a strong edge, I'm not going to post trades.

Specifically I'm talking about the VERY short term 3C divergences for a potential bounce, not the intermediate and longer term that are securely locked in on the leading negative side. This doesn't really make a lot of difference to me practically speaking because I didn't have any intention of trying to trade the market from the long side, only to short in to any price strength, but it is still odd.

From a futures perspective. there weren't any divergences intraday, but rather near perfect confirmation of price action.

 ES/SPX futures intraday and overnight with near PERFECT confirmation of the price trend.

NQ / NASDAQ 100 futures with a negative divergence starting just after the European open and sending NQ lower with near perfect 3C price trend confirmation through the day.

And Tf /Russell 2000 futures with a minor positive divergence early in to the morning session, in line through the day and a slight negative in to the close, but otherwise, near perfect confirmation.

Yesterday I talked about an asset, it escapes me at the moment, but there was perfect 3C confirmation and I said this is telling you, "What you see is what you get", there's no underlying trade that is building accumulation or distribution, things are moving exactly as money flows would suggest which is a bit rare, that's exactly what we have above.

You may have noticed the lack of relative performance between the averages today with the Russell 32000 leading at +.61 while everything else was in the red with the NASDAQ 100 down -.55%, almost as much as the Russell was up. This is NOT a healthy sign even for a short term 1-day bounce. Yes the Russell should lead in a risk on move, but there was no followers. We can probably sum up the BASDAQ's weakness to AAPL's weakness today, down -1.82%, but the Dow and SPX, both down about the same at -.16 to -.19% were laggards big time.

 These are the major averages and transports today with transports performing the best at +1.12% followed by the Russell 2000 and everything else red.

I suspect you do know that Transports on a bigger picture perspective have NOT confirmed the Dow/market for those Dow theory fans.

In addition, the SPX and Dow are both down about 1% year to date with Transports down -2.7% year to date. In fact since QE3 ended on October 31st, the market is nearly flat which looks like this...

All the majors and transports nearly flat since October 31st or the end of QE3.

Yet! P/E ratios are 27.85x current earnings, a level which has marked just about every major top in the past with the pre-financial crisis top pegged at 27.65x then current earnings, now is worse than then and why, a big part has to do with stock buybacks which reduce the number of shares and lift the share price, all the while insiders (from the company's) are selling their shares! In fact stock buybacks are one of the more traditional indications of a top as they tend to occur, ironically when stocks are most expensive rather than at the end of a bear market when they could be bought on average for half the price, but insiders need to get out with as much loot as they can carry.

In any case, that doesn't change today's market which had me looking all over the place and trying to find something that made some sense.

The closest I came, would probably be the VIX short term futures which were positive yesterday and whether most of the market closed red today or not (despite a huge 1-day oversold condition yesterday), the relative performance today was much better than the past week+ so there seems to be something to the VXX divergences.

Lets start with Leading Indicators and work our way there.

*Note the SPX comparison on the charts below in green shows the SPX prices inverted , normally VIX which trades opposite the market would trade exactly the same as the SPX when prices are inverted, in this way you can see differences in the correlation/relative performance.

 VXX intraday vs SPX (green inverted), the correlation looks pretty spot on intraday.

However over the last several days the VIX short term futures have been a little weaker than the correlation would normally expect, I suspect this has to do with VXX accumulation at low prices as the market is in stage 4 decline of the February cycle which should send VIX products up as the market moves down.

This is Spot VIX intraday , also looking to be in near perfect correlation with the SPX's weakness (remember SPX prices in green are inverted).

The 3 min VXX 3C chart looks pretty close to confirmation after some accumulation last Thursday and Friday that has sent it a bit higher.

However on a shorter term chart of 2 mins where new divergences will appear first, there's some 2 min distribution suggesting some VXX weakness, whether to pull it back to lower levels to be accumulated in larger size or as a warning of the market ready to bounce, I don't know, I suspect both, but the averages are all over the place short term on the 3C charts.

This is a 15 min chart of XIV, the inverse of VXX or short short term VIX futures, it trades WITH the market so a 15 min negative divegrence like this is not only negative for XIV prices, but the market in general and positive for VIX and short term VIX futures, thus I have kept the VXX 2x long position, UVXY, open.

We have solid confirmation on the inverse, VXX 15 min chart...

VXX 15 min leading positive divegrence. I could say this is one of the reasons I have a high degree of confidence in market shorts and UVXY long, however there are many, many indications, this is just one of many pieces of the puzzle that fir with perfect confirmation on the XIV chart above this one in the exact same timeframe. Note the rounding base here as well. This is however one of the reasons I don't have any problem leaving the UVXY long position open which is at a +15.50% gain since recently opening,  even if I do suspect a market bounce.


Intraday on a 2 min chart, XIV (just consider this to be the SPY for all intents and purposes as they trade roughly the same), does show a small 2 min positive divegrence suggesting VXX pullback a bit and the market beyond just IWM sees the bounce we were talking about yesterday. This chart is nearly perfectly confirmed on the VXX 2 min negative divegrence above.

However finding the same divergences among all of the averages in multiple timeframes is futile, as I said, they're all over the place very short term. Remember what I said about volatility at this stage of a cycle and the outside influences like margin debt and fear, it's not hard for the market to run over weak divergences once fear sets in and the margin calls come pouring in. I can't say if that may be what we are looking at, in fact I'm not going to make any assumptions over 1-day of sloppy intraday charts (other than the Index futures which were unbelievably in line).

As for other Leading Indicators...

 For the second day in a row, our custom SPX:RUT Ratio is leading the market short term, it did the same yesterday and the R2K rallied today. This is happening at an area of price that looks like a very short term base for a bounce, however I would NOT buy this as I said yesterday.

For more meaningful divergences check out RSI on a daily chart between the November/December timeframe and now in all of the major averages, DIVERGENT and not positively.

The Pro Sentiment leading indicator gave a positive signal yesterday and today it took it right back.

Our second version is in line, they aren't telling us anything other than they are at best confirming market prices as they stand.

 High Yield Corporate Credit is one of the first places I'd look for a divergence, although it's HYG's actual price divergence with the market that acts as a lever to ramp the market.

Likewise, the leading negative divergent signal given around the market highs has not only led HYG lower, but the market (SPX in green) as well.

Over the last 2 days there has been a very small positive price divegrence between HYG and the SPX, but who knows if that was reflecting the Russell 2000. I still have to stick wit the original bounce from here, but it is certainly nothing I'm worried about as far as core short positions go.

 This is a 30 min 3C chart of HYG, the idea is 3C gives us early warning of an HYG divergence and the actual HYG price divegrence vs the market is the actual leading indicator. Above you can see this serious timeframe was SCREAMING HY Credit distribution and shortly after HYG followed as it should have, the market followed that.

 More confirmation of HYG's divergence on an intermediate 15 min chart. All of this tells me (along with the longer term divergences) that HYG is going to continue the primary downtrend it is already in and the market has some serious catching down to Credit's reality, thus another reason I don't have any concern over core short (trending) positions.

 On a 1 min intraday basis, you can see HYG's trend lower and 3C confirming that trend and the last 2 days a slight turn upward, but no 3C divergence, just confirmation, this too is strange as 3C would normally give a positive divegrence. I suspect smart money is not willing to take the risk of going long HYG even as a lever.

Considering the credit markets are more sophisticated than the equity markets, you can probably understand why they say, "Credit leads and stocks follow". That has been our experience and right now, Credit has a big negative head start on equities which owe a lot of downside.

 HY Credit (not HYG as it tens to be a lever from time to time) is also moving in line with the SPX, no positive leading there either.

The same is true for PIMCO's HY Fund which has also worked well as a leading indicator when it diverges with the SPX (green).

 TLT the 20+ year bond fund in blue vs the SPX is slightly leading, this means yields are lower which pressures the market lower. However the bond situation is getting more complicated than it was last year with the F_E_D tightening policy.

30 year yields were slightly leading last Friday which is "part" of the reason I forecasted early strength this week (Monday) and as you can see the market bounced on Monday right to reversion to the mean with yields. Since yields have led the market lower and they have been in sync.

 This is a longer term look at the cycle using TLTin red vs the SPX, but this time I have inverted TLT to show you what 20+ year yields would look like (being yields move opposite Treasuries). You can see the weakness at the top in yields that forecasted a top in place and ready to break, however the current slight leading position suggests that the SPX revert to the mean or yields revert down to the SPX, this is some of the evidence I would point to for a short term market bounce and not a particularly strong one, but a market bounce nonetheless.  This is FAR, FAR from any kind of signal I'd ever consider trading on the long side of a market bounce, it is however exactly where I'd want it to short in to a market bounce, which at this point in the market's stage (as the SPX and DOW have erased the entire head fake move) would be perfectly normal, not anything unusual or of concern. While many of us would like to see it, the market just doesn't travel in straight lines, at least not for very long.

 This is an intraday view of the same chart above, (inverting TLT to show 20+ year yields), they are nearly perfectly in line as well, not leading and showing us strong confirmation of a market bounce, but in line which is part of my frustration today.

However I've seen this numerous times before and know it's a passing event that is usually understandable after it has passed. If there's no edge (in this case for a long bounce trade), you don't take it.

Commodities have also been acting as a leading indicator one again after years and after the F_E_D stopped artificially pumping the market up with printed money. As you can see on a sub-intermediate trend (Feb. cycle), commodities led the market lower and gave a clear signal that this is where the market was heading, they are still leading it lower. Combined with transports not confirming and we don't only have a very negative market signal, we have a very weak global economic signal.

This is the best we are going to get short term from commodities intraday, a very small leading divergence vs the SPX, again, if you'd go long on such weak evidence, I'd say you might have a gambling problem.

Otherwise, we saw the EUR/USD dump hard today. It was just under a week ago I suggested the EUR/USD might hit parity, it's closer than ever right now as there's talk or complaining that the ECB hasn't loosened policy (rates) as their QE looks to be a failure out of the box with both not enough net issuance to buy, but a bunch of negative rate yields (bonds) that they don't know how to treat.

We saw an overnight dump in the pair and another this afternoon, nearly breaking to the $1.04 handle and closing in on parity.

This in turn sent the $USDX over $100 to highs not seen since March of 2003 and the fastest rate of change to the upside in the $USDX in 34 years!

 This is the February cycle of UUP (proxy for USD) vs the SPX (green). You can see a bit of the typical legacy arbitrage inverse correlation (typically dollar denominated assets like oil, gold and stocks move opposite the $USD). The recent spike in the $USD looks to have pretty good correlation with the downward spike in the SPX.

On an intraday basis, again the jump in the $US Dollar Index seems to have pushed the market toward the lows by the close.

Looking at the $USDX intraday futures / 3C chart, there looks to be a small negative divegrence so perhaps the $USD will see a little consolidation overnight, but right now the market seems to be pricing in a F_E_D rate hike plus some.


As for the Dominant Price/Volume Relationship, you may recall that last night the Russell was the only one that didn't have a Dominant P/V relationship, interestingly it was the only one to rally today.

Tonight we don't have a Dominant Relationship in anything except the NASDAQ 100 with 48 stocks at Close Down/Volume Down which has the least bias of the 4 relationships, I call it, "carry on" as in keep doing what you're doing because there's no next-day bias.

As for the S&P sector performance which was insanely oversold yesterday, absolutely amazing there was noi bounce based on that which may be just a sign of how weak this market is, tonight there's a similar situation, although not as extreme. Only 2 of the 9 groups closed green led by Financials at +0.63% and lagging with Consumer Staples at -0.71%.

Of the 238 Morningstar industry groups which only had 5 of 238 green yesterday (again, amazing that there was no bounce outside the R2K), saw a mediocre 150 of 238 green today, not an extreme at all unlike yesterday.

These relationships which were so dominant last night toward the 1-day oversold condition are lukewarm today. I have to wonder if this may be the best the market can do on a bounce, we are after all in stage 4 decline.

I wish I had better answers for you tonight, but it may be that the market just gave it its best shot and that's all the bounce were going to get or perhaps tomorrow it builds a bit more and gives some signals, otherwise I have to say that the market remains in a bearish position, in a bearish trend (stage 4 decline) and hasn't given much reason to believe it can do much more than it has done today.

While there's no special surprises in breadth indicators tonight, many are nearing new lows for 2015. Take the New High/New Low Ratio on a 1-day, 4 week, 13 week and 26 week basis, it's just off new lows for 2015 made yesterday.

The percentage of stocks trading above their 40-day moving average is not only approaching new lows for 2015, but at a mere 40%, this is normally at 80+% in a bull market.

There are definite breadth problems and there have been through this entire February cycle, they are just getting a lot worse.

Index futures look nearly exactly the same as posted earlier so there's nothing exciting to see there, but I will check in on them later and let you know if there's anything standing out, otherwise, they are in line to the downside on multiple timeframes, most importantly the 60 min.

Have a great night, I'm sure we'll have some better data tomorrow, it may be that this is just the best the market can do.

Market Update

I just want to mention one thing about volatility first as I have tried to show examples of where it is commonly found which can be helpful in knowing where you are in a cycle or transitional period and can give you an idea of what tools are best suited to trading, in this case more appropriate for short term trading.

Volatility is useful and a bit different in the position we are in now which is having transitioned from a stage 3 top to  stage 4 decline which has wiped out all 2015 gains in the SPX and Dow in a very short period as well as concluding the entire head fake move above the early 2015 range that was standing out like a soar thumb in late January, attracting the kind of attention that would result in a head fake move as traders are very predictable and that predictability is profitability for smart money.

 I was a technical trader before it was popular and we were mocked as using "Voodoo Analysis" and asked how a line on a chart tells you anything about price action or a company's valuation.  I've always maintained that the one thing that turned Technical Analysis in to mainstream analysis at a time when everyone was using CANSLIM was the advent of the Internet and the transition from stock brokers to low cost Internet brokers. Would you rather pay $80 for a roundtrip trade, paying a stock broker who didn't know the first thing about analysis other than what their manager told them they are to get their clients to buy or sell that day (a glorified telemarketer) or pay $14 for a round trip trade?

As I was getting to, I've always maintained that the attraction to Technical Analysis after the introduction of low cost internet brokers was quite simply, LAZINESS. A lot of books were sold, a lot of systems were put out and it really wasn't that hard and didn't take that much time to make a trading decision based on a simple moving average crossover, about as simple as you get compared to valuation/fundamental analysis which I tried as well a long time ago.

The point being, the reason we see so many head fakes and false set-ups or failed set ups is that the same tradition of laziness still permeates Technical Analysis, you can see it just in the search for the "Holy Grail" of Technical Analysis, that system that beats the market every time without having to do any real research. Or the whole "GURU" thing, that one guy who can lead you to riches and make you in to a millionaire, there's quite a few of them out there. This is why head fakes are so prominent, Wall St. adapted to Technical Analysis going mainstream, Main Street never adapted to Wall Street knowing and using all of these century old precepts against traders and again, it's based on simple laziness.

There I go on a rant and off track, but if you take anything away from that quick history lesson of the markets from the late 1990's until now, take away that the market always requires hard work and diligent research. Anything that seems too good to be true usually is.

The subject was volatility at the particular stage we are at now, it is intense and there are good reasons for it. Consider the record levels of margin debt and investor negative net-worth. This means that when things get a little ugly, they can get VERY ugly very fast as margin calls come in hot and heavy and in that way, an outside force other than the actual market is controlling the market's movement...forced selling, etc. just like the F_E_D was an outside force that moved the market and will again, just not in the direction the permabulls are hoping.

So at this stage, Fear is the strongest emotion and we are in a fear based stage, that means otherwise solid technical analysis can be over-run by surprise news, something that happens that the market had no way to discount, say an unintentional shot fired in Ukraine that kills a Russian General who was on the ground advising the Pro-Russian separatists that suddenly changes everything and the market had no way to discount this. In a different cycle the market may be able to weather such a fundamental event, but in a stage in which things can snowball a lot easier and Fear is the strongest emotion, things can change fast which is why I choose, even when I know the probabilities of a move like the October rally or the February cycle are high, to stay on the path of highest primary trend probabilities.

Just be aware, what we see and expect right now, can look a lot different in a matter of hours in the current cycle we are in and with the market structure and breadth so eviscerated.

This has a lot to do with why I'd much rather use a bounce to short in to than to try to trade it long and then short it, there's too much risk and not enough reward.

On to the market update...

So far this has not been anything like a normal accumulation cycle even for a very short term bounce of a day or even half a day, it's certainly nothing like the Jan. 29th-Feb. 2nd accumulation cycle, this is much more sloppy with a lot less timeframe confirmation. I suspect there are those who simply will not trade this short term from the long side.

 This is the SPY intraday, note the "W" shaped bottom and right after that I captured the NYSE intraday TICK on the same timeframe and same zoom factor, note the area around the second intraday low just before 2 pm.

This is the NYSE TICK (the number of NYSE stocks trading up per bar less the number trading down), note that the second low of the day first saw a deeper TICK reading like small intraday capitulation or a source of supply on the cheap and then note the trend in TICK which looks the best on the day.

I suspect we are pretty close to being finished with this base as I theorized earlier today "Finish the base today, bounce tomorrow, Friday a bit stale due to op-esd and maybe bounce in to the F_O_M_C", but the last part is a big maybe.

From smart money's perspective, the probability of a rate hike in June went way up much faster than they anticipated and the total rate hike for 2015 changed a lot faster than anticipated from .50 basis points at the end of the year to a F_E_D based average from F_E_D members of 113 basis points, that means everything just about doubled, faster rate hike and a larger rate hike as compared to market expectations before the last Job report. The point being, if "Patient" is removed from the MArch statement, it's almost certain that everyone will be front running the rate hike that became more probable in June with "patient" removed. Thus, if there's any last minute house cleaning /selling of long positions or "squaring", there's only a few days left before the F_O_M_C next Wednesday.

Or this may just be a normal, run of the mill bounce attempt, but I suspect the former.

 My custom TICK/SPY screen showing the TICK deteriorating (market breadth) exponentially with the turn from stage 3 to stage 4 and then suddenly it improving, this is likely more evidence of what I saw yesterday causing me to close the QQQ/AAPL puts so they can be re-opened at a better entry with longer expirations.

 The 3 min SPY 3C chart looks like this, not a very clean divergence yesterday, but we knew that. Today as the potential base is a bit wider as it would need to be, the chart looks better, but don't forget, it's still a 3 min chart.

As for the SPY 10 min chart, it reduces a lot of noise. You can clearly see distribution during stage 3 TOP/DISTRIBUTION and what happened next as well as downside 3C confirmation (green arrow). The first area of the divergence is to the left side of the white box, not where the white arrow starts to the left.

This was evident yesterday just in the way price action was behaving, today we have the objective evidence that yesterday was more gut feel.

However looking at the SPY 30 min chart, what do you think I would prefer to do with any bounce here which by the way was probably needed any way as the trend was way too round/predictable?

With the 30 min (and longer) SPY chart looking this bad, I don't want to trade against probabilities, but with them, thus the same plan as yesterday, short/sell in to any price strength because the underlying strength has left town.

The white trendlines are the 2015 range that was standing out. In January I said that the market is going to have to take out this range to the upside before we make any serious move lower, I think we'll look back and see that was true.

 As for the Es/SPX futures 60 min chart that has also been calling this cycle (I must have posted this a hundred times), there's nothing approaching a positive divegrence so compared to the 5-10 min charts above, this is like rock, paper, scissors and the 5-10 min charts are "PAPER", this chart would be "SCISSORS".

As far as what I might actually want to do with specific assets, take XLF/Financials for example and this 30 min chart. I've drawn in divergence areas , both positive and negative, I want to leave room so you can pick them out for yourself, but still know where to look.

Look at the stage 3 range to the far right in red and look at the head fake in yellow, as usual, they are one of the best timing indications we have for a transition or trend change, hopefully you've read the linked posts on the member's site, "Understanding the Head Fake Move", then you'll understand why and what a gift these are.

Since XLF looks like that, I wonder what FAZ (3x short Financials) looks like, interestingly it not only confirms, but looks amazingly strong with a LARGE inverse H&S base so if I can get a gap fill from this week's weakness in the market and strength here, that's what I want to do to use this to my advantage.

 QQQ 5 min looks better today, not much yesterday, but again, so far these have not developed like normal divergences, all I can say is that there's a change in character in the market and while I may not understand the exact dynamics causing this different divergence process, I think it's significant as a message of the market especially where the market is and what's coming up in the next several days.

The QQQ 30 min doesn't look much different than SPY, ES or XLF, there's a reason for that, it's called "Confirmation".

 The IWM so far has one of the sloppiest divergences I've seen, this is 3 min, but it does diverge where I'd expect it to.

As far as what I might want to do with an IWM bounce, SRTY (3x short Russell 2000) has a pretty substantial divergence and base area.

USO Update

As USO has made a lateral turn from down and started showing accumulation we have gone from expecting a counter trend bounce and a resumption of the downtrend to a probable base in oil as the base is now way bigger than anything needed for a counter trend rally.

My last update for USO which was yesterday's USO UPDATE, contains a lot of charts and information on our near term expectations, below is just one of several from yesterday's post which I suggest you take a quick look at if you are following the Oil saga and are interested in an informed decision on a trade.

" This was what a quick glance at the 1 min chart looked like, I could tell the highest probability near term was that this trend on this timeframe continue for now."

The chart above from yesterday/Monday as well as several other charts all suggested what I have been looking for and that's a deeper pullback toward the lower end of what should be the base's range, that's where I expect to see accumulation pick up and where I'd be interested in filling out the other half of a partial USO long.

The interesting thing to note about this chart and other charts like a 15 min chart posted yesterday as well, is that they pointed to a continued pullback in USO well before yesterday's after-market API inventories that surprised to the upside and sent oil a bit higher and before this morning EIA data that was week, in fact the 9th consecutive week of builds in inventory (opposed to the API data shoeing a draw).

The point is, people today are blaming the downside in USO on the EIA report out at 10:30 a.m. today showing another build, while that may be part of the grander scheme to get us down to the lower end of a base range where accumulation took place before and where I expect it to take place again, yesterday's update linked here, USO UPDATE , had ALREADY forecasted lower prices in the near term before either the API (after the close yesterday) or the EIA (10:30 this morning) data was out. Someone already has a grander scheme in place and casual observers not privy to our data are simply making the most obvious assumption where as we already knew better.

The difference between the two perspectives is one is "This is 9 weeks of consecutive builds and oil price is responding bearishly, therefore oil is bearish" and our perspective of "Oil needs to head lower to the low end of the base range to accumulate and thus the longer term, primary trend in oil is that someone with deep pockets is expecting an upside reversal". 

One perspective is as a result of perceived cause and effect, the other is based on objective underlying trade, as I often say, , "Price can be deceptive". While one perspective assumes everyone is bearish on oil, the other assumes that lower prices are needed to finish building a larger base and a trend reversal. One perspective expects the trend to continue down (although it has been lateral for months), while the other anticipated a primary trend reversal, the two perspectives couldn't be further apart.

Picking up where we left off yesterday in USO UPDATE...

The 15 min chart which shows the most likely short term direction of USO well before either inventory data point came out....

" It has been charts like this 15 min that show the positive divergence/base and a downside reversal which doesn't look like heavy selling/distribution, it looks like a base/range is being created and smart money simply isn't biting above a certain level."

And of course from our longer term charts...

This 2 hour chart not only shows the massive distribution of USO while it was at its highs and a H&S top, but downside confirmation if not leading negative readings which changed to leading positive and a lateral, base-like trend. Note where the first actual 3C positive divergence is, I didn't draw that white trendline to show you where the lows were, I drew it to show you where the first long term 2 hour 3C leading positive divergence was. So if we take the shorter term 15 min chart above which as posted yesterday even says, " It has been charts like this 15 min that show the positive divergence/base and a downside reversal which doesn't look like heavy selling/distribution, " then what you get are two pieces of the same puzzle that fir nearly perfectly with the anticipated or forecasted outcome.

I don't exactly understand what's going in with oil, if this is as it was originally sold, to punish the Russians who are major oil players for Crimea and Ukraine or if it's a Saudi play to crush the more expensive US shale Industry or if it's something entirely different. I do know that there are large investors with deep pockets who are storing oil in huge tankers just waiting for prices to rebound, I suspect they have some better information than just, "Oil is cheap historically so it must go back up". 

Whatever the case may be...

This large descending triangle that we expected to be broken on the downside as price heads back toward the USO lows where strong accumulation occurs, has now taken place as forecast. In the days and weeks ahead, we;ll be watching very carefully for increased accumulation on the pullback, The "Come to us" trade on our terms.

This is looking to be a much bigger trade than first anticipated and totally at odds with market perceptions which gives us an enormous edge.

AAPL Update

This is probably one of the most recent posts from Feb 26th that covers some of AAPL's longer term charts which are not as interesting to me at this point as the shorter term charts, as in trading positions and leverage (options) for reasons I made clear yesterday, I think AAPL if it is topping here, will be choppier than many other assets that have already topped and are better suited to trend trades. The post, AAPL Position Management

Now since closing the AAPL puts yesterday and considering re-entering them on any strength, I've taken a look at AAPL this morning on a move lower that to me looks like it may end up being a small inverse H&S base, similar to the recent top area that looks a bit like a H&S top.

 This is the trendline I drew in last week and have been following since. Note the spikes in volume on the first two areas, each of which looks like stops were hit. Normally the second break of support wouldn't have that kind of volume, but it looks like traders bought the dip after the first break of support, thus the stops were there again. In white, this volume looks a little more to me like capitulation, of course short term as it's only a few hours, but that would fit with a bounce that we can short in to.

In case you are not aware of the meaning of capitulation, it's a selling climax in which just about everyone who is going to sell does so and you'll see this occur on a 5 min chart like the one above or on a weekly chart in a full blown primary trend bear market. The point is, when it occurs, you are usually close to a bottom, but in this case, it would be short term capitulation and a bottom that is appropriately scaled to the bounce theory for AAPL and the general market.

We know AAPL is a bellwether and has tremendous influence over the NASDAQ and soon the Dow, but in general most stocks move with the market so you can take a lot of the information in particular stock updates and generally apply it to the market, this isn't a hard and fast rule, but I'd say about 2/3rds of the stocks out there are correlated to the market.

 This is a closer look at what I suspect is a capitulation area for AAPL. If you recall the reason I suspect now is a perfect time for a market bounce (shown earlier with the SPX and Dow is in the same boat) which is totally normal, heck, the market is too round at the moment (see the chart below), then you'll soon see that AAPL is in a similar situation and that's usually not coincidence, that 's usually the high degree of correlation between stocks and the market,

This is the area in AAPL I have been watching as a potential small top that could be leading to a much larger one, but the point is if we look at this as a H&S top (rightly or wrongly), the concept of a shakeout of new shorts is exactly the same as the support/neckline is broken.

You may recall the 3 places I'll short a H&S top and the one place I will not, this break below the neckline is the one place I will not enter a new short and usually I'd want to be wrapping up any short term positions like yesterday's puts (even though this scenario had nothing to do with closing yesterday's AAPL puts, but it worked out great in any case).

The head fake/bounce would, in our H&S shakeout concept), move above the neckline and probably the right shoulder highs represented by the yellow arrow and trendlines.

Could AAPL be a worthwhile long/call position here? Maybe if the charts improved dramatically, but as the market has entered stage 4 and in 2 of the major averages wiped out not only the entire head fake move, but all 2015 gains, this is not an ideal trade as it runs counter to the prevailing trend which I feel absolutely will reassert itself and continue to much lower levels. Thus any AAPL piggy back long is by nature, speculative.

Market is too round, too predictable, time for the market to mix it up...

Until today where the market is treading more laterally (short term base-like), it was way too round and obvious, obvious markets are not profitable markets. Take the October lows for example when EVERYONE and their uncle who's not even in the market were bearish, so much so that certain long term sentiment surveys were posting all time highs in bearishness. You may recall me saying that despite how I feel about the market, that there are too many people calling a top and for that reason, the market will shake it up and we predicted a "face ripping rally" before we even had the 3C proof. If everyone is on the same side of the market, no one makes money and that's what was happening here with this very predictable rounding.

AAPL to a small degree looks similar.

We do have some improvement in the AAPL charts, something we didn't have a lot of yesterday as I explained a lot of the reasons for my decision yesterday were based on other factors like price and volume action.  3 min-

While I'm not making any case right now as far as AAPL goes with long term charts as I feel there's probably some more lateral choppiness in finishing a top, I am interested in the shorter term and this 5 min chart has been in line on the downside (3C price confirmation) for a while, since the negative at the top. I'm sure you can see the current positive divergence forming. While this divergence won't trump the larger picture in AAPL, it is interesting on a shorter term options type trade basis.

I think the bottom here is a little too narrow and AAPL probably has more work to do, but that's of no concern as I'm not interested in AAPL long here (at least not right now), thus whatever it does in either making a wider base or popping to the upside is irrelevant to me, I'm interested in re-establishing the AAPL short/Put position closed yesterday.

If that information isn't interesting or useful for you with regard to AAPL specifically, remember in general you can apply the same to the broad market.