Daily Wrap

Since the lovely Andrea will be gone for a few days, I'm going to cook her dinner as she leaves early tomorrow morning. Being that I have the weekend with not much going on, I'll update the Daily Wrap as well as Trade Set-up/Ideas.

However you should know that as of our April 2nd market forecast which was for a head fake (failed breakout) above all of the triangles that were in the market at the time such as this AAPL which was used as an example and proxy for the broad market...

 AAPL's triangle with the April 2nd forecast for a breakout above the triangle's apex in what would be revealed as a false breakout and lead to the next pivot, a larger primary leg down, likely moving toward and below the October lows (not all at once of course).

So far the forecast has been right on.

 We also saw triangles in other assets and averages, some where symmetrical, some were 90 degree like this ascending triangle in the SPX. You can see our April 2nd forecast date in yellow and the breakout above the triangle's apex finally just the last 2-days.

Or the NASDAQ 100 with a descending 90 degree triangle. The April 2nd forecast date in yellow and the breakout and what I consider to be a valid, official head fake move, this is what I said was missing in yesterday's Daily Wrap, the emotional component which forced a short squeeze as seen in an earlier post today-THAT'S THE POINT OF A HEAD FAKE MOVE, TO MOVE EMOTION AND CREATE MOVEMENT IN THE MARKET SUCH AS RETAIL CHASING, WHO DO YOU THINK IS SELLING TO THEM?

In any case, I laid out the 3 different indications I'd be looking for to tell us when this move was coming to an end as a head fake move it was expected to fail the same day the upside forecast was made, April 2nd as probabilities of long term charts showed us that any upside move was almost certainly going to be aggressively sold in to.

The 3 elements were the 3C charts of the averages going negative, specifically out to at least 15 min charts and/or longer.

The Leading Indicators to give a clear dislocated/negative signal vs the SPX

And Index Futures going negative from 7 mins to 15 mins.

As of tonight...Leading Indicators are where they were expected to be almost a month in advance...

 The custom indicator SPX:RUT Ratio and it's failure to confirm the SPX in green.

On a longer trend basis since 4/2, note the leading positive divergence in the indicator in to a "W" base in the SPX, this was part of the analysis that led to the April 2nd forecast. However, since then, this indicator that has been exceptionally accurate for us has had a total failure to confirm the SPX above, THIS IS THE KIND OF LEADING NEGATIVE INDICATION I WAS LOOKING FOR AS DEFINED NEARLY A MONTH AGO.

HIGH YIELD CREDIT WHICH WAS SUPPORTIVE OF THE MARKET, recently has seen horrible 3C negative divergences suggesting ti would start to fall apart and act as a leading negative signal, as you can see, it has diverged from the SPX as well.

Index Futures...

 For the first time in a month, EVERY TIMEFRAME IN ES SPX FUTURES IS NEGATIVE, A "FULL HOUSE".

Again, EXACTLY what I was looking for....

And the averages...

SPY with the April 2nd forecast and trend since in white on the time axis with 3C showing a large negative divergence. Note the positive divergence going in to early April like our Leading Indicator above showed at the exact same "W" bottom.

For the first time in almost a month, EVERYTHING I have been expecting to see on this move including the move itself and head fake as seen in the NASDAQ today, has occurred, I have no reason to believe that the rest of our forecast leading to the next leg won't be equally as accurate.

Have a great weekend and I'll see you soon.

MCP Follow Up

Here are several recent MCP posts/Updates so you can get up to speed if interested. I normally don't cover stocks this cheap, but we have seen something in MCP's 3C charts for some time, something that said "Something is going on here" and as I always say, "With 3C we can see what money is doing, but by the time we find out why, the chance to make money has passed".

In this case it was a 10-year deal with Siemens which sort of puts all of the Seeking Alpha articles about the company's imminent demise out to the pasture if Siemens is willing to sign a 10-year contract for rare earth metals. I suspect this may be what was in the pipeline causing those persistent 3C accumulation signals.

In any case, recent posts:

April 15th, MCP "Patience Pays?"

April 22nd, MCP Update

April 24th, MCP Position Update

MCP closed up +17.86% just a couple days after our Wednesday post showing accumulation in to the consolidation/pullback off the near +100% mid April 2-day jump.

Today's update from this morning is the last one, April 24th above. As I said, "As soon as we can get this in to a Trend Channel, I'll post the stops".

As of the close, this is what the charts look like for MCP...

 Today's Daily chart with a close that has a little too long of an upper wick on its candlestick for my liking, especially on that volume, it suggests some churning, although I think we may be ok in this case for the moment.

As I think I made clear, I have little doubt MCP breaks out from the large "W" stage 1 base and moves to stage 2 Mark-up. I'm just not convinced it's on this leg without a consolidation together a head of steam,  which would make for a beautiful long or add-to entry.

 The 3 min 3C chart shows some profit taking which isn't surprising with double digit gains and going in to the weekend, I think we can let that slide.

The 5 min chart was clean and accurate enough to call the 4/16 highs as seeing distribution, today it's in line so I don't have immediate concerns about MCP's upside as the 5 min chart is in perfect confirmation (green arrow area) today after a significant positive divergence on the consolidation pullback.

 This 30 min MCP chart shows significant "Gas in the tank", however it isn't a particularly large divergence in terms of time, but it makes up for that in intensity on such a strong timeframe. (The longer the timeframe, the more significant the underlying money flow).

 It's this 60 min chart that has me a bit concerned that MCP stalls at base resistance, that's where it did last time in forming the top of the "W" to the left, although there was a very significant positive divergence/accumulation at the second low of the base which by the way saw a head fake move/stop tun under the yellow trendily, as usual, just before a trend reversal (to the upside). This is the same concept we are dealing with right now in the broad market. As I have said dozens of times this week alone and thousands otherwise, a head fake move is one of the best price-based indications we have for timing a reversal as they happen about 80% of the time in every asset and every timeframe as you can see above by the shorter 60 min timeframe and much smaller trend area to be reversed (lows). The more obvious the head fake trigger such as resistance/support, a triangle's apex, etc. and the more popular or watched the asset, as well as the bigger the trend to be reversed, the higher the probabilities of a head fake move which already stand at about 80% even for a small trend change in a little known stock like MCP at a small support area.

 It may be a little premature, but for a wider stop, I have set my Trend Channel at 60 mins. This is the first indicator I won an award for and it self-adjusts to each assets individual volatility and creates a channel around that. If volatility changes, the Channel changes with it , not quite like Bollinger Bands, but not at all like an envelope channel. I apply a certain standard deviation to the channel and if that is broken, then we know that something unusual has happened and a change of character like that will lead to a change in trend, thus we stop out with an objective stop system that doesn't require guessing as to when / where the move is over.

Currently the 60 min which I prefer to use on a close or at least the close of a 60 min bar is at $.89.

The channel will keep locking in gains, even if MCP were to consolidate laterally here, in fact the channel will often hold a healthy consolidation without stopping out.

For a tighter stop, the 30 min Trend Channel has held the last 2-days of gains and is at $.92. As the trend becomes more developed, we can apply a wider channel to allow for normal consolidations and capture as much of the trend before the choppy/volatile top which rarely gives better gains beyond a lucky guess, this is meant to capture the meat of the trend, not to stop out at the high, 3C is better suited to that and I use both in conjunction.

If you need an updated Trend Channel stop, email me. We will likely also be able to put it in to our X-Over Screen/system that will tell us where the most likely first pullback will be and whether it's healthy or not, we just need another day or so.

For now, until the 60-min chart has time to catch up, I would assume resistance at the base's trendily, but I'll stay on top of it, feel free to email me with questions/chart requests for MCP.

Wall Street Under the Covers...

A quick, simple look at the Index futures for the SPX, NDX and Russell 2000 reveal something that would seem to be interesting, however it's often the basis of many of our trade set ups.

With SPY at a mediocre close of +0.23%, the IWM at a lagging close of -0.33% and the QQQ at a leading close of +1.36% I suspect you could imagine what the underlying action would look like in each of the averages based on their closing prices. Remembering that Wall Street's orders/positions are so large, if they were to place them at once they'd crash or drive an asset up in a way that would have regulators screaming Flash Crash or Ramp Job and likely put their position (even if highly profitable) at a loss. In other words, unlike us, they can't simply place an order for a position and be done with it, it's a process and there are specialized, predatory HFT's that look for their orders, better known as "Icebergs" so they can front run them and nail it to the large institutional traders.

Back to the point which is the point of a head fake move whether running below a very visible support level and triggering a boat load of stops to pick them up on the cheap without anyone every wondering "Who took the other side of that trade?" Or in a head fake move/false rally, causing a breakout above a very visible technical area that traders have been conditioned to react to over a century so there's demand to sell or short in to (both actions come across the tape as a sale). You just have to keep in mind, Understanding the Head-Fake Move... Motivation



Take the ES/SPX Futures...ES on an intraday chart...

 ES/SPX futures intraday. The SPY barely moved today at a +0.23% gain. The 3C chart of ES is nearly perfectly in line with price action, no significant institutional action was undertaken here.

TF/Russell 2000 Futures. The IWM closed at a loss of -0.33%, pretty hard to sell in to or short in to in any size, so what do you need to do to be able to sell or short in to demand?  While a minor divergence, interesting that it is positive given the IWM's losses today as compared to the next chart...

NQ/NASDAQ 100 futures, The QQQ close up +1.36%, note the difference between this 3C chart on the very same timeframe vs. the two above,  this was the only average that gave institutional traders demand, price strength...SOMETHING TO SELL IN TO and it appears they did just that.

The Week Ahead

After having surveyed the market today includin and leading indicators as well as stock specific trade ideas, I believe the reversal process will be Time fairly well with next week's F_O_M_C meeting. The timing of this move getting one last pop off before the FOMC is a little more than ironic.

There are numerous trade setups that look good some look great, But as I said with Apple in my view most look like one more day would be the safest route unless you are considering the larger trend and willing to have a wide stop, And then I think anywhere in this area is fine.

Almost all of our leading indicators are not only negative negative but they're -in the way we wanted to see them this includes the SPX:RUT Ratio, professional sentiment, high-yield credit, the VIX is out performing on intraday basis and VIX futures are showing accumulation and treasury yields look as they should with a turn to the downside.

I believe we have our head fake move in, there's nothing new or interesting about the reversal process even on a one-day move like the QQQ today.

This weekend I will be putting out a list of trade ideas ideas which is unusual for me on the weekend, But I believe we have the time and I believe it is worth taking the time to do it right.

And I said this morning I can't predict the exact top to the hour or day, but when the market is at the area, The signals are unmistakable.

So far everything we expected to see since the April 2 second forecast has occurred. This in large part is due to the higher probability that trumps even a move such as the one we have seen since April 2.

I'll have a little more for you after the close and of course over the weekend

AAPL Market Proxy

Coming full circle back to where it began on April 2 with the analysis and forecast that started with AAPL as a market proxy as well as multiple assets and the averages; all of which were showing some sort of triangle. AAPL just happened to be the last chart I looked at before I felt strongly about the forecast and it had the cleanest looking triangle.

 While the AAPL daily chart shows a triangle, it is too large to be a consolidation continuation price pattern. Large triangles tend to be tops or bottoms depending on the preceding trend. The forecast on April 2 was for these triangles which we're pinching in volatility TC and upside breakout which would be revealed as a false breakout or a head fake that would not hold and eventually fail leading to a larger primary trend to the downside, one I suspect we'll take out the October lows eventually. While I don't have time to go into the particulars of why head fake moves are seen about 80% of the time before reversals both up and down, there is a good reason for it and as I showed several times, none of these triangles are organic as you'll see below. The perfect head fake set up.
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Furthermore volume on the breakout of Apple's triangle has been dismal.

AAPL 1 min. The trend has turned lateral which is where we most often see strong underlying trade such as the negative divergence today.

 This chart shows a head fake move to the downside, a stock run on huge volume which was accumulated. This is the same concept that holds true for upside head fake moves except they are distributed. An effective head fake move needs a very visible technical  area to be effective. In this case the break of support at the yellow trendline hits stops causing selling which was accumulated as technical traders are very predictable. On the way up from the breakout of Apples triangle there's brief confirmation before distribution sets in.

 This large W base with significant accumulation, in proportion with the following move is right into April 2 forecast which I have marked below on the time axis. Note the in-line three she signal on this two minute chart and as Apple makes a break out high, the distribution of those higher prices. This is effectively what the entire April 2 forecast was about.

On a five minute chart we have another smaller W bottom and the actual breakout from the triangle with an initial confirmation as you don't want to kill the baby in the crib as you need higher prices to sell into, the current distribution should be clear.

 This very strong 15 minute chart shows the W bottom and its divergence once again. There are only two small negative divergences and both are within the triangle. I made the case on April 2 that these triangles were not organic they were formed. Compare the price and 3C levels at point A and point B.

 On this 30 minute chart I can mark multiple small negative and positive divergences through the area of the triangle, these were used to create the triangle which can be seen in a number of assets as well as market averages.. As I said, technical traders need something familiar that will cause them to act and Wall Street has there number as they have not changed the basics of technical analysis and its dogma for nearly a century. That's predictability that's easily used against technical traders.

The 30 minute negative divergence is the focus of this chart on Apple's breakout from a large, clear triangle.

While I'm having some trouble with getting my indicator to scale all the way out this is a four hour chart with an overall very negative sentiment.

Apple has earnings on Monday and I usually don't like trading earnings unless there is a very strong edge, if I consider a position in Apple it will be Monday before the close.  I suspect there may be a position opened Monday.

Intraday Market Update

So far, while being an interesting day in seeing the QQQ make an anticipated or expected price move much more in line with the emotional extremes head fake moves are associated with (as you may have noticed yesterday I was clearly disappointed) while the other averages are acting more like they're engaged in an op ex max-pain pin which should diminish the closer we get to 2 PM.

From a criminal enterprise perspective otherwise known as Wall Street, the most effective use of a head fake is to let the headlines simmer over the weekend with retail traders placing orders Sunday night or Monday before they head off to work. In addition as you know I am not a big believer in a V shaped reversal process. The more "U" shaped (or pick your top) reversal tends to not only be more realistic (as a reversal is a process is rarely an event) , but we get the added and if it of stronger 3C signals. This is sort of a "chicken or the egg" scenario, but the way I see it is distribution continues until prices fall of their own weight and the deeper  3C divergences during this time are simply a reflection of that process.

All in all, everything looks very good for confirmation of a head fake move, Probably about staying on the queue queue queue move today on nothing more than horrible earnings. Point being, the Q's did not move on "good" earnings or any other news. As you know my opinion is they moved on the very common Head fake we have been forecasting for over a week.

As far as intraday charts, it is difficult to see them continue to deteriorate and maintain patience, but that is the edge. However this tends to give us the only confirmation we can get, which is during the move (despite probabilities being very strong long before).

Again I'm dealing with short-term charts so there may be some difference since I've captured them. I've tried to add in a few different multiple time frame perspectives.

There are so many charts, I will not be able to comment on all of them with everything I have to do today, but I will put the asset and timeframe

 TICK remains very mellow today, Actually quite negative considering.

 DIA one minute intraday

 DIA 1 min trend

 DIA 5 min trend. Compare and contrast the size of previous local divergences versus the leading divergence around the two horizontal red arrows.

 DIA 15 min trend, the leading negative signal started around the time of the reversal process, the igloo portion of the Igloo/Chimney price pattern.

IWM one minute shows how boring intraday trade has been. Yes there have been intraday steering divergences, but they have been very mellow.

 The more important chart, IWM 2 min trend

 IWM three minute trend since the early April forecast. The green arrows denote 3C confirming price action.

 On an intraday basis, I would like to see migration to charts like this five minute. Once this is leading negative on intraday basis I'll feel better about throwing out a lot of trade ideas what I suspect I'll be spending my weekend doing.

 I WM Long term 15 minute trend from a base to mark up and obviously intense distribution.

QQQ two minute leading negative . I've been watching this closely today however with Apple earnings on Monday and the ability to have a market headline out over the weekend, I suspect it won't turn today.

 QQQ five minutes the kind of intraday deterioration I'd like to see. I drew in a V shaped reversal, this is not a common occurrence unless there is a fundamental event that the market did not foresee. This also gives us more time to confirm and enter the appropriate trades. It is surprising how many individual assets will show the exact same signal as the broad market when we are at they are ready to turn such as the one we caught at the exact top on February 26 after the NFLX earnings-based gap. We set up the trade in what we were looking for a month in advance and had to wait a month for the exact signal but entered at exact high to the day.

 QQQ five minutes relative negative intraday

 SPY one minute intraday, again nothing exciting

 SPY 2 min with the yellow arrow acting as the trendline and yesterdays 11:51 AM break out with distribution ever sense

 SPY 3 min trend showing the four stages. Remember volatility precedes each new stage, the next is stage 4 decline and certainly have the volatility.

Market Update

As I said last night in the Daily Wrap, for a HEAD FAKE move, I wasn't impressed with yesterday's price action specifically because they are extreme moves that push emotional extremes and create movement via that mechanism. I also mentioned today's weekly Friday Options expiration max-pain pin which usually runs until about 2 p.m. and after that the market tends to do what it wants, but the underlying trade/3C signals we get are some of the best of the week.

Today's QQQ is acting much more like a "typical" and expected head fake move (remember AAPL earnings Monday). The rest of the market is acting much more like the typical op-ex max pain pin that I described as typically opening near Thursday's close and hovering in that area until about 2 p.m.

Ask yourself what is the catalyst for the NASDAQ move today? Earnings? I don't think so. I believe this is the head fake move that we should have seen yesterday.

There are still a lot of charts to go through and I am still going through a lot of individual assets and trade ideas as quickly as I can. Here is a brief synopsis of what we are looking at considering the futures update from this morning which has finally hit the anticipated set of signals in everything except, the Russell 2000 strangely (I would've expected the QQQ).

 The QQQ Daily chart, please click on it to enlarge if you can't see today's price candle well. This is the kind of break-away gap above a very obvious resistance range that will get traders chasing price which allows smart money the demand and higher prices their large positions require so they can sell in to or short in to (both are selling) without collapsing price around their position and no one every asks, "Who's on the other side of the trade?" which is detailed in my two articles on the "Head Fake" move linked on the members' site.

Also note volume today, it wreaks of a short squeeze which is exactly the kind of emotional extreme I was talking about last night when I said I was disappointed in yesterday's move. It is this emotional extreme that causes movement in the market, which is one of several reasons for a head fake move.


By contrast…

 This SPY intraday chart shows the type of price action that is consistent with an options expiration maximum pain price pin. The yellow area consists of yesterday and today.

 Today's in NYSE TICK index is very mellow at-500/+700, this would make sense with the kind of price action seen in the SPY above. Intraday breath is very poor.

 This is the QQQ 1 minute intraday chart, Obviously there is no confirmation of its gap up today.

 The QQQ two minute chart is showing the same and distribution in to higher prices which is the point of a head fake move.

 I always try to use multiple time frames and multiple asset confirmation. Although SQQQ and TQQQ will move with the QQQ, volume is very different so if there is not an actual confirming signal it will not show up as the only requisite for these ETFs is to match the underlying's price, not volume. As you can see the two minute chart of SQQQ, it is giving a nearly identical, but mirror image positive divergence as this is the three times leveraged short QQQ ETF. Confirmation

 The SPY intraday one minute chart does not look unusual at all.

 However looking at a trend basis of the intraday charts(2 min) it's quite obvious that the igloo and chimney price pattern which you'll see below is seeing distribution at the chimney which is the head fake move for this common Price/top reversal pattern. This is a different scale of head fake move as compared to what we were expecting and now seeing in QQQ.

 SPY trend sense the April 2 market forecast and you should be able to make out the igloo/ chimney Price pattern which is one of the best price based indications we have four a timing signal at a pivot point. These tend to fail quickly in reverse quickly once the head fake move is in.

While much harder to see currently, this is the head fake move in the QQQ. It is much easier to see in retrospect obviously, but this is much more in-line with the kind of emotion-moving extreme that I expected as I think was obvious in yesterdays posts.

The Q's look like a very obvious short squeeze, which is why once smart money can lever price above the breakout area, retail takes over.

A typical short squeeze in QQQ. Intraday price action shows very few to no pullbacks on light volume. This is overall very weak tone for such a move and in line with expectations of a head fake.

Ironic that this is so close to the Futures charts giving a signal that we have been anticipating and waiting for since the April 2nd forecast.