DAILY WRAP

I'm thinking about everything posted this week and trying to think about what I can tell you beyond what has been posted, truthfully probably not much if you include the last post published, GLD, SQQQ & Head Fakes being that the late day signals and the overall concept have played out in to  after hours. A head fake here in this area would be spectacular as far as trade set-ups. I put out several today, but you probably noticed I left some room with each of them for a very specific reason which was covered in the posts and the last post linked above.

Overnight was another "managed" market amidst low volume. Then the template was nearly the same as yesterday's...

Then around the European close as has been the pattern (intraday trend changes) we saw some downside, but this was also about the same time Yellen made a statement that was clarified by the WSJ's F_E_D whisperer, Hilsenrath, that the F_E_D needs to hike sooner and that will mean they can be less aggressive rather than hike later and have to be more aggressive so , so much for the Retail Sales print yesterday that all the talking heads said would push the first rate hike in to 2016. As I've said 1000 or more times, the F_E_D isn't hiking for the normal reasons, there's something they are quite worried about and as you know I have my opinions as to what they may be, but they are hiking even if GDP goes negative and it snows in August. Then later in the day the market started feeling real emotional, which usually means you should refrain from joining in that emotion, keep a cool head and look for objective evidence as those emotional trades rarely turn out well. In this case it seemed to be the news coverage of Molatov cocktails in Athens in front of Parliament. In any case, as I showed late in the day and in the last post, there were already signals that the market was going to be heading higher even before earnings came out AH.

As you can see on the day the big losers were small caps/Russell 2000 and of course one of our favorite core shorts, Transports; everything else pretty much moved together.

Futures didn't look good as I showed a sampling of, the charts saw a lot of deterioration today, there was an attempt to support the market after the Yellen decline with HYG so that kind of tells me the reversal process which is very narrow at this point is likely not over, especially with no head fake move and if I'm correct in my thinking that the next move down slices through the 200-day (SPX), then a head fake move would be an even higher probability with such an important move to come right after.

Before I forget, I will say I like TLT as you've known and I think a pullback is a probability thus an entry at a better price point and lower risk looks to be a probability. There are a lot, LOT of others I like as well, it just feels like they are not quite ripe with the overall market and the reversal process.

TLT intraday 2 min chart looks very much like a near term pullback.

As mentioned above and earlier today, HYG was pulled out as a market support lever and used both earlier and in to the close to try to help support the market which is another indication that tells me we are in the reversal process, but it is a process, not an event.

HYG vs the SPX intraday used as support

In addition, the VIX/VXX which slammed higher (SPX prices in green are inverted to show the normal correlation and relative performance) as things literally heated up in Greece, was also Whack-a-VIXed in to the close, the same time we saw intraday positive divergences which were well before after hours earnings just in case you had that thought. So that's 2 of 3 of the main market manipulation levers that were pulled in some manor to support the market in to the afternoon. While I can't say price movement in TLT acted as the third lever (otherwise known as the SPY arbitrage manipulation scheme), there was a clear negative divergence intraday in TLT as you can see above. I suspect the concept of 3C signs picking up where they left off takes center stage and it's probable that TLT opens lower tomorrow or sees weakness early on in the day, again more near term data that points to a reversal process under way, but not complete. Interestingly earlier in the day when I went through all of the futures, Market and Futures Update, one trend I saw that let me relax a little about potentially having had missed the best entry in TLT, was the 1, 3 and 5 min charts were all negative for 30 year futures while the longer charts from 7 min and  beyond all pointed to TLT or 30 year Treasury futures rising so hopefully we'll get a decent pullback and entry in TLT long.

Also among the futures charts, VIX futures had some very impressive//strong charts, this wasn't the reason for the UVXY long position today, TRADE IDEA: UVXY (LONG), but didn't hurt and certainly points to the market seeing some serious additional downside as the reversal process wraps up. The Index futures were , as mentioned previously and in the A,M, Update, very ugly throughout. I also got the impression that EUR/USD has more downside coming and there's a decent chance that USD/JPY downside coming as well. I know that's a contradiction for the USD, but it can happen. Gold also had much stronger futures charts than it has had recently, which again wasn't the reason for the TRADE IDEA: GOLD (SPECULATIVE LONG) CALLS post, but it doesn't hurt the overall position.

Most Leading Indicators were mostly in line, one of the Pro Sentiment indicators put in a slight positive divergence at the end of the day on an intraday basis, on a trend basis, they look as horrible as I have shown you all this week. 30 year yields which led the market higher earlier in the week as a Leading Indicator turned sour the last two days as seen yesterday and even worse today...

(30 year yields in red vs the SPX in green) However if the TLT 3C divergences are correct as well as the 1-5 min 30 year Treasury Futures, then yields should pop higher tomorrow and again support the market as the reversal process continues and perhaps we get a head fake move which sounds scary, it feels even scarier, but would be an absolute blessing to new positions getting ready for a downside pivot. 

Otherwise commodities are risk off and divergent with the market as a Leading Indicator and HY Credit is also in the same ugly spot as last night.

I'm clearly of the opinion that we have some more reversal process action, maybe a head fake move before we are in prime location for loading up the truck, but I did want and do want to have some exposure, especially going in to the Greek vote tonight which "seems" like a done deal, but the streets are ugly and who knows. Europe is quickly showing itself to be as corrupt as it is inept, who knows what flies out of Schaueble's moth tomorrow morning. The IMF is certainly an interesting dynamic, but once again I think we may be getting too much tunnel vision over Greece as it's right in our face. China is a Black Swan and F_E_D rate hikes seem to be almost forgotten, believe me, they won't be for long.

As for positions, I said earlier in the week in the Trade Idea: USO SPECULATIVE (Long) Bounce and the follow up post right after, that if USO were to come down a bit and show strong 3C positive divergence in to that pullback, I'd consider raising that up to a full size position. Interestingly as if almost by magic...

That's the 2 and 3 min USO intraday charts, positive in to a pullback in the area so this may be an add to or second chance opportunity trade if you like it. Of course there's more to objective evidence than just a 2 min chart, but it's pushing in the right directions.

So I think my opinion on near term trade is pretty clear, I know my opinion on the next pivot is very clear, it's the in-between and my opinion that we'l be pretty close to wrapped up by the end of the week, as I said last Friday, I thought this week would be taken up with a bounce inclusive of the reversal process and by then we should be pretty close to the next pivot. The pivots are the highest probability/lowest risk entries, what happens between pivots is trade management. 

As for Futures tonight, S&P and NASDAQ futures have made the move to the upside that reverse the afternoon emotional selling and continues the reversal process. Unfortunately as of yet, the average I'm most interested in, the R2K hasn't made the same move, but it has time. There's nothing about the intraday charts that tells me much about overnight action, I'd expect it to be managed again unless something really surprises with the Greek vote which just came in, I guess the surprises really would be more on the EU/Troika/German side. 

ES 1 min reversed the afternoon "emotional" selling as expected.

While the 3 min charts are still ugly, these could move toward positive if we are going to get a head fake move and it wouldn't be a bother, in fact the 5 min charts could as well and I wouldn't be too concerned about it as long as they are clearly negative by the time we are loading up the truck which is a PREREQUISITE anyway and I believe would give several charts I really like as longer term shorts like AAPL, to mature and "SCREAM" or jump off the screen if you prefer.

As for that Greek vote in case you didn't already hear, an overwhelming landslide victory for the Troika, I wish I had an Athens cam on my live stream. The vote wasn't even close, 288 yes to 64 no. It seems the Greek parliament also doesn't care about democracy as they just overwhelmingly voted to ignore the overwhelming desire of the Greek people as shown in the referendum vote in which they said NO to the bailout. Unreal, why bother to ask the citizens to vote and then roundly ignore what they have to say, which is how Syria came to power and I suspect how they'll exit power. Well as an EU official said, "Bailed out countries shouldn't even bother to have elections" and Syria proved that beyond a shadow of doubt.

Now since I suspect tomorrow will be a very busy day, I'm off to watch the riot cam in Athens, I'm sure they're all over the internet.

Have a great night.

GLD, SQQQ & Head Fakes

Today's charts saw a lot of damage, actually most of the week there has been a lot of damage, surprisingly Monday there was more damage than usual that early in a bounce. It makes me wonder if the IMF Greek Financial Sustainability report that was released to the general public yesterday, but that the EU had over the weekend wasn't perhaps leaked to the same set of bankers who are behind the Greek drama, the usual suspects that are all from one firm and run the European Central Bank, have run both Greece and Italy as Prime Ministers while both countries accepted bum bailout terms and the one that releases trade recommendations that if you trade against, you always have a winning trade. It's that bank known as the Vampire Squid with its tentacles everywhere in all places of power across the world with a two ticker symbol starting with "G".

Hey, it's well known that Congressional staffers are some of the most profitable traders, how much more so with the alumni who not only run countries, have run the NY F_E_D, run the European Central Bank and host one of the most popular financial media shows on television. Anyone have a guess?

In any case, we're talking about the last position put out, SQQQ and specifically why I prefer to leave some room. The market looked VERY emotionally driven late this afternoon, that's not to say that there's not rightful damage for such an ugly end to the day, there is. However I chose to leave some room to add to and chose not to chase positions, because there's a concept that we see a good 80% of the time before reversals in just about every asset type and any timeframe you wish to trade in.

In fact the GLD long position today was in part based on that concept, the head fake as well as proportionality.

GLD as I showed earlier, took out the March 17th lows/support and obviously hit stops, a head fake move , specifically a stop run.

 I'm not sure if I would have noticed the head fake concept if I didn't have access to 3C and see what happens when they occur over a period of many years. For instance, this intraday chart of GLD this morning shows a large spike of volume at a VERY specific level; it was when the support of the March 19th intraday lows of $119.77 were taken out.

If I stuck to what I learned in somewhere near 100 Technical Analysis books in my library al gathering copious amounts of dust, I'd say, "WOW, smart money is selling gold, look at that volume".

IT's not until you apply a 3C chart and see it moving up that you realize that someone tripped up a lot of stops that are usually on the books for everyone to see and then they accumulated all that supply on the cheap and didn't raise any eyebrows in doing it, thereby surpassing the normal concepts of supply and demand dynamics. Of course it took me some time to also understand that multi billion dollar funds don't by odd lots or even even lots of 100 shares, they have much different position sizes than we do and therefore need to create specific circumstances that allow them to fill put those position sizes without triggering the supply ./demand dynamic and driving price against their large position sizes.

 The end product on GLD's daily chart is a beautiful daily candle called a bullish hammer with higher volume which typically makes the candle about 3-4 times more effective than the same candle on lower than the previous day's volume.

 I could show you the specific 3C divergence at today's break of March support, but I rather show you this GLD 3 min chart and point out that this is the kind of chart I'm talking about when I say, "Jumps off the chart" or "Is screaming" or "The kind of signal I don't ignore".

This is where our edge is with the tools we have. Yes we can torture the charts and try to get something out of them, but those are not the probabilities that this chart carries.

As for SQQQ, 3x short QQQ which I prefer for a longer term trending trade as I don't have to worry about expirations or massive leverage draw-down. Believe me, I think there's a right tool for every trade and in certain circumstances I'd go for a QQQ put. specifically if we got an upside head fake move above the recent QQQ highs from this bounce and that head fake move was chased by retail and sold by smart money with 3C divergences screaming to prove it, I'd say, "I think the discount on this move and the signals telling us it's a probable head fake. make this the right circumstance for a option trade".

 This is the SQQQ (3x leveraged inverse or 3x short QQQ) 60 min chart with a VERY similar chart to what we saw earlier in Short term VIX Futures like VXX and UVXY, a "W" type base with a leading positive divergence, the only thing that's missing here is the head fake move BELOW what is now a clear support level, in the QQQ it's a clear resistance level and the head fake would be a move ABOVE.

 The 15 min SQQQ chart is what I'd call a screaming divergence, the only thing I'm not absolutely crazy about right now is the smaller reversal process at the lows as they tend to be proportional to the preceding reversal and trend, thus it looks a little narrow and as pointed out above, there's no head fake move which we see about 80% of the time , especially at important reversal areas.

 If we take the SQQQ 5 min chart and consider the common Igloo/chimney concept and simply invert it as head fakes aren't just on downside reversals as we just saw with GLD above, we'd have a rounding bottom (the igloo) and then a Chimney that pushes below the rounding bottom, this is what makes retail technical traders ignore the bottoming process as they see a new breakout/breakdown move which they consider price confirmation. These are nearly a century old technical concepts and Wall Street is well aware of them, they can see your stops when you place them with your broker and if I can tell where the stops or limit orders are based on technical traders' predictability, how much more so do you think they can?

What I'd like to see to either fill out SQQQ to full position size or to open a QQQ put or SQQQ call (I'd go with the QQQ put because of liquidity) would be the "Chimney " portion or the head fake that breaks below the rounding bottom's lows and draws in new SQQQ shorts or QQQ longs, they have already been insanely bullish on the stream as I get daily sentiment updates.

 If we look at SQQQ's 1 min chart on an intraday basis, there's a late day leading negative divergence, this isn't anything I'm concerned about, but it does point to the building chance of that head fake move I'd like to see.

So why not just wait for the head fake move and not open any SQQQ position until then? Well I think the SQQ charts already look fantastic and while I'd say the head fake concept occurs about 80% of the time, in this position and this time in the market, I can deal with a little head fake draw down that allows me to tweak my entry or go with a more leveraged options position.

 This is the QQQ 15 min chart and a ugly leading negative divergence which is already lower than the previousness with price in the same relative area, it's sort of that UVXY  "W" concept in reverse.

 However on a 1 min intraday chart, just like SQQQ, we have a leading positive divergence, in fact it confirms the SQQQ leading negative 1 min chart and increases the probability of a head fake move.

 We don't usually notice them, although some are very extreme and really standout, but this chart of the QQQ shows a rounding top to the left with some emotional and pretty nasty price declines on an intraday basis, but still it makes that higher high or head fake move at the Chimney in what looks like an igloo with a chimney on the right side. I often say that this price pattern/head fake move is one of the best price-based timing indications we have as these moves almost always directly precede the reversal whether that be down like this or up as I suspect we see near term in GLD.

The current price pattern to the far right doesn't have a head fake move as of yet and it's a bit too narrow as I said before, there's usually some sense of proportionality between former reversals and/or preceding trends. 

THERE'S NO HARD AND FAST RULE, THESE ARE PROBABILITIES, BUT TEND TO BE VERY HIGH PROBABILITIES.

 Here's a longer chart of the Q's with 2 of these price patterns. As I said above, sometimes they stand out like a sore thumb, usually when they have a job to do like change sentiment and create an extreme and believable move, other times they move just enough to trigger stops or limit orders such as we saw in GLD this morning.

 As for the intraday TICK today, as emotional as the market was feeling toward the end of the day, it didn't register any eye-opening extremes. The lowest TICK print was -1265 or so and then shortly after an upside print of +1200, while rare, we have seen these print extremes of 1600-2000.

And our custom TICK Indicator so we can follow the trend, it definitely went south today since the bounce started, but like the divergences intraday at the end of the day in QQQ and SQQQ, note the very late day improvement in TICK which points to a higher probability of that head fake move that gives us the strongest, best times entry with the least risk.

Of course this is pretty myopic, all in all we are in a good position no matter what in my view, I just prefer to try to get the best position within reason and today reason meant having some exposure with UVXY long, SQQQ long, GLD long which really could have been SPXU long, VXX calls , IWM short, etc. You know that VXX/UVXY trades opposite the market so if I think UVXY is going to move higher, then I obviously think the market averages are going to mover lower.

I'm going to take a post close look around and see what else stands out other than price recovering off the late day lows and making a head fake a higher probability.

TRADE IDEA : SQQQ 3X SHORT QQQ (LONG)

With the Q's coming back to unchanged on the day, I'm looking at adding SQQQ as a trend/core short position here, as an equity long as it already has 3x inverse leverage.

I'll open the position at 75% of a full size position, to leave a little room for a potential head fake before a downside reversal or perhaps to add QQQ puts, but again I want to do that in to strength.

MARKET LOOKS HORRIBLE

This is why I never take off the core short positions and just let them ride out bounces, in the end they tend to be worth more as each successive month goes by.

As far as entering new positions or more new positions, the market feels a little panicky right now. From a chart perspective, it's hard to make an argument for patience so we are not chasing positions, from a conceptual perspective, a reversal process is usually a little bit wider and a head fake move is usually a pretty high probability.

There are a ton of positions, AAPL short, Financials short, Transports, Biotechs, VIX long, market average leveraged inverse ETFs long, etc. We have a lot of those positions as core/trend positions, the ones I just leave alone and let them work.

As far as adding new positions, perhaps the chaos that is Greece right now will have a different outcome in the morning with a Yes vote which from all accounts seems assured, but from all accounts the Greek population doesn't seem to happy about it.

I think I said this several times, the Germany is effectively waging WWIII on Europe, but instead of using bullets, their using the Euro. Not that Greece isn't responsible for the predicament their in, at least the politicians, but I get a pretty intense sense of dread when I see a sovereign nation being destroyed by banking interests. Who can fight that and win? So we stay under the radar and kA what the market gives.

I'll put up some charts in the mean time of several positions already entered while I keep hoping we get a bounce which would put us in spectacular position for position entries.

TLT Looking GOOD

However I'm looking for a pullback which I think is a decent chance, then I'd be looking to add some sort of TLT long position.

I'll try to get some charts up soon.

Market and Futures Update

I am going to post a sample of the Index futures through multiple timeframes, the simple message in the charts is that we are at a pretty ugly spot in the market , one that is typical of a reversal process and where I usually like to try to enter positions on strength (short) or weakness (long), with the 3C charts showing divergences.

The IWM/Russell 2000 is of particular interest to me, but I'm not willing to chase it so an intraday bounce which is starting to look more probable at least in the IWM would be very helpful.

Index Futures...

 Es/SPX E-mini Futures 3 min with a clear negative divergence. These shorter term timeframes are most often used for timing indications once we have seen a divergence migrate out to strong enough timeframes to indicate a reversal is highly likely, this is why I require that the 5 min Futures charts are in line with any positions taken as it shows there;s a decent amount of strength in the divergence and timing in the position.

Speaking of 5 min charts, this is the Russell 2000 (TF) 5 min chart. I'd say the divergence is very clear here.

And the stronger charts like the 7 min are also leading negative. Here I'm using Dow 30 e-mini futures (/YM) as I've noticed in past declines from market tops, the large caps tend to hold out the longest and see the least damage, but in this case they look just about as bad as everything else.

 ES 15 min leading negative. It was just last week that the positive divergence for this week's bounce was VERY clear and strong on ES's 10 min chart, now we have seen the divergence migrate , erase any sign of a positive divergence and move to a stronger 15 min leading negative 3C divergence.

This is the 30 min NASDAQ 100 futures showing the last leading negative divergence to the far left pulling the market lower with price trend confirmation at the green arrow, the positive divergence for a bounce at the white arrow and a leading negative divergence again only in worse/lower position than last time as price is at the same relative area.

 And the 60 min TF chart showing what I believe to be a top, as in the top and a confirmation signal of the downtrend, no positive divergence made it out this far and a current leading negative divergence.

This is one of the reasons I have an interest in an IWM / R2K short, but would like to see some price strength to open that position in to.

The averages...

 This is the 15 min IWM chart leading negative below the area of where the bounce started and most of that leading divergence was the last 2 days so it's a rather strong and fast move.

 The 15 min QQQ for reference, it too doesn't look good, none of these do, but it may be of particular interest in choosing what positions I think will give the best relative performance.

As for a bounce intraday or near term for position entries...

 The SPY intraday 1 min chart isn't showing anything specific that I can work with.

The 1 min QQQ is showing that increased rate of deterioration mentioned above in reference to the deterioration in 15 min charts.

However the IWM 1 min intraday looks to be putting in a small positive divergence, after earlier weakness, I do have upside price alerts set to let me know when we are in the area of an upside move.

 The IWM 2 min shows the weakness intraday leading to its downside, but again a positive divergence, nothing huge, but it should be enough to get us back in to more favorable position, especially if we are looking at options positions.

 SPY 3 min isn't looking very good here which is in line with a reversal process. For options positions I'd prefer to see an upside head fake move with the same kind of negative divergence to give us a discount on the premium.

And the QQQ 10 min trend shows that really nothing changed in 3C despite the bounce, the trajectory continues lower and this is the bigger picture of underlying trade and counter trend bounces.

TRADE IDEA: GOLD (SPECULATIVE LONG) CALLS

Today's gap down in GLD hit stops back as far as the March 17th lows as you can see on an intraday chart exactly where they were hit. The 3C charts look good for at least a decent bounce from here. While there's GLD long or leveraged long ETFs, I would prefer to get some extra leverage on this position so I decided to go with an approximately 75% of normal position size for an options trade, leaving some room to reflect the speculative nature of the position and some room in case there's a larger reversal process. I actually expect this to be a fairly quick move along the lines of a gap fill, thus the extra leverage of options.

I decided to go with GLD August 21 (monthly) $110 Calls. Of course if I decide to add to the position, I'll put that out as always first.

TRADE IDEA: UVXY (LONG)

After having gone through the futures charts for S&P, Russell 2000, NASDAQ-100, Dow 30, VIX, $USDX, Euro, Yen, Crude, Gold, 30 Year Treasuries and 5 and 10 year Treasury futures, I feel stronger than ever that we are in the middle of the reversal process. There are a number of positions that I'll be looking at, but the first will be about a 3/4 normal size UVXY long position leaving some room for a potential head fake/stop run under the $31.25 level. If we get such a head fake move that is confirmed as I'm fairly certain it would be, the other 25% of what would otherwise be a full position size will go to VXX calls.

I'll of course be setting price alerts for any such move.

Market Tries to Support, We're In the Reversal Process

Well the idea that this bounce would take up most of this week including the reversal process once you figure in the Options Expiration of Friday, looks to be a pretty accurate forecast.

There are numerous signs among Leading Indicators that we are in the reversal process, remember "Process" because that's what it is although being we've had such a parabolic move, it would not be unusual to see a tighter (faster) than normal reversal process, still we don't want to rush in to anything and certainly don't want to chase anything.

 As Yellen made some "sooner than later" will allow the F_E_D to go slow with interest rate hikes, the market took a downturn, interestingly right at the same time or just after, HYG's (High Yield Corp. Credit) lever was pulled to help support the market and stem the intraday selling as you can see with HYG in light blue shooting up.

 This is the intraday HYG 3C chart with strong confirmation of the move to the upside, this was a lever pulled in support of the market because once again, the reversal process IS a process, not an event.

As for intraday breadth, our custom TICK indicator allows us to keep track of the trend. We see short term capitulation or a downside flameout at the first red arrow to the left and improvement in TICK on the bounce, but note to the far right the deterioration again as price flattens out, typical of a reversal process and starts to deteriorate within intraday breadth for the first time since the bounce started. Again, I think the timing of the IWM calls and UVXY being closed were both as good as you get with the information we have.

 Our custom SPX:RUT ratio indicator was supportive of the bounce and then started to underperform, today it's in outright divergence and this has been a very accurate indicator for us among our Leading Indicators.

 As you have already seen numerous times, this is the trend between the SPX and Pro Sentiment. This was the first positive divergence in the indicator since May (last week) and clearly it has fallen off and it seems pros have been more interested in selling in to price strength than chasing it which is why we called this a RISK OFF bounce well over a week ago before it began.

 Commodities as a risk asset are also sharply off vs the SPX indicative of a reversal process and...

Yields which have been one of my favorite leading indicators as they act like a magnet for the SPX have failed to the downside and are leading the SPX lower at this point. Remember these are LEADING Indicators, so they tend to lead.

A larger view of the entire process with the same 30 year yields...

While there's some support in the market intraday, I feel pretty comfortable that we are in the reversal process, this is where I'll be looking for new positions at the best entry/timing.

It Looks Like We Closed IWM Calls Right on Time

Yesterday's closure of IWM calls at a small loss rather than a large one looks to have been nearly perfectly timed, Closing July 17th IWM $125 Calls.

This is what the Russell 200 futures look like intraday.

 Tf 1 min intraday with a deep leading negative divergence, I don't think we would have had a much better exit.

Perhaps more interestingly...

The IWM 3C charts are seeing a very sharp increase in 3C negative signals as you see today, thus holding beyond yesterday I don't think would have been a good idea.

However more importantly at the moment, there appear to be several positions that are opening up and starting to look ripe as I do believe we are in the reversal process now and on such a parabolic move, it may not be as rounded as usual as parabolic moves tend to fail in like manner to which they started, extreme.

Ideas coming...

USO Update / Oil Inventories...

Last night we saw a massive or much larger than anticipated draw in oil inventories via the API data, but it "seems" that oil fell overnight on the Iran deal, which has been used as an excuse for oil falling every day, even though a deal does not bring Iranian oil to market, a lifting of sanctions does and to lift sanctions, a deal must be verified, which is why Iranian oil is a good 6 to 12 months from hitting the market above and beyond the sanctions. In other words, it's not really an event of any immediacy.

However a lower base building process in USO is and something we have been watching and looking for as price got a little ahead of itself, then it came down as we expected. The current speculative USO long position is for a bounce/gap fill, not a long term trade which is something I'm very excited about and looking forward to so long as the charts continue to point in that direction.

So picking up where we left off with the API inventories in last night's Daily Wrap, today the EIA/DOE oil inventories were out at 10:30 a.m. and confirmed the API data's larger than expected draw after 2 weeks of builds.

The EIA consensus was for a draw of 1.9 mn bbl and came in at a draw of 4.346 mn bbl. In addition, production fell -0.44%.

Looking at the USO charts and some of the Oil Futures (Brent), my plan is to stick with the original plan which is to keep a fairly speculative size position (long) open for a bounce/gap fill and then look at a potential USO short for a move back down toward the bottom of the base's range that has been in effect for most of this year; this is where base building for a primary uptrend reversal in crude would be done. If we get confirmation of accumulation down near the lower end of the base, we'll have an interesting longer term long trend position, if not, then we aren't forced to take any action and really have nothing to lose.

 This daily chart of USO shows the range area approx. between $16.25 and $20.25 with #1 being the anticipated near term (speculative long position) bounce/gap fill. #2 would represent the short position target I'd like to look in to after a bounce/gap fill and the area where we "should" see accumulation which finishes building this base that has been in place most of 2015 and #3 would represent the primary trend reversal from last summer's downtrend leading to a flat trend through 2015 as seen above. Of course as always, we'll be looking for objective/overwhelming evidence of accumulation while most traders will likely be looking for oil to fall further.

 This is the 1 min intraday chart and it looks to me that there's an accumulation area in the $17.50 area or so. I did say when opening the speculative long USO position that I would consider adding to the trade if it pulled back a bit more to the $17 area and again confirmed accumulation as that would suggest a bigger base and a more stable/larger bounce, otherwise I'm fine with things the way they are and would be looking for a probable full size USO short after a bounce to fill the gap above.

 Again on a 2 min chart there seems to be an accumulation zone around $17.

 This is the longer term 5 min chart showing the anticipated pullback in USO from the $21+ level, above the range and the shorter term nature of the current positioning in USO for a bounce/gap fill.

 This shows the accumulation at the lower end of the large range in March that led to the break above the range, although it didn't hold and we didn't expect it to, we expected it to come back down which it has done.

As for Crude futures...

 Again there seems to be an accumulation range at lower prices in the very recent pullback range on this 5 min chart.

Doing away with the noise...

This close up of a 2 hour chart shows a high probability bounce/gap fill. We'll deal with the next trade set up once we get a resolution of this one and then there will be another after that.