Closing Take

This will be short, pretty much everything you need to know about today, you already knew last week as we put the pieces together throughout the day, this end of day post from Friday starts like this....

"Well I'd much rather have the NASDAQ call position than a NASDAQ put position going in to Monday."

SPY Daily-Support on Thursday, Friday had its own hints.

That QQQ Call position taken up on Friday is up +48% for 1-day, not bad.

I often say it and much of our strategy is built around it, "Price action is above all, deceiving"

Friday was a perfect example of it as this post from the EOD makes clear

EOD Market Update

Taking a quick look around, I plan on keeping the Call positions open as much of the market is showing decent confirmation, there are some 1 min negative, they may playout in to the close or maybe Wednesday or they will not be a factor.

I'm still not chasing AAPL here, I'll wait.

I'll update everything in a bit, but for now, I think we are starting trend 1 finally.

DE Trade Set Up Idea

Today we have some decent market gains, they aren't yet what I hope to see and expect to see, but the point is I'm not talking about chasing trades today, the trades for this move were set up last week. If the situation allows for decent trades to still be set up for trend 1, then we'd of course take advantage of that, but not chasing, there's too much risk for diminishing returns.

However, I did look at DE for another member and found it so interesting that I thought I'd share it with you. This is a trade that can take advantage of a quick move higher in the market and give you a great entry, lower risk and higher probabilities, so this is one you want to put on your radar and if it goes according to plan, which I think it will, it will be a set up for the next tradable move (trend 2, down).

 There are 3 possible levels that we want to watch as entry levels for DE, the 3 are shown with trendlines, obviously the higher the better, but the less likely we get that move as well.

 This is the first level, we should be able to get a move through this, it's a clear resistance area in a Dow-30 stock, it's seen by a lot of traders, therefore it sets up a perfect head fake move/bull trap. Where do you think all the Buy to Cover stops are? Where do you think retail longs would rush in to DE? Yep, right above that trendline/resistance.

We just need to simply confirm distribution and make sure it's not going to try to make a run to one of the higher target levels.

 The daily Money Stream chart shows 2009 accumulation, nearly perfect confirmation until 2012 which has been getting progressively worse on the negative divergence/distribution side.

 The 3C daily chart in a leading negative divergence and especially tight in this target area. When we see these kinds of signals before a breakout / head fake move, we almost know for sure that the trade will work, BIDU was one of the best examples of this in Q1 of 2012.


 The long term 15 min chart should be an obvious divergence.

 Close up of the same 15 min chart and we have recent distribution, but we are looking for a breakout on the upside. What the above charts have done is tell us that an upside breakout is A VERY HIGH PROBABILITY HEAD FAKE MOVE.

Here the 5 min chart gives us the positive divergence we need for a head fake move/upside move to commence. The fact it is 5 min only helps our case as it is not a large positive divergence so DE is shaping up to be one of the more interesting short prospects that may be available this week.

Call Positions Still Open

The Call positions where specifically for trend #1, last Friday I had liked what I saw in the NASDAQ and opened a split position in Jan $64/$66, those are in the green today, the older SPY calls, Jan. $140 & $145 are in the red, but have moved significantly closer to the green, I expect they will be green by the time this is said and done.

I have no intention of moving anything as of yet, either long or short, I'm happy with the way things are positioned which is kind of a modified, positional hedge. Instead of a traditional hedge in which short positions are protected by a call option and you end up with a toughly flat percentage move, these hedges are meant not only to hedge the short positions, but to make money, to be closed out when they are finished and then to let the short positions work.

I don't like what I see in the TICK right now though as far as intraday movement.

Volatility is still confirming Trend 1

There's a VERY weak positive divergence only in the intraday 1 min volatility futures (VXX/UVXY), this would signify an intraday (small) move lower in the market, IF there's no news that runs it over.

As far as the evidence I showed you earlier today regarding trend 1, the pop higher, volatility continues to confirm the other evidence (both presented over a longer period and today).

 1 min positive, suggests volatility moves up intraday, but this is the weakest of all the signals, and doesn't suggest much of a move, more a jiggle.

 2 min is perfectly in line

 3 min is leading negative, this would suggest volatility futures have more downside, the market moves opposite these futures, this is the reason for the call positions, the last was opened Friday in the QQQ.

 10 min in a deeper leading negative divergence, this is an important timeframe.

BONUS CHARTS-remember that we expect trend 1 to be shorter lived relative to 2 and 3, (2 is down and 3 is back up). Volatility on longer charts is in line and confirming trend 2, that would be a market decline and volatility moving up.



 60 min leading positive divergence

 2  hour leading positive, LOOK at that change in character!


And the 4 hour, no drawings needed, this is a big time move up in volatility, that is a big time move down in the market, that's still trend 2, trend 1 needs to play out first.

One Hint

This may be something, especially if it keeps up and more specifically if it can stay positive with a SPX pullback which is coming

Right now it is moving with the market, so it's not a huge signal or hint, but it is a bit stronger on the TICK upside.

 TICK trend is with the SPX so that's normal, the +1500 move is a little strong for this kind of a move in the SPX so maybe there's something there and this is one you can even watch.


SPY 1 min intraday negative divergence.

If the TICK moves more positively than the SPX, that may be an interesting hint.

Market Update****

Last week we saw some muddy signals in which it was obvious that the market didn't know which way things were going to go, but I really don't think I've ever seen this kind of indecision. 

Earlier today I showed you charts that were pretty much across the board suggesting trend #1 (the pop) which almost certainly seems to be tied to the announcement of a deal,  should happen and likely will happen fast and will reverse fast (my gut feeling is the reversal will be on the thought that it took so long to get this done and the Debt Ceiling is next- perhaps we even face a downgrade based on Congress's inability to work together as was the reasoning for the last downgrade also on the debt ceiling).

However in terms of timing and intraday signals, the market is showing no bias that I can ferret out no matter where I look, sure I can find hints, but nothing solid that I would consider high probability, this is one of those VERY RARE occasions in which (as I pointed out recently as we had another on the Boehner plan "B" vote), that the market seems to have no inside track, no inside line on when, how or what is coming and as such, they aren't making any moves.

I'll use the Q's as an example, but nearly every average, industry group and important stock look exactly the same.  Try to concentrate on the area from around noon to the press conference (in yellow) and note how 3C and price are almost exactly the same, this is where the market really went TOTALLY indecisive.

 1 min

 2 min

 3 min

 5 min

15 min.

Obviously, any strong move that diverges away from price is likely going to be a strong signal that someone knows something, so I'll be watching for that as it will give us an early heads up and depending on what it is, should give us a huge advantage over the crowd as once Wall St. figures out which way to go, it will take them a little time to position which we can use.

Some Idea of How Tight This Is

There's a little more negative movement the last few minutes, I think it's nervousness, but look at the right side of the charts as the Obama speech became known, 3C and price moved almost perfectly in sync, effectively short term the market doesn't know what to expect.

TLT Stands Out

However only on the 1 min chart, you saw the way TLT is moving (negative) and I think that is because of what the ultimate reaction is expected to be, but as far as this speech, the 1 min TLT is much more positive than price, suggesting money is moving to safety very short term.

Other Indications

Leading Indicators are completely flat as well.

The 1-2 min VXX and UVXY are pretty flat, they are negative in the longer charts, but that is what has been expected just on the reaction alone, as far as timing it, the 1 and 2 min charts seem to indicate what the rest of the market is indicating, IT DOESN'T KNOW if the Obama speech is it or not