Intraday Market Update

I'll be spending the rest of the day split between broader market updates and the Week Ahead and any positions I think might be useful right now as yesterday I paused on several as I believed the IWM pop above the sym. triangle was the most probable course of action, which opens up better entries so long as we have good timing confirmation which seems to be falling in to place ever since we passed 2 p.m. with intraday breadth falling apart quickly (TICK).

 SPY intraday is at the worst leading negative divegrence of the day, note since 2 pm passed, it has picked up on the downside. I wouldn't be surprised to see an attempt to overtake Wednesday's intraday highs if the market can hold together internally (TICK/breadth), it didn't earlier and I suspect that was max-pain related.

The Q's are also at a new leading negative divergence on the day.

 DIA has been one of the most steady performers (3C perspective) on the day, but still negative.

And the earlier IWM positive divergence that popped it higher has turned to a negative . Note both divergences were in ranges where it is very common to see underlying activity pick up even though from a price point of view, the market looks very dull, just remember VWAP and you'll have an idea as to why this is as it is.

 Although I'm not prepared for the broader update, I just couldn't resist giving you a sneak peak of the Risk - On leader, IWM and the next timeframe at 2 mins in to the knee jerk F_O_M_C and since.

Again, NYSE TICK has fallen out of the channel, but it appears there have been some longs willing to chase as we have some TICK readings at +1300, yet very little movement to support those kinds of readings in that area.

The custom SPY TICK histogram with yesterday's late improvement supported intraday by yields and some intraday divergences as we have seen, not to mention the obvious IWM triangle set-up which is what caused me to wait before adding any additional positions. Since we have a light uptrend and a sudden sharp turn to the downside, again 2 p.m. seems to come in to play.

TICK Trend Change

A quick head's up, I'll have market updates out in a few minutes.

Almost as reliable as the European close, 2 p.m. on an options expiration Friday (apparently even Quad Witching) sees a trend change as intraday breadth is falling out of a nearly 2 day channel, this serves as early warning.

NASDAQ BIOTECHS / IBB

I haven't put out many recent updates for biotechs as they have just become too parabolic to consider chasing not to mention the "Don't fight the F_E_D crowd" who are openly fighting the F_E_D first with the end of an open ended QE3, unlike former QE programs. Then with the Biotechs and Social media stocks are overvalued, that sounds like a shot across the bow.

However as I have made reference to numerous times and in numerous ways, price action isn't always what it seems. In addition we look at the market from our experience which is if we want a position we simply place an order, typically it's going to come in around the bid/ask spread. However if any of you have traded in illiquid stocks without the help of viewing the book (Totalview, etc. something deeper than just Level 2) and have traded in illiquid stocks, you may have had the experience of having a winning position (on paper) filled at a loss if you're not careful as the bid/ask spread and size can change rapidly in an HFT market and illiquid stock. You might get part of your fill at the anticipated bid, but if the size wasn't there to fill it and you didn't have a view of what was available at the next level and the one after that, you may have run through a decent chunk of the stack on the bid side and ended up with a fill that gave you a losing position. For these large firms, this is every day life with HFT Iceberg hunters and other kinds of front-running, they have to fill in what I term a "Process", rather than the way we fill which is an event (one time).

When I was making the point that the leaders of one bull market are rarely the leaders of the next and showing the accumulation of homebuilders for a good year and a half as the Tech Bubble was imploding, the point at the time was, "Who would have thought boring housing would lead the next bull market?" and "How did they know a couple of years in advance?". However for our purposes, if you remember those charts, the lesson might be that it was a good year and a half of accumulation and some additional time before some of these stocks moved up to 4500%. Filling the orders at institutional size is a process. The same holds true for selling them. David Tapper's Appaloosa cut all of their AAPL and FB position as well as about a dozen others in Q4 of 2014 in addition to reducing their equity exposure by 60%, but that was 60% since the previous quarter. Appaloosa as Tepper warned in May of 2013 had been selling, "Everything not nailed down" and here we are in 2015 and he's still selling which just gives you some idea of how long it takes to move a portfolio the size of some of these institutional portfolios and what do they need to sell? As Tepper said in 2013, they need someone to buy which means price strength and market demand to absorb the supply, in the end when you look back at the completed market cycle, you'll likely see those buying Tepper's wares in 2013 were left holding the bag, although you may not see that now.

So we can't assume smart money didn't take Yellen's outright and unusual commentary and warning on the stock market to heart.

For our purposes, noting distribution and knowing when it is on the fine line between distribution and decline is a very different matter, but you can't be aware of one side without understanding the other.

As I said, I hadn't covered Biotechs for a while in a tactical way because I just didn't see the opportunity and it's certainly not an asset class I want to chase at these levels. However things are changing as we saw in December with the first failed Santa Rally in I can't remember how long and the first failure of the January effect in quite sometime, but more importantly we had forecast both events based on the charts in November/December, that's what was important, something had changed enough that those two seasonal rallies that are just expected like the sun rises in the east, failed completely.

OK, on to Bios and not just because they are having an ugly volatile day...

 IBB 30 min with an in line (confirmation) area to the left at the green arrow, a couple of dips that were accumulated and a large relative negative divegrence which is informative on its own, but not actionable on its own. Since, in fact since the New Year as we had suspected that Q4 2014 and full year 2014 window dressing was in fact straight up distribution as we now know from a number of funds' SEC releases like Appaloosa's or Soros's 600% increase in SPY Puts to the highest level he's held since 2008, it looks pretty clear the same trend was / is underway in biotechs (at least NASDAQ Bios as the divergence has transitioned from a large relative to the stronger leading through all of 2015.

While a 30 min chart is informative from a strategic viewpoint, it's not exactly actionable from a tactical point of view.

 Although less detailed, we can see a longer and confirmed trend (multiple timeframe analysis) is the stronger 60 min IBB 3C chart. To the left is price/trend confirmation, the same accumulation area (white) and the same negative divegrence since then and a leading negative since the start of 2015, but note how deeply it is leading; it is relative to price levels last seen in February of 2013!

 On a more tactical basis, but not quite there, the intermediate 15 min chart (excellent signals for swing moves, etc) shows recent confirmation which is why I have largely stayed away from any new tactical positions/entries in NASDAQ biotechs.

However if we zoom out a bit on the same chart we see a little different perspective, although it's still on a strategic level and not tactical.

 This is as far back as I can zoom out, but if I could push it a bit more, the blue 3C line would be right where price is as indicated by the two green arrows on the left side of the chart which means the area since February that is near term in line, on a strategic view is deeply leading negative which is part of multiple timeframe analysis, multiple trends all at the same time, just in very different timeframes.

 The 5 min chart is a lot closer to tactical and yet still provides an institutional strategic view. Note the "inline" confirmation to the far left at the green arrow and the relative negative divegrence at the red arrow and leading negative divergence at the red box.

The leading negative area seems to be around the 13th of this month.

 On a trend basis of a 2 min chart we have the same rough confirmation with a few more details and divergences that worked, I just didn't mark them as I don't want to confuse the chart too much with details I'm not trying to point out. The point is, despite some divergences we mostly have an in line trend at the green arrow which is why I have mostly stayed away from any biotech posts or positions recently, but once again the area of the 13th comes up with a negative divegrence on a tactical timeframe that goes leading negative during the last several days, the bounce/F_E_D knee jerk area.

The 1 min intraday chart showing the period in which we first forecast a bounce to come on March 10th also is a leading negative area with it worsening since the F_O_M_C, which looks like the knee jerk momentum has been used to increase the rate of distribution as the two things needed, higher prices and demand were both present.

Remember there's a channel buster and these are what we call, "Seemingly positive" events, but in every case I can remember posting, they have always been red flag warnings as it's the change in character which leads to changes in trends. Also as I have shown many times, volatility increases at the transition between stages of a stock/market's cycle whether on a weekly bounce or a primary trend.

Remember that accumulation area above followed by distribution, there it is right at the volume and a nice steady trend until we move in to the new year with a parabolic move which is a warning in itself and a Channel Buster, a "Seemingly bullish event", but more often than not these are red flags as we have seen these at nearly every important top (like oil in 2008, gold in 2011 which is a beautiful example that looks almost exactly like this).

Channel Busters are a type of head fake move and they will most often break to the other side of the channel, meaning below this one.

BIS (Ultra Short NASDAQ Biotechs) also has some interesting tactical signals recently.

Note the change in volume's trend and the huge volume today. Normally on huge volume like that with a bullish candlestick I'd be buying on a reversal, normally, but today is Quad Op-Ex.

 10 min BIS change in tactical trend.


Leading 3 min

As I showed earlier, the Trend Channel's Daily stop isn't that far away, especially for a Channel Buster as these tend to reverse fast.

Note the bullish Hammer in February and it's on a huge increase in volume which makes it 3-4x more effective. Since then the Trend Channel has held the entire move with a current stop on a closing basis at $347.50. Even if we get a fast moving reversal on the Channel Buster, I'd guess that the Trend Channel will lock in at least to the $350 area or better.

Beyond a short term swing trade, I would be patient with a IBB short or BIS long although I like the concept VERY MUCH. The reason is simple...

Even with this bearish long upper wick and heavier volume which indicates bearish churning to me, the reversal process is a process and not an event. The last 2 reversals weren't of a major primary trend and they were 2 weeks each. I think we have time to let the Channel Buster take effect and the Trend Channel to be stopped out, we'd still be in an excellent area for a position and we can monitor the charts every day until we see what we are looking for. I just don't believe "V" shaped market events are 1) very common and 2) very reliable. I'd say IBB short/BIS long is definitely on the list, I'd just let it price itself a bit first. MAybe set some alerts for a break of the channel around $325 and of course the Trend Channel at $350-ish.

There will be more updates in the coming days.

Intraday Update

The intraday updates are so important today being quad witching and being we had that and still have that clear Russell 2000/IWM set-up from yesterday which looks to be a perfect timing trigger to transition to a move down from the bounce we first forecast last Tuesday the 10th as warning signals were showing up in price action and shortly after in all of our indicators.

TICK has started to come unhinged which is always a useful early warning.

 The NYSE TICK Index has had a pretty stable channel since yesterday afternoon, it's on the verge of falling out of that channel on the bottom end right now.

I posted the earlier, Intraday Market Update as a reference point for subsequent posts through the day so we know where we've been and where we are moving relative to the baseline post linked above.


 The SPY's lack of confirmation intraday has now turned to a leading negative signal, things aren't improving on an intraday underlying basis.

The DIA also looks worse as it has turned to a leading divergence.

And the Q's never confirmed or even made an effort to.

The IWM that I showed earlier with an intraday small positive divegrence at a flat range this morning has failed to confirm since.

And the Index futures did a good job overnight of confirming market action, they are now falling apart.

 ES 1` min confirming at the green arrow, going negative at the red arrow.

The same is true for NASDAQ futures /  NQ

And as you see, TF/Russell 2000 futures.

This isn't the "Screaming", chart popping divegrence I'm looking for yet from yesterday's IWM set-up, although we are in the right place and moving in the right direction. As usual, it's a process, not an event, however as we approach the 2 p.m. hour, I expect to see a lot more volatility at least between 3C and price if not price outright, I'm hoping that's where we find a timing entry for remaining positions.

Richard Fisher on CNBC

The F_E_D's Dallas President, Richard Fisher was on CNBC today, I don't typically watch CNBC and even if I did I wouldn't have had the time to get all of this down, but luckily a friend got most of it.

While most retail assume the F_E_D "Has their backs", I've found that other than statements they've made with clear "plausible deniability" meant to effect the market in the short term and then allow the F_E_D speaker to back away from the statements as they were "Plausibly deniable" or just ambiguous enough that they are left wide open to cognitive bias, the F_E_D has actually been pretty clear about what they intended to do.

Some of you may recall when QE3 was unleashed, the very day in fact and the very press conference with Bernanke just after, I said (somewhat ironically being QE was just unleashed), that the F_E_D was already preparing the ground work for their exit which started first with hints that they'd change forward guidance or the yardstick the market uses to asses the F_E_D's intent from a very clear and unambiguous qualitative (date and target based) guidance to the very ambiguous and ope to any interpretation the F_E_D wishes to attach to it, "Qualitative guidance".

The suggestion for the change in guidance we was made at that press conference. Within 6 months the F_E_D changed their forward guidance from quantitative like, "When unemployment is below 6.5% we'll stop the QE program and 6 months after the end of the QE program, we'll begin hiking rates", which took another 6-12 months or so to get that out.

Then forward guidance was changed to qualitative, not that I have an argument with that, it's just as we saw earlier this year and in fact until Wednesday, the F_E_D has been totally ignoring the slipping economy and hadn't really acted as if they had taken any notice of it beyond a transient event until this Wednesday when they made some downgrades to forward looking outlooks, but still removed "Patience".

Another example is the F_E_D saying they'll hike rates before Core Inflation reaches their target of 2% as long as they "Feel" it will be headed that way. Well the F_E_D has been wrong on inflation for 2+ years, but that's not the point. Qualitative guidance which sounds much more reasonable, also allows the F_E_D to do something like hike rates while inflation shows no movement toward 2% because all they have to do is say that they "Feel" it's headed in that direction.

Thus if you read between the lines a bit, the F_E_D is actually pretty transparent, how else did we forecast on September 13th 2012 as the F_E_D opened up QE3, that they were already planning their exit from accommodative policy and here we are 2.5 years later and QE is over (which was open ended by the way) and we are looking at the first rate hikes sometime in the not too distant future?

Well I'd say Dick Fisher is one of the least unambiguous of the F_E_D presidents and this is pretty close to verbatim what he had to say this morning as the F_E_D will give the market a message, often you have to read between the lines and more often than not people rather ignore it or apply some cognitive bias, but to me this seems pretty straight forward as a follow up to the F_O_M_C... (Thanks for the transcription Mike).

Here's the actual link to the interview

In addition, "Lockhart 'rate hike under serious consideration' ... per Liesman"

'We're in a good spot here, relative to the rest of the world, we're a '10'.  

'Investors have become too dependent on the Federal Reserve.  Are we vulnerable to a significant market correction?  I believe we are.  People have gotten lazy.'

Santelli 'has the Fed conditioned people to be lazy?'

Fisher:  'What worries me is that people watching this show and particularly  the big-money traders, are dependent on the Fed.  The markets have a responsibility to do their own work.  The Fed must implement normalizations ... I could see a correction taking place of significant magnitude.  Should the Fed react?  I don't think so.  These markets are hyper-over-priced right now in my view. '

Santelli - are we going to have all these flash-crashes now because the Fed has distorted things?

 

Fisher - I just hope people are beginning to discount in their own ways that the base rate will be raised.

Santelli - 'One word answer - will the Fed raise rates in 2015?'

Fisher - 'That's up to them.  I would start the process.'

Intraday Market Update

After the per-market stop run, it looks like most of the averages found their max-pain pin level.
There's a small initial change of character intraday in most of the averages which is where any new divergences will start so it's worth posting and keeping an eye on considering the general IWM set-up I'm looking for with multiple asset confirmation.

 DIA intraday looks to be starting to go negative.

The SPY and several other averages as you may remember put in some intraday positives with support from yields on an intraday basis yesterday, however this morning there's not even 1 min confirmation.

The Q's which looked like they may have found their max-pain pin for a bit are also not confirming even on an intraday 1 min basis which should have been able to confirm a couple of minutes in to the day.

The IWM has a small positive intraday as price was very flat in a range intraday...

Here's a closer look, note the flat price range since the open with a 1 min positive divegrence that is break ing it to the upside.

We still have plenty of time, these divergences in the SPY, DIA and QQQ may be the start of a broader divergence building from here that I wouldn't really expect to see until after 2 p.m.

Taking Wednesday's UGLD Long Off the Table

UGLD (3x long GLD) was entered just before the 2 p.m. F_O_M_C policy statement Wednesday and generally speaking since the Gold pullback and what it has done since including not only a downside ROC in price from down to a more lateral base-like formation and confirming divergences, I suspect this swing may be running in to some resistance and may be best taken off the table and looked at another day for a longer term trend entry (not sure if I'd need the leverage as I usually use that for shorter term trades , although there are exceptions).

8+% isn't a bad little gain for a day and a half or so of market exposure.

This longer term 60 min chart that was telling us a pullback of some magnitude was coming back in January...

 Has since gone lateral with a positive divegrence. I'm just not convinced that Gold can make a turn up to a primary trend without a little more lateral work on the base (widening out the foundation for a primary trend move).

 As we are nearing some local resistance any way, this intraday volume looks a bit like churning to me so I'd rather be safe than sorry here.

There have been good divergences for going long and good confirmation right through yesterday, today is the first day that short term intraday (1 min) confirmation has thus far failed.

Even in to yesterday's close there was a positive divgerence suggesting higher prices this morning, but since, there's a small negative and taken with that volume, it may be a short term churning/selling event as gold broadly speaking, could use a pullback and a wider base (more work laterally).

I'll be updating gold more and more as well as Dolf miners, GDX, NUGT and DUST.

For now though, I'm taking the gains off the table and waiting for a better looking forward looking set up.

As a longer term position and without the leverage, I'd probably have no problem holding gold here with the understanding that more stage 1 base building volatility is likely.

BioTechs Head's Up

I haven't covered biotechs for a bit as the intermediate charts have been in line and I'm not one for chasing, but there is a Channel Buster in place and if you've seen the NASDAQ Bios this morning, there's quite a bit of volatility and what would otherwise be known on a daily basis as the start of a bearish Dark Cloud Cover and perhaps a Bearish Engulfing candle, although we are no where near that actual designation other than early volatility and considering the channel buster as there has been a definitive change in character in bios since the 13th.

I'm putting together a rather large update for Bios, for now though know that the 2015 Trend Channel stop out that has held the trend is at , well...

Below $347.50 on a Daily chart's closing basis. It looks pretty far from the Stop, but considering the Channel Buster, you've seen how quickly those reverse. I might set some price alerts for the area. The Trend Channel will continue to move up and lock in gains, but also move up to a closer area and the actual stop will be a bit higher even if Bios continue to see downward volatility.

I obviously would want some very strong signals considering this is a quad witching day and volatility runs rampant, but there has been a significant change in character in NDX bios since March 13th as you'll see soon.

Broad Market Timing Trigger / IWM Set-Up

From yesterday's Broad Market Update we have the IWM set up mentioned as not only an interesting set up for the IWM in something like SRTY, Puts, etc, , but also in a wide range of assets, I even mentioned the set up as a timing factor in replacing the VXX/UVXY position closed last Friday in yesterday's VXX / UVXY Trade Set-UpUpdate post...

"Considering my opinion on a possible IWM/TF short term intraday move and the outcome, I think the charts below are very interesting, although they are still telling me to be patient before adding VXX or the 2x leveraged long UVXY long back in the line up. Consider the IWM triangle and most probable head fake based on technical trader's' expectations.

In that scenario, the following VXX charts make a lot of sense as does the trade set up and timing trigger."

And what was the set-up? From yesterday's Broad Market Update, here are a few excerpts with regard to the IWM specifically, but the market timing more broadly...

"

 IWM 5 min since the knee jerk higher yesterday. The yellow arrows in this instance are just pointing out a triangle. Considering Technical traders see this as a consolidation/continuation price pattern, what do you think the most probable course of price is?

I say a head fake (failed ) breakout to the upside first, pulling in new longs before a drop below the apex of the triangle locking longs in a bull trap.

Now you see why I'm waiting on entering some additional positions."

The market started to move toward that "most probable course" yesterday, see Quick Market Update, with some TICK and Yield support intraday.

As of right now, the anticipated IWM move is perfectly in place on Quad-Witching volatility/ stop hunt.

 Here's our IWM symmetrical triangle from yesterday which tripped the price triggers I set first thing this morning. Viewed by Technical Analysis, this is a consolidation/continuation price pattern, thus the most probable outcome is pretty easy to predict as we did yesterday in the excerpts from the Broad Market Update above.

As mentioned earlier, this also sets up a broad market reversal candle, a Bearish Engulfing or at least the first half of it, the second half will only be known at the close, but so far...

 There has been no intraday confirmation of the IWM this morning from yesterday's triangle and we already kknew that the longer term charts for this bounce had run out of gas in the R2K.

 IWM 2 min trend.

IWM 10 min.

The intermediate and longer term charts look great for a trade set-up, however as mentioned yesterday, with the shorter term charts which are the timing charts, I want to see the signals jumping off the chart, that's when I want to make any final moves in positions I'm interested in.

We should see broad signals across numerous assets including the VIX derivatives like VXX, not just IWMm so keep your eye out for the market updates.

Typically most max-pain pins (this is a bit different in that there was a strong stop hunt first), tend to end around 2 p.m. as most contracts are cleaned up by then.

A.M. Update

Good morning.

You may have awoken to a vertical ramp over the last two hours and ask yourself if a new QE program was announced. No, as Op-Ex is not only upon us, but the once a quarter super volatile QUAD Witching, expiration of  stock index futures, stock index options, stock options and single stock futures the market is on a tear hunting down stops.

From no news or catalyst whatsoever, the market is on a ruthless stop hunt to hit any and all stops above the post F_O_M_C highs, volatility runs high on Quad Witching as a general rule, it all just depends where the maximum options expiration damage can be done.

So just a few hours ago on no catalyst, the $USD starts to fall as we expected any way, but not that much...

 5 min chart of $USDX showing the F_O_M_C lows as well.

And this morning's boost in EUR/USD after a quiet overnight session as stops are ruthlessly hunted down.

The reaction in the Index futures...

This actually sets up a nice 3 candle reversal pattern with the Harami in place since yesterday's close, the open higher with a close below yesterday's is the downside reversal confirmation which is also the same set up we were looking for in the Russell 20000 based on its triangle, I'd say we have that now in place no problem, just a matter of looking for the timing.

The closing candle would look like this...

The red candle I drew in is the gap up, and the bottom would be the close or a dark filled in green candle. That's a perfect candlestick reversal and a fulfillment of the IWM set up seen yesterday.

It's going to be a volatile ride, just know why.