Did you see that?

Last night I mentioned URRE and the momentum crowd seemingly getting ready to play this one. This is an elaborate type of trade in which the market maker is forced into a corner that actually causes the market maker to drive prices up. It's almost the opposite of the old time bear raids. In any case, it was up 34% in one day today. There was some room to make some money in it if you played it right. So the industry group has several more that could be potential targets.

Trade guild explains my view on the market, we know what we are going to do so long as we don't see upside follow through.

In the meantime, maybe you can make a quick buck in the Metals and Mining industry group that URRE was in. I listed a few long trades in the group as momentum breeds momentum. Take a look at the trades tonight, but remember that this is counter trend, a move like today's 34% should be taken immediately. These are also largely speculative so absolutely you must have risk management plans in place, but while the market is like the summer sea (flat, stinks to be a surfer), you might make something in one of these.

UPDATE Here's how momentum trades work. A market maker/specialist is the last resort, by law and for the privilege of making a market in a particular stock, these guys HAVE to take the other side of any trade that is at market if there are no other takers. So a group of traders or a black-box continually pounds away at the ask, the market maker raises the ask initially to discourage the buying which is diminishing his stock (actual supply), but he can go naked short unlike us. The momo traders keep hitting the ask driving price higher. At some point the market maker will run out of inventory and in effect be filling these market orders in a naked short position which he must cover. So the market maker tries to cover by buying which drives the market higher, and so on  and so forth and it can last for days and even weeks. It is typically in low priced NASDAQ stocks that have memorable tickers like BOOM  or CHINA (which is another one worth considering right now). I don't know why they choose these stocks, these tickers, maybe because the retail crowd remembers the name and gets involved, maybe coincidence. In any case, a market maker can be severely punished by these momo traders and it can take him a long time to work the bid and ask to get back to a flat or profitable position, that's if the momos don't show up again which they often do.  So whatever is going on in the Metals and Mining group, it appears to have attracted their attention. The only thing with these trades is when they disappear, the stock can fall like a rock so you have to not be greedy and watch the volume for signs of them leaving the trade.

So now you know.

Update 2

This is the morning range. There is a strategy used by day traders (although less effective in volatile markets like we are in now). when a trading range develops, the first breakout above resistance or below support is the direction the market or stock will close for the day. For a close up, then we'd need to see a breakout above 111.90 (SPY) and a close down a break below $111.20. It's not perfect, but helpful. In a volatile environment they are prone to false breakouts that usually return to the range fairly quickly. We still have negative divergences in the averages.

Update

OK, well last night's 3C charts of the Dow's negative divergences seem to be accurate meaning yesterday is likely to have been a false breakout. False moves create real and fast moves in the opposite direction. Lets see what we get today. If you are new, look t the core ETFs we are using to short the market and the limit shorts will start triggering if this continues down, so pay attention to them, put them on a watchlist if you can with an alert. TeleChart has this ability.

Lets see what this turns into, but you know my suspicions. As I was saying to newcomers, we want to be at about 50% short and the rest cash or a little in UNG long. Another 25% short will be added below SPY $104.40 and the remaining 25% stays in cash. If you don't have your positions, you should take any chance you can get (any intraday strength to short into). RISK MANAGEMENT before you place the order, not after!

Keep your arms and legs inside the vehicle, and put on your set belts, today is likely to be another volatile one.

Read Trade Guild tonight

Last time we had the NASDAQ breakout and the S&P and Dow fail to follow I felt the same as I do now, except today we had the mirror opposite. 3C is showing significant divergences to the downside, my money is on false breakouts today in the Dow and S&P, but if they are not, we can look forward to another rally and a right shoulder to complete a H&S top. News is not driving this market, it is being used to drive volatility. Fundamentals are out the window. How can you have a valid argument for fundamentals/economics when an index is down nearly 300 points in a day or two and then up 200+ the next? This is one of the toughest trading environments I've seen since late 2008 when the Fed was the culprit in manipulating the market.

I'm hesitant to issue any trades until this situation resolves which could be as soon as tomorrow if the Dow/S&P fail and the NASDAQ and Russell fail to make any upside. At that point things will make a lot more sense and our plan will remain valid and intact. If not, then be prepared to hedge and raise cash. You are now trading in one of the most difficult environments I've seen in a few years. As I shout from the rooftops every night , "RISK MANAGEMENT!"

THE UNG TRADE IS WORKING SPECTACULARLY, STICK WITH IT!

WDC is approaching an area in which it would make for a high probability low risk short.

Watch LZB (S) for a break below $10

Watch the SPY for a break below $111, it could make for a quick profitable short.

Any move up in the Dollar index or UUP will be very bearish for the market. It traded in a fairly narrow range today suggesting that the downside pressure may have subsided, there are short term positive divergences as well.

URRE is a highly speculative play, but it looks like the momentum crowd may be sniffing around. You could try a long on the open and close it at the end of the day should it take any loss or make a new low. This would be a quick pop trade only. It is highly speculative.

The exact same applies for URZ.

If we do continue on an upward trajectory, I have a lot of long positions that should do well(in an upside environment), BUT, Wall Street is using extreme volatility, as noted 2/3 of the market days in the last month have seen triple digit moves up or down. I do not think it is wise to chase yesterday's big move considering the fact that the S&P 500 has had a net move of -.50% in the last 20 trading days (4 weeks). This is the meat grinder. For now, lets stick with the plan until we see something suggesting otherwise. Chasing yesterday's triple digit move is more than likely going to put you on the wrong side of the next day's triple digit move. As I've stated before, your greatest edge over Wall Street is your ability to wait. Patience isn't easy, but it is exactly what is called for right now.

If you have an interest in a specific stock, email me. If you are even a little unsure about risk management, email me immediately.

Tomorrow is another day.

Update 3

This could be the false breakout attempt I mentioned last night, 3C remains in a deteriorating negative divergence

Update 2

The divergence to the downside is getting worse and prices on the SPY have broken the intraday uptrend

Update

A bearish ascending wedge in the 1 min SPY

Continued deterioration in the NASDAQ Advance/Decline Ratio

And mostly negative 1 min divergences in about 11 of 12 charts looked at.

This a.m.'s action thus far is inline with last night's forecast. We'll have to wait to see what this becomes, but it does not cause me any concern at the moment with regard to our bearish stance.

Clarity

We've found a spot of clarity, whether short lived or not, (volatility has masked Wall Street's intensions), it has confirmed the strategic outlook we've been preparing for for well over a month now. Trade Guild has the charts up today.

I do not think that I will be posting new trades tonight (although check in the morning as I'm still looking over charts) because I posted a lot of limit trades that should trigger if we get the downside that I believe we will see shortly. Also the core of our positions is in the inverse, leveraged ETFs. The only excellent long I'm calling out is UNG, it's not too late to buy it.

If you have a question about the outlook for any particular stock or industry group, email me.

Our plan has not changed, we are still looking to add the final 25% bringing us to 75% short when the SPY breaks the $104.40 area. We will keep 25% in cash for opportunities.

For whatever reason, it seems that 3C is one of the few indicators that is thriving in the new "volatility based environment". Traders are being punished all around trying to hold positions with this volatility and many feel they can not get ahead of the algo-trading. 3C seems to uncover icebergs. Right now we are on the event horizon of a dramatic shift in the supply/demand structure of the market as Wall Street has been busy laying the trap that will destroy a lot of accounts.

Wall Street understands that the dollar can not continue to rise without negative effects to the bullish environment traders still think we are in. Just like trading options and making a lot of money in your first trades, people become emotionally attached to that which has made them money, in this case the uptrend that started in 2009. Do not become attached to what was, the next event will not be the same as the last. Stand back and look at the world economy, what does simple common sense tell you about the direction of the market in the coming months?

Go back and look at the charts of the Dow now vs. the Dow pre-crash 1929, it is striking.

There remains the possibility, not probability, of a right shoulder taking shape, a 5-day chart will illustrate this possibility fairly well.

As for today's events, the Dow staged a one day false breakout. The NASDAQ, S&P and DOW are now in close parity. The dollar index took a big hit today, the market could not take advantage of it, rather chose not to. Gold has started to form a daily negative divergence, meaning distribution has begun in the commodity, this does not imply an impending reversal of trend, just that intensions are there and they do not portend for a healthy bull market in gold.

Based on observations, but still an opinion, I believe that we will see a market completely decoupled with the standard market relationships that have been in effect for over a century. Something very strange is happening and assumptions based on past market behavior are apparently being setup as a terrible miscalculation.

All of this said, I would be 100% remiss if I did not implore you to keep risk management as the forefront of your defenses. We could be 100% wrong, events could change the landscape and smart money is not always smart and reserves the right to change their mind with little notice. WhiLe I believe we are on the right track and I have a lot of money committed to this idea, we must always accept the possibility of being wrong and the only life preserver in such a scenario is risk management. IF YOU DO NOT HAVE A PLAN OR DO NOT UNDERSTAND RISJK MANAGEMENT, EMAIL ME IMMEDIATELY SO WE CAN WORK SOMETHING OUT TO PROTECT YOU.

Finally, this chart of the NASDAQ Advancers/Decliners clearly demonstrates how quickly the market turned today. As I said on Trade Guild, this market is in a lot worse shape than it appears to be.

Look for early updates tomorrow morning.

Update 3

We now have serious leading negative divergences in the regular 3 C indicator. By the looks of the candle formation, we could have something like a shooting star reversal. At this point, we now have an edge. We are out of the longs, save for UNG and if we needed anymore shorts, this would seemingly be the last best opportunity to get them considering the probabilities.

Update 2

You can read about this new indicator on Trade-Guild, here are the current readings-3/4 are negatively divergence, the IWM is not in a great position but I wouldn't call it negatively divergent yet using this version of 3C.