A Short Term Long Position

This might be worth a shot, XIN long, either on the open or above $2.75. I'd use a stop around $2.50 so make sure you position size correctly as to not have too much risk in the position which is speculative by the nature of it's price and volume

One other thing,

The metals and mining sector has some news in it again surrounding China, but last week I talked about the momentum traders operating in that industry and mentioned URRE, I also listed quite a few stocks in the industry on the spreadsheet, take a look at those as possible long positions. Now we know why the momentum crowd was hanging around the sector.

Should I Hedge?

FXP is one inverse ETF on China, if the gap fills this a.m.  I would consider trimming down or cutting that position as the news prompting today's gap is related to the Chinese revaluing their currency.

As for other charts, I feel the same as last night, that it will be hard to say until we see a close and follow through, but if you feel the need to hedge out positions now, then you can use any of the Direxion 3X Bull:

TNA
BGU
FAS
SOXL
CZM

In this maneuver I would pull it off in pieces, maybe 25% at a time, but I would also wait a bit and see if the gap is filled, that would be the ideal time to make the switch. Then I would do the same tomorrow, another 25% toward the close if it looks like we are getting a bull move (close up today with volume and follow through tomorrow).

Otherwise, if you can wait it out until Tuesday, that would be my first choice, but you have to decide what is right for you and a 3x leveraged ETF is the quickest way to hedge.

This is why we are at 50% max short positions and no higher, not until the market proves itself. It leaves enough cash to hedge out your shorts.

I'll be updating around 11-12, whenever I see 3C's direction, which right now (as I said on TG last night) shows what appeared to be a gap up followed by weakness in the 10 min chart which could be today, but more likely to be in a day or two.

Reset Switch

Sometimes I post ideas and sometimes I don't. The reason being is that I want to be relatively sure of the market's direction, then I know which trades I want to look for. Friday's Quadruple Witching options expiration has thrown everything into the Bermuda Triangle again. I'm seeing a mixture of short term negative and positive divergences, in that case when I do not have majority confirmation I do not post any anticipated direction, it would be dishonest to act like I know where the market is going in the short run when I do not. Options expiration created so much volatility as they pinned the heaviest volume calls at $112. To make money you'd need price above $112 plus whatever premium you paid for the options. It seems to me that they fought it with a lot of volatility to keep it pinned and make all those calls or many of them expire worthless.

 I can come up with opinions of what that might mean, but there are so many strategies in options that you can never draw any accurate conclusions from them. We do have several reversal signals the last few days, it looks to me to be about time for a pullback, in that pullback we will have the information of whether we make a higher low or not which will tell us a lot. Should the market just peel off north then we have a different scenario altogether and our plan will be to sell bear ETFs a little at a time and replace them with bull ETFs and continue hedging in this manner until we get a reversal.

The charts now show what to me seems to be a clear path down, the question is when and how? The new Wall Street maneuver is volatile breakouts followed by failures, but we have yet to see a real failure.

Monday will begin the re-set. If we get higher prices, that is not out of the norm and it does not mean we are entering a bull phase, if Tuesday we got confirmation with a higher high and volume, then we have reason to start the hedging process. If Tuesday we see a failure to confirm as we have seen the last week, then we are on track.

The market is very much like professional poker. there are times to press, times to fold and times to sit and wait out the game. Right now it is time to sit and wait out the game.

I would post some short term trades that I see, (and I have in the last week, many limit order trades too which should be watched carefully for an opening), but I will not post those trades tonight based solely on the intraday volatility, the market seems to be heading in the desired direction and in the last hour it makes up all the ground it gained or lost during the day. Talking with floor traders, even the most adept that do this every day are getting massacred and when they move into cash to wait for clarity, who am I to say otherwise? I would not hesitate to say otherwise with clear direction from 3C, but it is not there in the short term (1-5 minute charts) which depict the daily movement and movement over several days and reversals. The longer timeframes are solidly negative, but as I said, getting from here to there can cost a lot of money if we do not have a strong edge. Many of you are here because of 3C's ability to give us that strong edge, when it's not there, I tell you.

I do not make market calls based largely on my experience and opinion, I make them on clear objective and overwhelming evidence. So I know it is frustrating to sit still, but for me to offer anything otherwise at this time would be gambling, a partly educated guess. You are not paying for a partly educated guess, you can do that yourself or get it froma thousand sources. You are here for the strength this system shows and when it shows that strength I will give you enough trades to keep you very busy as I often do. It's not there tonight.

Check back around 10:30-11 a.m. tomorrow. What I see now appears to be some sort of early strength, how long it goes on will be better determined tomorrow morning to the early afternoon.

Agin, if you have specific questions, and I answered several today with several page explanations, send them to me. In the meantime I will help all I can in whatever manner you desire.

Don't get too caught up in the early indications if they are very bullish. We just had an extraordinary round of bad jobless data an things are heating up in the middle east-the market hates uncertainty and will quickly mark prices down, thus the saying "When the missiles fly, it's time to by". the market would rather the certainty of war then the uncertainty of whether or not there will be a war.

Update

we now have 1 min neg divergences in all the averages. Look for a decline to set in soon

Options Expiration Friday

As pointed out by a reader, today is options expiration Friday with the largest open interest of SPY calls at $112. It will be interesting to see what happens, but expect there to be volatility in the area. Also I'm not sure I would take any break of $112 too seriously until Monday

MEat Grinder keeps grinding away

Even intraday, this market is punishing anyone trying to navigate it. This is the most ridiculous manipulation I've seen in a top and truly it ought to be investigated by the SEC. With all their circuit breaker rules, why they allow this kind of senseless volatility to exist for the sole reason of stripping people of their accounts is beyond me, except for when I consider the fact that the government is complicit in these events or at least turns a blind eye to them. This is why we do not chase every 200 point day up or down. As I have recently pointed out, over the last 4 weeks, the market has gained no ground, yet we have seen the S&P rack up 29.13% up or down combined and 315.37 S&P points up or down and a net move over the period of +0.09% That's a lot of movement for not even 1%! That's what I call a meat grinder and that doesn't even take into account the intraday highs and lows-you could probably double those numbers!

Tonight I've taken some of the positions I posted about a week ago and updated them to reflect the market's move since then with new stops and entries, many can be entered now.

The end of day rally has me wondering what they intend to pull out of their hat in the a.m. Maybe a gap up and a bearish engulfing candle of that hanging man in most of the indices? That would be nice, at least we'd have some follow through and in our direction as well.

This is exactly the reason we have our core trending shorts at 50% and not 75 or 100%, the market needs to follow through and show us before we commit the rest of the position. Please consider not reacting to every shuck and jive of this market, that is exactly what they want you to do. Be patient and follow your risk management plan.

check out tonight's updated list. If this market does follow through on the negative divergence and hanging man, they should be in perfect position to make some money. This is not a market well suited to any kind of trading at this point, as today showed, even day traders can't hold a position more than a few hours without getting whipsawed. This is not by chance, it is by design.

Also check out the longs I put up last night in metals and mining, the momo crowd should be back and URRE that jumped 34%, was a long on 6/2's list. I hope someone got a pice of that one.

Look for an update in the a.m. I can't imagine the market will not have a reaction to the unemployment #'s that came out today, or at least that they won't use them to create even more volatility.

I have divergences in the DOW and QQQQ (interesting pairing) that are a hair from leading divergences. If this happens, it will be very bad for the market, it's literally ticks away.

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.