Morning Update

Above are two negative divergences on the fast version of 3C, this where divergences on short timeframes show up first.

There were some good earnings out and some bad today. The news says traders are mulling over the batch of reports, this looks more like a holding pattern waiting on Ben Bernanke's Congressional testimony today this afternoon. We already know that he's going to say that the Fed stands ready to keep the market momentum (or perceived momentum that was thought to exists) alive.

Why is the market not shooting ahead right now? Because they want to hear the tone of his voice, they want to listen for any nuance, subtle contradiction, they want to figure out of the Fed is able to anything. Interest rates are about as low as they can go, the only seeming tool the Fed has to really twist the banks' collective arms is to stop paying interest on reserves and force them to do something with the capital they are sitting on.

As I write this, the divergence has deepened. I will continue to watch for any signs, but it seems as if there's not going to be much known until he speaks.

Correction or?

WOW! Last night I warned about strength today, even in the face of a gap down-that's a hard call to make, seeing a gap down like that and saying, "but we'll see market strength". The only way to have confidence in these calls (How about HOG today? Several members eamiled me today that made money in HOG and a few other trades based on the market call) is to trust your indicators, I trust mine. However, accumulation is one thing, but the strength of today's move can not be overlooked. In Western terms, this is what is known as a "Key One Day Reversal", in Eastern, candlestick charting terms it's known as a Harami reversal (day 3 and 2) and today (day 1) is a "Bullish Engulfing" candle. The volume was up, not on par with the massacre on Friday, but up substantially from yesterday. The price/volume relationship as you can see from the chart below, was Price Up/Volume Up, the most bullish of 4 configurations.

The only thing not annotated is yesterday in the white box, this is the Harami Pattern. Today we got Price Up/ Volume Up, and a strong candle on volume. This is surprising to see as a correction, the configuration usually leads to a more substantial move. Friday did create a one day oversold configuration which is rare, now we are seeing almost equally volatile price action today. This is why earnings and tops are so difficult to trade.

Good thing to remember, the close of the previous day is typically the first zone of resistance/support. Note volume picking up as it crossed through resistance. A couple of things happened, longs jumped into the trade there and shorts covered there. This is exactly why I say to keep your stops in your head, putting in a stop with your broker is showing the market your hand. Typically at 3:30 on toward the last 10 minuted of the day, we'd expect to see day traders closing out positions and a little but of a loss of momentum. With all the new developments including algo trading and prop firms being shut down, day traders don't have the same influence on late day trading. So we saw a very strong close, we also saw a very bullish price volume dominance of Price Up/ Volume Up which is the most bullish. Taken with the successful Harami reversal and the engulfing candle/ Key one day reversal, this was a strong day. I expected strength today, I really had no way to say it would be this strong.

This 5 min 3C ver. 3 was the most accurate in calling today's move. You can see a strong positive divergence toward Monday's close. I find it strange with all of the other apprent strength today that this 3C chart was not able to make a new high with price. This is, of sorts a somewhat weak relative /negative divergence, but it suggests to me that there's some fading momentum, not downright distribution. This leaves the gate open for more upside in my opinion. However, as I mentioned before this move up got started, I anticipated a couple of days of upside.

This 3c ver.1 5 min chart of the SPY shows a positive divergence at this morning's lows and the rest of the day it confirms the price trend. It is rare to see a positive divergence in an uptrend, although they do occur, so this is actually a fairly strong chart.

This same 3C chart, except 10 min has been pretty reliable in the past. This is the first timeframe in which we see a negative divergence, which I would interpret as the start of selling into strength, but not an imminient reversal. Of course smart money's not always smart-Lehman Brothers comes to mind, however, I find it hard to argue with the evidence. It seems to me that we are in for at least two more days of upside, unless we see a lot of selling in the 1-5 min charts tomorrow, it wasn't really there today.

Here's something interesting, the SPY 5 min 4C chart, which provided a leading positive divergence Monday, a very pronounced one. In looking at this chart yesterday, there was very little chance of not seeing upside today. It has formed a mild relative negative divergence between yesterday's close and today's close. This is really the strongest case I have toward distribution and it's fairly mild.

Now that I've posted so many charts that seem to not give us much perspective on the market, I will explain why.... The name "3C" stands for "Compare, Compare, Compare"-it's a reminder of what good analysis is all about, comparing, putting together as many pieces of the puzzle as possible. The point I'm trying to make other than, brace for more probable upside , is that we do not see consistency between the indicators like we did yesterday. I call this the fog or the Bermuda triangle, this is a situation where any call is not backed up by high statistical, objective probabilities. IT makes me nervous to say anything regarding market direction as there are a few different doors open and it's most likely because all versions of 3C/4C are written differently precisely so I do not get the same signal unless it is very strong, then they align like yesterday or today's move in HOG which could be seen with quick view.

So lets look at what this could mean

Although the market is good at manipulating price patterns, the bigger patterns such as this Head and Shoulders are very dificult to manipulate. This is a consensus of human emotion. It's a stage 3 top of proportionate size found where it should be expected with 3C daily charts confirming it. People talk about the failure of the Head and Shoulders May-July last year, but they didn't take the time to validate the pattern. It has been said that one of the main attractions to technical analysis is laziness and that is what happened back in 2009 with the H&S, YOU MUST CONFIRM THE PATTERN WITH VOLUME and in this case, we have confirmation. The greeen arrows are pointing down, this is volume n the rallies, the red arrows pointing up is volume in the sell-offs, this is what confirms a Head and Shoulders top. It's difficult for me to believe that this top will be voided. So if the market rallies the next few days, you know what to look for-VOLUME! If it dries up like we have seen in every other rally during the top, then this is not a serious threat to the top and the short position is justified. If it does increase in volume, if it surpasses the blue arrow and most importantly the red arrow above price, then we have a problem with this top.

Many have talked about the "Summer Rally", even people I respect. It's almost a Wall Street cliche now it's so embedded into our technical brain. There have been years, even in Bull markets like 2004 where we didn't see a summer rally. In 2008, at the right edge of a Head and Shoulders the summer rally that started late July was worth about 3.5%-not a very big deal especially considering the fact that Friday we saw a one day move that was nearly equal to the 2008 summer rally. The point is, your analysis sholdn't be based on superstition, but objective data.

Bottom line, we watch carefully tomorrow for any indication of a halt to higher highs, higher lows. We watch for volume, does it increase or decrease? Of course I'll be watching developments in 3C, but to remind you of the most powerful and telling of all the charts,

This is the grand daddy. In the green box, TSV largely confirms the trend, except the orange box within it, we see the distribution start in October-same as the blue arrow on the 3C chart. The red boxes both show extreme leading negative divergences, these would be exceptionally difficult to turn at this point, something amazing would have to happen in the economy. So keep in mind the long sighted view as well.

As fr the next few days, continue to honor your stops, no cheating and moving them up unless you have an exceptionally good reason-you can always short at higher levels and recoup any losses taken by stopping out. Take a small loss and you won't be faced with taking a large loss. Learn to love taking small losses, that's your survival mechanism in the market.

If you have the time and are nimble, you can certainly play some longs. Several members emailed me with long plays they made money on today including HOG as I warned last night we'd see upside. One of my favorites for a quick bounce is UPRO, it;s 3X leveraged, you don't have to worry about earnings or news really and it'll generate a nice little return in an quick pop up.

Now, looking forward to tomorrow's earnings as people have been making money on this new twist I've thrown into the mix.

JNJ did what was predicted in last night's call-it was down on a nice gap and there was downside off the opening, not that it's a high beta stock, but 3C was right on. And b the way, it broke the flag, so watch for the target to be met. GS wasn't much of a call, the biggest thing there was, "as GS goes, so does the market" and that's what we saw in price configurations today. HOG was a huge success, like DAL the day before.

As a quick possible trade of a day or so, because after that it's murky, USO appears that it will see some downside tomorrow-watch for a possible gap up that falls back into the triangle. If that situation unfolds, this may be worth more then a day or two, a false breakout in USO right now will most probably create a downside sell-off that would be worthwhile.

Now please keep in mind what we are doing here with these earnings calls (I NEVER used to trade or recommend trading earnings), we are trying to find possible leaks that the market is acting on before the earnings come out, this is the first time I've used 3C for this and quite honestly it's pretty tricky, so don't go betting the farm. First up in Altria (MO), which I'm ashamed to say that I have contributed to their sales this year, I may have even made their quarter :( Please no emails, I know, I know-but all traders smoke, right?

This 4C 5-min chart has been accurate and honestly I like the stocks that are reporting early because you'd expect to see the final exodus the day before in the afternoon. I think they come out at 9 a.m. Notice the sell-offs around the $21.45 level. There's been about 7 day of resistance there and it seems to be coming from the late April, very early May top that formed right before the sell-off. then we saw a move above in mid-May, it didn't hold and was an obvious false breakout. Why obvious? Look at what happened next, it took a 10% nose dive-false breakouts reverse quickly and violently and in this case, on big volume. Today MO broke out, any other day and I might feel differently about it, but it appears that they used the market strength to perhaps create one more false breakout, one more opportunity to sell at higher prices and set shorts. 4C could not confirm the afternoon close higher. My opinion is that this will not do well whatever the earnings are, the only wild card is the "rising tide lifts all boats" meaning general market strength, still, I feel this is probably a bull trap today. Otherwise it seems to be a decent short on a longer daily basis.

BIDU has negative divergences on 3 different time frames, even MoneyStream in red is divergent. I'm expecting weakness here. Even today as it moved up with the market, it could not muster any volume. It's also in a daily triangle-looking top.

FCX 1 min 4C chart. All 3 3C charts are negative on the 1-5 min as is the 4C chart you see here, price rose with the market, but it seems apparent that there was selling into that gain while the rest of the market at least confirmed. FCX should report pre-market. If you get a chance, look at the last 30 minutes where it actually starts making lower high/lower lows=downtrend on high volume. I think this is a pretty good candidate for a short-sell trade.

Good News?

This is a 10 min 3C chart of GSK, 10 min is pretty substantial and you can clearly see the positive divergence yesterday and today we have a leading positive divergence, the most powerful and on a 10 min chart. I feel that this one is going to respond well to earnings.

Finally, for tonight-this is the one I'd rather skip, but this is one stock that will be or has the ability to be the fulcrum of the market-UTX

On a daily chart, UTX looks remarkably like the S&P-500. There's one difference-this 4C chart does not look like the SPY. We have the positive divergence yesterday, but today toward the close, actually earlier then that, we see distribution. There's also some bigger negative volume and this is what has me a little hesitant. Although the assumption I'm making by putting this chart in this section is that earnings leaked, the volume at the end of the day could have influenced 4C. 4C is meant to pick up on quiet accumulation/distribution, but the anomaly in volume could effect it. The reason I went ahead any way is all the 3C 1-5 min charts are negative and the divergence started before the volume really got heavier at the EOD. So the assumption here is we have a possible leak in UTX regarding earnings and it won't respond well. If that is the case, this one could very well influence the market. UTX reports pre market.

Happy Hunting

Update

Ok, this is the strength I was seeing last night, the 1 min 3C is inline , confirming the price trend, but on the 5 min we are starting to see more distribution.

WFC which reports tomorrow is seeing  short term 1 min negative divergence, but in the other timeframes it appears to be pretty positive. My guess "GUESS!" would be that they have good reaction to earnings Wednesday-keep an eye on that one it, may be worth a shot with a tight stop.

I'd think the market will pullback around 3-3:30 and then finish strong.

Update

The higher prices I expected to see in the market were based on a 5 min positive divergence, both 1 and 5 min positive divergences are loosing momentum, it could be a temporary consolidation, but I wanted to let you know. HOG is also loosing upside momentum for anyone trading that one.

earnings leaks

So far the analysis on BAC, AAPL, JNJ, GS, Especially HOG, BIIB and USO all seem , at least to this point, to be very accurate-HOG was one of the only stocks that I said looked like it would do well with earnings and it's been up this a.m. Over 15%. We did apparently miss on UAUA, but I didn't put as much analysis into that as I should have with DAL's disappointing earnings, it probably colored my perception. On Trade Guild I mentioned the after hours indications are pointing to a gap down, but we see positive divergences and thus far the market has been moving higher from the gap lower. It looks like 3C is picking up on earnings divergences, which confirms what I've been saying all along-the numbers appear to be leaked well in advance of earnings releases. I'll update as the market changes.

A Bounce? More Earnings Inspections With 3C

Take a look at Trade-Guild tonight and earlier today here at Wolf, I put up a note noticing the change in character in the market. It's possible we may have a bit more upside, do not be fearful, as I have said, there are more down days then up typically even a bear market. You want to limit emotional reactions, especially to earnings which are largely price driven by retail-dumb money while smart money is more then happy to sell into their demand. We don't chase every move the market makes-imagine if we had done that last week on the market rally... the result, a serious butt whooping for a lot of longs that react emotionally to information that has already been priced into the market.

It does feel like something may be coming out the news chute here shortly, maybe Fed policy? However, as I pointed out if the Fed was serious about trying to keep this market up, they would have released it when the rally started to falter, which makes me think they don't have much to work with(besides cutting interest rates paid to the banks reserves forcing them to lend or do something with the money other then sit on it) and if they do come out with some policy directive, it may be largely for show as the midterms are upon us and the incumbents are in serious trouble. In any case, the market seems to be bracing for some move up. Until the charts tell us different (and we DID NOT change course in the last couple of weeks when the Dow saw it's biggest 1 week rally in years, because there was nothing objective to change my mind-and good thing we didn't).

Read Trade Guild for more on the market, AAPL and BAC.

Tomorrow we have JNJ which is a biggie, not sure when they report though. Here's the analysis on JNJ (and by the way, I received several emails from people who made some money in the DAL trade short term when it was down over 9% intraday-nice gain for a day).

This is a two day chart of JNJ, look at all kinds of different chart timeframes, you'll be surprised what you can find in other timeframes. I used a 2-day chart here to show more clearly a probable Double Top and a bear flag. In the past, the second top of a double top often fell short of the first one-this is not how the market works anymore. Remember, they know what everyone is looking at and they want to use that against you so it's more common to see that double top (the second one)  give a false signal by "appearing" to be making a new high and continuing the rally. What happens? Longs get excited and then trapped in a bulltrap and their losses feed the downtrend. In Q2/Q3 of 2010 we see a big bear flag, volume is not perfect but we had a few events transpire where it is not correct, that would explain that. The Red arrow shows a false breakout that seems to negate the bear flag, it's short lived and false moves create fast moves in the opposite direction-same theory as the double top-they suck in longs that feed the downtrend with their selling, converting paper losses into real losses.

Here's 3C (Blue) and TeleChart's MoneyStream in red, both red arrows point to negative divergences at the time of the false breakout from the bear flag, now 3C is in a leading divergence. This is a fairly long chart, but it doesn't seem like the kind of action one would expect if the earnings were expected to be really good. On the other hand, lower prices are better for accumulation, the problem is we see no accumulation!

The 15 min chart is the only place I can find accumulation, but this isn't all that strong depite it's appearances, if you trace price, it's strongly confirming with a bias toward accumulation, MS below is showing the complete opposite.

Blue=positive divergence / red= negative divergence-red boxes= big selling and at the right side of the chart we see a negative divergence at a time when the indices are putting in positive divergences. Looking at the whole picture, my guess is that JNJ (despite any initial reactions), will see downside and the bear flag target will be in effect with a first stop around $52

GS will be of major interest reporting at 8 a.m. I have to say, it hard to find a real bad negative divergence, but I also am quite sure that the settlement (which amounted to a slap on the wrist with a wink and a nod) was likely leaked before it was announced, I think we covered this. So a lot of those positive divergences may be left overs from the settlement with the SEC. The only thing I see that is at odds with the market is a 1 min negative divergence on several 3/4C charts. Here's one-

The red boxes show negative 1 min divergences in MoneyStream, TSV and 3C-this is at odds with the markets behavior and GS reports in the a.m. It appears the Specialists are reducing their inventory before the earnings... why? You'd think if GS was going to pop that they'd want to have accumulated supply to sell? right? I don't know, it's a little mystery, but this is what we have to work with, however expect GS to be  fulcrum of the market tomorrow, as in "as GS goes, so goes the market"-at least for tomorrow to some extent. Keep an eye on this one. After all the accumulation before the SEC news, if earnings/guidance disappoint, then there could be a lot of sellers lined up-and institutional sellers at that.

Do HOG owners love their Hogs more then their savings? 
The easy answer to that is probably yes. I didn't do exhaustive analysis on this one, just a quick look as they are reporting Tuesday and it looks like HOG may very well come in with some good news that the market can sink it's teeth into. Like I said, this was a quick look but it appears to be fairly positive. The thing that makes HOG interesting is that its price position is so close to changing the downtrend, it just needs to get above $25.50 and it will have changed at least one trend from down to up, there could be some room for the bulls there. We'll know soon enough.

DAL took it on the chin for a bit today before the market thew it a lifeline, UAUA reports tomorrow, so more of the same? Is the industry just not in good shape? It wouldn't surprise me. UAUA has a strange triangle top, it's (cyclically  speaking) in the right spot for a stage 3 top (distribution) and although DAL had a different top, it too is stage 3, so there may be an opportunity tomorrow for the nimble to catch a quick move down like a few members did with DAL today. Otherwise, it may be a worthwhile trend trade.

A double bottom-3C showing accumulation there and as I have said-accumulation occurs on light volume-this is Stage 1. Stage 2 mark-up is confirmed with 3C and the triangle top shows signs of distribution and a false breakout, most likely in stage 3, next stop=DECLINE

BIIB
Reports in the a.m., this stock is not looking good. My guess would be that it will not do well over the next few days. Although it has had a significant rally in July, it appears at best 3C confirms the trend in in a few instances the daily chart is in a negative divergence. It reports in the am and while the SPY saw price confirmation at the 3 p.m. rally high, BIIB sold off, so there was 3C relative weakness which without doing an hour work up/analysis on the stock, I can only take it to mean that the results will not be well received.

Now for some questions I didn't answer yet....
USO-this chart is in a consolidation, a big one and the most likely resolution is the preceding trend which is down. I only make 3C calls when a divergence jumps off the chart and is extremely obvious. If I have to search for it, I pass it by. USO is one that I would pass by, 3C is not giving any strong signal which could mean it's in some transition, So next I fall back on the price/volume of the chart which I mentioned, right now it's in a downtrend that is consolidating so I'd guess, besides a false breakout, the path of least resistance is down. However that's a 60/40 call and not a high enough ratio that I would put money into the trade. There are thousands of opportunities, the trick is to find the highest probability trades, USO right now is low on that scale. A break above $35.50 or below $33 would change the dynamics and then there may be a worthwhile trade there but right now I'd just put it on a watchlist.  The typical correlation with the $USD is not strong right now, I suppose it's because currencies are in such upheaval and our government is so out of control with spending that every other country is calling for some other currency benchmark.

Bottom line, until something happens, skip it.

Look for updates tomorrow. If we do get the gain in market prices, it's not something I'd be concerned over. The drop on Friday was enough to put the market into an oversold condition in a single day so there's bound to be some correction, It's when sentiment is so bad, we will see the market forget about oversold and just dump. We are getting closer to that as Friday proved.

Last, if you are not getting updates via email and want them, please let me know.

When we get back into a decent trend and less of this seesaw volatility I will post trades again to the spread sheet. Right now though there's a ton of window dressing and volatility due to opposing forces, on one side we have political/ Fed interests (or surface interests from the Fed) and the other, what the market really wants to do, they are fighting day and night and institutions use that volatility to scare people out of positions set false breakouts and make everything worse and more volatile. This is not a good trading environment unless you can sit in front of a screen all day, then there's some money to be made, otherwise, sticking with the prevailing trend is the best option. They say don't fight the Fed, but there's so much more to that story nowadays then ever before, it's just not a hard rule like it used to be; nothing is anymore-just look at the correlation that used to exist with the VIX-it was reliable-now... it's like a kid scribbling on paper. Correlations are quickly disappearing and rules that use to be hard and fast are fading fast. Like I have been saying, this is a new market and it isn't easy but you need to understand how it works and I hope I can help with that as I learn more every day myself.


In any case, if there's one time you don't want to actively trade, it is during earnings. Why? The whole idea of what we do is to put probabilities on our side and then and only then commit. Earnings (unless we figure this out with 3c in a manner in which we have a strong edge) are a wild card that kill probabilities. That doesn't help our cause and it would be irresponsible of me to feed you some trades just to make it look like I'm doing something. That is not a good investment of your membership and I won't do that unless the probabilities are overwhelming. That said, there are a few ideas people made some money on today, just don't swing for the fences , okay?

Feels Like Something's Coming Out

There are several positive divergences on the 1-10 min charts . Nothing goes straight down and we had a bad plunge last week, keep an eye out for news soon. I don't see any threat to the overall bearish trend assumptions, it's just again, getting from A to B and we are on the last leg of that trip.

If It's Obvious, It's Obviously Wrong

The Vortex of Human Emotion...

What we saw on Friday, was something like we expected. As I have said recently and posted on Trade-Guild.net in “Looking Long”, DO NOT BE CONCERNED WITH DAY TO DAY VOLATILITY, WATCH FOR THE MAJOR TREND UNFOLDING AND POSITION YOURSELF WITH IT. At least that is where I see the highest probability, lowest risk opportunity right now. If you are a day trader then this doesn't help a lot, but there is some use in it. As I have described Wolf on Wall Street, like a Wolf, we are opportunistic. People all too often try to force trades and assume that the market will work with their investment strategy that may have served them well in the past-IN A DIFFERENT KIND OF MARKET! 

WOWS identifies opportunities based on what the market offers. We can chase rodents, rabbits or big game and I am of the opinion that you'd like to make more money, so why chase rodents and rabbits?

Friday was described like this by about the only person I take some heed of, Don Worden,

“The Worden Report (Friday, July 16, 2010)

Urgent Dumping

It probably doesn't surprise you to learn that the Dominant PV Relationship on this day of days was PDVU. More than 2/3rds of the Russell-3000 were down on increasing volume. PDVU sometimes indicates a capitulatory shakeout, formerly usually termed a "selling climax." The market bounces to the upside (often just temporarily). But when this occurs coming off of a minor top (which this has), it indicates urgent dumping.

For the Dow, not only did volume increase, but it was the heaviest day since June 25 (one day before a five-day plunge that took out the June and February lows). Since then the market has been in a Short-Term bounce. Today that Short-Term Bounce rally was resolved negatively, as all four of the Major Averages deteriorated to Short-Term Downtrends in the data table.

Looking at it on a chart of the SP-500, I believe the probability is that this leg down will violate the July low within a few days. Many will look at the upside reversal that occurred as July began as a so-called "support level." I don't look at it that way. The market merely bounced in a logical spot to bounce within a determined down leg. And I personally expect it to cut through that level again like a butcher knife going through soft butter.

Could it bounce from that level again? Well, yes, of course the market can do anything it wants to, and sometimes it can be very surprising. But this configuration looks to me as if the elevator is heading down. If the market doesn't do what you expect it to do, the solution is always the same. Change your mind and get outta there!

Today's trading stats were atrocious. The Ten Important Averages dropped -2.99% on average. That's three percent! Wow!

The Breadth Groupings were like a teeter-tauter with a little dog on one side and a 400-pound gorilla with an elephant on each shoulder on the other side. All 31 Major Industrial Sectors were down. All thirty Dow stocks were down. Needless to say, all 16 Groupings were Super-Decisively Negative. “

I reprint this because if you are a TeleChart subscriber and read Don's nightly report, he is as “down the middle” as you get. This is one of the rare occasions I have seen him inject strong passion and extremely obvious expectations into his nightly report. I was stunned just reading it after having read his reports for nearly a decade and having met him several times.

I will be a little more restrained and go down the line of, “The market's in a horrendous position, but it can do anything it wants”, meaning I'm very confident we will move from “A” where we are, to “B”, somewhere much lower then we are currently, but I will leave some room for market surprises along the way.

What we saw on Friday was not a mesurured reaction to earnings or to Retail Sales, it was emotional. There are two forces that dominate the market and cause it to move, you may say supply and demand, but it is actually Fear and Greed. This is an extremely fearful market which gives institutional money an angle to work, if they themselves have not been badly damaged in this tsunami.

As I mentioned on Thursday and I think Wednessday too, new members should be easing into short positions unless we are breaking serious support levels which was clearly evident by price action alone on Friday, then you want to turn up the volume; so you would have wanted to accellerate your accumulation of bear positions.

Despite the spanking the market took, we are still in decent position to add to shorts and any strength should be used for that purpose. As I have said many times before, there's still a lot of downside and actually we haven't truly even really kicked this bear off. Below $104 (SPY) is where the action will really accelerate.

The first thing to look for Monday and early this week is “Follow Through”-more downside, more volume, more bad breadth. However, remember that there are typically more up days then down days in a Bear market.  I saw this today by creating a quick custom indicator, there are way more days that close below the previous days median volatility or median ATR. I think there's a custom indicator somewhere in that truth-I'll be working on it.

Support levels on the SPY will include: $106.60-we're right there, a stronger level will be found at $105.90-$106.15; this is where you “may” see a short intraday bounce (50/50). There' weak suport at $105.60 and a stronger level at $105. The big test will be around $104.40 with a minor test at $104.70. The major obstacle at this point and the one that will truly RE-ESTABLISH the downtrend will be found, as Don said, at the July low, this level will tell everyone, “The Downtrend is back” and there's no arguing with it. The level is found at $101.13. The probabilities of a bounce at that level from there to $105 are better, maybe 65% chance. However if emotion rules and sentiment stays sour, then I agree with Don, “A Hot Knife through butter”.

Google (GOOG) is in big trouble and will likely lead the market lower. I think the next stop for GOOG will be $400 where it will likely bounce and may put in another leg down. Strangely, GOOG is working on a bullish price pattern called a descending wedge. In a bear market, bullish patterns are more likely to fail, but the bigger they are, the better chance they have and this is big. If it does breakout from this pattern-(let me say the false breakout last week will push this down fast) then it's upside target will be close to $600!!?? We do have to keep in perspective though that GOOG has been in a bear market a lot longer then the market itself so it may make some sense. In any case, there's short side money to be made there for now

AAPL is another horrible looking chart and market leader. This is a clear trianlge top which saw a false breakout-as I keep saying, the market doesn't work like it use to and a lot of suckers got caught in that flap; they'll be quick sellers soon. The volume is astoundingly bad as is this 4C indicator is showing pure exodus out of AAPL. On the downside, we can expect at least a move to $150, maybe even closer to $100!!

Will RIMM fare much better? At first look, this looks to be very lateral, but upon closer inspection and with 3C in yellow, we see a clear top, clear support that was broken and a classic rally to support were it failed and got dumped. The gap down in Rimm back in late June is an excellent example of stops piled up at obvious support and near a whole number ($55)-BIG MISTAKE. There's still a lot of overhead supply to feed the bear here and I see a target of $35. The stop is way to obvious at $55, I'd give it intially a little more room, but I doubt it'll be visiting that area again. This is in excellent position now for a short, just remember a wider stop and take fewer shares initially until we break July's lows.

Mondy, IBM will be a biggie releasing results, however, this is one of those stocks that is difficult to get good 3C signals because of its relative low volatility and the fact it's used as a part of basket trading to equalize ETFs-bigger stocks have this feature of being misleading so if the signal is not jumping off the chart at you, I pass them by. IBM is one I have to pass by. The only thing I see that looks strong is an early morning positive divergence, I'm not sure what time they announce.

HAS is interesting, we have a dichotomy here.

Obviousy on this 10-min chart it apears that there's been accumulation at least by market makers. I wouldn't expect to see this, I'm not comfortable with it, but I report it as I see it and we have a positive divergence on a stock that reports tomorrow a.m. The longer term blue under the chart is clealy negative so maybe we see an intial wave of buying with shorts into that at a later time, maybe a day or two? It's interesting because the accumulation was during the sell-off Friday and they know they report before the market open on Monday-lets keep an eye on this. Short term traders may like to take a crack at this one, but it should be more informative then anything especially as I'm using 3C this earnings season for a different approach.

Here's another oddity, insurance giant Brown and Brown (BRO)-I hated these guys when I was in commercial insurance, insuring the mega-condos on the beach-they had that market locked up so tight you'd have to really get lucky to steal business away from them. In any case, the 1 min 3C shows accumulation? Could tomorrow end up being an upbeat day that puts a temporary emergency brake on the market slide? Should be interesting to say the least, and if you're a day trader, this is another to keep on your radar, long term I'm not a fan of any position here.

DAL-Delta reports Monday at 10 a.m., this is a clear H&S top. At the left in the square, that is good price/volume confirmation-volume up with price and down with price, but when we get into the top formation, it does exactly the opposite, this is why people see a random price pattern and call it a H&S top when it's not-YOU MUST CONFIRM VOLUME AND IT SHOULD BEHAVE AS WE SEE HERE.

 So long term , DAL is a short; when it breaks $11, you want to be pretty close to all in although you could start sliding into the position now.

As for 3C and tomorrow, I don't see much to get ecited over, it looks like it'll go down the drain real soon so that means if it pops, which I doubt, I wouldn't put too much importance on that and probably would short into any strength.

As for the market, there's no doubt that the longer, more substantial timeframes of 3C are all bearish, but there is an strange positive divergence in just about all the averges in several timeframes suggesting that this bear will try to bounce, unless there's something that's not earnings related that we don't know about that is going to hit the wires. Otherwise my guess would be maybe IBM has a decent quarter, but as I said, there's no transparancey there.

So keep Risk management in the forefront of your mind and remember a bounce will get you closer to your intended stop, which gives you less risk and the ability to take on more shares, but we love to phase into positions. The final commitment to a position should always be when it finally does what you are expecting.

So this is a guess only based on what I see, maybe some early strength maybe even a close either up or maybe a small bodied candle, maybe even an inside day. However, it shouldn't take long for this market to fulfill it's destiny. Just remember, if it's obvious, its obviously wrong.

If you need help establishing a portfolio geared for the trend or are stuck in some mucky stocks, or have any other questions, let me know and I'll try to help.

BT46n2@ gmail.com

Have a great week!

This says it all

I hope everyone had a great week, this is just the start of great things to come-as I said, Patience and always-Risk management. We have a huge opportunity that just opened up way bigger then I thought. TODAY was PURE PANIC selling, not the kind you see at capitulation, but the kind you see at the start of a big move down.

Thanks keeping the faith, hanging in there. I'd think most of you (from emails I've received) are well on your way to great profits. Remember, most people got knocked around pretty good reacting to every gyration up and down in the market for significant losses (I've seen those emails from non members too). We've had a strategy and today it really kicked into high gear. Congratulations-Have a great weekend and I'll see you on Sunday.

Oh, don't forget to check Trade guild tonight, specifically look for the link to Cramer's recent foot in the mouth. This is why (he's not dumb) you can't trust what you hear on CNBC for the most part.

Take Care!

Brandt

Good Calls Last night?

I told you we'd look at a company before earnings (last night C) and look at it today.

OK-watch for an intraday bounce here anytime. Maybe a good time to add if you want or need to.