Dynamic...

No sooner did I hit publish, see the Euro had given up then entire hourly candle, then this came out..

http://www.zerohedge.com/article/did-jean-claude-juncker-just-declare-currency-war

The Euro has regained some ground, more then half since.

Jobs Data is Bad, but Is It Bad Enough?

As you probably know, the economy shed another 95,000 workers. It seems some media are puzzled as to why the unemployment rate remained unchanged at 9.6%, as one put it ,

"The unemployment rate unexpectedly held at 9.6 percent."


As I mentioned a few days ago, people are falling off extended benefits and are falling into the murky shadow of U6, which the media act as if they have never heard of. Not surprisingly, the U6 rate rose from 16.7 to an astounding 17.1% this report. That's why U3 headline rate didn't change.


So what's got futures dropping and the dollar rising against the Euro as well as a few other currencies? This is bad news, this should guarantee a second round of QE? Goldman Sachs said yesterday that QE2 at at least 500 billion and from what I understood, nearly a trillion dollars is pretty much already priced into the market. That means if we don't get it, beware the sell-off of sell-offs. So the data, "may" not be as bad as they hoped for a guaranteed round of QE2 and what appears to be happening is the market discounting the possibility.


This is why my post last night stuck to the facts, the market is clearly bearish, but why I'd attempt no guesses as to what smart money may or may not have known because this one was not black and white, the two colors were not even on the palette, it was pure shades of grey.


We'll se what happens, but the Euro had a nice rally going this a.m. and it's now giving up most of that one hour candle spike and futures have fallen way off-another reason I largely ignore extended hours trading.

The Dollar Did It?

I think most of today's moves can be summed up with one word, "Dollar". Here's the Euro against the dollar today.

This is a dropping Euro or a rising Dollar. For the Euro we are seeing a bear flag, for the dollar, a bull flag. I know currencies and commodities tend to trend better then stocks, I don't know whether they see the same amount of game playing with patterns like we saw near the end of the day today with the bear flag in the major averages. As you can see here, it appears not. Instead the breakout to the upside back into the flag after it had already broken down (something we see probably more then 85% of the time with patterns like this) was caused by AAPL and SMH-or at least they were a big part of the reason.

The correlation between the dollar and the market was nearly spot on today as you can see below.

The only time it deviated to some degree was at 3:40 p.m. which was the time we saw the head fake move back into the bear flag.

Compare the same time in AAPL and SMH

The volume in both  increased dramatically. The question that remains, "is this the market maker/HFT firm head fake or an intervention?" At present, I'm assuming it's the HFT black boxes or market makers as we have seen this so many times and not at critical junctures.

As Gold/GLD is highly correlated to the $USD, GLD took quite a beating today. As you know, 3C has shown negative divergences in both (recently in the dollar and for awhile in GLD). The volume in the first hour of trading was above the previous day's volume.

The candlestick pattern formed here would be considered a confirmed reversal with a star yesterday and a bearish engulfing pattern today that nearly took two day's of previous candles. As I mentioned, volume was exceptionally high.

I don't need to show you the charts again, but you know in the last few days 3C has picked up distribution in the dollar. 3C has also been tracking a long string of distribution in GLD-that's a lot of volume today.

Last night I described the lack of follow through on Tuesday's big move in essence as troubling, but it didn't stop there. Of the 10 important averages, 8 were down. 14 of 16 breadth groupings Don Worden follows were down.

Today the thematic price/volume relationship in 3/4 major averages was price down, volume down which is the typical pattern seen during a bear market.

While the averages didn't crash, a few and some other notable equities did put in some interesting candlestick patterns as well.

 The NASDAQ 100 with a no-name pattern, but in late September we saw something similar that led to a decline.

 The S&P-500 put in a Harami reversal confirmed by a bearish engulfing pattern-with a bit of a hanging man look to it as well.

 UUP, our proxy for the dollar which has seen recent accumulation put in a fairly strong day on a big increase in volume not seen since August. It's also emerging from a bullish descending wedge.

XLF, the ETF for financials highlighted a couple of nights ago for it's distribution put in a star confirmed by a bearish engulfing pattern.

USO put in a nice star with a huge bearish engulfing candle today.

I haven't updated USO's 3C chart in awhile it's interesting today and definitely shows why it's such a bearish close.

You can see the negative divergence building since October. Today's gap up was met with a leading negative divergence seen at the second arrow. In essence, the gap was sold off right from the start. USO lost -2.26% today.

Last month there had been signs of accumulation in the dollar, they dissipated and then the last few days have been making an appearance again.

While I can not say that today's market averages were HORRIBLE, I can say we have seen some very distinct changes that come to the market or at least the retail side of the market as very surprising. The move in GLD, the move in USO, the move most certainly in the dollar and while not as noticeable on a chart, the 3C readings which are positive in financial inverse ETFs and negative in financial ETFs.

On the Positive side of 3C divergences recently: FAZ (Financial bear 3x leveraged), TZA (Small cap bear 3x leveraged), SKF (Ultra Short Financials), TWM (Ultra Short Russell 2000), TYP (Technology Bear 3x leveraged), BGZ (Large Cap bear 3x leveraged), FXP (Ultra short FTSE/China 25), DTO (Crude Double Short), DXD (Ultra Short Dow -30), QID (Ultra Short QQQQ), PSQ (Short QQQQ),  SCO (Ultra Short DJ-UBS Crude Oil), EEV (Ultrashort Emerging markets), EDZ (Emerging Markets Bear leveraged 3x), SMN (Ultrashort Basic Materials)

As for ETFs that have shown negative divergences that may be in different timeframes, but ultimately I consider to be important:

FXE (Currency Euro Trust), UDN (US Dollar Bearish Fund), UYM (Ultra Basic Materials), DJP (UBS Commodity Index Total Return), DBC (Commodity Index), UGL (Ultra Gold), HAO (China Small Cap),  SLX (Steel ETF), VGK (Vanguard European ETF), IAU (COMEX Gold Trust), GSG (Commodity Index Trust),  EWY (South Korea Index), VWO (Emerging Markets), EDC (Emerging Markets Bull 3x leveraged), EEB (BRIC ETF), VPL (Vanguard Pacific ETF), OIL (Crude Oil Index), DIA (Diamonds Dow Jones 30), DBO (DB Oil Fund), QLD (Ultra QQQQ), RSX (Market Vectors Russia), DDM (Proshares Ultra Dow), XLK (Select Sector Technology), SPY (S&P-500 ETF), OIH (Oil Service ETF), FXI (China 25 Index), EPI (India Earnings fund), SSO (Ultra S&P-500), ROM (Ultra Technology), SMH (Semiconductor ETF), XLF (Financial ETF), MVV (Ultra Mid-Cap 400), BGU (Large Cap Bull 3x leveraged), TYH (Technology bull 3x leveraged), UWM (Russel 2000 Ultra),  USD (Ultra Semiconductor), TNA (Small Cap Bull 3x), FAS (Financial Bull 3x)

These are not cherry picked, this is an index of ETF's that I've used to backtest some trading strategies. I think if you go through the ETFs that have positive divergences at the top you will find nothing but bearish ETFs, if you go through the second group that show negative 3C divergences, you will find nothing but bull ETFs. No two ETFs have the same divergences, but all I consider to be important as they are not just 1 min charts, they are substantial time frames with multiple confirmations. I haven't looked at ll of these in such a comprehensive way until today and I was kind of shocked that not 1 deviated from the path, the path which seems quite bearish for the market in many different industries.

Before 3C, and before the market was really manipulated by the Fed, (Pre 2008), I always had a good feel for the market direction by the number of good looking long or short trades. This is a similar concept although more effective and comprehensive.

Tomorrow we have some important reports due out, although I'm a little distrusting after seeing the revision rate of reports accelerating. In any case, we have non-farm payrolls, non-farm private payrolls, the unemployment rate, wholesale inventories and a few more. Tomorrow may be a watershed day, it may be nothing. Quite often though you will find that things you believe to be bullish reports are sold off, and bearish are bought-it's Wall Street. I'd recommend taking a look at some of the ETFs I provided above. If you have specific interest in any, feel free to email me and I'll try to get you a more detailed account.

ADBE Second Glance...

This one looks to have been setup for a few days, this is a 30 min 3C chart and I backed it up to 1 bar (30 minutes) before the breakout.

Before the lift off, this was already in a huge positive leading divergence. Prices are close to their lows and 3C is near a new high. This has been planned for several days.

Count ADBE in on the PARTY

HFT firms? ADBE, although I'm not sure of their weighting, was also probably a contributor. Take a look at the volume.

Intervention

As I said, the question was whether the bear/bull flags would see the false breakout which is so common. IT appears currency DID NOT SEE IT, instead equities, as usual did and they did by at least these two Patron Saints

So now the question is, "is this typical market maker money making" or "is this some kind of general market intervention?"

The seeming reversals now in both charts seem to suggest the first, but who really knows. As Usual, we'll have to wait it out and see who's playing the game.

UPDATE

The correlation is no longer the dollar, it just turned AAPL/SMH, take a look at the charts, you'll see.

Update

As you can see, the 3C chart has followed the Q's up, but it remains in a negative divergence.  A negative divergence is a negative divergence.

UPDATE

It seems the market is nearly perfectly correlated to the $USD right now, which in intraday terms is experiencing a bear flag. Now I know the chances of an upside breakout from a bear flag-the opposite of what is supposed to happen, is very high, I do not know if that same rule of thumb holds true for currency markets. I'd think there are more sophisticated investors in the currency markets, but who knows. So we have a bear flag, which way does it break?

Correction, there's a bull flag in the dollar, a bear flag in the market.

Update

The last divergence didn't hold, we can see one here on the Q's get run over by a sudden surge in tick volume. Lets see if this one holds.