GOK is BACK

I know at least one member has been long this trade since it was on the "LIMIT LIST" in late August. I posted this reminder the next day to hopefully get you to put these trades on watchlists with alerts as you can't watch them all, but when the limit is triggered, you'll know in your email.

Now GOK is looking as if it may be set to break out of a wider base. Take a look at the charts and don't forget to set those alerts.

 GOK looked like a base being formed and had an excellent 3C daily positive divergence which has only turned out to be a fantastic looking divergence and base. The little triangle is where out long limit order was. The next day it was up huge. It has also traded very orderly in a nice trend.

 Here's the current gain since late August +132%

Here's a linear regression channel with settings you can use. There's 3 possible entries or a combination of the 3-all are at the green squares.  If you note the red trendline, we have a huge "U" shaped base, the breakout point is around $9.50. One entry is a breakout of 9.50, you can add to it if it tests $9.50. The two most likely outcomes are a breakout is either a straight breakout with no pullback, or a run close to $9.50 then a pullback to one of the two lower green boxes on the linear regression line. With so many possibilities, phasing into this trade could be a great tactic.  The base suggests a measured target of at least $15.25

If you are interested in the trade, feel free to email me for options that may ft with your tactics.

Intraday bounce...

GLD and SLV also have the 1 min positive divergence, USO does not.

CME has Nothing on China

The Chicago Mercantile Exchange which recently hiked margin requirement s on about a half dozen commodities just got upstaged by China which just hiked margin rates on (as I read it) virtually every commodity traded in China. Interestingly as well, earlier in the week, the Russians and Chinese agreed to start trading commodities in their own currencies rather then the standard, the US dollar. While I haven't had the time to put in the research and brain-cap on with regard to the two situations, I feel pretty confident they are correlated in some way.

China also introduced measures earlier in the week to crack down on commodity speculators. If this move doesn't work to cool inflation in hard assets like commodities, expect China to announce next, an interest rate hike.

In a somewhat related note, EDZ is looking pretty good thus far today. This is a long idea I have presented recently.

GLD/SLV

 GLD 1 min -pretty much in line except for the one attempt to break higher met by a negative divergence this a.m.

 GLD 5 min showing a negative divergence near the recovery top and pretty much most of Wednesday 3C headed down while GLD was lateral in price.

 SLV 1 min looks like a reversal off the gap bounce this a.m.

SLV 5 min showing negative divergences into the top

Both Gold and Silver have seen a mass psychology bubble. The mantra for both has been "buy, buy, buy". While fundamentally I do not object to that mantra, I've issued no trades on either except in a few gold mining stocks. There's just something that doesn't make sense, especially with GLD on the longer term charts and bubble mania always makes me nervous. This is neither an endorsement or a call to stay away. I look for edges in the market, if I don't see a clear edge, I don't raise the issue as far as trades go.

I've found some of the most dangerous assets to be in are those that are seeing this assumed, right call by the masses-it happened right before the stock market topped in 2007, it happened with tech, it happened with housing , it happened with oil and at the time, there was no good argument against any of the long calls in those assets, except the bubble effect. If 3C were massively bullish, then I'd issue a call. If it goes very negative and we see price confirmation early on, then I'd issue a call.

As far as your own opinions and how you feel about trading them, as I said, I'm not taking a bearish stance in terms of a short call. I'd just advise not to get so caught up in the hysteria and even if you go long, always assume a defensive, skeptical posture which should be accompanied by good risk management,

Gap Update

 DIA 1 min

 QQQQ 1min
SPY 1 min

This looks like the typical early a.m. gap fill which is why I don't really place too much importance on opening trade before 10:30-11:00 a.m.

Retail sellers seeing news and futures place orders, usually they go to work after that (today may be an exception) so the market makers fade the orders. taking prices higher and then short them bringing them back down. that appears to be the case right now.

Next update will be on GLD /SLV

Update

It's a little early for readings from the 5 min charts, I just include them to see Wednesday's activity. Remember that distribution is a process (negative divergence) in which locals/smart money are trying to exit positions at the best available price, this is why it is called a divergence-price is going one way, while 3C showing the underlying trend is going the other. Wednesday suggested to us that locals were moving out of the market, that leaves retail to support it and retail can not support such a large position in the market, especially when retail has been fleeing the market. Once institutional support is gone (and they may have shorted as well Wednesday) price drops.

 DIA 1 MIN

 DIA 5 MIN


 QQQQ 1 MIN

 QQQQ 5 MIN

 SPY 1 MIN

SPY 5 MIN

Right now we are seeing the typical gap being filled, what happens next, we'll have to watch the 1 min, but there's already some signs of negative divergences in the 1 min charts.

USO update

I'll get to the rest of the market just as soon as I can, however, short term weakness was seen on Wednesday in USO so an intraday pullback is not surprising. The extent to which it may effect the longer term charts of USO, which have looked good for a continuing bounce, despite the rising dollar, is as of yet unknown. I'd think by mid-day we should be able to see to what degree the longer term charts are effected and whether there is still a viable bounce opportunity in USO. I would personally be nervous to hold any long positions over the weekend, unless they were inverse ETS (basically buying a long ETF that is a short on a particular sector).

Quickly, the pullback in the market this morning is not surprising either as I stated earlier on Wednesday that I thought they'd try to keep prices up even as we saw distribution/negative divergences into those higher prices. So this morning's drop isn't surprising considering the way the 5 min charts looked on Wednesday and with a nearly 5-day weekend as few traders return to work today. The light volume could produce some extreme volatility intraday today.

Euro Update

More trouble for the Euro last night. Things are happening so quick I literally can not finish one situation update before the situation changes and turns into something else. Last night the Euro fell again on further concerns about the need for a possible Spanish bailout, keep in mind that this is before the Irish bailout terms have been negotiated, before Portugal has requested any kind of assistance and while Spain has sought or made no comments about assistance. However, bond yields are rising, making it increasingly expensive for Portugal and Spain to raise money they need to keep their governments operating at a reasonable rate of interest repayment.

Now news is out this morning that the strongest of the Euro countries, Germany itself may be facing trouble along with France and the Dutch as CDS (Credit Default Swaps) have risen for all 3 in the last few days. CDS is most easily explained as an insurance against the borrowing country from defaulting on their bonds, so you can think of it as bond insurance for the 3 countries as rising.

Apparently the German people are panicking and angry as they feel Germany can not keep financing bailouts without going broke itself. Reportedly, you can not find a bank deposit box in Germany as people hoard gold and silver for fear of losing their savings as they did in 1923 and 1948. Their also angry that Germany may have to raise funds for other Euro country debtors as cuts to welfare programs in Germany are underway.

German debt itself is not considered to be high until you adjust it for the aging crisis (like our own baby-boomer Social Security crisis), once adjusted for that, Germany has one of the highest debt levels in the world.

Causing further tensions are the rumors and denials that the European Financial Stability Facility (EFSF) rescue mechanism of 440 billion Euro announced in May will need to be doubled to handle bailouts of Ireland, Portugal and Spain. The Spanish bailout could be twice as large as Greece, Ireland and Portugal combined. If Spain is bailed out, the bond vigilantes will most likely attack Italy which is already seeing its bonds go up at the rate of 10 basis points a day and with two trillion Euros in debt, they are forced to go to the bond market often; and then France next which would be one of the most difficult entitlement societies in the world to try to curb with austerity measures.

For those who think and have believed from the start that the E.U. Project will end badly, that eventuality may be forth coming sooner rather then later. The Greek bailouts, the EFSF and the ECB bond purchases are going to challenged in German constitutional court as a number of cases have already gone into the court system. German legal scholar and contributor to one of the complaints, Prof Hankel, said, “There has been a clear violation of the law and no judge can ignore that, I am convinced the court will forbid future payments."

I wrote a piece at Trade Guild to give some basics of the Korean Peninsula history and dangers as they may relate to the market and posted a video as well of a very vocal E.U. Critic, which is a short, but must see video.

You can find the Korean Article Here 

and the E.U. Video Here 

As Many As I Could Squeeze In

 DIA 5 min neg.

 DXD short on the DIA 5 min positive


 QID short on the QQQQ positive 5 min

 QQQQ 5 min negative

 SPXU short on the SPY positive 5 min

SPY 5 min negative

 IWM 5 min negative

TWM short on the Russell (IWM) 5 min positive 5 min

 EDZ short on emerging markets positive 5 min in a leading divergence

EDM long Emerging markets negative 5 min

 FAZ short financials positive leading divergence 5 min

 XLF financials long 5 min negative divergence

Looking at the 5 min charts of the long sectors vs the 5 min charts of the equivalent shorts on those sectors, we have negative divergences in the longs and positive divergences on the short. I covered as many as I have time to. That is a perfect 12 for 12 all alluding to the same thing.

USO

 The USO 1 min chart has shown improvement

While the 5 min chart does have a negative divergence, it's not nearly as bad as some we see above and may improve with the 1 min chart improving.

Here's the FX EUR/USD, as I mentioned earlier most of the early going today we were in a bounce (green arrow), I mentioned the start of a reversal several hours ago and you can see that at the red arrow. The red trendline represents new lows for the Euro.

2/3 Leading Negative Divergences

These are all 5 min chart, DIA , QQQQ  and SPY, only the SPY is not in a leading negative divergence.