BE SURE

To check out the SPECULATIVE TRADES listed on the TRADE SHEET linked to the upper right of the site, the ones in RED were added last night, these are quick trades, many are close to triggering and ALXA I listed as a market trade, take a look and see if you like any. Any quick gains or big gains should be booked soon. You can email me about specifics.

Wrap

Today the financials took the lead and were up 1.65% compared to an average gain in the market of about .30% A quick browse through the financial charts show many starting to roll over a bit, but there were also quite a few that posted solid gains on rising volume which opens up the possibility of a follow through day, at least in the early going, unless the Euro corrects substantially overnight. There could be an opportunity in some banking names or just financial ETFs, if you are able to buy and sell the same day, as it may not last too long. It does take time to distribute the gains in some of these stocks that closed well, so I'd expect the financials to outperform tomorrow, but probably not to the same extent as today and this is why I say the opportunity may be early and fast fading into the afternoon.

The bottom line from the pundits today is that the market hasn't decided how it feels about the tax cut surprise that knocked the market down Tuesday, but suddenly the market changed it's mind on Wednesday. I have a feeling that Tuesday was a hard hit that wasn't expected combined with the bond vigilantes, which took a breather today, I believe it allowed some losses from Tuesday to be made up today.

I'm adding a couple of very speculative trades, these are not long term or even swing trades, but trades that you may realize a quick gain and should be quick to take it if it materializes, they also should not be big trades, that's why I say speculative. You'll find them on today's list on the spread sheet highlighted in red.

 BAC is one trade that has been trending well for awhile, but it's recent failure to make a lower low wold have me booking profits for now. It can always be reentered later. It hasn't hit the stop, but I just have a gut feeling on it, if you realized decent profits from the extended trend, I'd consider booking them.

As for the market, there are more then just 3C negative divergences, there are divergences in MACD, RSI and quite a few lesser known indicators I combed through tonight. Then I decided to check breadth as it's been awhile since I did and I've been maintaining the theory that despite the apparent highs in the market, there's a bit of illusion as the highs are in the indices. However, the market is not 3 averages, it's  a market of stocks and as I have been maintaining, the market of stocks is tanking while the averages give a false impression which is a good reason not to focus so much on the averages, but rather the good trades that are out there as the market of stocks is declining, despite the 3 averages.

Here's the impartial facts...

The green line is the indicator, the red line is the comparison between either all of the NYSE listed stocks or specific averages the indicator measures.

 Percent of stocks that are 1 standard deviation above their 40 day moving average-that would mean they are trending higher then their 40 day moving average by at least 1 deviation-the strong stocks. Luckily in red, the NYSE, we can measure between two almost exact same price points. In November that % of stocks was 65%-pretty strong, now it's 45%- or in other words at the same price level 20% less stocks are above that 40 day moving average by a standard deviation. Or in plain English, 20% less strong stocks now as compared to a month ago.

 Percent of stocks trading 2 standard deviations above their 40 day moving average-these are even stronger stocks that have run way above their moving averages. In November it was 45% of stocks, now half that, 22%!

 Percent of stocks just trading above their 40 day moving average, in October at lower prices it was near 90%, now 60%

 Percent of stocks trading above their longer term 200 day moving average, was 90%, now 75%

 Percent of stocks 1 standard deviation below their 200 day moving average, these are stocks that are trending down, below their long term moving average or are in bear markets. They were about 5%, very few, that number has almost tripled.

 Percent of stocks 1 channel above their 200 day moving average-lost over 10% of stocks

 Percent of stocks 2 standard deviation above their 200 day moving average went from 40% to 29%

 Percent of stocks 2 standard deviations BELOW their 200 day moving average, these are stocks in big trouble, went from about 3% to double that.

Stocks making new highs/new lows over 13 weeks period, what is interesting is the number went from 90% to 67% in ONE DAY! That would be today. The calculation is new highs-new lows, the lower the number the more stocks making new lows.

So there it is, pretty much what I've been saying. The averages portray the stock market, but these charts portray the market of stocks and in my opinion, being long right now with these kinds of numbers is like holding a hand grenade as long as you can for maximum gains and hoping you throw it before it goes off. Being short the right stocks is not trading against the trend, the trend is clearly falling apart.

2:41

With not much in the way of market moving news, other then the tax cuts are under pressure in Congress from the liberal base, the market moved in almost lock step with the EUR/USD currency pair since 2:41 p.m.

1 min update

 DIA 1

 QQQQ 1

SPY 1

The 1 min is getting worse and starting to show on the 5 min, but we are still within range of a normal pullback off resistance, which could be tested again. However at the moment, there is deterioration in the 1 min and the SPY just saw some ugly volume.

XLF may offer a hint

Financials have been the backbone of the upside, take a look at XLF's chart.

I think if the divergences there come through as selling, we may have our answer.

AT RESISTANCE

The market is at this morning's intraday highs, except for the DIa which is lacking a bit, so they are at resistance. the 1 min charts are showing a bit of a negative divergence, whether that's just resistance/profit taking or a more serious trend to develop, it doesn't really fit well with the 5 and 15 min charts that are looking stronger. So in my opinion, what happens with the 1 min is crucial here. Is it just hitting resistance or starting a trend that will filter into the longer term charts?

These charts are 1, 5 and 15 minute for the DIA, QQQQ and then SPY. The DIA is the only one that seems to make logical sense.

Afternoon Update

It's been kind of a slow day for signals.

 DIA 1 min most of the day in confirmation-no divergences except the one red arrow-green arrows=confirmation/no divergences.

 The 5 min does have a leading positive in the white box

 The 15 is showing pretty much nothing here.

 QQQQ had positive divergences in white and a leading pos. divergence in the white box now.

 5 min confirms

 As does the 15 min

 SPY 1 min is in confirmation right now of price

 as is the 5 min

 as is the 10 min

 The 15 shows a very slight negative divergence, but that is so small and not developed it could change soon.

 XLF 1 min appears to show some distribution

 As does the 5 min

as does the 15 min

That's about it for now, however this type of lull-other then the Q's, is very dangerous to be complacent.

Update

As for the averages, the only eye catching indication at this point is the probability of an intraday bounce as the QQQQ charts post some positive divergences this morning.

Trade List is Updated

There are several trades that can be taken now.

There's No Anticipating The News

Just Monday night, Obama and the Republicans seemed very close to a deal on taxes, which seems to have been expected and priced in. Had they not or if Congress fails to pas certain measures, the most dangerous for the market-the Capital Gains rate, then it would be very likely that many traders would be locking in gains from this year before options expiration sending the markets lower so last night seemed to be a good deal for the market and the market acted that way before the open with futures ramped up between half and one percent until the bond market realized that the deal would be adding a trillion dollars of debt in the next two years alone.

As I showed in my very first update, we had negative divergences across all timeframes right off the open, meaning the gap up was used to distribute shares, not rally the market higher.

Why is this? Take a look at what happened to bonds today. Despite the Feds massive QE bond buying, bonds were dumped today in a way we haven't seen in quite awhile. The reason? Deficit spending was front and center stage with all of the tax cuts and add ins of the proposed agreement. The 10-year bond's yield rose to levels not seen since June-this despite the Feds buying to keep rates subdued, their now higher then before the most QE began, well higher then QE2 levels, that's how intense the selling was. The move in treasuries sent the dollar higher, a higher dollar leads to lower asset prices.

As I'm writing this, the Asian markets are mixed, Japan is getting a boost from the stronger dollar, weaker yen which makes Japanese exports more competitive. Other Asian countries are booking profits and are sliding on fears of uncertainty.

In the US, the higher bond yields, especially on the 10-year which determines mortgage rates is causing higher rates in an already soft real estate market, remember that SRS is on the long list of trades, (an inverse ETF or short on real estate). The saying is “Don't fight the Fed”, while the war may not be over, today they lost the battle with the Fed getting spanked hard with rates higher, remember QE was supposed to keep rates low.

All that said, the divergences seen today across many timeframes, all really didn't just develop today, there's a bigger back story going on as this distribution has been going on for some time. One factor may be funds are not willing to gamble right now with gains, they may be trying to lock them in, today's gap sell-off on negative divergences surely illustrated some degree of that line of thought.

Here's what the charts look like as of tonight for the SPY.

 1 min- strong negative divergence right off the open. 6 months ago I use to list a lost even most of the trades list as market orders, buy on the open the next morning because a gap up almost always ended with a close at the high of the day, today's market could not have been more different.

 5 min has flowed into all the longer charts with distribution evident very early on in the bounce , we're near bounce highs, yet 3C is at pre-bounce lows. That's a lot of distribution very quickly.

 The 15 minute chart being in this big of a negative leading divergence (in the red box and the worst kind of divergence) is saying a lot about the underlying tone of the market.

 Even worse, the 30 minute above and 60 min below are also now in leading negative divergences.

Finally the most serious, the daily chart. While it's hard to look at the market and think about the consequences of these charts when the market has been moving higher, I can't ignore them. 

We'll see how tomorrow goes, but I'll be updating many of the trades to reflect better positioning.