Interesting Open

The House voted to extend the Bush tax cuts, notably for investors the Capital Gains rate will remain at 15%, rather then revert back to 20% which would have caused investors to take profits before year end and likely today to avoid a higher tax rate.

Yet it's not the news, but how the market reacts. We also had positive earnings from  ORCL and RIMM and US Housing Starts rose in November breaking a 3 month trend.

The market's reaction? It could be a bit of "buy the rumor, sell the news", but the reaction on the open, (keep in mind today is triple witching options expiration)-not good.

The only thing I see as a negative driver is the recent turn around in the Euro which was covered yesterday via FXE/UUP.

Here's what the 5 min chart looks like.

By the way, ALXA just triggered a long.

TRADES

Today's dominant Price/Volume relationship was the most bearish, close up/ volume down.

Earlier today TICK volume hit -1500 which doesn't happen too often, yet we saw a marginally higher close. 

As of now, and as I showed you earlier today, the Euro is moving up, FXE had positive divergences which makes sense with the continued move up in the euro after the market close. Should it continue higher, we should see a gap up in the a.m. and some early strength, what happens next will be hard to say, but the Price/Volume reading wasn't one to get excited about as a bull. 

Below are some trades to take a look at.

RURL Short- watch for a gap up in the morning and a close down, at tht point it is worth a shot on the short side with a stop @ $14.95

The last 3 days have seen diminished momentum on high volume, or churning/distribution with today forming a shooting star reversal candle.

The chart above shows the same thing, distribution over the last 3 days. This is more of a swing trade, but possibly a parabolic move for quick, decent size gains.

MGLN- Short sale on a move below $46.29 with a stop at $47.15

The bear flag is seeing distribution and should break soon.

SNY-short

The 200 day moving average has been very important support/resistance

The 60 min chart has shown distribution at the breaking points of the 200 day.

The 1 min chart seems like SNY is ready to rollover, exhausted by the fights at the 200 day m.a.

AZN-short

AZN has seen resistance and support off the 50 day, now it will act as resistance .

3C seems to confirm the distribution heading into resistance.

FBP is a speculative long play

As you can see, it's giving a long signal.

3C shows accumulation in a long formed base.

The 5 min chart shows what looks to be a stock ready to go into stage 2 markup with continued gains, there's a good chance this one could move up quite a bit and for awhile considering the size of the base.

JSDA is a speculative long

As you can see, JSDA has held the 200 m.a. for 4 months which makes for a fairly low risk entry.

The 10 min chart looks like it's bracing for a move up.

The 1 min chart looks like the market makers are stocking up for a move as well.

Strategic/Tactical

In this case, the DIA and QQQQ are up, although there underlying activity on the 1 min chart is not confirming, so they are up on negative divergences and the 15 min charts show the longer term perspective. This is especially where I want to position myself.

 DIA 1

 DIA 15

 QQQQ 1

 QQQQ 15

 SPY 1

SPY 15

Currency

FXE is on a bounce, you can see the accumulation on the 5 mi chart, how much further it has to go? Not sure, but I'm fairly certain it isn't much beyond  bounce.

 FXE Euro 5 min

UUP -Dollar 5 min

UUP 60 min

So we have a short term pullback in the Dollar, but the above chart shows the wider trend of strength. This is the difficult part of trading for many. The longer view is our strategic view, and we use the shorter term for tactical entries. For example, I believe the dollar's longer position is bullish-that's the strategic outlook, so I want to buy the short term pullback-the tactical.

Note the Dollar has broken out of a bullish descending Wedge, that is the MACRO outlook.

I'm no Guru...

However I just wanted to point out a few stories today that I mentioned last night in the souring of sentiment.

Banks and Real Estate-Fraud-closure
First-and this is one that goes back a few nights to the post in which I talked about Cramer's dismissive tone over Fraud in the banking sector over foreclosures; his opinion summed up, it's old news and news drives events.

Here's the first which fits in with our SRS trade as well as Financials

Banks are taking a second look at their foreclosure practices and halting many foreclosures. First there's pressure on bank earnings, there's the issue of putbacks on faulty/fraudulent mortgages-all affecting the banks' bottom line. The second component is the limbo of properties as the pipeline which is already bursting at the seams will see a high pressure flush that may push housing prices down even lower. If you were aware of this news and looking at buying a short sale or REO, would it give you pause?

Here's the story


Trades related to this include long SRS, short financials through any number of means including XLF or long FAZ and maybe some of the bigger players in the arena-BAC, WFS, and JPM.


The USO short trade from yesterday, despite the inventory build...

Spain's Debt auction commanding higher yields (borrowing costs) today


Here's the story




Mortgage Rates higher, home prices lower
Again, trades here include Real Estate REITS-just put on the trade list and of course SRS long

Here's the story


It's not the Fed... yet, but the Treasury isn't too fond of oversight.


Story and Video are Here  just wait until it's the Fed's turn under Ron Paul

More Downgrades


Here's the story


China and Rate Hikes hits the Chinese markets

The Story
Related Trades, a lot of Chinese stocks or just use FXP, one of our recent favorites to play China on the short side.

Ron Paul is Serious about Fed Oversight
Here's the Wall St. Journal piece today


More on Cramer and his "buy banks-buy BAC call"
That's some serious movement in the last hour

A suspicious person might conclude the call to buy BAC is helpful to Wall Street if they needed demand to sell into.

We'll be using today's strength to add to some positions.

Update

I'm using some timeframes that work around about 1.5 hours of data loss, hopefully it will be restored tonight.

 DIA 1-the recent divergence is good, it's past any data loss.

 The 15 min wouldn't have lost much, only 6 bars and the divergence there was pronounced before today

 QQQQ 1 min isn't showing much

 The 15 looks very bad, there's always some volatility when these wedges break so the price volatility doesn't concern me too much right now.

 SPY 1 min is getting worse.

The q5 min also looks very bad, I doubt 6 bars would have moved this up in any meaningful way so the 15 minute which has been very good with reversals seems to be a reliable choice.

Late Update

As you can see there's a good chunk of data missing, I'm not sure when it will be restored and how much it will effect 3C, but the SPY chart is showing a negative 1 min divergence now.

RT is back up

However I'm missing a bunch of data from while it was down, I'm going to update the system, hopefully that will restore the missing data and get then get an update out to you.

Update

I'll be updating ASAP-right now it seems TeleChart in Florida at least is having an RT outage.

Violence, the People's Political Tool

Today has been a day of a lot of events, events that shape sentiment. However as we have seen with the demise of the financial trade, the market has shown that it too seems to be closely linked with the sentiment there. If you watched the 3C charts over the last week in financials, you got a real look at the inner workings of the market, quiet accumulation, a rally and then distribution into higher prices until there was no more inventory to unload and then a 3 day reversal down that has weakened the market every day.

Most people would acknowledge that sentiment shapes perception and perception shapes the market, however, as we saw with the financial charts, smart money's perception is a bit ahead of the general public's.

Some of the events shaping sentiment for better or worse:

Riots in the streets of Greece which started out as a strike, except a strike in Greece isn't a news ordeal or a political statement, it's an economic event that deteriorates GDP, not good for a country that needs to restructure its bailout received just a few short months ago in May.

To a lesser degree, we saw riots in Italy today as well, although they were more about the election then austerity measures.

Remember last week it was Britain over student tuition hikes. Ireland has seen it's share of violence and its probably not done.

And the French took to the streets en masse over pension reform a few months back.

The point? European governments must take on austerity measures, but the backlashes are growing increasingly violent. The hard choices that the governments in Europe have to make are becoming more difficult due to protest/violence that can cripple Gross Domestic Product and make the situation they are trying to remedy even worse. Not to mention politician's distaste for being booted out of office. The only thing that would help would be selfless politicians putting their countries interests first, even if it meant they would lose office. How many of those type of politicians do you think are out there?

Spain on downgrade watch-either the ECB steps up bond purchases or Spanish borrowing costs lead to the next leg of contagion.

Belgium is in the S&P's rating cross hairs with a negative outlook.

A weak Portuguese bond offering, seeing yields (borrowing costs rise)

Germany is not looking like it wants to play ball in expanding a European bailout mechanism

The very real specter of a Chinese rate hike within the next quarter, probably sooner then later due to very palpable inflation concerns

The Housing Crisis may be quiet, but it's not better. Prices are falling. I told you my personal opinion, I wouldn't touch a short sale of bank owned REO. I shared with you some of my favorite trades as well-SRS at the top of that list.

The tax cut ordeal in the US is a bi-polar issue when good is bad and bad is good, it's just that the opinion of what is good changes nearly daily.

Pressure on the Fed as Ron Paul openly supports abolishing the Fed, certainly they'll come under greater scrutiny and that is one thing the Fed has managed to avoid for a long time.

Recall my comments on Cramer and BAC, today BAC is trying to settle the issue of putbacks with PIMCO and the NY Fed-this is just the start for the fnancial industry and could very well set a precedent that could effect many that put together these toxic mortgages as they are forced to buy them back-the big problem, they don't have the reserves set aside to do so. Banking Crisis # ????

In any case, what has manifested seems to be the markets finally taking the lumps they so desperately deserve.

The charts below show price rounding back over to the downside, but the 3C readings show how dramatic and negative the underlying action is. 

 DIA

 QQQQ

SPY

Tomorrow morning, unless we get some Asian or Euro data that send the dollar higher, I'm expecting  little early morning strength. There may be an opportunity in that strength to enter some of the trades listed today and recently at better prices.

I'll also be adding the next 2-3 industry group trades from my scans. Be sure to set these on alerts so you don't miss opportunities.