SPY Update

I'm back and the SPY has continued laterally since the last update, the positive divergence continues to build suggesting a bigger move to the upside, the longer it builds in a lateral environment, the bigger the eventual upside move will be. I'm still expecting a move above the apex of the triangle.

Market Update

Here's a market update, I need to run out for about 45 minutes to pick my mother up from a surgery center then I'll be back.

 Basically everything from the last update has come to pass, the triangle continued to develop, note where traders put stops and limit orders-the usual places and volume increased as those were broken.

 As I said, the volatility dropping would cause the Bollingers to squeeze and we'd get a highly directional move-DOWN.

The triangle is too obvious and the initial break (intraday) I doubt will hold, we may see a "Crazy Ivan" with a reversal break to the upside of the triangle's apex.

There's already 3C indications of positive divergences, like here in the SPY

 Here in the DIA

And a strong one in the Q's. 

Another possibility would be a kiss goodbye to the apex, but again, that is what trader's would expect, so I doubt that will be the final move, I lean more toward the upside shakeout. After that we'll see what happens. It's likely the market will close semi-flat going into AA's earnings tonight.

Be back in about 45 minutes.

AAPL

We watch AAPL a lot, whether trading it or just because it has so much influence on the market. AAPL is now heading toward a crucial inflection point as earnings season kicks off tonight with AA.

 Linear Regression shows a well defined downtrend in AAPL for most of the year, note how it's headed for the lower channel and possibly the 3rd major lower low putting AAPL into a possible primary downtrend.

 The daily chart was pretty unambiguous about the distribution into the top, what's perhaps more striking is the current leading negative divergence in both 3C and Money Stream.

 On the 60 min chart, note how sharp the reversals in AAPL were.

 The 30 min chart confirms the 60 minute with a little more detail.

 On the 15 min chart we see the tricks of the market, each negative divergence/reversal happened AFTER a false breakout (in the red boxes), again, these false breakouts serve as a primer to get the reversal moving under its own power as longs sell at a loss increasing supply.

The 1 min chart has been very clearly negative, both in 3C and MS, it seems like the bottom channel is a magnet drawing AAPL toward it. What happens there and the severity of any possible moves could have major implications for the NASDAQ 100 and the broader market. I think AAPL is one of the reasons the NASDAQ is underperforming the other averages today.

If you are interested in trading AAPL, I'd wait to see what happens at that bottom channel, a bounce would be a welcomed set up.

LVS Trade (short) Follow Up

This one was from March 1st

LVS made about 15% since it was brought up, then bounced with the market to an area which I would consider to be a "Kiss Goodbye" to the top pattern.

 The March1st Trade idea and the subsequent "Kiss". LVS looks like it's rolling over here which makes for a pretty decent probability trade with good risk/reward characteristics.

 30 min 3C shows negative divergences both at the breakdown from the top and a worse one currently on the bounce as it starts to round over.


 The 15 min chart is also negative in a leading divergence.

On the 1 min there is a positive divergence, I'm not sure how much further it can bounce intraday if at all, but my guess would be to the white trendline, making for a lower risk entry.

Watching Grass Grow

Today's market is mixed and lackluster, it reminds me of the summer doldrums when you couldn't find a trade anywhere as nothing moved. Interestingly, Monday's historically are the biggest gainers of the week and responsible for most to all of the gains for the week. So far this market is like watching grass grow, which always makes me nervous and on alert.

 The Dow is the strongest today, but remains in the lateral range so technically it's doing pretty much nothing.

 The IWM is one of the weaker of the averages, but has managed to find some support at Friday's lows.
Look at the volume on each of these, excruciatingly low.

 The QQQ another weak one, basically having an inside day within the range.

The SPY also is having an inside day with very little going on, some higher prices earlier were rejected and the averages look like they too are in triangle-type consolidations as well; that means that volatility will die off and Bollinger Bands will narrow, that usually leads to a highly directional move, that's why this type of action makes me anxious.

Chart Request- SLV

Today's SLV momentum is turning into an intraday triangle. Usually triangles are (in this case) bullish continuation patterns). There also tends to be a high degree of vaolatility and false moves around such common price patterns, especially in an ETF that has such a loyal and large following.

 For a consolidation day, it is interesting the volume is so high already, it appears it's on track to surpass Friday's which is not common for a consolidation.

 The hourly chart has moved into confirmation of the trend

 So has the 30 min chart

 as well as the 15 min chart so there's no reason at this point to suspect anything very negative with any sort of high probability.

The 5 min chart is showing a bit of a negative divergence. My initial thoughts, considering the intraday triangle, the volume and this chart as well as SLV's extended run, are that it may be prepping for a pullback or consolidation. Typically high volume days are often associated with reversal days whether it be a real reversal in trend or just a short term correction. That's my initial take, but it's too early with little evidence to declare a pullback at this point, I'm just leaning in that direction from what I see now.

LEE- A Cats & Dogs Trade (long)

LEE just breached a technical level I had an alert set for, you may want to take a look at it this morning. The breakout came on good volume.

USO to Gap Down

Last night's post speculated on the probability of a gap down in USO for reasons outlined in the article, "Action/Counteraction" so far in premarket it looks like that's what we'll see.

Here are some USO charts as a pullback was expected around March 4th or 5th, but oil being sensitive to fundamental developments kept running higher.

 3c Hourly, continues to make higher highs, this is very bullish confirmation of the longer term trend in oil/USO

 The 15 min 3C chart shows in red where a pullback was expected, in white, we see where 3C has been playing catch-up but never quite making it.

 The 5 min chart has been ( as it should be) more responsive in catching up and doesn't reflect any distribution so it seems likely that the African Delegation's Road Map to Peace was not expected to be an event that would move the oil market.

 We still have a long signal in USO and here are a couple of potential pullbacks. The 10-day in yellow seems too shallow for a second pullback, maybe the 22 day in blue.

The longterm Trend Channel Stop is even deeper and this would represent a real shakeout which I think is very possible, however, so long as the channel is not breached on the close, USO would still remain within the trend.

We'll watch for the buying opportunity, it should be a decent one.

Action/Counter Action-Oil

Last time we had a Libyan peace proposal it came from Hugo Chavez and as laughable as it all seemed, the market ate it up and oil dropped. Now we have a groups of African leaders with South Africa's Jacob Zuma having said Gadhafi has accepted the preliminary ceasefire/road map for peace proposal.

Given oil dropped on a ridiculous Chavez proposal, it would seem reasonable (and oil is in need of a breather) that this may pull oil back a bit. If this were all that was on the table, the only question would be whether this would be a consolidation or under the circumstances a more vicious pullback to shake out as many traders as possible.

However, there's never a vacuum or a singular event defining the day ever since 2011 started.

We have an intensifying brutal crackdown in Syria, conflict between Israel and militants in Gaza, the much anticipated and predicted turn of the Egyptian populace against the Egyptian military who has been running affairs since Mubarak stepped down (more on that in a minute), the Gulf States demanding that Saleh step down from power in Yemen, of course the Saudi nightmare of Bahrain continues, and interestingly the Iraqi security forces cracking down and killing Iranians who are against the current Iranian regime and live in a camp in Iraq. Iraqi security forces ran them over using Humvees, fired rifles and killed at least 25 with over 300 injured.

It would seem strange that Iran has been demanding that the Iraqi government shut down the camp, most of us remember a 10 year war between Iran and Iraq and wouldn't think at first glance that the Iraqis would respond to such a request, but this is the third time the Iraqis have attacked the camp since it was handed over to the Iraqis by the American military.

It's important to understand that the conflict between Iran and Iraq had many facets, but the most fundamental was a Sunni led Iraq fighting a Shiite led Iran, Iraq is no longer Sunni led. The Iranians have been making inroads into Iraqi politics for quite some time-remember Muqtada Al Sadr. In effect, Iran has widened it's sphere of influence to include Iraq and the two are closer then they have been in decades, you might even call them allies in a sense.

As for Egypt, Tahir Square is back in the headlines and not surprisingly (there have been many posts suggesting that this was coming). The seeming overthrow of Mubarak was not at the hands of the people, this is important to remember. For Egypt's population, the uprising is scope and size wouldn't truly be called popular and it certainly didn't displace Mubarak. What did displace Mubarak was the Military who has been running the show in Egypt since Nasser, choosing the leaders which have all come from the military. Mubarak double crossed them and tried to set up his son for succession, this irritated the military long before Tunisia started. The uprising was simply cover for the military to do what it as going to do one way or another.

If the Egyptian people think that a democratically elected leader will be chosen, say El Baraedei , they ought to think again. The military has controlled that country for decades and kicked Mubarak out for challenging their control, they aren't about to roll over and allow the people to chose the next leader and the Egyptians are starting to come to terms with this.

Still the question is will Libya over-ride everything else temporarily and see oil fall for a bit, I think it's likely. The question will be how deep the correction will be, how forcefully traders will be shaken out.

For our members trading USO, this is what you've been waiting for. We'll keep an eye on the situation and likely find an excellent entry point with low risk and very high probabilities. My longer term view on oil remains extremely bullish for the foreseeable future, however, I also think oil is approaching its last Hurrah and that is part of the reason I think we will see prices reach obscene levels this year with MENA providing the backdrop.

I'll have more analysis on USO as the situation unfolds. The one thing that could derail a pullback in oil is the Israeli conflict, oil has responded more to Israel then almost any other event in MENA.

Some Short Trade Ideas

As I said earlier, I ran a new scan and came up with a LOT of candidates. I wanted to get some out there to you before the close, that does not mean you need to rush into them. You may want to establish partial positions or take the weekend to take a closer look at them (of course you can email me as well with any questions), but here are a few that I've had a chance to take a closer look at. These all have 3C negative divergences plus the Stochastics/RSI divergence that has proven to be very useful in identifying turn around situations. The red square on the first of each daily chart is an approximate stop out level, of course they are just suggestions and should be considered as such. Make sure you are comfortable with the risk in determining your stops and position sizes. Most of all, don't over react to today's price action, there's plenty of time to establish positions still.

ERTS

 Daily

 Hourly accum./dist. cycle

JOYG

 Daily

 15 min cycle in a leading negative divergence.

KLAC

 Daily

 60 minute cycle

MU

 Daily-the white arrow is just there for example showing no neg. divergence in RSI until the most recent at a double top.

 MU 15 min cycle in a leading negative divergence.

MXIM

 Daily top formation

 15 min cycle with previous negative divergences and effects of them.

ROST-Retail I think is a strong candidate.

 Daily

 30 min acc/dist. cycle

XRAY

 Daily with a confirmed reversal

Hourly negative divergences and the Stoch/RSI indications.