Market Update continued.

Not much has changed since the last update.

Here's the intraday pullback I mentioned and said it didn't look too serious. My assumption was that the Q's/IWM would gather a little momentum and take another hot at intraday highs and a possible inverse H&S breakout, if that happens, we want to keep an eye on the volume.

QQQ Update

So far the NASDAQ 100 and the Russell 2k are in the green so far on the day.

 Daily chart of the Q's -volume appears to be rising today.

 The 1 min QQQ 3C chart showing some backing off , but nothing too horrible.


 Here's yesterday's positive divergence and in the red box, a further positive divergence on the open, so it seems that old day trader trick on the NYSE still works. This 5 min chart looks pretty solid, but it is a 5 min chart, not an hourly. Yesterday my thoughts were the market would be up today going into a bad NFP number on Friday.

The QQQ exhibits what looks like a small inverse head and shoulders bottom, volume was good until the breakout point, so for now, I'm assuming it will drop a bit, get itself together and make another run at a breakout with expanding volume. 

 The IWM (Russell 2k) daily chart, so far a pretty impressive move and volume again appears to be up.

Here's the 5 min 3C on the IWM, it shows yesterday's positive divergence and again a positive divergence on the opening gap lower "Fade the gap" The white box is an approximation of the positive divergence zone and the yellow line is an approximation of the average position cost.

I can only speculate at this point, certainly sentiment has been sour on the day, but the daily candle is pretty impressive considering the preceding trend and the fact we saw some accumulation yesterday. 

So the NASDAQ and IWM are green, the SPY/DIA aren't down very aggressively. As I mentioned in an email to a member, the market's action tomorrow will be important. If we get what will probably be a bad NFP report, does the market move to discount the news or as we see today, take it largely in stride and whistle past the graveyard? Considering where futures where this morning, this is so far a market that has taken a horrible report in stride. However, as I pointed out yesterday, today would be the perfect day to lift the market if indeed we see an aggressive sell off on a bad NFP number. 

More on Speculative Money

ZH just released this article on margin debt, it's worth a read to understand a little more about a speculative money unwind.

My speculation (which is speculation) is that Bernanke is trying to wiggle free from the Chinese Finger Trap without making policy adjustments. Bernanke is producing a true dichotomy,  in official FOMC decisions, they feel inflation is too low and they want it at the long term target of 2%, however commodities which we'll define as pretty much anything that is used to produce something else, are out of control. I think part of the problem is that the Fed considers food and fuel to be "volatile" or in Bernanke vernacular, "transient". However, this is the Fed's historic way of viewing inflation; I think we can safely say that the entire world is at a historic turning point that requires the Fed (if they want to be in the reality loop instead of the dogma ditch) to adjust their historic view on "volatile" food and fuel. There's probably several other inflation guides they use that could use an overhaul as well at least for the time being.

If we are real about the jobs market, we can probably safely assume that 20% of Americans are either unemployed or severely underemployed-the U6 number isn't that far off and private polling puts it a bit above that. We can safely assume that for those who are employed, they are earning less, they don't have access to the kind of credit available to them 3-4 years ago, they have a heavy debt load and their buying power (the dollar) is severely diminished.

Some examples from my experience and perspective: I've been in several lines of work, as a production manager for a high-end custom interiors manufacturer, I made $48 an hour 7 years ago! These same jobs, when available are now paying between $12 and $15 dollars an hour. The national average use to be $18 an hour, but we are in an affluent area and even the people who worked under me made $25 an hour as moderately skilled laborers and had no management capacity.

Gas is off the chart in my young experience, I wasn't driving in the 70's so I don't have that longer perspective, but I know what it costs to fill up my truck vs. what it cost a few years ago, even when oil was in that 5 year uptrend under the Bush/Greenspan "weak dollar" policy period.

From our family cafe, I know that food prices and surcharges shot up very quickly. Applicants for minimum wage jobs are hugely over qualified, I'm talking about architects making sandwiches and smoothies. A job opening ad on CraigsList would produce about 100 emails a day for at least a week straight.

So Bernanke I assume is trying to get commodity inflation under control and keep rates low. We assume the Fed has a few policy tools and none of them are good choices. We also know the Fed and Federal government have enormous influence.

So my speculation at this point, what if their using that influence to try to effect a change without moving policy? For instance, why are brokers coming out with silver margin hikes that are much larger then the CME's enormous hikes?  If you ever read Jesse Livermore, World's Greatest Stock Operator, you'd realize the government has had the power to sway Wall St. when it needs to. "We need you to hike margin rates on silver oh and about that SEC investigation, it'll probably disappear". Or "We need you to reign in your speculative positions, we'd rather you do it then force us to hike reserve requirement ratios on your bank". Sure it could be a lot more friendly then that, but until/unless we hear FOMC policy changes, I am assuming some back door influence is being wielded.

Look at Pimco and Bill Gross's prophetic Fed musings? He clears out his bond portfolio and all of the sudden it seems like he's on the outside as he almost overnight becomes one of the Fed's biggest critics.

Sound a little paranoid? Good. Usually the truth is way further out then our paranoid imaginations can carry us.

$USD

Please go back and read this post from Tuesday when you have a minute 

In a nutshell, accumulation in the dollar was underway as of that post. Take a look at the dollar today via UUP

The FOMC's last policy statement should have sent the dollar lower. Again, the April 28th date comes up in the analysis posted above.

Granted, there's been some bad news out of Europe this morning, specifically German manufacturing, the ECB and Bank of England kept rates unchanged as there are signs of a fading recovery in England and for the ECB, Germany. Also the True Finns have spoken out saying that Greece WILL default, we already know that they have veto power over the Portuguese bailout so there's certainly pressure on the Euro and that accounts for half of the Dollar index, but the signs of something stirring in the dollar went back to last Thursday-something shifted very quickly last week.

Commodities

I have a feeling that something very nasty is about to break news. The action in the commodity arena (which I chose to highlight because of the extreme leverage available there) is the antithesis of a short squeeze, it looks very much like unwinding of speculative money. What does that mean? In a nutshell, the Fed has kept rates between zero and .25% for an extended period of time. Ever wonder why banks earnings are pretty much garbage if you take away their trading desk operations? They take money which for all intents and purposes, is nearly free and invest it in speculative assets, some have been in stocks like PCLN, but the bulk has gone into the commodities complex. It looks like they are desperately trying to unwind that risk exposure quickly before "an event" occurs. An event could be the hiking of interest rates, at the leverage they're using a 25 basis point hike could be disastrous. It could also be a reserve ratio requirement being lifted, I don't know what the event is, but action like we see below is telling us something is coming. I keep falling back on the April 28th date that I showed you yesterday.

SLV is interesting in that not only is the CME hiking margins, but brokerages are putting in some of the fiercest hikes. I can only assume they're going after silver so aggressively because of its recent parabolic activity-the flavor of the month.

Interestingly, TLT is creeping up very quietly. For the price pattern involved, volume should be huge, it's not. It's almost as if there's a migration into TLT that's trying to go unnoticed, that kind of action or non-action is precisely what you'd expect to see in a quiet rotation. It' odd behavior, it's not typical at all and should be kept on your watchlist.

 Global Commodity Index

 GLD

 SLV

USO

Initial Claims Historic Miss

This Initial Claims miss is the second biggest in history vs. consensus. Tomorrow's NFP can't look good.

The average of the averages

Below is the zone in which we saw positive divergences yesterday

 DIA the white square is about the area where positive divergences occurred. If there was any accumulation this morning, you can average that down a little and you can see roughly where the market would need to be to get to break even, although this is quite a rough depiction as we have no way of knowing how many shares were picked up where.


 QQQ


SPY

 NYSE specialist (unlike the NASDAQ) actually choose the opening indication and in some cases, when to open the market, it's not always at 9:30. An old day trader trick was to buy the a.m. lows in the first 5-10 minutes as the specialist would usually open the market close to what they thought the lows would be and then move it up from there to fade the open. It's a bit more complicated with ETFs of the averages themselves, but ETFs do at times diverge a bit in price from the underlying asset, this is one reason I prefer to track the ETFs rather then the average, volume and demand is different and you often get better, faster signals about intentions with ETFs.

We'll see if that old day trader secret still works shortly.

SLV

SLV at the Trend Channel stop that has held the SLV run up since early 2010.

This is our final line in the sand on the close, should this break, the 1.5 year character of SLV changes with it. This is also one of the last areas for SLV to stage a bounce before a major change in character comes down the road.

From ZH on the margin hike (you have to wonder which commodity will be next):

"Nobody could have foreseen this. Nobody. At this point there is nothing left to comment on what is a concerted action to "mitigate" any and all risk in the commodity market but could as well be classified as executive order 6102.5. While we were joking before that soon one will have to post more cash than an silver contract is worth, we are now forced to reevaluate this sarcasm."

This is getting Conspiratorial

If you didn't already here, CME, for the 4th time (this is happening about every other day now as this is the 4th in 8 days) has not only hiked silver margins again, but this time by and whopping 17% (12, 10 and 9 percent previously).

I know someone at CME that I'm going to try to get in touch with. This is really sounding like orders are coming down from a higher up place as each hike is evaluated.

NFP Doesn't Stand A Chance

Initial claims this morning was beyond bad. Previously IA came in at an upwardly revised 431k, estimates were for a drop to 410k, the number came in at 474k. This is a wild miss and does not bode well for Non-Farm Payrolls tomorrow.