This may have material effect

The list of short candidates I added yesterday should be something you are looking at today, and if this article from the WSJ rings true, we may very well see a new leg down in the market.


As you may know, Bernanke is set to speak at 3:45 today. What the permabulls want to hear is some hint that QE3 is possible, after all, when you look at the performance of the market vs. the performance of the financials as I posted a day or two ago, you'll see that the market has way outperformed the financials and in the S&P's case, it usually doesn't stray too far from the financials, it did however during the QE1/2 regime for reasons we should all be aware of by now.


In the WSJ article, noted dove, Charles Evans of the Chicago Federal Reserve said he is, "marking down his growth forecasts for 2011 and 2012, but says he isn’t prepared to call for new Fed actions to support the economy."


The article continues, "The Fed later this month will conclude its $600 billion Treasury securities purchase program. Mr. Evans doesn’t want to add to it, but he also has no inclination to reduce the Fed’s portfolio of mortgage or Treasury securities any time soon, he said."


and... "Mr. Evans was among the Fed’s more outspoken proponents of the Treasury purchase program. His comments suggest that there isn’t a strong base at the Fed right now for more monetary easing. "


Clearly QE has been the sole driver of equity prices, without its artificial market support, the market will have to stand on its own two feet. 


Once again, Financials vs. the S&P

Financials in green, the S&P-500 in white.


You may want to consider easing into some of the short positions provided for your consideration yesterday.

Here's What Retail is Watching This Today

 The short term downtrend line

 A closer look at it, they'll want to see it hold another test.

And the 50 bar 5 min moving average.

GLD-It's the small things that matter.

I don't know where I heard this, but it's so true, "To make money, you have to see what the crowd missed" and my own take on that, "It's the small things that matter."

I can't tell you how many traders I know who are eating through bandwidth running constant volume surge scans through out the market. Yet, how many times have I shown you accumulation and distribution taking place in a quiet lateral market, the type of market that traders pass right over. In addition, accumulation and distribution often take place in relatively low volume environments. Traders run these volume scans because they believe the spikes in volume are evidence of Wall Street buying or selling. Wall Street is not that stupid, they aren't going to show you the cards they are holding by announcing their actions with a volume spike. If they were to do such a thing, traders would be all over that spike and drive price up or down, depending on the situation and killing Wall Street's ability to get in or our of the trade at the most favorable price. Volume spikes are often advertisements after the work is done, and in many cases, traps.

Take a look at gold and this is something that was pointed out yesterday.

 Yesterday GLD just barely broke through recent resistance; hardly noticeable on a chart. There were no huge volume spikes or anything to draw attention to GLD, yet GLD is down today even in the face of a lower dollar!

 Here's an intraday look at the break of resistance, as usual, it quickly failed. This is why I say these false breaks are excellent timing indicators. An options player could have made some decent money this morning just on that small move.

 While I believe 3C is one of the most predictive indicators I've ever used (not tooting my own horn, I kind of stumbled on it by accident trying to create something different), a good ole fashioned regular Wilder's RSI showed the negative divergence on the breakout yesterday. You just had to be aware of the small things that often mean a lot.

Here 3C gave a clear signal that the break was used for distribution. Retail traders are creatures of habit and understanding those habits can be profitable. Wall Street understands them, so if you understand them, you have a good idea of how Wall Street will respond. Gold is the "HOT" trade, everyone wants it. Traders are also heavily biased toward trading the long side. Short selling has been demonized and people believe the ridiculous myths about unlimited risk and limited potential profits-both are wrong.

As I've mentioned many times, traders continue to view support and resistance as EXACT levels to the penny, Wall Street takes advantage of that. Look at the volume surge as GLD breaks resistance by just a penny. Most likely there were limit orders set to buy on a break of resistance. Then note the low volume environment that distribution occurred in and lateral prices. The red volume that has picked up since GLD broke back down is those buyers from yesterday exiting losing positions, often leveraged to the hilt.

Just be aware of the small things, they are often big events and be aware of how retail traders act, then you'll have a good idea of how Wall Street will react.

Here's yesterday's post predicting exactly what would happen.

USO-Not Quite an Update

I just explained to a member that I was preparing a post for USO on what I thought was a likely bounce, I had the screen captures of the charts and in looking at all of it, I decided against the post at this time. There's not enough hard evidence in my opinion to post something that people may act on. However, I also told the member that if it were a coin toss, I'd be leaning toward a USO bounce.

When the charts and evidence are more compelling-either way, I'll update USO. I'm not one to give opinions based on instinct or assumptions, I like hard evidence and I'm sure you would prefer that as well.

Watchlist Candidates

Yesterday I gave you quite a few charts that are all in top formations and a timely list it was.

Here's the idea...

ISYS was one of the candidates and what most of them shared in common was a top formation and most had broken down below the top. The Backbone of the uptrend and the top is broken. Now it's a question of tactics for the best entry possible.

What we want to see is a "Kiss" or an upside break of the neckline (which is where the stock broke down, here around $11.50). A kiss of the neckline used to be very common, now it is increasingly common to see an upside violation of the neckline and a move back into the top. Remember though, these are short term tactical plays by Wall Street, the trend is broken, the top is broken, it's all about shakeouts and we can use this to out advantage. Note ISYS is up over 1%-a lot more then the broad market and a LOT more then the sub-industry it belongs to. This is a tactical move by Wall Street traders and we want to use it to our advantage.

Keep an eye on the watchlist for stocks making a move up toward the neckline or above it, those will be your short list (both short selling and highest probability candidates).

Once this happens, you can always email me for ideas on set ups that will work for you.

SPY intraday pullback coming

Perhaps a consolidation a bit lower.

It's raining Cats and Dogs-UCBI Trade Idea Long

I set an alert on this one, it has broken the downtrend line. RSI is very positive. A stop can be placed under $2.00 (NOT AT $2.00!)

WEST-the C&D rally

The last time I posted on WEST, it made a 99% move in a day. Today it's at 40% or so.


I'd recommend a trailing stop on this one... At least to take partial profits. Bulls make money, bears make money, pigs get slaughtered.

10-bar m.a. on a 10-min chart.

Yesterday's Closing Market Post...

Yesterday toward the close I posted the following (please take time to read as it will give you some insight into market behavior).

 SPY daily chart pointed out yesterday. At the white box we have a strong reversal candle (Hammer) providing support. Yesterday at the white arrow this support was broken. Technical analysis teaches that one should go short on a break of strong support. However more and more, the tenants of TA are undermined to catch traders off guard, cause false breakouts and bull and bear traps. As I mentioned in yesterday's closing post, if the SPY can get back above that level either on the close or the open this morning, there's a strong likelihood it will send the averages higher on a short squeeze.

As you can see, yesterday the break below that important support level was accumulated. With the sell-side demand, it's easy for Wall Street to buy up decent size chunks and not stand out. This morning we are back above that trendline.

It's still early a.m. retail dominated trade, but this is a good start to a possible bounce higher. The important thing to take away from this is, conventional analysis is now used in the opposite way by Wall Street. What should have caused major selling, is now used to cause a short squeeze. If you have been using technical analysis over the last 5 or 6 years, there's an adjustment and a new understanding of the game that you must adapt to.

UUP $USD

Yesterday in this post I talked about the strong probability that the dollar was rising too high within the accumulation zone and was likely going to be pulled back down. Overnight a People's Bank of China advisor said the Chinese FX Formation Mechanism needs DRASTIC reform, sending the dollar lower.

It's hard to know whether FX traders had hear whispers or rumblings about this before it was officially announced and therefore backed off accumulation of the dollar when they knew it would drop the next day or if they just simply weren't interested at those levels and would wait for a catalyst to send the dollar lower, it's kind of a chicken or the egg question.

What was unquestionable was the fact that they were not accumulating yesterday

UUP all of yesterday on a 1 min 3C chart.

As of the drop this morning...

Accumulation is back on, at least in the early going.

The overall bigger picture was posted in yesterday's update

Some odd behavior today:

The market reacted well to the drop in the dollar as would be expected, but we'll get to that in another post.

The commodity indicies have reacted fairly well, although it's still early morning trade and a lot cannot be gleaned from retail trade which dominates the morning.

Silver and Gold had decent initial reactions, again, as to be expected. Gold has since gone negative, I believe this is part of the Macro trend in gold we've been talking about ( a decent size pullback in gold).

Oil was the standout. Usually a fall in the dollar send oil prices higher being oil is settled in $USD, not today. This could be because of news that over 120 Syrian soldiers were killed and the fear of tensions igniting from government retribution. That's the only real news I see, other then the fact oil has not been acting well and is in a price position/pattern that suggests it will continue to fall.