USO Update

We have some newly emerging short term positive divergences in USO

 The 1 min chart...

 The 5 min chart in leading position...

And the 10 min chart in leading position...

USO just took out local support as well, I would set some alerts especially on the upside as this could very well be a head fake move.

AAPL Update

AAPL may make for a decent little intraday to even a swing trade.

 AAPL 10 min 3C with some accumulation yesterday and a leading positive divergence now. It looks like AAPL wants to go higher.

 The 5 min chart is in a leading positive divergence as well.

Here's the kicker, the 1 min chart suggests a pullback, so AAPL may be able to be bought on a pullback at low risk with a better entry point and then taken for a ride higher.

Market Update-SPY

I said a few things in last night's market wrap that I want to revisit.

"What seemed to be a positive divergence intraday, didn't look so hot at the end of the day. I just heard someone dumped $3.3 Billion in E-mins at the end of day. The market also closed below the 50 m.a. on volume, it is hard to imagine a bounce from here, however we'll have to let the market tell us."


"As for today's dominant Price/Volume relationship, it is easily Close Down/Volume up for all of the averages. There's a dual edge to this relationship, it can be a sign of a serious break in the market and it can be a sign of a serious oversold condition.  Since we are so close to the 50-day moving average, we cannot rule out either possibility. The divergences that formed earlier today weren't strong, only on the 1 and 5 min charts with one exception, these are usually little more then a 1-day bounce. However, such an overwhelming P/V relationship in such proximity to the 50-day moving average can set up a nasty bounce up although it doesn't look or feel that way now, we must reman open to the possibility of this happening even if it is remote."


"The key thing to remember is how bad the longer term charts look and even if we were to see such a bounce (it would likely be a scary upside bounce with so much selling today), we can't take our eye off the ball and that has been, as mentioned above-since June, the next shoe to drop is going to be very ugly on the downside; just consider the breadth posts I put up a little over a week ago."


The point of the above comments was not to sit on the fence and try to be right either way, the point was, there was a unresolved positive divergence, even though it was on the short timeframes it lasted most of the day. Secondly, with a break of the 50-day moving average, a lot of traders are going to run to the short side of the ship, this is a perfect opportunity for the market to use Technical Analysis against it's practitioners. There are very few times I have seen Wall Street lose control of the market, typically, they are planning very far out n advance. I use to get the internal trading memos from a large Wall Street firm, I couldn't make sense of them simply because they were thinking so many steps ahead, nothing they talked about seemed remotely possible looking at the charts. Some of you may also recall that while I was teaching, I use to show charts of the homebuilders which were under accumulation in a quiet lateral base for well over a year while the tech bubble had exploded and we were in a bear market. The point of showing these charts was, "Who would have thought after the tech revolution had started, that the next major trend was going to be in housing?" Well Wall Street knew and was accumulating positions almost 3 years before housing really took off. The point being, once in awhile they do lose control of the market, but more often then not, what we are seeing today has been planned out far in advance. Just look at my July 15th post, "What Can We Expect After Op-Ex Today?"  I could not have posted an outcome that was so accurate over the next week if I hadn't been able to see the underlying 3C action which was pointing to exactly that outcome. Over the next week, everything played out exactly as posted on July 15th, from the dip on Monday to the bounce through the rest of the week.


Now we have to prepapre for what may be comng next, the 3C charts wll develop and give us a better feel, but this s my initial idea and this goes back to what I had been expecting last week.

 As mentioned last night, when the Price/Volume relationship is dominant (among the 4 possibilities) as it was last night, we have to pay attention. Last night's P/V relationship was close down/volume up and it was easily the dominant relationship. Rarely when the market really breaks away to the downside this relationship will appear, but more often then not, it's a short term signal for a reversal. Just look at the chart above and the 2- heavy volume days and what happened next.

 Here's the intraday price acton, already above the average accumulation level.

 Here's the 3C 5 min chart which showed a spike in the divergence as the market broke intraday support as well as the 50-day moving average. Wall Street knows full well that traders are watching and acting on the 50-day moving average. The white box indicates improvement in the 5 min 3C chart as it leads.

 Look at the positive divergence at the break of intraday support on this 15 min chart and note all the volume, this makes it very easy for Wall Street to accumulate a large position openly as they are simply taking the other side of the trade. The 15 min has improved today as well, in a leading divergence.

 I also warned last night that it could be a "Scary" move up and as 3C develops we'll have a better idea, but the 15 min chart being so positive right now is a strong signal in itself. Last week I was expecting a breakout above resistance, and that's where I think Wall Street will go massively short when the bulls step in as buyers, the reverse of yesterday. I've had this opinion for some time, so to see the early manifestations of the possibility, I lean toward this opinion. Of course if 3C changes, I'll let you know. I'm not in the business of guessing where the market will go, I bring you the indications I see.

This would be the breakout level on the DIA. 


As of today, I'm going to lighten up a bit on my shorts and perhaps hedge a bit until this becomes more clear. 

DUST Request

We've been all over DUST and many members did great with DUST yesterday with a 6% 1-day gain. Those who stuck with the trading signals were to enter DUST on the open this morning, a few missed the trade and are wondering if they'll get a second chance, so lets take a quick look.

 First of all, DUST is coming up to a resistance area, so I would think that will put some temporary pressure on DUST which may allow an entry at better prices today.

 The long term 60 min chart of DUST has been very positive as we have been following for quite some time now, so I view DUST as having a LOT more upside.

 There is a 5 min negative divergence today, hinting at a pullback

And the 1 min chart looks like that pullback will be soon. I doubt it pulls back to the open, but I think it will pullback. You may want to phase in to the trade on the pullback or you can contact me for updates of what the 1/5 min charts look like. Ultimately while a better entry is preferable, I think there's enough potential upside in DUSt that I wouldn't worry too much about a deep pullback and miss the trade altogether.

HBI Chart Request

HBI is a short trade idea originally from July 22 I also posted a subsequent follow up on 7/26.


Here's HBI now...

 Here's the original idea at the white arrow and the follow up at the yellow arrow. There was a clear bear flag, which is exactly why I posted a stop around $32 in the original idea and said this in the follow up,

"It wouldn't be uncommon to see a move out of the bear flag to the upside, which would be fine. I'd like to see the small breakaway gap remain unfilled."


The bear flag is too obvious, I fully expected it to be gamed, even though HBI is bearish, Wall Street still plays their games.

 Here's the 60 min. 3C chart showing the top and negative action in the bear flag, this is the most important of the intraday timeframes and shows HBI as being a solidly bearish stock.

 The more detailed 15 min chart also showed the top reversal and more importantly, we have good confirmation through the various timeframes.

 However, yesterday the 5 min chart put in a positive divergence.

So did the 10 min chart.

This leads me to believe HBI most likely will be gamed a bit. Technical traders are too predictable and it makes it too easy for Wall Street to take advantage of their predictability. For a technical trader, a bear flag is to be sold short, our trade is based on a longer term view of bearishness. It would not be uncommon to have seen an upside breakout from the bear flag, instead we saw a downside breakout and what will likely turn into a Crazy Ivan shakeout. For our newer members, I have coined the term "Crazy Ivan Shakeout" from the movie, "The Hunt For Red October". You may remember that the Russian submarines would use a maneuver called a "Crazy Ivan" in which they would turn 180 degrees to see if any enemy sub marines where following in their prop-wash, an area they would have difficulty in hearing another sub, so the maneuver "cleared the baffles" and then they would head back to their original course.

For trading purposes, my "Crazy Ivan" is a double shakeout, first the shorts that entered on the break of the bear flag would be stopped out as price rose above the bear flag, making the pattern a failed pattern. Most technical traders will enter the trade in the opposite direction (long) on a failed bearish pattern. Finally the trade would move bak down below the bear flag, stopping out the longs who just entered.

I feel there's a decent probability we will see a Crazy Ivan in HBI. I still think the trade is a good short and may offer a better position, like I said, the trade was not based on the bear flag, but the 60 min 3C chart.

I would set some alerts, this may be a good second chance shorting opportunity at a better price point.

GLD continues lower, for now....

 Here's the 1 min negative divergence in GLD that set off our warnings a couple of days ago, note the negative divergence on yesterday's gap higher-to be expected as part of the snowball effect. In the white area, you can see the divergence persisted yesterday with GLD making some intraday gains and 3C heading lower. Again this morning on a gap up, 3C was negatively divergent. Remember this is the 1 min time frame and is for short term and intraday moves.

 The hourly chart is what has bothered me and prompted my warnings about a possible more serious pullback.

 However, as you know, our best divergence/reversals come when all timeframes are aligned, especially important is the 15 min chart seen above. There is no negative divergence present at this time, which makes me think GLD may attempt a rally close to the recent highs, that would give the 15 min hart a chance to go negative. The other possibility is that the 15 goes in to a leading divergence as GLD moves lower, but I think the first option is more likely. Reversals are rarely a clean U-turn.

 Here are two potential support areas, the 10/22 sma.

The longer term reversal I would hope would lead us to the long term mean of the 150 day simple moving average, something that only happens once or twice a year, but has been a great place to be a buyer.

UUP/$USD Follow Up

In reent posts, I've been talking about the divergence between price in UUP (proxy for the Dollar Index) and 3C, which have shown strength. As is almost always the case, UUP broke below an obvious support level at May/June and as is usually the case with these types of breaks (especially with positive 3C), the breakdown was accumulated only to see UUP shoot right back through resistance the next day. 

Here are the updated UUP 3C charts for today, there are some minor changes.

 1 min 3C showing accumulation of the break below support, also note that we have a negative divergence on this morning's gap up.

 The 15 min chart shows a bit more history and the importance of the positive divergence in UUP, however it too is already showing a negative divergence on the gap up this morning, to be found on a 15 min chart so quickly hints that there's been some decent distribution in to the gap up.

 The 30 min chart shows more history of the divergence and also a slight negative today.

And the 60 min remans very strong. I suspect UUP will pullback which will have effects on correlated assets, but considering the longer view, I think there's something bigger brewing in the $USD/Dollar index that will play out soon.

SRS Trade Follow Up

Yesterday I highlighted one of my theoretical favorite trades, SRS, which finally seems to be moving (you can see the idea by clicking on the link to the post)

 SRS is at the level that I called "the first hurdle" yesterday.

 As you can see, the short term 3C has been in line with the trend or confirmation of the trend.

Since we are at a resistance area, it wouldn't surprise me to see a little pullback, since 3C is not negative, I would expect a pullback to hold at the red square.

The 60 min Trend Channel which I thought would work as a decent stop on the initial swing move should allow for a consolidation, if you are taken out on a Trend Channel stop, you will at least have a break even trade. Should SRS breakout relatively soon, we should look at widening this stop to allow for future consolidations.

16 weeks of 400k+ in Initial Claims Snapped

Today's I.C. printed at 398k (consensus of 415k) and is the first week after 16 weeks to print below 400k. It should be noted, as usual the last print of 418k was revised higher to 422k, this is to be expected; I can't recall the last time we had a downward revision.

This seems to be the only support the market s getting. The Chinese rating agency, Dagong (kind of a funny name) says they plan on cutting the US sovereign rating as early as Monday or Tuesday next week.

Is this important news? Dagong it, you decide. Sorry, I couldn't resist.

Early Indications

We still have some relative positive divergences in the market, specifically the SPY, QQQ and IWM, but not the DIA. These are of short term nature, 1-5 min. , but they have lasted nearly a day, they so far have kept the market from seeing follow through selling, we'll have to see f they produce anything on the upside, fall apart or if they continue to build.

 IWM 1 min positive divergence from 2:30 yesterday

 IWM 5 min relative divergence from 10:30 yesterday

 QQQ 5 min relative divergence from 10:15 yesterday

SPY 5 min -slightly leading positive divergence from 10:15 yesterday