Market Update

First off, ES has hit another new low. This is VERY strange, 3C on ES usually tracks very well and divergences respond well, I have never seen ES lead like this for so long.

Here's a quick look at the major averages, I want to get industry groups up next.

 I want to show you the zoomed out versions too, I'm just pinched for time so here's today as the market has hit a sort of double top, resistance and I suspect it has been selling and heavy at that. This is the DIA 1 min leading strongly negative

 DIA 5 min the same

 Even 15 min leading in a single day which usually takes more time

 IWM has been falling off in this parabolic move which I called earlier today, "Dangerous looking", like picking up pennies in front of a steam roller.

 IWM 5 min leading negative strongly, plus the IWM couldn't even make the second part of a double top today.

 QQQ 5 min leading negative strongly.

 On the 15 min chart as well.

 SPY 2 min, not much to say that the chart doesn't

SPY 5 min as well.

I'm going to try to get up the 3 industry groups.

Keep an eye on FCX

Huge volume and the stock is going nowhere on a day the dollar is down, I'll try to get some charts out in time.

ES Update

 Here ES has hit a new consecutive low. Just for the record, I've never seen 3C on ES do anything like this for this period of time.

Since the panorama of the 3 ES charts I posted earlier to demonstrate this was difficult to see and understand because 3C is not scaled to price so as you change the zoom, it changes the placement, I have tried to record the chart (which cannot be shown in 1 screen capture) using a new video capture that I haven't tried before. If it works correctly, you will see yesterday's pre market activity, then yesterday in the darker background, then last night and finally end at today. Just note the trajectory of 3C.

GLD Update

It's been a while so I'll make it a bit broader.

 a 5 day chart of GLD, the smooth uptrend has had a definitive change in character at the triangle. Large triangles are NOT consolidation patterns, but more typically tops or bottoms, depending on what trend precedes them, this would be considered a top. The question is whether it is a primary top in which case gold may be a bubble waiting to burst, or an intermediate top, in which case it likely pulls back a healthy amount and resumes an uptrend or perhaps moves laterally as there are 3 trends (up, down and sideways). Volume at the triangle is correct for the price pattern.

 Here's a 1-day chart close up, the yellow box is a break away gap, we don't see many of these any more, the volatility in the market seems to fill most gaps, however if it does hold, it will have very bearish implications for gold and lean toward a primary trend adjustment. The red trend line is an area offering some resistance. Remember what I have said about large volume days at a support level? They are typically a type of reverse churning and a reversal point, in any case, there's overhead volume there that may be creating some resistance. It's all psychological, assume you bought on that day because price hit support (as did many others based on the volume), then eventually GLD fell 9-10%, when price nears your buy area, you become a seller as you have prayed for the last 2 months, "If I can just get out at break-even" and presto, you know understand the emotional component that creates overhead resistance.

 Here's GLD vs the Euro which has been a decent proxy in non QE periods. Note what happens when GLD runs up without the Euro's support, it's happened 3 times already and each time GLD reverts down to the Euro (of course the dollar index has 50% weighting of the Euro, but for some reason the Euro has a better correlation strangely.) We have that same thing happening now in yellow, that's not a prediction, just an observation.

 The 150-day moving average is well known throughout the gold trading community as a solid buy point historically, we were waiting for a pullback to the average to look at a buy, but this time was different and we put that on hold. GLD still hasn't tested the 150 ma and the recent bounce has been on declining volume.

 However the 200 day average should be noted as long term it has provided support and resistance. Gold traders are too hung up on the 150.

 Here we see the importance of the 200 day, not only did it provide resistance and support, but the biggest volume day on the breakdown from the triangle was not the breakaway gap, it was the break below the 200-day m.a. The break away gap remains significant resistance, but that's still a ways off.

 A 60 min chart shows some weakness in this recent bounce above the 200 day, the white trendline is an off chart positive divergence at the lows that started this bounce.

 On a 15 min chart 3C is not as strong as it should be, it has seen a couple of distribution moments like the one in the red box that may be holding it back from solid confirmation, however with volume falling off as GLD has gone up, I wouldn't expect strong confirmation here.

 On a shorter term basis, the 5 min hart shows decent confirmation, so I don't see the GLD move as being over yet.

On a shorter timeframe, we see some negative 3C action which has sent GLD lower today despite a weaker dollar.

In my opinion, there's not a strong trade set up either way in GLD yet and I would be patient, but keep it on your radar, I think a strong set up will come, but it's not here yet.

USO Update

Every EIA report day we have a number of trader who day trade USO as we seem to get some great signals on likely report leaks, remember from the earlier post that USO was negative on this a.m.'s gap up. In any case, this update is for both longer term position traders and those of you day trading USO.

 So here's the bear flag, it did break, intraday we often see volatility shakeouts on these breaks so if you were in early and using leverage, you probably have a decent profit that you'll be looking to protect.

 Here's the intraday break from a gap up which was negative since yesterday on the short term charts, long term charts are just plain ugly and this post doesn't apply so much to position traders other then the initial bear flag break is starting the next leg down.

 Here is the 1 min chart zoomed in close, so intraday thus far there's nearly perfect confirmation of the trend, the negative divergence from the open is visible to the left.

 When the 1 min chart is scaled out to where it belongs, you can see the  1 min is actually leading negative, for swing traders this is a good sign.

 On a swing trade basis, you'll want to allow some room for any volatility since the flag was broken, the Trend Channel was also broken at the red line, the white area is a potential initial stop for swing traders.

If you are running a leveraged day trade, then you don't want to get caught in any volatility moves and I would use this tighter stop (white trendline) as you probably already have well over double digit profits on puts.

URRE Update

URRE continues to do as expected, maybe a little faster then expected, it also is a good example of what we are not seeing in the broad market, confirmation and even better. Since I covered the long term yesterday, I'm just going to stick to today's action and the examples mentioned above.

 The first example that has been a year plus trend in the market is that of large wedges, whether they be bullish ascending wedges like this one or bearish ascending wedges (of which the broad market shows several although not as large as this). According to 100+ years of technical analysis, once a wedge makes an apex (point), it should break out, in this case, an upside breakout, with ascending wedges, they should break down. I have been noting for well over a year that this has changed, the wedges now create a period of lateral consolidation, in this case a base, but almost always have a head fake move first. You can see the head fake move in URRE as it looked like it was breaking out of the October apex, this is what traders expect and many probably got nailed on this one as it failed. The difference between professional traders and retail is that professionals will take several shots at the entry until they get the position/entry they want. Retail would have taken 1 shot at this on the breakout, got stopped out and would have long forgotten about URRE, which may be part of the reason this is happening. It gives institutional money that quiet period to accumulate when no one else seems interested in the stock.

In any case, URRE has continued to round up as I have been hoping to see, today it's up 11+%. Since I view this as the second part of URRE accumulation, this second base may not need to be that big. The way in which URRE closes today will tell whether it is just seeing a decent day and will continue to base or whether t is moving to stage 2 mark up. If it is moving to mark up, then volume will be large on the day and there should be a breakout above the white line, this is the attention getter to get retail involved in URRE again and from there, URRE should trend up well for a decent period. Watch price and volume today.

 Unlike the market, here is 3C in perfect confirmation of the move higher.

 Here we see on a 5 min chart, the accumulation in the "U" shaped area.

On the 15 min chart, we also see that accumulation that has bled over from the 5 min chart and 3C is not only confirming the trend, but is leading it as 3C is higher then the relative price point at the left of the red trendline, while price is still below that relative price point, this is a bullish chart with excellent confirmation.

Market Update

 There's two views here, one intraday and two a bit longer. This i a bit longer on the DIA, the 3C level refuses to even confirm at price levels seen on the 17th and even further back beyond the 12th. This very thin wedge-like price action that is poking out like a thin limb looks very dangerous, along the lines of a parabolic move which almost always ends badly with an equally nasty parabolic price move in the other direction.

 Intraday, it looks like this move is losing steam, it has roughly been following a Euro bounce that has been very parabolic.

There's the 1 min Euro parabolic move.

 The Q's are also not confirming price action even at the levels of the 12th and before the 6th on this chart.

 Intraday in the Q's there also seems to be a reversal nearing, although I'd expect the Euro to reverse first.

 longer term again there hasn't been confirmation of the move even back to levels at the 10th-11th. This recent price action looks very dangerous to me on the upside.

 Intraday the 2 min is bleeding n to the 5 min, as if they know the parabolic move in the Euro won't last and are cashing out on intraday trades.

 The long term trend also has been negative recently. The dates in white show rough 3 confirmation of the market trending down, it's the area in red where it won't follow price.

 SPY intraday is also losing momentum like the other averages.

 Again, longer term no confirmation, even at lower price levels of the 17th or before the 11th.

This gives a better feel of why I feel this move in red is a dangerous area for the market, it's very thin, there's very little short interest in the market left, the majority of stocks (as seen last night) that have advanced have done so on diminishing volume.

I'm not huge on these kinds of articles or including them n my own analysis, but apparently on GS's Sales round up call they said the following, which would fit very well with what 3C has been showing...actually I'll just show the entre quote as there is some other information on retail coming back in the market, that would be the obvious suckers GS would be dumping to (from yesterday):

"Earlier today we got our first clue that the smart money has stopped "distribution" and is now offloading to retail after we saw the first equity fund inflow, however tiny, in months, and only the second one out of 37 outflows since April, as reported by ICI. The second and far more important one comes from today's Goldman sales roundup, which confirmed that following today's latest borderline ridiculous meltup, retail investors looking for the sucker at the poker table, wouldn't be able to find one. Here's why. Quote Goldman: "As has been the recent trend, our cash flow remains better to sell, both from long-only and hedge funds." And there you have it: smart money (well, relatively so) has "recently" been using every melt up chance it gets to dump the bags with the E*Trade baby. Third and final proof: "ETF flow however skewed toward better buying." At this point retail investors may want to ask themselves: what do they know that the others, who are actively selling to them, don't."

EIA Report/ USO

EIA Petroleum Status Report

Released on 1/19/2012 11:00:00 AM For wk1/13, 2012 Prior Actual Crude oil inventories (weekly change) 5.0 M barrels -3.4 M barrels Gasoline (weekly change) 3.6 M barrels 3.7 M barrels Distillates (weekly change) 4.0 M barrels 0.4 M barrels

Demand indications are very weak in this week's petroleum inventory data. Gasoline demand, measured here by changes in wholesale supply, is down 6.1 percent in the January 13 week for the steepest year-on-year decline of the recovery. Distillate demand, at minus 4.1 percent, is at a six-month low while jet fuel demand, at minus 5.6 percent, is at a year-and-a-half low.This report is offering a leading signal of weakness for final demand.


USO...

 This is the overall USO trend, there's no need to mark the divergence as it should be very clear as USO has trended laterally in price (most often where distribution/accumulation events occur), 3C has clearly been trending lower suggesting distribution throughout the area.

 This is the most recent break down in USO, it is a bear flag, note volume confirms. The following timeframes will focus on this area.

 15 min is negative at the start of the flag pole, the vertical drop in price, as the flag portion has unfolded, the 15 min chart has gone negative in to the matured flag.

 The 5 min chart focusses on the same area, with some more detail, it too is negative in the flag portion to the right and has bled in to the 15 min timeframe.

 The shorter charts offer more detail as they see the divergence first and bleed in to the longer charts so long as there is sufficient weakness in underlying trade.

The 1 min chart shows the flag area, clearly quite negative on the maturing of the flag.


A bear flag is a bearish consolidation/continuation pattern. The longer trend and the more tactical bear flag both look very weak here.

Overnight ES Update

This is beyond a doubt, the strangest 24 hour ES reading I've ever seen. Last night I went through the Dominant Price Volume Relationships which were pretty rare, I've probably only seen that kind of dominance among all of the averages maybe once every 2 months and I'm not limiting it to just a bearish dominance, but any dominance reading, bearish, bullish or in between.

Here's the ES chart in 3 sections starting from yesterday as I can't get the entire 24 hours on 1 chart.

 Yesterday and in to early evening EDT. Note the price spike to the top right for reference on the next chart.

 Continuing going straight down through the night and in to the NY open

From the EU to the NY open. If this were all on 1 chart, it would be a non stop diagonal line heading down without interruption.

BAC Earnings Farce

Yesterday I said I don't care one bit about fundamental data because it is unreliable, deceptive and there's no edge. I was differentiating between fundamental analysis or "Value Investing" and having an understanding of fundamental issues in economics, geo-politics, etc (in essence, having a basic understanding of what is going on around you in the world), those fundamentals I value.

In a fine example of why fundamental stock investors (if they are not experts and CPAs) should be careful, one needs to look no further then any financial companies earnings and since BAC is the flavor of the day, it will serve as a good example.

Here's the headlines for BAC earnings that many traders will look at and pretty much go no further...

New York Times DealBook:

Bank of America Swings to a Profit

On top line revenues, BAC reported $24.89 billion beating consensus of $24.5 billion.

EPS BAC also beat at $.18 vs consensus of $.15.

So the headline numbers are a beat.

However, there's a cornucopia of 1 time charges as well as a massive under-reserve of contingent liabilities along the lines of a 65% shortfall or about $492 billion dollars. 

However, just sticking with the 1 time items (meaning this is not income and write-off that BAC can use more then once and thus isn't part of their business model which is what earnings are supposed to show us), their EPS would have come in at $.10, or a miss of 33%. Top line numbers would have been significantly lower as well.

We'll see how long it takes the market to put 1 and 1 together, I suspect they already have.