USO Update

 USO daily has benefitted from a stronger Euro/weaker dollar on this morning's Greek news

 Intraday there's a consolidation with volume confirming, it however is a descending triangle rather then the continuation (bullish) ascending triangle.

 The 1 day Trend Channel has held fine, although as I have mentioned, I prefer the wider 2-day as a stop.

 The X-over screen saw 1 false crossover which was not confirmed (red box) and then a recent cross-over which is a short signal. More importantly, the first pullback is usually to the 10-day moving average in yellow, which is where we are today. I mention this because I have been asked about USO as a swing trade, we want to short in to strength and today provides that.

 Today's 3C action in USO would suggest this is a pullback and nothing much larger then that.

 The longer 60 minute chart which is why I have been bearish on USO has had no damage done to it and continues to trend lower.

On the swing screen, the red candle is the short swing trade, white candles are noise, the recent long legged Doji from Friday suggested a pullback , which we have seen. That same candle is also the pivot, so a stop out on the trade wouldn't come until at the very earliest tomorrow and only if it posted a low higher then Friday's high.

All in all, with the strength today and the larger trend, it doesn't look like a bad swing entry here. There's also SCO/DTO which could be bought for more leverage or options (Puts) could be used, I'd prefer a few months out for a swing trade so the time decay isn't as bad.

Ah, I found it

Published 4 minutes ago...

Greek leaders' meeting on new austerity measures postponed to Wednesday

Perhaps It was the Spiegel Opinion Piece?

Here it is and they are correct...

The unknowns and the political as well as financial backlash are setting in with a German and French populace that are soon to be going to the polls. Eight months ago Merkel was losing support in regional voting, losing. It looks pretty clear at this point that Sarkozy will lose and will be replaced by a president who wants to renegotiate and over turn just about everything Germany, France and the EU task masters generally, have agreed upon.

We already know as I've pointed out as does this article, that the rescue package that Greece is trying to obtain is already too small since it was agreed upon last October, the Greek economy has shrank faster then the Troika thought and the bailout is insufficient. The debt restructuring which we haven't heard much about lately is filled with unknown outcomes, will a sufficient number of bond holders agree to losses or will Greece need to apply retroactive Collective Action Clauses to force creditors to accept the terms. Then what does that mean for the other PIIGS once such a precedent is set? Will the hedge funds that have been buying Greek debt in hopes of taking legal action to make a profit by recovering full par succeed? What happens when Merkel and Sarkozy are thrown out and the German tax payers are on the hook for all of the Greek aide to date and a new set of leaders decides to end the great experiment called "saving Greece" with the aide already handed out amounting to 30-50% of German GDP?  "IF" this is successful or even if it is not, a precedent has been set, what stops Ireland, Portugal, Spain and Italy from seeking similar treatment?

If there ever was moral hazard, we are looking at it.

No News, but the Euro is hinting something is up

Thus far the news today has been sounding pretty positive, although we have seen this what feels like a hundred times, rumor/denial, so why the Euro just took a bit of a plunge and one candle specifically, I don't know, but you saw the last update.

 Often major changes in the market are seen in fleeting glimpses, maybe this is one?

A close up view shows the Euro declining on a series of smaller candles and then a relatively large drop on 1 candle. As far as I know, the Greek coalition government meeting hasn't started, but the Greek population is not happy and I have seen head lines of riots as today is also a general strike by several unions.

Market Update

I've had a lot of interest in my Swing Layout and the rules, I'm going to fit it in to this market update real quick.

 While I don't have the Swing Layout open, the white arrow is the highest high in the uptrend on a 5 min intraday chart, it becomes the pivot or signal candle, specifically, its low at the red trendline. The first 5 min candle to make a high that is below that trendline (below the pivot candle's low) breaks the uptrend and signals a short if conditions are right, which you can quantify with many different indicators, for now since this is an update, I'll use 3C.

 3C started going negative and the market lost all relative performance, even with a new high, the relative strength dropped way off and as you can see, the 1 min 3C is now leading negative, which adds some weight to the swing candle signal.

 The next 2 min intraday chart shows the early accumulation for the move up with the Euro and is also now leading negative.

ES below has been in a negative stance all morning.

Quick Update

I can't stress enough that today is all about Greece, the news that a final draft between the Greek PM and the Troika was being put together sent the Euro higher, correlations have been pretty strong as you saw with GLD/SLV and as you will see with the SPY. The market seems to understand that a draft document is not an agreement, the real fight will be later today when the Greek coalition ruling party members meet to either accept, reject or counter-propose what is contained in the draft, I'm actually a little surprised that the market reacted as positively as it did to a draft of conditions being drawn up, there's no real news there and as was noted yesterday by the EU, they are past the deadline. To get the money Greece needs in time, it will take time to get the PSI debt restructuring deal done, agreement itself will not pull Greece out of the fire, there is a time component and if they get the bailout tranche, but 1 day too late, Greece still defaults.

 The SPY compared to the Euro intraday, very similar to what we saw in GLD/SLV. There was an RSI divergence and for the time being, it seems likely that the market will tread water awaiting further developments.

on 1 1 min 3C chart we see early confirmation of the move off the lows to above yesterday's close (white trend line) and since 3C has fallen off as the market has lost upside momentum with the Euro.

Not much makes a whole lot of sense in sector rotation this morning except financials due to yesterday's start of pre-announcements, essentially lowering the bar for the quarter when we are only 1 month in to the quarter. Tech seems to be the strongest thus far of the 3 major groups, it also has the least correlation to the Euro. Interestingly, we are seeing some strength in rotation in Tech, but at the same time in the very defensive utilities. This is what I meant when I said rotation this a.m. doesn't make a whole lot of sense.  Energy makes sense considering the FX correlation and the recent loss of momentum in Euro upside/dollar downside. Interestingly, Industrials are way off.

The bottom line appears to be a holding pattern. I'll be watching for any unusual activity in this area as it might be an early heads up of things to come.

Gold and Silver (GLD/SLV) Update

I've had a lot of requests for updates on both, each are my least favorite assets to analyze, mostly because of the unpredictable nature of each, especially when it come to the COMEX. However, here is where we are at this point. The GLD charts were captured first and then SLV, so you will see a little bit of a decline taking hold intraday, that will be obvious from the SLV charts as compared to the first GLD charts.

On a side note, listening to Bernanke in the background as he testifies before Congress, he made a statement about the NFP that in his view, it is "understating unemployment". This is one of those good is bad/bad is good as that statement could be taken by some bulls that QE3 is not off the table. Just a little side note.

 GLD since the last update (daily chart), that odd  non-consolidation pattern did break. Applying Swing rules, the white candle was the pivot, the red candle was a break of the swing uptrend and today's candle represents noise, in a Swing context, GLD would be a short swing trade with today representing noise.

 Intraday, GLD like the market, has appreciated with the Euro/weaker $USD this morning, obviously on the news out of Greece regarding a final draft between the Troika representatives and Papademos.

 There was some initial accumulation in GLD , it is not clear that the move up is being confirmed, it did see confirmation early this morning, but that has faded.

 The same is true of the next timeframe at 2 min.

 As well as the 5 min chart...

 The hourly is the worst looking as this particular cycle  has gone from confirmation to distribution, you could think of this as the 4 stages and we'd be somewhere in transition between stages 3 and 4 (distribution/top and decline).

 Even though the trend line has been broken, as I pointed out in the last GLD update, my preference would be to see the Trend Channel broken to the downside before considering this to be a high probability stage 4 move. This of course would go a long way in helping us understand whether GLD has reached a bubble, whether that be a very dangerous primary trend bubble or a large pull back in an intermediate trend. My custom indicator at the bottom "Close within the range" (think candlesticks), grew well during the uptrend as it should have, it has since declined as I would also expect on a break of the trendline that we recently saw.

 As for SLV, the last time I updated, I said I believe that there may be a line in the sand around $34, it is likely that this has a lot to do with JPM's short on silver, we are in that area and there is significant overhead resistance in the area, There is a short term trend line that is on the verge of being broken, similar to GLD.

 Again, intraday, the Euro has supported commodities broadly this morning and GLD/SLV specifically as you can see the very close correlation (Euro in red), RSI has gone negative in this morning's trend and as you can see, as this capture is a bit later then the GLD captures, a slight fall off in the Euro is effecting both GLD and SLV.

 Intraday we see early a.m. accumulation and we are close to in line right now, with a slightly negative stance in 3C-intrady.

 On a 5 min chart, it does look like SLV has hit an area of resistance and appears that the next trend is being set up for a decline or stage 4, which is very similar to GLD's position.

 Longer term, the 15 min chart is confirming the 5 min chart and in the same area.

 The 30 min chart also is confirming what the previous two charts show.

Once again, the Trend Channel is what I would pay the most attention to as far as defining a stage 4 decline. Longer term, I don't feel SLV has as much of question mark regarding a top, SLV has been manipulated severely by the COMEX, at one point SLV was looking as if it may enter a bubble like area, but the COMEX (and in my opinion, to protect JPM as a favor via the F_E_D) hiked margin rates 5 times in a row in something like 6 day and absolutely stopped SLV in its tracks, this was not the kind of volatility margin increase that is normal, especially when they kept hiking it after they had already killed the upside momentum. That being the case and SLV/silver probably not being in a bubble, makes SLV less attractive to me for any trades either long or short.

Speaking of which...

Here is the chart when the Silver vigilantes (remember there was a viral web campaign to break JPM's short) finally pushed SLV through resistance that Blythe Masters has managed to maintain, the resulting move was very parabolic so a margin hike did make sense, but 5 consecutive hikes was clearly something other then dealing with volatility, it was like kicking a man who was already dead and perhaps was a message. SLV lost nearly 30% in 5 days!

Longer term it is hard to look at this chart and argue that SLV is in anything other then a primary downtrend right now.

Greece Moving the Market

As expected, Greece is the fulcrum event of the day, maybe the week, maybe longer. The Euro and thus the market have gained this morning...

 The US open and the Euro moving up on news that Greece and the Troika representatives are drawing up a final draft of the terms for a bailout or the next tranche that Greece needs so badly.

This has lifted the market off earlier nearly .60% losses, however, this is a draft of the conditions that need to be met, the document still needs to be agreed on by the Greek coalition government later today, that is the main event. As you can see both early volume to the downside and volume since is already much heavier then yesterday.

IRE Update

 IRE's pullback still looks reasonable at this point, it hasn't done any technical damage, it's healthy for stocks to pullback/consolidate so they don't become overbought and see a sharp correction that can feed on itself. My guess would still be that it corrects through price or time and meets the rising 10-day yellow moving average or in the area.

 Since 3C signaled the pullback, the 5 min chart is now showing some hints of accumulation starting in the flat area yesterday, the green arrow is 3C in line with price movement, but in the white area, that's a positive divergence just as there was a relative positive divergence on today's opening lows. We are just starting to see the hints of a more powerful leading positive divergence, but it's still very early in forming.

I would still stick with the daily Trend Channel, this is a custom indicator I designed, actually inspired by the Turtle Traders. The channel is unlike an envelope channel which is a fixed width or Bollinger Bands which can show enormous volatility, instead the Trend Channel looks at each individual stock it is applied to and self adjusts to that stock's recent volatility and allows a certain standard deviation from the average volatility of that stock, in a long trade, a close below the bottom channel is a stop. The Channel is also designed to maximize profits as it continues to lock in gains, for instance, yesterday the channel was at $6.44 and today at $6.63, nearly 3% locked in overnight and it will continue moving up today, by the time price were to reach it, it would likely be close to $7.00 and being we entered the trade at $6.27, it's already locked in a guaranteed profit. It allows enough room for consolidations so the stock is not stopped out on a normal consolidation, but if the stock's behavior deviates more then the multiple standard deviation of the stocks normal volatility, a stop out will occur, which also tells you the character of the stock has changed and likely the trend will as well.

For now, we have the beginning of what we expect to see on a pullback, so I don't see any red flags yet.

I will say the Cats and Dogs that were rallying hard yesterday, are not doing so today, at least not in the same industry groups-shipping and biotechs. I will check around and see if there's been rotation in the C&D stocks.

Overnight

I like to try to keep you informed of the basic fundamentals in the market, so in that spirit, as well as yesterday being a huge Cats and Dogs rally day, you may also know by now that it came (and you saw some of those volume surges of over 1000% in the C&D's) on the lightest volume the market has seen in 10-years excluding holidays. So for a normal trading day, it was the lightest in 10 years. That taken with the awakening of the Cats and Dogs rally should sound some alarm bells. As you might expect, the dominant Price/Volume relationship was solidly Close Down/Volume Down, which is the hallmark relationship in a bear market, although other factors are certainly contributing, none are healthy for the market.

I was watching the Euro last night and saw a dramatic drop off just before midnight, I checked the news and it seems that it was caused by the RBA of Australia keeping rates at 4.25 on expectations of a .25% cut, it wasn't so much Euro weakness as dollar strength that drove the Euro lower. The inflation concerns Australia is clearly telegraphing are making the market nervous that China will follow suit.  As such, trade in commodities today should be interesting, I would think they will underperform and in fact have started the US session on a weak note.

As I told you a week or so ago, earnings for the last quarter had seen expectations for growth slashed in half before AA even reported and still the earnings have come in very disappointing, well they're at it again, before the analysts can even slash their estimates, financial institutions are already pre-announcing to the downside and lowering expectations 1 month in to the current quarter! I suppose they are literally banking on investors short memories by pre-announcing so early.

In Germany, Industrial Production which was expected to remain flat to a slight gain, came in down 2.9%, remember what I said about why Germany needs the Euro-zone to support exports or you can substitute Euro zone for Free trade zone. This is the first decline in a very long time and whether it is noise or contagion remains to be seen, but the European market was uneasy with this development. In fact ES has decoupled with an early morning surge in the Euro off its lows.

Today will we finally get the Greek meeting? It is scheduled, but so was yesterday's. The market, being light on US data, will continue to keep a close eye on developments out of Greece.