ES Update

The 3c template is loading now, but looking at ES/3C...

ES has been largely negative all day, there was a noon time positive divergence sending ES a bit higher, that is now going negative.

Risk Assets and Sector Rotation

We look at these risk assets because they "should" rally with the market. Many times they are predictive or leading indicators and the longer term shows how dislocated the market is and how serious it is. Sector rotation tells us a lot about the tome of the market and where potential trades are.

Commodities

 Commodities were a leading indicator early today as the market tested yesterday's afternoon highs, commodities moved lower, right now they are just about in line with the market probably due to the Euro consolidating as it broke below $1.32. Remember we often see a volatility bounce after n important support level is broken ad that happened in the EUR/USD pair today.

 As a reminder, longer term commodities are severely dislocated from equity performance

 High Yield Credit still hasn't made a higher high with the market is 4 trading weeks now, interestingly this is the same area where the 3C divergences have gained downside momentum and the averages have lost momentum.

Over the same 19 days the SPX has gained +1.88%, compare that to the previous 4 weeks at 5.25% . The R2k has a percentage move of -2.86% over the last 4 weeks compared to +9.93% for the previous 4 weeks. The Dow -30 has a .98% gain for the last 4 weeks compared to 3.65% for the previous 4 weeks and the NASDAQ 100 (the strongest) has a current 4 week gain of 4.47% compared to the previous 4 weeks at 7.56%.

 Yields which are like magnets for equities refused to make a higher high yesterday and the end of day comparison was a warning. Early today they declined while the market was lateral, even now they will not participate in this bounce.

 Long term, Yields called the July melt down in equities and the October rally, they have not participated since.

 Here's the EUR/USD (Euro) since yesterday's close, note the consolidation below $1.32

 The Euro's performance over the last several days vs the SPX.

 Longer term, the Euro called the 2011 top and July equity market decline, the Euro remains strongly dislocated from the market. I do not think the correlation is broken and I do believe equities will revert to the mean.

 High Yield Corporate Credit sank badly at yesterday's close.

 Here it is today, not participating as well as calling out a red flag between 1 and 2 p.m. yesterday which is precisely where we saw strong negative 3C divergences.

 This is Energy vs the SPX, it did not make a higher high yesterday with the market, a negative divergence and it is performing worse relative to the market today.

 The long term dislocation between energy and the SPX, note that they were in sync during August/October.

 Financials yesterday also were a red flag at the 1-2 pm area, they performed a bit stronger early today and have since weakened vs the SPX.

 The recent divergence between financials and the SPX

 Technology is outperforming today.

 Looking at today's sector rotation, Financials, Energy, Basic Materials, and Industrials have all lost ground. The trade is more defensive with Healthcare, Utilities & Staples gaining ground. Only Tech and Discretionary are risk sectors performing relatively well and not that well compared to the Defensive sectors.

This is the SPY vs AAPL, you can see where the Tech strength or at least relative outperformance is coming from.

It's been a busy day, but lets put things in context

First you already know (and I think we all already knew) what happened to this week's LTRO money, it went straight in to the ECB's deposit facility costing banks 25 basis points to keep it out of the financial system.  One bank that may be worth a look is Barclay's, they did take LTRO money this go around. In any case, 800 banks, that's a lot more then the first go around and they all probably knew what happened to the banks who took LTRO 1 money, they were sold. So apparently there's a bit of a liquidity crisis which is also nothing we didn't already know.

I told you yesterday about the Greek dilemma in the banking system and with the LTRO as Greek bonds are not acceptable collateral, along with the bank runs, the planned bailout doesn't include enough money to recap the banks if it ever did. I also told you how the Greek economy has gone down the tubes, so the funding for the bailout which was based on fundamentals back in October, is woefully insufficient as Greece has slid since then and the "Top Secret" Greek Sustainability paper leaked, proved that Greece needs about 3x more money to get to the 120% of GDP by 2020.

I also told you about the Germans being upset with the ECB and Draghi for taking junk collateral in the LTRO and how the Germans want Draghi to change this immediately as the German's are starting to really understand that it is Germany who will be stuck with the bill at the end of the day.

Overnight:

As for German economic data, German retail sales unexpectedly declined in January as rising oil prices fueled inflation, at least that's what we are told, but who knows, they may have declined without rising oil prices.


The German finance minister Schaeuble said final decision on the second Greek bailout will be made during a teleconference on March 9th. (Sources) He added that the Greek bailout package now depends on the participation of the private sector.

They are certainly cutting it close aren't they, it also depends on the IMF and the IMF  depends on the PSI and the PSI depends on the bailout, I'm not trying to be facetious, this is the circular logic among all of the individual players that must all meet at the same point to make the Greek bailout happen.

As suspected yesterday by USO's price action,  A Saudi official has said there were no acts of sabotage on pipelines in the country, following reports from Iranian state press yesterday claiming an explosion on a key pipeline. Ironically it was Iranian TV that was broadcasting pictures of the fire, not the pipeline on fire. This kind of event plays in to the Iranians hands so of course they would be eager to exploit it.

In Spain: Speaking at a news conference, Deputy Prime Minister Soraya Saenz de Santamaria said that Spain's economy will contract by 1.7 percent this year as the government carries out drastic austerity measures. Earlier, Spain also defied the European Union, setting a 2012 deficit target at 5.8 percent of gross domestic product, a far softer goal than the 4.4 percent agreed with Brussels. More importantly, the country now anticipates that its unemployment rate will hit 24.3%, worse even than in Greece; the youth unemployment rate is well into the 50%s. It will only get worse as Spain's unemployment soared from 21.5% to 23.3% in Q4 alone! 25% unemployment is what was seen during the US Great Depression to give you some context.

The Latest:

A spat between Germany and Greece or an exit from the bailout plan? We heard yesterday that Greece has implemented all of the changes the Troika asked for before deciding on a verdict on the bailout. I pointed out yesterday that austerity measures just means the Greek economy will be that much worse. The Troika was to confirm the changes made on the ground in Greece this week. NOT SO FAST!!!


Bloomberg acquired this report from Germany's Economy Minister Roseler 

Greece Is Reneging on Programs to Spur Economy, Germany Says

Greece is reneging on programs to spur its economic competitiveness that it signed with Germany since July, calling into question its willingness and capacity to revitalize its economy, the Economy Ministry in Berlin said.


Economy Minister Philipp Roesler and other German officials started bilateral projects with Greece from creating a development bank to advising on the construction of the Trans Adriatic Pipeline and on improving tax collection, the ministry said in a report, a copy of which was obtained by Bloomberg News. Greece has failed to fulfill its pledges in most cases, it said.


Greece’s implementation of project targets “remains insufficient,” the ministry said in the report. Revamping Greece’s economy at the same time as cutting its debt “is decisive -- that’s why Germany agreed to its support for the programs.”


For the Greek government, the programs “obviously have no priority,” the ministry said. “This is unacceptable from the German standpoint.”


So......, about that bailout?

HGSI Update (long)

HGSI was an earnings pick (@ $7.94) that did pretty well in after hours and several members made pretty decent money for a quick trade of less then 4 hours, however, even after earnings and a decline (reminiscent of RIMM which was an earnings play that didn't react well, but still had strong 3C positive divergences and ended up moving well above our earnings entry for a nice profit) HGSI continues to look positive, here is a post earnings update on the position.

Today HGSI is bucking the market which is a sign of strength, it's even bucking its sub-industry (bio tech) which is in the red while HGSI is up nearly 1%.

 HGSI daily seems to be building some sort of base and is up 1% today while the IWM is down -1.75%

 HGSI intraday

 Daily 3C chart, from  a top to confirmation to a positive divergence and what looks to be a large base

 The 30 min chart with a leading positive divergence.

 15 min

 5 min

And specifically, the last 3-4 days have seen increased momentum in the 2 min chart, remember when we have confirmed divergences through all the timeframes, we come back to the short term charts to look for the middle men to stock up in anticipation of a move.

Bottom line, I still like HGSI and still have a position there. Recent activity looks like it wants to move higher, despite the market which is uncommon.

Don't Forget RCII

This was another trade idea we've been watching for a good entry.

 Here's the daily with a break away gap and a bear flag. I was 'hoping" to see a false breakout or shakeout above the top trend line of the flag, it could still happen, but an entry on the break of the flag, if it remains convincing, may be the trade. If I took that trade, my stop would be wide enough to accommodate a shake out move, at least initially as I always favor wider initial stops.

 Here's the break on a 60 min chart

 And on a 5 min chart.

Wall Street "Conditions" people with propaganda to take advantage of them. Wall Street produces no tangible good so to make money, they have to take it from someone else, a zero sum game. Some examples are "Dollar Cost Averaging" , "Hold for the long term", etc. These are phrases that have been brainwashed in to the investing community for 5 decades or more. The most recent one (I' wouldn't be surprised if Goldman Sachs themselves put this one out), "Buy the Dip" and we are seeing that, we will see that, be aware, when the time comes, they will use that against investors/traders.

 The 30 min chart looks like this break is serious, but that doesn't mean RCII can't still flop around like a snake with its head cut off.

There's a 2 min positive divergence, so I'd expect some movement above and below the bear flag's lower trendline. This looks like a good opportunity, just be aware of the volatility and the brainwashing that causes the volatility.

SJM Update

This is more of a reminder...

 SJM daily -Break-away gap and 200 day moving average resistance

 Intraday there's resistance around $76.25 which looks like a churning event

 The 30 min chart is showing some weakness in the bear flag.

 That weakness is flowing from the shorter charts like this 15 min.

 Here's today's 5 min, my guess would be distribution here above the 200 day.

There's a clear trendline in red and the 200 day near the same area. You might look for  break of both as a possible entry on a short trade.

ES Update-Bounce

ES looks like it has a decent enough 1 min positive divergence for an intraday bounce.

The overall divergence is still quite negative, we'll see what this produces and if it builds on to this start.

IWM Getting Hammered

So far the other averages are hanging on, but the IWM just gave up the ghost or so it seems.

 We'll have to see how this closes, the market hasn't let early losses like this stand without a bounce back, so how the IWM closes will be important.

 Note the volume as stops are picked off below the a.m. support.

 The 15 min chart is in line or confirmation of the downtrend.

 The 2 min positive divergence only produced a modest bounce, right now it is in line with the trend.

The 1 min shows a possible positive divergence, we'll see if it builds.

Options Model Portfolio Trade-AAPL

I'm going with a somewhat speculative position in AAPL March $550.00 Puts, I'd prefer April but they are incredibly expensive.

AAPL Update

No market analysis is complete without looking at AAPL. What I find interesting is the negative divergences (remember they flow from the shorter timeframes to the longer timeframes) in AAPL and how there's strong confirmation and how they get very bad at the same area.

I may consider a speculative short in AAPL.

 AAPL, despite launching a new product, has been lateral the last 3 days thus far on declining volume. It seems longs are not willing to aggressively chase AAPL up here.

 Here's the range and volume on a 15 min chart, note volume spikes at resistance and what looks like churning.

 AAPL 1 min

 AAPL 2 min

 AAPL 5 min-all of these charts got worse around the 27th/28th and remember, I consider the 15th to be an important day that we may look back on and see that it was the day AAPL had a significant change in character.

 The 15 min chart confirming the same area.

 It takes a little longer to flow to the longer 30 min chart, but it has and it is deeply leading negative.

The 60 min chart is now starting to see the same weakness starting with a relative negative divergence.