WMT Update

WMT was also from this a.m., interesting how they are starting to fall apart, these aren't small caps stocks.

 WMT intraday..

 WMT daily, ideally WMT would close below yesterday's open and engulf yesterday's candle, which would nearly put it back inside the channel as well.

 WMT 2 min today

WMT 5 min today...

Don't forget ORCL

ORCL was a short idea earlier this morning, it's hitting alerts left and right.

 ORCL moving in to the gap? The top channel trendline is right below

 1 min

 2 min

5 min

ORCL has been falling apart all day on 3C.

Dow looks the worst

Whenever I see a parabolic move, I never trust them, up or down. Parabolic moves tend to end with parabolic moves in the other direction.

Specifically about the DOW-30/DIA...

The Dow over $13k at the red trendline still hasn't brought any volume...

 The DIA as well

 DIA 5 min

 DIA 2 min starting at the bounce.

 DIA 1 min shows no support here.

 ES is starting to go negative here as well.

It seems small caps have been struggling the most-IWM

The S&P-500 Small Cap Index.

And mid caps...

PARABOLIC

Everything is looking a little scary here with this parabolic move, only the IWM which is still playing catchup, has any underlying support at all. Again the Dow has no volume support at all > $13k.

The Gap up in to breakout territory would set up a nice one day key reversal, we'll see what the market thinks of the F_O_M_C in 2.5 hours...

RIMM Update

RIMM looks like it wants to breakout here for a move to the upside.

 Keep an eye on the Triangle, it's pretty obvious so a quick shakeout wouldn't be surprising.

 RIMM 15 min

RIMM 5 min today.

I am tempted to play this, however I wouldn't trust this move for very long. I would likely take profits pretty quick and almost certainly before the 2:15 F_O_M_C.

ORCL Trade Idea (Short)

There are a number of different ways to play this idea, from short term trades to longer term trade, options, straight equity shorts, etc. The reason why is it appears to be a long term top that is near completion, but there are also shorter term components of it that look as if they are close to moving. Lets take a look at it first.

 ORCL on a 5 day chart, you can see a long term up trend and what appears to be a descending triangle top, a very large one, but about the right size for the trend.

 On a daily chart you can see how big the top is, ORCL not making up to the top trend line on this recent move (and I don't think it will make it there, is a sign of weakness, it's most often seen a sell signal in broadening tops after at least 5 points of contact with the trend lines, which we have exactly 5 points of contact. There was also a recent very strong gap down on big volume that found support at the bottom of the pattern for a bounce.

 Here's that bounce in a channel.

 For perspective, I drew some trendlines on this 60 min chart representing the top pattern. You can see the accumulation periods have been much smaller then the distribution periods, remember, Wall Street wants to sell in to strength, they need those bounces to do that.

 Here's a closer look on a 30 min chart,  just like the 60, the 30 min chart is recently negative in the channel.

 The 15 min chart is also leading negative, while there's a chance ORCL tries to break above the recent lateral movement of the last week or so, I doubt it would be able to hold very long. Furthermore, I have some doubt as to whether it can even make that move, the broad market will have a lot of influence on that outcome.

 The 5 min chart shows this gap up as unsupported...

As does the 2 min and the 1 min below.

There are several ways to play this, a move back inside the gap would be one potential set up, a move below the channel would be another or if it can manage it, a move to the recent lateral range would set up a beautiful trade, but again I have doubts about it being able to do that.

As usual, I would prefer initially a wider stop with fewer shares, but it depends on how you are looking to play it. I'll set some price alerts and keep an eye on this and update any set ups that form.

WMT Follow Up

WMT is a trade idea we have been following, here was the last update from last week

From the last update:

"WMT had a few intraday head fake moves above the bear flag that sent it lower the next day, yesterday was the latest, but the close wasn't below the lower trendline. Just like looking at the AAPL intraday head fake that sent AAPL lower by -2.2% vs the GLD daily closing head fake that sent GLD lower by -5.3%, the stronger the head fake move, the stronger the reversal move. So watch for WMT to hopefully post a stronger, unambiguous move above the trendline."

 That's pretty unambiguous...

 I would prefer to see a confirmation move back inside the flag, if you are more conservative, then a move below the flag lower trendline.

 3C on the breakout from the flag...

For those who are playing weekly options, WMT is listed at the CBOE as a stock with weekly options.

While you were sleeping

Futures/ES crept up, strangely (sarcastic) the same can't be said of either the Euro or the carry trade that finances risk on moves in the market, AUD/USD.

 Euro since yesterdy's close...

 The unwind of the carry trade in AUD/USD

And the AUD/USD overnight since yesterday's close....

Goldman Sachs Touches on the Cats and Dogs Trade

They call it the laggards to leaders, in any case, it's not exactly the phenomena I have noticed in the market over the last 10 years and that is, just before the market rolls over from a bull move/rally, there's a rally in what I call the Cats and Dogs, Goldman calls them the laggards.

The premise of my version of the C&D trade is that the market is above all manipulated, but also an emotional creature. I have often encouraged students, members and readers of my sites to try to view charts in an emotional light. When you see more the moving averages and you can see emotions, which include mania's, fear cycles, greed cycles, etc (for instance, we are in a mania/greed cycle- when the SPX dropped on March 5/6th, it stopped out a percentage of the longs who had bought over the last 21 days, nearly 1 trading month stopped out in 2 days-this is why I have been saying being long the market is like "Picking up loose change in front of a steam roller" and certainly some longs got steam rolled this month), back to the point, when you can recognize these emotions, you get a lot more information out of a chart.

Why do I say this is a greed/mania cycle? Look at breadth alone and if you think market breadth is meaningless, give it some time, you'll be able to look back and say, "Wow, breadth was warning big time". The longs don't care, as usual, "This time it's different", that is until it isn't- as always.

In the greed/mania cycle, people who saw the new October lows left the market and it probably took several months of rally to get them feeling like they missed it or are missing it, so they enter the market, but being most stocks followed the market higher (until recently as my breadth post proved last week), they don't want to pay for quality so they look for the Cats and Dogs, stocks that haven't rallied yet and are usually under $3-$5. Wall Street knows they'll be shopping and sets up some nice looking charts in the C&D trades. The thing is, they pop and pop hard, often with double digit gains, but they fall even faster, guess who is left holding the bag? This is why when we trade the Cats and Dogs, I recommend taking at least partial profits on any 1 day double digit gain and trail the rest with a tight stop. I have noticed for years this happens just before the bull move ends.

Here's Goldman Sachs version of the Cats and Dogs from ZH...

This year has been characterised by a dash-for-trash as the flood of central bank liquidity sent the marginal dollar into every down-beaten, over-shorted, unprofitable, over-leveraged, illquid stock it could get its hands on. As Goldman notes today, however, this laggards-to-leaders strategy is starting to underperform in the last few weeks. Buying the trailing 12M laggards and selling the trailing 12M leaders had returned an impressive 7% YTD but since mid-February (which notably was when credit started to underperform equity markets more directly) performance of this 'pair' has lost almost 3%. It seems the liquidity-floats-all-boats mentality is indeed leaving the market and with a refocus on growth(that this likely implies) we suspect correlation will pick up once again to the downside.

Chart: Goldman Sachs

ALERT!!!

I haven't done my nightly routine yet, still answering emails when I got an email about the CBOE's SKEW. I looked at it and was shocked, I figured maybe it's a corrupt data feed so I checked it on TOS, the same result. Then to rule out a corrupt feed for the exchanges, I went directly to the CBOE website to confirm and it is confirmed.

 This is my chart, SKEW just hit $139.25 in a +11.6% move today alone!

This is the data directly from the CBOE website.

As you can see, it just surpassed its 52 week high. I'm going to try to find out how high the last high beyond 52 weeks was.

For newer members, here's a brief summary of what the CBOE's SKEW Index is meant to do...

From the CBOE website:

"The CBOE S&P 500 Skew Index (ticker symbol: SKEW), a benchmark measure of the perceived risk of extreme negative moves — often referred to as "tail risk" or a "black swan" event — in U.S. equity markets. "


In other words, SKEW attempts to measure the probability of an improbable event or a black swan/ market crash. For historical reference, the SKEW from 1990-2010 has only been at this level approximately .15% of the time, $115-$117 is where SKEW spends most of its time, so this reading is extremely high and extremely rare. Skew was $135 around the 2007 top.


I will also remind you that the VIX hit a low of $15.23 today showing extreme complacency, the VIX typically trades inversely to the market, low readings often mark tops and high reading mark bottoms. 
The last time the VIX was lower was 7/1/2011 at $15.12, here's what the market looked like...

2 days later, the market started a decline, the S&P lost 18.8% at the August bottom and lost 20.7% to the October low, the Russell lost well over 30%.


Considering the 3C charts, the breadth charts, the Credit/Risk Asset charts and the events that I have expected and have started to unfold as expected, I take this huge climb in the SKEW as a major red flag.


I'll bring you more in the daily wrap...