Market Update

While I was putting together the last few posts here's what has changed in the market, although it's intraday.

 DIA intraday, still in a leading negative position (3C at prices would be confirmation) hasn't seen so much a positive divergence as confirmation intraday as 3C moves with prices.

 The only positive divergence intraday is on the ES 1 min chart, but even this still remain within a larger leading negative position as 3C would have to be well above the highs of premarket to even start to confirm.

 IWM intraday, this may be considered a small positive divergence, but most of the action is just 3C moving with price still in a leading negative position.

The same is true of the SPY.

I think part of the catalyst is FX based, I'll be looking in to that now and posting it.

BIDU Chart Request...

BIDU being s momo stock along with its longer term chart makes this an interesting stock and potentially an interesting trade shortly.

 The longer term trend in BIDU has been a VERY obvious triangle, with as many momentum traders out there watching this one, the triangle was surely noted. A breakout above the triangle would bring buyer in to BIDU, even before that the fact BIDU had approximately 5 points of contact with the long term trend lines and the most recent failed to hit the lower trend line may have brought buyers in early before the breakout. However, these large triangles are almost always either tops or bottoms depending on where they occur after the preceding trend, in this case it would be assumed to be a top. The market wants to catch as many people as possible on the wrong side of the trade and thus technical analysis is often used against technicians and a breakout like this is not always what it appears to be. I'm watching AMZN for the $200 mark, a centennial mark that traders gravitate toward for s similar situation and potential trade set up.


 Here's a longer term view, the preceding uptrend with the triangle forming after it would hint that this is a large top, the price pattern implied target would be a huge move in BIDU to the $80 area approximately.

The long term daily 3C chart shows a large round of accumulation in BIDU starting in 2008 and moving through the 2009 bottom, even stock accumulated early at the $22 area (adjusted for splits) would have seen a huge profit. The current 3C reading is leading negative. To confirm the dily 3C, I looked at Money Stream as well below.

 Money Stream confirms the 3C daily chart above with trend confirmation in green and  negative divergence in MS at the July Highs, since then MS is leading negative as well.

 This hourly chart shows positive and negative divergences in BIDU and in the squares, the approximate areas of both, as you can see, even very early divergences whether positive or negative would have yielded nice gains on long/short trades. The current hourly is going negative at the breakout area.

 The 30 min chart is a good example of a long term relative divergence as the yellow trend line points out two relative areas of the same price, yet 3C is lower at point B then point A, again I also marked the areas of accumulation and distribution. Being BIDU is a large , liquid stock, accumulation/distribution would obviously take longer to put on a significant size institutional position. Still, even at the highest point of where accumulation starts, the returns far surpass that level, the same applies for the distribution areas. More simply stated, even if you got in very early on a divergence (positive or negative) and saw better prices for either a long or short position develop after getting in early, you still would have made a hugh profit. This is often the case with large, liquid stocks like this.

 Here's a more recent triangle within the larger triangle on a 15 minute chart, you can see 3C is leading negative here.

 On a 5 min chart, the same

 The shorter timeframes offer more detail, the positive divergence in the triangle sending BIDU higher is likely smart money and/or market makers aware of the larger order they may have filled trading their own accounts. Again, no confirmation on the breakout, which would suggest there is selling in to strength and the breakout would provide the sellers with plenty of buyers to sell larger chunks in to demand.

 The 1 min chart shows a commonly seen head fake/,shakeout which was accumulated as some traders were likely stopped out o the break of the trend line, again no confirmation of the breakout, suggesting BIDU is seeing smart money sell i to strength.

 The white boxes just touch on the concept I often talk about, 'Large volume within a downtrend often becoming a support level/reversals). The optimal trade would be a short on a head fake move (the breakout being the head fake move). The underlying technicals seem to suggest this is the case. A break back in to the triangle would put the breakout buyers at a loss, a move below the triangle would put many more traders at a loss, this is often why we see head fake moves before a reversal. The longs (or in the opposite case of a base) are at a loss as BIDU moves below their buy point, the breakout would be a significant buy point. This in turn causes them to sell increasing supply and sending prices lower a lot faster then prices rise, it's a snowball effect that takes advantage of technical traders indoctrination in the dogma of technical analysis.

 An earlier entry point still above the triangle may be found on a break below the hourly trend channel. As I demonstrated on the longer term charts, even with a negative divergence BIDU can still move higher a the negative divergence is just showing us what institutional money is likely doing so I prefer to have some confirmation like a break below this channel which is a little more aggressive.

A break below the daily trend channel is a little more conservative, the probabilities are higher, but the risk is also a bit higher, for this reason I often prefer to phase in to trades like this.

We'll keep BIDU on the radar for a potential entry, but I would set some alerts, either price or perhaps trendline breaks.

Quick Market Update

 SPY 1 min didn't confirma at this morning's intraday highs, like ES, it has moved lower in to an intraday leading negative position which would suggest selling in to the pop and has kept the SPY range bound since, unable to add to the opening gains.

 The 2 min chart is also falling off pretty quickly.

 This is the longer view of the 5 min chart I posted last night that showed a relative positive divergence (relative is the weaker of divergences, leading is the stronger) that I thought may be there to fill the gaps in many of the averages and many have been, however at this point and we should be far enough in to the day for the 5 min to catch up to market action, it remain in a leading negative divergence here.

 This is a close up of the same chart, so the 1 and 2 min divergences have filtered in to the longer 5 min timeframes.

 A quick look at the other averages shows similar activity, the DIA 2 min not confirming the intraday highs on the gap up and a leading negative divergence that has been pulling the Dow lower since the a.m. intraday highs, still the DIA is mostly in a range.

 ES has not improved, you can see the earlier positive divergence, I suspect on the German eco data coming out and ES has been negative since then, including Bernie's speech, it appears the price strength is being sold in to at least on an intraday basis.

 The IWM saw early confirmation that moved with price (green arrow) and since a negative leading intraday divergence has put the IWM in to a range.

The QQQ longer view of the 2 min, it is seeing similar activity as the rest, you can just see the degree to which there is no confirmation of the move higher today and this is a fast chart so it has had plenty of time to move up and confirm.

Since the open (red vertical line), the NYSE TICK chart has fallen off, right on the open, although strong readings at +1250, now like the market which is in an intraday range, the TICK has settled in to a narrow range of +750 to -600 or more or less flat. The TICK chart is the number of NYSE advancing stocks per TICK (1 minute) less the number of declining issues.

I would expect some intrady downside from here as this is nearly a mirror of last week's action, the volatility on the gap and then the fade intraday off the best levels.

AAPL Update

AAPL's relative strength vs the market this morning has been surprisingly poor, AAPL even hit support off a decline on the a.m. gap, so AAPL trade remains interesting.

 AAPL vs the QQQ shows poor relative strength this morning with AAPL once again touching support from last week.

 On a 1 min chart AAPL was negative right off the open , but has put in a positive divergence (intraday) upon touching support.

 The 2 min chart shows this more clearly.

 Yet the longer term 5 min chart remains leading negative and has even added a bit to that this morning.

The long term charts are leading negative, this is the 60 min, the 30 min is worse as shorter timeframes flow to longer ones.

I would expect from what I see so far AAPL to bounce a little intraday or soon, but with the 5 min and on charts continuing to slide, it is certainly not looking good for AAPL. Furthermore it seems it will be disconnected from the market correlation.

I'd be interested to see what the short term 1-2 min intraday charts do upon any intraday bounce.

IPGP Follow Up

IPGP was a trade idea to put on your watchlist from last Thursday (short).

In the post I said,

" I don't usually like shorting H&S tops in this area because the first break of the neckline usually sees a volatility shakeout back over the neckline so you need a pretty wide stop, but if the market is tanking with it, we may get away without the volatility shakeout, or you can just keep it on a watchlist and keep an eye on it for opportunities."


I also posted this chart of the Trend Channel with the following comments below it...

"I'm guessing the top of the Trend Channel now would be about right for a stop, of course the closer IPGP can move toward that area, the less risk there is in the trade, or you might wait for a break of the neck line. "


IPGP is in that area, although this is on a closing basis, there may be something to IPGP's move today which was initially strong, but started to fade quickly.


Here are the current charts...

 Today's move with a tall wick on the daily candle, higher prices being rejected or hitting resistance.

 The 1 min chart did not confirm the move up and was negative on the open, IPGP has retraced a bit since.

Although it is still early for 5 min readings, this chart did not confirm the move up this a.m. either.

 And the longer term perspective (60 min.).

I'm not convinced of jumping in with both feet here, but it is closer to the stop level, I'd like to see a little more of how IPGP performs once we move past the volatile a.m. trade, however it is worth noting and keeping a close eye on in this area. It may provide an opportunity to nibble at a position.

Pending Home Sales Miss

One of the few US eco-data reports, Pending Home Sales just missed...

Released On 3/26/2012 10:00:00 AM For Feb, 2012

Prior Consensus Consensus Range Actual Pending Home Sales Index - Level 97.0  96.5  Pending Home Sales Index - M/M 2.0 % 1.0 % -1.0 % to 4.5 % -0.5 %

Consensus was for a 1% gain , instead it printed at a -.50 loss.

This is the 13th of the last 15 economic reports to miss as we move out of the easily manipulated seasonal adjustment period.

More from Bloomberg...

"Was the early strength this year in housing data a head fake? That's the question following last week's disappointing sales data for new homes and existing homes and today's likewise disappointing data on pending sales. The pending home sales index, which tracks contract signings for existing homes, fell 0.5 percent in February vs Econoday's consensus for a gain of 1.0 percent. Three of four regions show monthly declines including the South which is by far the largest housing region. A further risk is that contracts don't always make it to closing due to credit and appraisal snags, factors that increase the prospect for approaching declines in final sales. The winter's mild weather was supposed to have been a big plus for the housing sector including existing home sales but the positive effect appears to have been limited to January. The Dow, which jumped at the opening, has now steadied in early reaction to today's report." To answer Bloomberg's first question, I believe it is as many have suspected, the government had been using winter seasonal adjustments that they seemingly picked out of thin air to come up with economic data that looked a lot stronger then non-governmental sources otherwise indicated. Without the seasonal adjustment fudge factor (allowing the government to virtually pick any target and manipulate the numbers with seasonal adjustments), the real data is starting to come out and it's not as pretty as it looked earlier this year as the trend in mcaro-economic data moves from very positive to suspiciously negative.

GLD / GDX / GDXJ

On 3/20 and 3/21 I posted on the strong likelihood of a bounce brewing in GLD as well as the miners, GDX and GDXJ. There is a long term issue with GLD which may not be so bullish, the ideas posted last week for the miners and GLD for a bounce trade were along the lines of a "Swing Trade" and if the market gives more, then we'll take it.

Here's GLD and the miners this a.m. responding to Bernie's speech.

 GLD +.98%

 GDX +1.29%

GDXJ +2.39%

While I'm not saying this trade is over by any means, I'll be keeping a close eye on all of them as they originally looked like shorter term bounces in the 3.

S&P gaps filled

As mentioned last night in "The Week Ahead",

"we do still have at least 1 decent unfilled gap and this market has been very diligent about filling gaps."


and...


"the morning gap has been where the market movement and volatility and even trend have been."


Here re the SPY gaps noted last night,

 The S&P gaps filled on the open...

 The DIA filled one, there's one left open.

The Q's had already filled their gap last week...

The IWM/Russell 200 gaps filled.

ES at the open

after slowly drifitng lower most of the night, ES found some support around the Euro open and showed a positive divergence in 3C, ES headed higher 9yellow arrow) at approx. 5:40 a.m., the white arrow is Bernie's speech this a.m. at 8 sending ES up on a parabolic move. 3C is negative in to this move, based on what we see now, I would think there will be an early pullback from these levels as ES may have peaked here for now.

Overnight News and Sentiment...

In "The Week Ahead" I laid out some of the more important events taking place this week with a relatively light US economic data docket.

Here's what happened overnight...

ES futures, as I suspected from the 3C negative divergence from last night's open, continued to slide until 4 a.m. EDT about the time Europe opened trade. At 5:40 ES futures started making their way higher, the apparent catalyst, the German IFO Business survey after seeing a very weak Flash PMI in March, slightly beat consensus coming in at a slight beat at 109.8 vs consensus of 109.6.

As mentioned last night, early rumors about this Friday/Saturday's EU Eco-Fin meeting were out fresh this morning from none other then Angela Merkel.

From the FT:

"Germany is poised to bow to international pressure and allow a temporary increase in the eurozone’s financial “firewall” this week, to prevent the crisis in the region’s periphery spreading to other member states.

Officials in Berlin signalled on Sunday that the government would allow funds to be boosted as a way of calming financial market pressures.

Angela Merkel, Germany’s chancellor, had resisted any increase, despite pressure from most of her eurozone partners and the US administration, because she risks a political backlash from sceptical allies in her ruling coalition if it means any increase in Germany’s overall financial guarantees for its partners. But the thinking in Berlin is that she cannot resist the international pressure indefinitely."

This coming on the back of talk from the ECB (European Central Bank) that there may not be more liquidity coming from the LTRO.

From Bloomberg

ECB Suspending Long-Term Loans, Asmussen Tells Helsingin Sanomat

The European Central Bank won’t provide more long-term loans until it has studied how the funds are distributed into the economy, council member Joerg Asmussen told newspaper Helsingin Sanomat.

“We need to see how this liquidity feeds through over the next few months,” Asmussen said, according to a transcript of an interview with the Finnish newspaper on March 24 and published today.

The ECB has offered European lenders more than 1 trillion euros ($1.3 trillion) for three years since December. The bank’s two long-term refinancing operations have brought down yields on peripheral debt and helped calm markets. That doesn’t mean more such funds are forthcoming, Asmussen said.

“Nobody should expect that we will do a third LTRO based on the fact that we have already done two LTROs,” he said. “We never pre-commit on our actions.”

Apparently on the same day the LTRO article was published, rumors came out of Europe early, long before the Eco-Fin meeting to calm the markets as the ECB is making clear that they may not continue supplying EU banks with liquidity, naturally the pressure internationally under this scenario would be intense on the Finance Ministers to do something to keep contagion from spreading, thus the early statements out of Germany regarding the ESM.

As mentioned, there' no shortage of F_E_D speakers this week and Bernie got a jump on some other F_E_D members who have been talking about less accomodative policy and possibly higher rates sooner then expected, when Bernie was speaking this morning at 8 a.m. at the National Association for Business Economics.

Here's  link to the speach

The most important thing Bernie said which boosted ES futures at 8 a.m. precisely, was the following...

" A wide range of indicators suggests that the job market has been improving, which is a welcome development indeed.  Still, conditions remain far from normal, as shown, for example, by the high level of long-term unemployment and the fact that jobs and hours worked remain well below pre-crisis peaks, even without adjusting for growth in the labor force.  Moreover, we cannot yet be sure that the recent pace of improvement in the labor market will be sustained.  Notably, an examination of recent deviations from Okun's law suggests that the recent decline in the unemployment rate may reflect, at least in part, a reversal of the unusually large layoffs that occurred during late 2008 and over 2009.  To the extent that this reversal has been completed, further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies.

I also discussed long-term unemployment today, arguing that cyclical rather than structural factors are likely the primary source of its substantial increase during the recession.  If this assessment is correct, then accommodative policies to support the economic recovery will help address this problem as well.  We must watch long-term unemployment especially carefully, however.  Even if the primary cause of high long-term unemployment is insufficient aggregate demand, if progress in reducing unemployment is too slow, the long-term unemployed will see their skills and labor force attachment atrophy further, possibly converting a cyclical problem into a structural one.


If this hypothesis is wrong and structural factors are in fact explaining much of the increase in long-term unemployment, then the scope for countercyclical policies to address this problem will be more limited.  Even if that proves to be the case, however, we should not conclude that nothing can be done.  If structural factors are the predominant explanation for the increase in long-term unemployment, it will become even more important to take the steps needed to ensure that workers are able to obtain the skills needed to meet the demands of our rapidly changing economy."


And that is largely what has ramped futures this morning...