RENN Stop Update

RENN was a long trade idea from 3/27 at $5.39 which is now up as a straight long (no options) 40%.

I have been suggesting using a 22 bar 60 min stop to allow for consolidations and the high intraday volatility that the 30 min 22 bar average has had trouble holding, but as I said in a previous update, I want to tighten the stop on RENN as soon as it is practical, I think now it is practical.

You may also want to consider taking partial profits, at this point you could even take out the original investment and let the profits run with a trailing stop.

Here's the trade idea on March 27th and a solid breakout from the continuation triangle. RENN is now in stage 2 mark up and if we were in a bullish environment I would look at this as a longer term trade, unfortunately I think it should be viewed as a shorter term trade and profits should probably be taken before a major consolidation which could be the end of the move. If there's accumulation on the consolidation a new position could be considered.

 I prefer the 30 min Trend Channel for a stop as it self adjusts to the stock's recent volatility, but as many of you do not have the Worden platform to run my Trend Channel, a 22 bar moving average is a decent proxy.

 Here's the hourly that has allowed RENN to move higher without intraday interference stopping the trade out,

The 30 min "WAS" too tight earlier in the trade, but now it is starting to make more sense as RENN gains momentum, pulbacks have been holding at the 30 min and if you don't have the Trend Channel, this would be my choice.

There is some very short term 1 min profit taking, but this far the 5-15 min charts are confirming RENN's move higher. Once again, as was the case Friday, we do not want to see an inside day or Harami candlestick close as RENN looks right now, that changed Friday so it's too early to assume we will see such a close, but if RENN looks like it will see an inside day toward the close, I would probably be more aggressive in profit taking.

USO Update-Trade Idea

USO also appears to be a shakeout, I'll be looking at some May $38 calls for a quick trade on the long side.

 It looks like the break of support in USO shook out the longs that entered in the white box area.


 USO 2 min would seem to suggest the stopped out long shares are accumulated.

The 5 min chart continues a sharper leading positive divergence.

Financials v. Tech

So far what I suspected is what 3C is showing...

 XLF 1 min is in a relative positive divergence, the weaker of the two.

 The saem with the 2 min chart.

 Tech on the other hand is leading positive, the stronger of the two divergences and quite sharply.

Tech's 2 min is also leading positive.

 Financial's momentum relative to the SPX has been stronger thus far this morning.

Tech as you can see lagged on the open, but has since flipped to show better relative momentum than the SPX very recently. I suspect the accumulation process that is stronger in Tech will soon manifest in relative performance.

AAPL update

While the mid and long term charts of AAPL look horrible, the shorter charts continue to show what appears to be a set up in AAPL to shake out shorts shortly.

The 5 min chart which was already showing a positive divergence developing late last week is even stronger this a.m.

AAPL 5 min, no confirmation to the downside this a.m. leaves AAPL working on a 5 min leading positive divergence.

The SPX is now near break-even, close to going green.

Financials are still leading, but I'd like to check the relative momentum between financials and tech.

Continuation of early indications...

 This is the last SPY chart posted above...

 This is the current 1 min, there has already been a strong shift to a leading positive divergence in a short period of time, again this would suggest Wall Street is accumulating shares picked up on the cheap this morning.

 The QQQ 1 min is also joining in

And we now have a leading positive pretty early on an IWM 2 min chart.

TICK

 As we had discussed last week, from long time technical analysis dogma, a failure of a test of resistance on the SPX, (what Friday looks like) is what technical traders expect, it's a classic textbook view of technical analysis. I would say this happens once in a blue moon over the last several years with volatility shakeouts moving above the neckline or support that was broken.

It appears from looking at the TICK chart, technical traders saw this morning's gap up as an opportunity to sell/short the market from Friday's apparent failure at resistance as the NYSE TICK chart is pretty much off the scale at sub -1250.

This would set up a nice bear trap with the market moving back above resistance that appears to have failed Friday's test. The early a.m. trade is largely retail orders so I'd be expecting accumulation of the shares sold to move the market above the resistance test. Early indications suggest that is what is happening.

SPY Opening indications.

As you can see, the SPY was in a negative 1 min divergence right from the open, it is now seeming to gain a foothold, even the very long term TSV 55 is starting to go positive here. I rarely pay too much attention to a.m. trade as the market makers pick off pre-market limit orders.

Overnight

Overnight risk has stayed in the game, suggesting that our continued bounce theory is still in the game as well, here's ES (S&P E-Mini  Futures) since opening slightly down last night...

It was a slow grind higher after the EU markets opened, the 8:30  release of Retail Sales and the Empire Manufacturing reports came out, the market chose to ramp up on Retail sales which beat, while Empire Manufacturing missed.

Retail Sales:
Released On 4/16/2012 8:30:00 AM For Mar, 2012

	Prior	Consensus	Consensus Range	Actual
Retail Sales - M/M change	1.1 %	0.3 %	0.1 % to 0.7 %	0.8 %
Retail Sales less autos - M/M change	0.9 %	0.6 %	0.4 % to 1.1 %	0.8 %
Less Autos & Gas - M/M Change	0.6 %	0.5 %	0.2 % to 0.9 %	0.7 %

A strong beat in retail sales.

The Empire State Mfg. Survey missed and pretty big.
Released On 4/16/2012 8:30:00 AM For Apr, 2012

	Prior	Consensus	Consensus Range	Actual
General Business Conditions Index - Level	20.21	18.00	10.00  to 22.70	6.56

It would seem the consensus would be the market "chose" to latch on to retail sales, I think the 3C charts suggesting a continued bounce on Friday are more relevant, as mentioned last week, once Wall Street starts a cycle, even a short one, they usually get the market to where they intended, apparently even if it involves having F_E_D embers come out and play the good cop/bad cop depending on which way Wall Street is trying to take the market.

Some of you have heard this story, probably most of you. I use to get internal research reports distributed to a major Wall Street investment bank, I won't tell you how, I wasn't breaking any laws, I wasn't hacking or anything like that, they ended up in my email. I will say they seemed useless until I looked back 6 months later, then they were quite accurate. The punchline is that Wall Street works far out in advance of the market. I have charts showing massive accumulation of homebuilders of all things in 2000 during the tech meltdown. Who in their right mind, after having gone through the tech revolution would have thought housing would lead the next bull market? Wall Street knew and years in advance, making over 5000% on HOV alone.

I can't say I'm surprised by the pre-market ramp in ES futures, I also can't say that I think a very mixed picture between retail sales and the Empire State mfg. survey actually had much to do with it, but that's what the pundits will be saying.

Overnight Spanish yields on their 10-year crossed the 6% mark to 6.15, approaching new record wides. This is not good for the market, despite what the short term may do, you might call it the EU Financial "Sum of all fears".

The EUR/USD has managed to defend $1.30, below $1.30 and risk should fall off fast.

Thursday will be a huge day with multiple EU auctions, I doubt there will be anything positive there, for now, we seem to be back on track.

The Week Ahead

I'm not going to go in to too much detail of the near term charts as I already covered that late Friday, it looks like Tech is set to take over rotation from financials, this is exactly the same as the previous bounce move. As I think I showed in the volatility post, volatility is getting incredible, we have the biggest 2 day gain of the entire year and the biggest weekly loss of the year in the same week.

What I do want to bring to your attention as I find these charts really indicative of the market's condition, which as you now I have been saying it has been deteriorating badly, selling any strength, is an update of the breadth charts.

There's no ambiguity to these charts, these are pure math, pure numbers, there's no opinion, there's no maybe.

We've been following the breadth charts for some time, the divergences started a while ago, but now they are so bad, I don't see how this market can recover from these. The indicator is in green, the comparison is the SPX (red) except for the NASDAQ composite A/D chart.

 This is the percentage of all NYSE stocks that are 1 standard deviation above their 40 day moving average. Around Feb. this indicator peaked at 78.50%, it is now 11.40%, lower than the October lows with price significantly higher, this is exceptionally shallow market breadth, in essence, the market is a thin, hollow shell.

 Percentage of all stocks simply trading above their 40 day moving average, this peaked over 85% and is now at 28%, ONLY 28% OF ALL NYSE STOCKS ARE ABOVE THEIR 40 DAY MA! Again, lower than the October lows!

 Stocks trading 1 standard deviation BELOW their 40 day average was well below 10%, now near 50%.

 Stocks trading 2 standard deviations above their 200 day m.a. was over 20%, now at 6%, right near the October lows.

 Stocks trading 2 S.D. above their 40 day average peaked near 50%, it is now at less than 3% and below where this rally started.

 The MCO had been sowing a divergence for some time, this in my opinion is the best way to use this indicator, it has also crossed significantly below zero. You can really see on this chart where the internal damage to the market was occurring.

Finally the Advance/Decline line for the NASDAQ Composite has failed miserably since the start of February.

There's no arguing with these charts, it's amazing to me the market is still where it is. DON'T FORGET ABOUT THE PRINCIPLE OF REVERSION TO THE MEAN.

We have a market that is 25% off its October lows with internals that are below the October lows, this is indeed a very dangerous market to be long.

ES opened a bit lower, but has stabilized, we have a long night still so I won't read to much in to that. We'll take what the market gives, but I smell some very ripe opportunity.

More on volatility and where we are

 This is a simple daily percentage gain indicator I constructed using the SPX. We have expected increased volatility and that's exactly what we have seen. The 2 day bounce this week is the biggest since December or the entire year thus far. Compare the bounce this week (green) to the others marked, it travelled the most distance and some of the other bounces are 3 day moves and yet this is still the largest move up all year. Also note all of the increasing volatility is in the top area, exactly the opposite of a consolidation. Also Look at the exact spot the SPX lost ground at yesterday, resistance, this is the area shorts would expect the bounce to fail. If what I saw in the NDX holds up, then we should rip through the seemingly "failed test" of resistance and knock out even more shorts and bring the longs rushing back in to the market, only to see everyone knocked out of their positions.

 On a weekly basis, even with the biggest 2 day bounce of the year, we have the biggest decline of the year, -2%, now that is some volatility, the biggest 2-day move of the year this week with the week ending with the largest weekly loss of the year, spectacular!

Here's the apparent failed test of NASDAQ 100 resistance, I had a git feeling about AAPL underperforming in the bounce, that was correct, 3C suggested financials would lead the bounce, that was correct, now it is suggesting Tech will lead the last portion of the bounce, only time will tell if that is correct, but we should know early next week, most likely Monday as the positive divergence in Tech was very much like the positive divergence in the market on Wednesday and look how Thursday turned out. I see no reason volatility will diminish, so this should be another crazy week. My initial thoughts right now are a 1-2 day bounce is about what we have left, if it is two days, the failure should come in the afternoon of the second day. With volatility being what it is, I have no reason to think the failure will be any less spectacular then the increasing volatility we have seen for the last month-plus. That would make for a VERY ugly decline.