GLD Spec Position

GLD is not EXACTLY where I'd like to see it,  but it is pretty close. I'll be looking to enter a speculative Put, same as the last 3 as far as the type of trade (short term).

 GLD 1 min'

 2 min

The 3 and 5 min are pretty close to in line and the why I say "GLD is not exactly where I'd like to see it"

However,

 The longer term 15 min has not confirmed, it has had enough time to do so.

The hourly is also still telling me I want to trade GLD on the short side in to price strength.

I'll be looking for a PUT position, likely August $160, I'll let you know for sure, this will be a rather small speculative position.

QQQ out to 3 min

 QQQ 3 min negative leading...

This is why I would not be shorting the market here and rather looking for a pullback entry and holding established longs that were picked up for this move and as a hedge to core shorts.

The QQQ 15 min is looking very good overall, the accumulation event on the 28th can be seen here, it is VERY strong. However we still have that current 15 min ngative signal, this suggests to me nothing more than a pullback in which smart money is likely to accumulate in to, although they already did a lot of accumulation as you can see.

Be patient, let the trade come to you and remember there's a bus every hour.

SPY Migration of the negative divergence

 SPY 1 min deeply leading negative to new lows on the day

 2 min is now leading neg.

3 min as well.

I would not personally short the market as a short squeeze move to even higher highs is what we expect, I'd be looking for a pullback to buy in to weakness for the short squeeze to continue and move to higher highs.

IWM Charts

A Divergence alone is not great information, multiple divergences among the averages and migration through the timeframes from short to long is good confirmation, we are seeing better confirmation suggesting smart money is selling in to the price strength and perhaps even shorting some.

  1 min IWM near new lows on the day, leading negative

 migration to the 2 min as it is negative

And the 3 min....

The IWM is seeing migration of the negative divergence

I'll post the charts next, but what I was looking for on the institutional side seems to be making its way through the timeframes as the 1,2, 3 min are all going negative, in other words it looks like smart money is selling in to this move.

Summary

To answer a bunch of emails in one post, lets go back to the very first sentence of Sunday night's Start of Trade for the new week

"As of late Friday, I expected a bit of a pullback from Friday's gap up, although we are above major resistance in the SPX and were above major resistance in the EUR/USD, both of which could create a short squeeze."


Thursday was VERY unusual activity as we saw an accumulation event, rather than the process, meaning there was strong accumulation very fast, from there the market gapped higher Friday.


What we are seeing right now is the start of the short squeeze we have been looking for for quite a while now.


Most of the action we are seeing has very little to do with underlying institutional trade and has more to do with the strongest emotion in the market, FEAR as shorts are panicking and the snow-ball effect is taking place.

 The IWM since breaking out of yesterday's triangle, that parabolic price action with no pullbacks is a short squeeze, it is probably nowhere near as powerful as it could be so the main institutional activity we want to be on the lookout for today is whether there is selling in to price strength or not, if there is then we may expect Friday to look a lot different than today thus far, but again, this actual squeeze has less to do with institutional money (although it seems by Thursday's action they knew something) and has more to do with the snowball effect of a short squeeze. This is what we have been expecting, the reason we bought longs for the sub-intermediate trend and as a hedge to core shorts and the reason I haven't closed a single long or short for that matter as I expect we'll see the re-emergence of the primary trend after the short squeeze.

What we want to know is where this is going Thursday and that's what I'm on the lookout for. I still don't intend on letting go of the longs bought as hedges as a short squeeze should be much more powerful than this when all is said and done, whether we get some interim trades and good set ups is what we are looking for now and that will depend on signals we get on the institutional side.

IWM since the breakout of the triangle yesterday.


I'll update you on any changes that will offer opportunities or suggest a change, but for now, retail is rolling over itself to cover as the snowball effect and fear take hold.

GLD Trade

I'm going to be looking to enter a GLD put spec. trade at some point soon today. Yesterday I was looking for a breakout move above Friday's highs, we certainly have that, at this point it's just a matter of tactical timing and the short term signal there.

Follow Up

 As mentioned in yesterday's Risk Asset Update, the Euro's failure to confirm and relative $USD strength vs the move in the market is the major concern in this move (IWM daily vs Euro).

 Although the Euro is much weaker than we'd expect to see for a move like this in the market, it is seeing a little intraday strength. (IWM 1 min vs Euro)

Also lets not forget where this move originated, from a clear bullish consolidation triangle and an obvious one at that as that is where the IWM short squeeze started on a breakout from the triangle, this also casts some suspicions on "THIS" move.

 The DIA isn't seeing the same divergence on the 1 min chart that some of the other averages are seeing, it is a relative negative as 3C is not making higher highs with price.

 At the next timeframe the 2 min, there's not much migration here.

 The IWM 1 min is where we see some of the sharpest moves in the 1 min intraday charts.

 Just for perspective, this is the same chart zoomed out to cover the last day and a half.

 Thus far the migration to the 2 min chart is not as sharp. I believe the intraday move in the Euro above is lending some near term support, even though on a longer timeframe, perhaps as of the close today or the open Thursday, I feel this will be a problem.

 The Q's 1 min is similar to the DIA

 there's some migration of the divergence to the 3 min chart, although not horrible.

 The SPY is the other average (the IWM being the first) that is showing deterioration in the 1 min

However it's rather new and has not seen much migration to the 2 min chart as of yet.

There's the chance that the Euro improves and the market gets some more support. Thursday's accumulation event clearly seems like someone knew something in advance, the question is how far does this go. I would NOT be chasing this move, however I do plan on keeping already established longs open.

As of now the TNA long is up 26%, ERX is up 16.5%, FAS is up nearly 7% and 5 of the 6 core shorts are all in the green up to 21.5% with the only core short at a loss being XOM at 0.28%.

This looks like it will be a fast moving market as we approach the close.

Market Update

***NOTE-since putting this update together we are getting some stronger deterioration in the shorter term intraday charts. I will post another update of that deterioration next, but this update is still valid.

Keep in mind the shortened market hours today. Other than that, volume has been light as was expected on the mid-week holiday.

This is definitely a "unique" market. As you know, since mid-may, perhaps even before, we expected a STRONG short squeeze in the market above the SPX's major resistance level and above the EURO's major resistance level. Las Thursday afternoon we saw something that we haven't seen this year any way, probably quite a bit longer; late in the day on Thursday as the market was at the afternoon lows I put out a post that there had been a positive divergence and to expect a move higher in to the close. Later that day after looking at more charts, I realized that we saw a large divergence that skipped right over a lot of the intraday timeframes and went straight to the longer term charts, this only happens when there is sudden, strong accumulation. I described it this way, Accumulation and distribution are typically a process, what we saw late Thursday the 28th was an event" and apparently a well timed one at that as someone seems to have known something in advance as Friday's open gapped us right over major resistance and in to short squeeze territory, I also talked about this Sunday night in the " Week Ahead" post.

We have dismal volume, it doesn't seem we have a lot of strong institutional activity, but we are in an area in which a short squeeze can feed off itself.

 Here's the area we are in that is above major resistance and where we expected a short squeeze to take place, however with an early close today and July 4th tomorrow, I'm a bit hesitant about chasing this, luckily we or at least most of us were already prepared for this as we entered long (mostly leveraged long ETFs) as a hedge at the June lows in anticipation of such a move.

The other thing that bothers me is the Euro is very close and recently was in short squeeze territory, our expectation were for both to get squeezed together which would also provide the market some support, here we see the Euro has not followed the SPY/SPX/market higher which would make any short squeeze right now, unstable without $USD weakness and Euro support.

As for the opening indications,

The DIA

 We have a slight intraday a.m. negative divergence on the 1 min chart. The 2 and 3 min charts are in line with price.

 The 5 min above and 15 min below continue to suggest a pullback, however as I mentioned Sunday night, we are in short squeeze territory, we saw a little of the action late yesterday particularly in the IWM.

DIA 15 min suggesting a pullback in the DIA.

 The IWM 2 min in line as I mentioned above with a slight negative intraday this a.m., the short squeeze of yesterday's close is visible.

 The IWM has seen the most improvement of all of the averages and it happened quick, there's still a 15 min relative negative that is in the realm of a pullback signal.

 QQQ 1 min opening with a slight negative

 QQQ 2 min trend has moved together with the market, but is still in a negative divergence.

 And the 15 min showing the strong accumulation event of the 28th and the current negative divergence pullback signal.

 SPY 1 min on the open...

 SPY 2 min with a little short squeeze actibvity at the green arrow and a slight negative intraday divergence.

The SPY 15 min with the accumulation event of the 28th and a current negative divergence still suggesting a pullback .

Overnight and in to the open

It seems to be all about commodities and the Middle East...


Overnight the Chinese "Securities Journal" reported the potential for further Chinese Central bank (PBoC) Reserve Ratio Requirement cuts. We have been on top of this Chinese story since last year, months before their first PMI data showed they were in trouble, it was obvious in the way commodities were trading. Further evidence comes from a member who frequently travels to China, companies his company does business with are feeling the pinch and taking some drastic measures.

Chinese Services PMI were also released overnight with a slight improvement over the prior month and above the key 50 level which is the level that divides growth from contraction.

In the EU, Bob Diamond, the CEO of Barclays has resigned amidst the scandal engulfing BCS the COO also joined him in resignation ; There are stories that the BOE was actually involved, pressuring Diamond to resign as fears grew that Diamond might spill some sour beans taking down much of the UK political establishment. BCS is pretty much unchanged on the US open, but swung from down 3% to up 3% in European trade. Lloyds, RBS and HSBC are underperforming in European trade as the investigation in to the LIBOR and Banking Standards scandal continues.

Speaking of the BOE, the English Central Bank has a rate decision due out Thursday of this week.

As mentioned Sunday, watch Finland and the Netherlands and the entire ESM structure as disagreements between Northern EU and Southern EU countries continue. In the latest news from Finland (and not unexpected as this has been mentioned before), Finland want to secure collateral against loans to the Spanish banking system; so keep an eye on those Spanish 10-year yields as it seems the entire "Bazooka" proposal remains nothing more than that.

EU data saw weak Construction PMI, which was offset by better than expected Mortgage Approvals.

Oil gained significantly today even though the $USD was stronger yesterday and somewhat flat today, apparently on several events and news items, one coming from the NYT:

U.S. Adds Forces in Persian Gulf, a Signal to Iran

"The United States has quietly moved significant military reinforcements into the Persian Gulf to deter the Iranian military from any possible attempt to shut the Strait of Hormuz and to increase the number of fighter jets capable of striking deep intoIran if the standoff over its nuclear program escalates."


Furthermore...


"Iran said on Tuesday it had successfully tested medium-range missiles capable of hitting Israel in response to threats of military action against the country, Iranian media reported. The Islamic Republic announced the "Great Prophet 7" missile exercise on Sunday after a European Union embargo against Iranian crude oil purchases took full effect.


And...

Turkey's armed forces command said on Tuesday it had scrambled F-16 fighter jets for a third consecutive day on Monday after Syrian transport helicopters were spotted flying near to the Turkey-Syrian border, but there was no violation of Turkish airspace.

It said in a statement a total of six jets, four from a base in Incirlik in the south and two from Batman in eastern Turkey were scrambled in response to Syrian helicopters flying south of the Turkish province of Hatay, within 1.7-4.5 nautical miles of the Turkish border

And from Stratfor, the newest movements us US Naval Assets...

Apparently my closing of USO calls on June 29th was a bit early, but the profit and what we knew then, I'm not shedding any tears.

Over 100% profit

As for ES and EUR/USD...

 ES pretty choppy overnight, the European open is at the green arrow.

 ES with the EU open to the US open at the white arrow. Before the US open, ES had moved from the 4 pm close yesterday of 1359.50 to the 9:30 US open at 1359.75, pretty much unchanged.

 The Euro since start of FX trade this week has lost important support which is also where a Euro short squeeze becomes more likely.

Since yesterday's 4 p.m. market close the Euro is pretty close to unchanged so we'll take a look at USD denominated assets moving against the legacy arbitrage correlation such as the gap up in gold and oil as well as the opening indications market update.