USO

I've received several emails about USO, while I don't like USO up here especially where the EUR/USD is relative to USO and with the EIA report due out Thursday (as we have been near capacity for the last several weeks), I feel there's too much event risk in USO which is what it is responding to despite the legacy arbitrage FX correlation.

I also don't like USO long for the reasons stated above, I'd be patient with it because as of now, I see it as a gamble, not a high probability trade backed up by hard charts.

GLD Open

I decided to go with August $160 puts

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.