Market Update

Possible head fake move...

 ES 1 min has been in consolidation mode and now has a leading positive 1 min divergence...

 The one caveat to a pullback remains the action we saw last week which is a short squeeze that feed on itself.

 On the SPY 15 min chart there's a clear bullish continuation triangle formed today, traders will expect an upside breakout, this is where it gets tricky, normally an upside breakout would simply be a head fake move before a reversal, but since we are in short squeeze territory, it cold ignite fears and start that snowball effect we saw several times since Friday.

 The SPY 1 min is in leading negative position, but intraday has been pretty much in line with price.

 The 3 min has been in line with price, again there's no positive divergence here, any short squeeze would be retail created.

The 5 min chart is leading negative. I would think any short squeeze move would be sold in to by smart money and the pullback would continue.

BPZ Update

BPZ was last updated Tuesday, the update shows the original trade idea as well as subsequent updates. The overall theme of the update is that BPZ looks good longer term (one of a handful of stocks that may have a future beyond a sub-intermediate move up. However it also looked like a pullback near term was set and I said to watch for a target at the $2.50-$2.55 level, we are currently at $2.52 as BPZ has pulled back today as the charts suggested Tuesday.

While we are close to the target area, I'm not seeing convincing evidence yet that BPZ is a buy at this point. I want to see strong positive divergences in to a pullback and buy on price weakness/3C strength. I suppose this is not too strange considering how highly correlated the markets have been and if we are expecting more of a pullback in the market, why should BPZ buck that trend?

In any case, here's how BPZ is shaping up, it's not all indifferent.

 Another daily chart with a bearish descending triangle/bear trap...

 On a 15 min chart BPZ has pulled back to a near term trend line, this is probably a little too obvious as traders would look to pick up BPZ long on a pullback to the trendline which they would view as support, that alone probably is enough to argue for a deeper pullback.

 The 4 hour longer term perspective looks quite bullish, therefore I think it is wise to be patient with BPZ and look for that strong entry signal (strategically BPZ looks great, the tactical entry signal is now the focus).

 The 1 min chart showing the probability Tuesday of a near term pullback, however we are also watching this timeframe for positive divergences in to the pullback as an entry signal on the long side, I don't see anything there that is convincing... yet.

The 5 min chart looks like the pullback should be deeper than it is currently.

I would put this one on your radar if it meets your criteria, I think this will offer a nice move up and a nice low risk/high probability entry. Patience PAYS.

Financials/ XLF / FAZ

Tuesday I updated Financials, the general premise based on the charts was that financials would pullback (with the market for the most part as it too is giving similar signals and correlation is running very high between sectors, or at least higher than usual) which would be a constructive pullback and likely see positive divergences and then the sub-intermediate uptrend would continue, likely triggering a real short squeeze, not just the hints of a short squeeze we have seen recently.

This also made FAZ (3x leveraged Bear Financials ETF) an interesting short term long trade so long as you can pay attention to the market and are nimble to move in and out quickly (which has been the overall theme for the market the last several months).

As of today, here's what the charts are looking like...

 Another bear trap in Financials, this time from a large bear flag.

 The expectation for a move down in financials from Tuesday has been thus far fulfilled today. As the market bounced intraday off the 1 min positive divergence, Financials failed to participate, instead they just consolidated sideways

 XLF/Financials 1 min negative from earlier in the week and a leading negative as they consolidated today.

 2 min negative-

 3 min negative

 And 5 min leading negative so we have good confirmation of a pullback. I would not consider going long financials until we start to see positive divergences within a pullback, as the move is fairly new I would not expect to see that yet.

 The XLF 60 min chart is positive and this suggests that after a pullback Financials will continue higher in the sub-intermediate move up, again likely triggering a strong short squeeze.

FAZ (3x leveraged Short/Bear Financials) is looking good intraday with a leading positive divergence in to the consolidation.

FAZ 15 min leading positive looks like it has more upside as Financials pullback.

UNG Update

The last Update for UNG was last Friday, it looked like UNG was headed up to the resistance level, since then that is what it has done.

The question remains whether UNG is ready to break out to stage 2. Right now it doesn't look highly probable that it is coming within the next several trading days, however we do have the Natural Gas report due tomorrow. I have an open long in the equities model portfolio that is currently up +17%, but I'm looking for a much larger primary trend up. Here's what UNG looks like now.

 The breakout level to move UNG to stage 2 mark up-or where UNG is much more likely to trend.

 UNG currently sitting right above that level, but will it hold it? It appears it will pullback, which would be a nice opportunity to add to or start a new position in UNG on some price weakness if you like the trade idea.

 1 min looks like at least a consolidation if not an outright pullback.

 5 min also looks like a pullback.

 As we moved up from the 29th, I was watching 3C for signs of confirmation which would make a stage 2 break out much more likely, we haven't seen that confirmation and a pullback looks more likely.

OVerall, the 60 min's trend is why I believe UNG will eventually breakout to stage 2 mark up and be a good long, trending position. I'll be sticking with the long position even through a pullback and may even add some.

Market Update

That intraday positive divergence seen in the first market updates this morning so far looks like it has done what it set out to do and doesn't appear to be much more than what I originally suspected, just an intraday move. Here's the updated charts...

 DIA 1 min positive divergence this morning now seeing a negative divergence off the intraday bump up.

 The 2 min chart of the DIA is in line, not seeing the 1 min negative migrate over yet.

 However the 5 min chart shows a negative divergence and an overall near term negative atmosphere.

 ES is about in line since seeing that positive 1 min divergence just after the open.

 The IWM which has been pretty strong the last several days shows a 1 min negative that is in leading negative position.

 That has migrated to the 2 min chart.

 And overall is making its way to the 5 min chart, even though the IWM's underlying trade shaped up very quickly early this week.

 QQQ 1 min positive this a.m. is turning here

 The 2 min looks worse, this was already in place for the most part since Tuesday's readings suggesting the market looks quite a bit different today than it did Tuesday.

 The 15 min in the QQQ is at a relative negative divergence, unless this turns a lot worse, I would still expect a constructive pullback in the market.

 SPY 1 min positive this a.m. and a relative negative now.

The 5 min shows a much more overall negative tone, again suggesting a pullback, however the fact the longer timeframes haven't seen much damage suggests that this will be a constructive pullback, the kind in which we expect to see some positive divergences and may be used to enter some speculative long on price weakness.

EIA Petroleum Report sees a Draw

The EIA petroleum report usually released at 10:30 on Wednesday was released just 4 minutes ago because of the US holiday, the draw was fairly decent size, although consensus is not provided for the petroleum report as it is for the Nat. Gas report which is coming out tomorrow.

Released On 7/5/2012 11:00:00 AM For wk6/29, 2012

Prior Actual Crude oil inventories (weekly change) -0.1 M barrels -4.3 M barrels Gasoline (weekly change) 2.1 M barrels 0.2 M barrels Distillates (weekly change) -2.3 M barrels -1.1 M barrels

Compared to last week's draw of -0.1 mn barrels, this weeks -4.3 mn barrel draw looks significant; SO had a fairly strong response to the report...

Although I do have some open USO call positions at a loss open from former signals, right now I do not favor a trade in USO fro several reasons. For the time being I will leave the existing call positions open, but I don't really want to be involved in new trades unless USO gives a very solid negative signal; I'll explain....

 USO's reaction this a.m. to the EIA report showing a draw.

 USO exhibits one of the many bearish price consolidation price patterns that have (as expected in most cases) turned in to bear traps. This descending triangle is a bearish consolidation/continuation pattern and as price broke below it, you can see volume jumped as retail shorts usually wait for price confirmation, the move back above the apex of the triangle puts these shorts at a loss and as such, in a bear trap.

 The lack of support from the Euro/$USD on the move up is what has me skeptical about a long position in USO which seems to be largely driven by event risk in the middle east (USO vs. Euro-they should move together).

 USO vs the $USD, the normal correlation is an inverse one, so the $USD moving higher with USO moving higher is unusual and not broadly supported.

 The USO 5 min chart gave good signals and made sense, this most recent negative divergence in to rising prices also has me skeptical as oil's move up seems to be largely contingent on unpredictable event risk.

 USO 15 min chart also does not lend support to USO's move higher.

Nor does the 30 min chart.

I would consider closing the long calls and opening a short/put position if we were to see some very negative signals develop

Potential Stop for GLD

Although I prefer stops on the close as intraday and especially morning trade are deceptive, you may want to consider this as an intraday stop, although I suspect any stop in the GLD trade will be signaled by 3C first, it's good to have this stop handy.


The 60 min Trend Channel

The stop is right around $156.70. This is why I prefer to use leverage in these short term GLD trades.

GLD Update

We've had good success trading GLD from the short side in a series of short term put trades (I believe 3 or 4 consecutive winners). Today, Tuesday's new GLD put position in the options model portfolio (August $160 puts) which was based on this analysis from just before on Tuesday so far is doing pretty well, but GLD trades have required that you be nimble.

Up +22.64% in about 2 hours

Remember that gold has the most to gain from QE or specifically $USD debasement and as such rallies when the market sentiment is leaning toward more QE.

Here are the updated charts for GLD this morning...

 The 60 min chart has been negative since the sudden accumulation on May 31st that sent GLD soaring, there was distribution in to that move higher. This 60 min chart' position is why I have wanted to keep short term GLD trades on the short side for the time being.

 On the daily chart we predicted at least a an Intermediate downtrend and perhaps a Primary, we have already seen the Intermediate downtrend and are close to a Primary trend, however since GLD first went negative in to the August highs last year, there has been improvement on the daily chart, suggesting the Intermediate downtrend may be all we gat and a new trend in GLD may emerge to the upside over the coming months, of course we are not there yet, but it should be watched for continued strength building in.

 The 1 min chart suggested GLD pulls back this week and thus far that chart today is pretty much in line with price, a bit on the negative side.

 The 2 min chart also shows the negative divergence for a pullback and today is about in line.

 The 5 min chart is higher than I'd like to see in a leading positive position which I believe is a carry over, thus for the current position we need to watch the 1, 2 and 3 min charts to see if they grow more negative and migrate to the 5 min chart and break up some of this positive divergence, otherwise GLD may have to be closed sooner than I'd like.

The 15 min chart is still in a leading negative position, there's quite a bit more work to go before we can say that a GLD primary uptrend is high probability.