USO Charts

The event risk is still there for UO, but so is the FX legacy arbitrage divergence, so I figure they even each other out, but now we have some negative divergences, that tips the scale for me toward a bearish position or a put.

 USO 3 min trend has weakened a lot today.

 A closer view including a positive from Tuesday

 This negative divergence is migrating to the 5 min chart as it should, it appears to be distribution of USO.

 The 15 min chart is leading negative

Finally the white line representing the Euro should be tracking USO, or rather USO tracking the Euro, this suggests a reversion to the FX mean, or a move down in USO. I'm going to look at some puts.

Very Tempted to start a put position in USO

I'll get some charts up, this obviously would be a position requiring you to be nimble.

It's not just the SPY

As I showed you in the last update what I thought about the near term action in the market today, I used the SPY as an example to get the update out, but here's a look at the other averages.

 SPY breakout from the triangle

 DIA 1 min intraday negative at the breakout above the a.m. range.

 DIA 5 min is now leading negative

 IWM 3 min leading negative

 IWM 5 min leading negative

 QQQ 2 min leading negative-pretty bad too.

QQQ 3 min leading negative, also bad.

Market Update

I'm still looking at that intraday triangle and thinking about the short squeezes we saw on Tuesday. The signals I'm seeing suggest the break out move that has started (as expected per the last couple of updates), but still an overall bearish near term environment that should still keep us on track for a pullback on continuation of the pullback having started today. 

As I answer a lot of emails about a lot of different stocks and the market, I think I've found a good way to describe a short squeeze and why I keep adding the caveat of a short squeeze, it's not to sit on the fence. In my view, although we may see some market manipulation here and there to get the market in to position for a short squeeze, an actual short squeeze is probably one of the few remaining organic or real events in the market that doesn't need manipulation, the other would be a Black Swan sell-off. This is why I'm careful when talking about where we are RIGHT NOW, as a short squeeze feeds off of fear and is just a loop created by human emotion, thus it's one of the few natural events left in the market.

I still think from the signals we see and from the mass psychology, a breakout above the triangle (which would be a head fake move any way if it led to a pullback as the charts suggest), is actually the best outcome for Wall Street to manipulate the market so long as they can maintain a controlled burn and not let a short squeeze get out of hand and take on a life of its own.

 Hee's the triangle, it was obvious to traders as volume picked up on the breakout and it was a bullish continuation triangle so they would have expected it to break out to the upside from a technical perspective, the bears are bearish, it doesn't really matter what's there (if you recall the sentiment update).

 ES is still positive on the 1 min chart..

CONTEXT for ES IS NOT, the model is significantly lower than ES itself

 The SPY 1 min since going negative Tuesday and with today's a.m. positive divergence has a current position of in line, although that move looks very aggressive, it is simply in line with price.

 There's no positive on the 2 min chart, in fact there's a negative divergence.

And the 5 min is moving in line intraday, but from a leading negative divergence.

GLD Follow Up

Another small victory in GLD, you take what the market gives. As you know the market is dynamic, especially on a week like this with fairly low volume, that means adjusting to the market. They say every boxer has a fight plan until the first punch is thrown. I'd prefer to have held GLD longer, but I'm not taking the chance.

I'm not sure where GLD would be filled, several of the previous trades came in better than what would be shown above which is a 1 day 14+% gain in GLD.

 This 2 min intraday chart moving up in to a new local leading positive high bothered me, but not as much as the 15 min chart.

 Looking at the 15 min trend it may not be as easy to see as the trend is in a negative position, but zoom in and...

This 15 min chart is moving up too fast, too much for my comfort with a position with a small gain.

Closing GLD August $160 Puts

Charts coming-14+% 1 day gain.

PCLN Update

We haven't looked at PCLN in a while. I believe this was the last time PCLN was shorted as part of the primary trend "core" short positions (the ones that are still in effect and hedged).

This position is still up 10% and hedged with leveraged longs. There's also a July $655 Call that is down about 10% (this is not the hedge to the equity short).

 This is the basic set up in which the trade came to us. The small descending wedge is a bullish price pattern, but as you'll see below, there was distribution in to that price pattern. From observing market action, with a negative divergence already in place, the most obvious play would be a breakout from the wedge that retail would chase and smart money could use retail's buying to sell short in to, that's the same place we were selling short PCLN.  Back in June I had to make a decision as to whether to close out the shorts and try to trade around them or to hedge them; since the market becomes more unpredictable in a situation like this and with the prospect of an EU Black Swan event arising any day, I decided to hedge the shorts rather than what I would normally do which would be to cover them and look to re-enter at a better price. I simply didn't want to take a chance in trying to get too fancy in trading around the market at a time like this and I'm still happy with that decision.

PCLN is above a resistance area, much like the rest of the market and in an area with a high short squeeze potential. Should a short squeeze come in PCLN, hopefully my calls will do well, but ultimately I'll be looking for an area to add to the core PCLN equity short.

 The 30 min chart shows the bullish descending wedge formation area at the red box, the breakout from that area in the yellow box and a 3C negative divergence through that entire area on an important timeframe. Around June we had a positive divergence sending PCLN higher until it ran in to some distribution and another weaker positive divergence recently.

 The 60 min chart went from uptrend confirmation (green arrow) to a nasty negative divergence (distribution) and has remained in a leading negative position, so from a longer view point, the highest probability primary trending trade is on the short side.

 Near term the 5 min chart shows a positive divergence at the start of June and rough confirmation on the move up. This is certainly not overwhelmingly positive, it is really barely in line, thus the primary bearish position still holds water.

 Recently-like most of the market (due to very high market correlation), we have a leading negative trend on the 2 min chart suggesting again, a pullback.

The 3 min chart is also showing the same.

My expectation is for a pullback in PCLN followed by the resumption of the market's sub-intermediate uptrend. I would think PCLN would see a short squeeze with the market, but as mentioned, both the market and PCLN are in short squeeze territory now, so a simple pullback may offer several different trades 1) So long as there are short term positive divergences in to a pullback there's a long trade that is probably best played with options, hopefully a short squeeze will make that trade a killer. Eventually we should see distribution in to a short squeeze and that's where I want to look for opportunities to short in to strength as the primary downtrend re-asserts itself. I prefer not to use leverage on what I would consider to be a primary/trending trade, I see no need for it.

Again, it's just patience, choosing the trade/trades you want and letting them come to you.

Sentiment Update

Maybe a breakout from the triangle I just showed you is what is needed.

From Sam, one of our members who stays on top of the Twitter-verse and various trader's blogs...


"Hi Brandt,

Wanted you to know everyone on blogs and twitter is expecting a pullback here. Most bulls are waiting to buy on the pullback and most bears are short and doubling up here."

Purely from a psychological point of view and if in fact this sentiment is reflected on the order books, then a breakout from the intraday triangle to the upside would confound longs expecting a pullback and do the same to shorts who are doubling up here as a move higher would put them at a loss as well.

Again, the caveat being this could feed on itself and create a short squeeze. It would take more firepower from Wall Street to manipulate the market in this scenario to stop a short squeeze as Fear is the most powerful sentiment/emotion in the market and the very nature of a short squeeze compounds that fear.

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.